# National Beverage Corp: Form 10-K for the period ended May 2, 2020 - Company: [National Beverage Corp](/companies/fizz.md) (CIK 69891) - Form: 10-K - Filed: 2020-07-01 - Accepted by EDGAR: Jul 1, 2020, 21:31 ET - Period: 2020-05-02 - Accession: 0001437749-20-014395 - Inline XBRL: yes - Main document: https://www.sec.gov/Archives/edgar/data/69891/000143774920014395/fizz20200502_10k.htm - All documents and exhibits: https://www.sec.gov/Archives/edgar/data/69891/000143774920014395/ ## Figures reported in this filing Standardized XBRL line items for the period ended 2020-05-02. | Line item | Period | Value | XBRL concept | | --- | --- | ---: | --- | | Revenue | 3 months, 2020-01-26 to 2020-05-02 | $262.4m | us-gaap:Revenues | | Revenue | 12 months, 2019-04-28 to 2020-05-02 | $1.00bn | us-gaap:Revenues | | Cost of revenue | 12 months, 2019-04-28 to 2020-05-02 | $630.3m | us-gaap:CostOfRevenue | | Gross profit | 3 months, 2020-01-26 to 2020-05-02 | $98.7m | us-gaap:GrossProfit | | Gross profit | 12 months, 2019-04-28 to 2020-05-02 | $370.1m | us-gaap:GrossProfit | | Selling, general and administrative | 12 months, 2019-04-28 to 2020-05-02 | $204.4m | us-gaap:SellingGeneralAndAdministrativeExpense | | Operating income | 12 months, 2019-04-28 to 2020-05-02 | $165.7m | us-gaap:OperatingIncomeLoss | | Income tax | 12 months, 2019-04-28 to 2020-05-02 | $39.5m | us-gaap:IncomeTaxExpenseBenefit | | Net income | 3 months, 2020-01-26 to 2020-05-02 | $36.2m | us-gaap:NetIncomeLoss | | Net income | 12 months, 2019-04-28 to 2020-05-02 | $130.0m | us-gaap:NetIncomeLoss | | Diluted EPS | 3 months, 2020-01-26 to 2020-05-02 | $77.00 | us-gaap:EarningsPerShareDiluted | | Diluted EPS | 12 months, 2019-04-28 to 2020-05-02 | $2.78 | us-gaap:EarningsPerShareDiluted | | Basic EPS | 3 months, 2020-01-26 to 2020-05-02 | $78.00 | us-gaap:EarningsPerShareBasic | | Basic EPS | 12 months, 2019-04-28 to 2020-05-02 | $2.79 | us-gaap:EarningsPerShareBasic | | Diluted shares (weighted) | 12 months, 2019-04-28 to 2020-05-02 | 46,828 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding | | Operating cash flow | 12 months, 2019-04-28 to 2020-05-02 | $177.7m | us-gaap:NetCashProvidedByUsedInOperatingActivities | | Capital expenditure | 12 months, 2019-04-28 to 2020-05-02 | $23.9m | us-gaap:PaymentsToAcquirePropertyPlantAndEquipment | | Dividends paid | 12 months, 2019-04-28 to 2020-05-02 | $0 | us-gaap:PaymentsOfDividendsCommonStock | | Share repurchases | 12 months, 2019-04-28 to 2020-05-02 | $6.2m | us-gaap:PaymentsForRepurchaseOfCommonStock | | Cash and equivalents | at 2020-05-02 | $304.5m | us-gaap:CashAndCashEquivalentsAtCarryingValue | | Current assets | at 2020-05-02 | $460.7m | us-gaap:AssetsCurrent | | Total assets | at 2020-05-02 | $648.6m | us-gaap:Assets | | Current liabilities | at 2020-05-02 | $141.7m | us-gaap:LiabilitiesCurrent | | Total liabilities | at 2020-05-02 | $196.3m | us-gaap:Liabilities | | Shareholders' equity | at 2020-05-02 | $452.3m | us-gaap:StockholdersEquity | ## Business As filed, 21,207 characters. ### GENERAL National Beverage Corp. innovatively refreshes America with a distinctive portfolio of sparkling waters, juices, energy drinks 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. *Creative Innovations –* 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 made commercially available only after extensive concept and sensory evaluation. Our variety of distinctive flavors provides us a unique advantage with today’s consumers who demand variety and refreshing beverage alternatives. 2 *Innovation Ethic –* We believe that innovative marketing, packaging and consumer engagement is more effective in today’s marketplace than traditional higher-cost national advertising. In addition to our cost-effective social media platforms, we utilize regionally-focused marketing programs and in-store “brand ambassadors” to interact with and obtain feedback from our consumers. We also believe the design of our packages and the overall optical effect of their placement on the shelf (“shelf marketing”) has become more important as millennials and younger generations become increasingly influential consumers, and are now influencing baby boomers and older generations. *Creative Dynamics –* In a beverage industry dominated by the “cola giants”, we pride ourselves on being able to respond faster and more creatively to consumer trends than competitors burdened by legacy production and distribution complexity and costs. The ability to identify consumer trends and create new market-leading concepts define our new product development model. Speed to market with the appropriate concept, unique flavor creation and trend-forward ‘better-for-you’ ingredients continues to be our goal. Internal development teams are responsible for concept creation, packaging and design, which allow for rapid ‘go to market’ timing and reduced development costs. Presently, our primary market focus is the United States and Canada. Certain of our products are also distributed on a limited basis in other countries and options to expand distribution to other regions are being considered. National Beverage Corp. is incorporated in Delaware and began trading as a public company on the NASDAQ Stock Market in 1991. In this report, the terms “we,” “us,” “our,” “Company” and “National Beverage” mean National Beverage Corp. and its subsidiaries unless indicated otherwise. ### BRANDS Our brands consist of beverages geared to the active and health-conscious consumer (“Power+ Brands”) including sparkling waters, energy drinks, and juices. Our portfolio of Power+ Brands includes LaCroix®, LaCroix Cúrate®,and LaCroix NiCola® sparkling water products; Clear Fruit®; Rip It® energy drinks and shots; and Everfresh®, Everfresh Premier Varietals™ and Mr. Pure® 100% juice and juice-based products. Additionally, we produce and distribute carbonated soft drinks (“CSDs”) including Shasta® and Faygo®, iconic brands whose consumer loyalty spans more than 130 years. 3 ### Power+ Brands – ### LaCroix LaCroix® Sparkling Water, our most significant brand, has uniquely redefined the Sparkling Water category that is rapidly becoming the alternative to traditional carbonated soda. With *zero* calories, *zero* sweeteners and *zero* sodium, LaCroix leads the premium domestic sparkling water category. Naturally essenced, LaCroix has gained the support of national retailers in multiple channels, including mass-merchandisers, club stores, drug stores, mainstream supermarkets and natural and specialty food retailers. Early in Fiscal year 2020, LaCroix launched Hi-Biscus, a unique flavor that adds the delicate essence of the hibiscus flower to sparkling water. LaCroix Hi-Biscus delights taste buds with pleasing floral aroma and exquisite taste. In the fourth quarter of Fiscal year 2020, two new naturally-essenced flavors of LaCroix, the enticing savor of LimonCello and the refreshing taste of Pastèque (French for watermelon), began rolling out to retailers throughout the U.S. Fans are instantly transported to the Italian Riviera with the refreshing finesse of LimonCello. Pastèque, one of LaCroix’s most highly-anticipated flavors to date, captures lusciousness of a sweet picnic watermelon. These innovative new varieties join the LaCroix family of 27 refreshingly *innocent* flavors. LaCroix’s dynamic ‘theme’ LaCroix Cúrate® (‘Cure Yourself’) celebrates French sophistication with Spanish zest and bold flavor pairings. Cúrate naturally refreshes in tall, sleek 12 oz. consumer-friendly cans. Eloquent graphics, robust aroma, naturally ‘essenced’ and premium-priced, Cúrate is an attractive alternative for today’s consumers. 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 $87 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 that feature unique packaging and ground-breaking flavor concepts designed to capitalize on LaCroix brand loyalty and growth of the sparkling water category. 4 ### 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. The brands’ signature package is a hot-filled, 16 oz. glass bottle designed 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 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. ### Clear Fruit Clear Fruit is a crisp, clear, non-carbonated water beverage enhanced with fruit flavors. Clear Fruit is available in 12 delicious flavors, including consumer favorites Cherry Blast, Strawberry Watermelon, and Fruit Punch. Clear Fruit is available in 20-ounce and 16.9-ounce bottles with consumer-favored sports caps. ### Rip It RIP IT® Energy Fuel is “Real Energy for Real People” with 14 unique flavors and six sugar-free options. Building on the flavor tradition of original Rip It, a 2 oz. sugar-free shot version in eight flavors is marketed in displayable package configurations. RIP IT proudly supports military and first responder heroes at home and abroad with such energetic flavors as Tribute, Citrus X, Cherry Lime and Atomic Pom. 5 ### Carbonated Soft Drinks – Shasta® has been recognized as a bottling industry pioneer and innovator for more than 130 years. Shasta features multiple flavors and has earned consumer loyalty by delivering value and convenience with such unique tastes as Raspberry Crème, Tiki Punch, and California Dreamin’. With more than 110 years of brand history, Faygo® products include numerous unique flavors such as Red Pop®, Moon Mist®, and Rock’n’Rye®. Faygo recently reintroduced fan-favorite Faygo Pineapple Orange. 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 continually evolving. We always 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. 6 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, e-commerce stores, drug stores and dollar stores. We distribute our products to this channel primarily through the warehouse distribution system and, to a lesser extent, the direct-store delivery system. 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. 7 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 also 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. 8 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 premium domestic sparkling water throughout the United States, the beverage industry is highly competitive and our competitive position may vary by market area. Our products compete with many varieties of liquid refreshment, including water products, soft drinks, juices, fruit drinks, energy drinks and sports drinks, as well as powdered drinks, coffees, teas, dairy-based drinks, functional beverages and various other nonalcoholic beverages. We compete with bottlers and distributors of national, regional and private label products. Several competitors, including those that dominate the beverage industry, such as Nestlé S.A., PepsiCo and The Coca-Cola Company, have greater financial resources than we have and aggressive promotion of their products may adversely affect sales of our brands. Principal methods of competition in the beverage industry are price and promotional activity, advertising and marketing programs, point-of-sale merchandising, retail space management, customer service, product differentiation, packaging innovations and distribution methods. We believe our Company differentiates itself through novel methods of innovation, key brand recognition, focused social media, innovative flavor variety, attractive packaging, efficient distribution methods, and, for some product lines, value pricing. 9 **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 or may be proposed in other states or localities or 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 May 2, 2020, we employed approximately 1,550 people, of which 360 are covered by collective bargaining agreements. We believe we maintain good relations with our employees. ### SUSTAINABILITY National Beverage Corp. is dedicated to sustainable operations and responsible business initiatives. All our beverage products are produced in the U.S., providing thousands of jobs in local communities and boasting a lower carbon footprint than imported brands. All of our packaging is recyclable and we continually focus on reducing packaging content. More than 80% of our products are in aluminum cans, which generally contain approximately 73% recycled material. Each of our facilities has programs in place designed to minimize the use of water, energy, and other natural resources. 10 ### 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, 5,755 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 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. 11 **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, statutory and other 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, certain of which are self-insured. Although we seek to limit these cost increases, continued upward pressure in these costs could reduce our profitability. **Unfavorable weather conditions.** Unfavorable weather conditions could have an adverse impact on our revenue and profitability. Unusually cold or rainy weather may temporarily reduce demand for our products and contribute to lower sales, which could adversely affect our profitability for such periods. Prolonged drought conditions in the geographic regions in which we do business could lead to restrictions on the use of water, which could adversely affect our ability to produce and distribute products. **Dependence on key personnel.** Our performance significantly depends upon the continued contributions of our executive officers and key employees, both individually and as a group, and our ability to retain and motivate them. Our officers and key personnel have many years of experience with us and in our industry and it may be difficult to replace them. If we lose key personnel or are unable to recruit qualified personnel, our operations and ability to manage our business may be adversely affected. **COVID-19 pandemic.** The magnitude and duration of the current COVID-19 pandemic is uncertain, rapidly changing and may be impacted by events beyond our knowledge or control. Such events could include a shutdown of one or more of our facilities resulting from illness or government restrictions, and the disruption of operations of our customers and suppliers. Such events could adversely impact our business, results of operations, financial condition and cash flows. 12 ## Properties As filed, 1,235 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 2025. We believe our facilities are generally in good condition and sufficient to meet our present needs. The production of beverages is capital intensive but is not characterized by rapid technological change. The technological advances that have occurred have generally been of an incremental cost-saving nature, such as the industry’s conversion to lighter weight containers or improved blending processes that enhance ingredient yields. 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, 643 characters. The Company has been named in certain legal proceedings, including those containing derivative and class action allegations. One complaint alleges the Company’s LaCroix branded products contain synthetic ingredients and therefore violate state consumer protection statutes and other laws. A similar consumer complaint was voluntarily dismissed during the fiscal year along with a full written retraction of all claims by the plaintiff and counsel. The Company is vigorously defending all legal proceedings and believes litigation will not have a material adverse effect on the Company’s financial position, cash flows or results of operations. ## Management's discussion and analysis As filed, 18,468 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. 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! National Beverage Corp. is uniquely positioned in three distinctive ways: **(1)** The retail 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)** Retail today is in the most competitively-indexed service industry, without exception. Innovation, plus the urgent time demands on the consumer, requires quick, expedient shopping. 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 than larger competitors who are burdened by legacy production and distribution complexity and costs. 17 Presently, our primary market focus is the United States and Canada. Certain of our products are also distributed on a limited basis in other countries and options to expand distribution to other regions are being considered. To service a diverse customer base that includes numerous national retailers, as well as thousands of smaller “up-and-down-the-street” accounts, we utilize a hybrid distribution system 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. 18 ### RESULTS OF OPERATIONS The following section generally discusses the fiscal years ended May 2, 2020 (Fiscal 2020) and April 27, 2019 (Fiscal 2019) items and year-to-year comparisons between Fiscal 2020 and Fiscal 2019. Discussions of fiscal year ended April 28, 2018 (Fiscal 2018) items and year-to-year comparisons between Fiscal 2019 and Fiscal 2018 can be found in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of our Annual Report on Form 10-K for the year ended April 27, 2019, which is available free of charge on our website at www.nationalbeverage.com. Fiscal 2020 consisted of 53 weeks; Fiscal 2019 and Fiscal 2018 both consisted of 52 weeks. ### Net Sales Net sales for Fiscal 2020 declined 1.4% to $1,000 million compared to $1,014 million for Fiscal 2019. The decline in sales resulted from a 1.4% reduction in average selling price per case due primarily to changes in product mix. Power+ Brands volume declined 3.4% and branded carbonated soft drinks volume increased 6.6%. ### Gross Profit Gross profit for Fiscal 2020 was $370.1 million compared to $384.4 million for Fiscal 2019. The change in gross profit is due to a 1.0% increase in cost per case resulting primarily from changes in product mix and increased manufacturing costs. Gross margin was 37.0% for Fiscal 2020 compared to 37.9% in Fiscal 2019. Shipping and handling costs are included in selling, general and administrative expenses, the classification of which is consistent with many beverage companies. However, our gross margin may not be comparable to companies that include shipping and handling costs in cost of sales. See Note 1 of Notes to Consolidated Financial Statements. ### Selling, General and Administrative Expenses Selling, general and administrative expenses were $204.4 million for both Fiscal 2020 and Fiscal 2019 or approximately 20% of net sales for both periods. Selling, general and administrative expenses reflect increased selling and administrative costs offset by reduced shipping and distribution costs. ### Interest Expense and Other Expense (Income) - Net Other income, net is primarily interest income of $3.9 million for Fiscal 2020 and $4.1 million for Fiscal 2019. The change in interest income is due to lower investment yields on an increased average investment balances. Interest expense is comprised of fees related to maintaining lines of credit. Interest expense was essentially flat for all years presented. ### Income Taxes Our effective tax rate was 23.3% for Fiscal 2020 and 23.4% for Fiscal 2019. The differences between the effective rate and the federal statutory rate were primarily due to the effects of state income taxes. 19 ### LIQUIDITY AND FINANCIAL CONDITION ### Liquidity and Capital Resources At May 2, 2020, we maintained $100 million unsecured revolving credit facilities, under which no borrowings were outstanding and $3.4 million was reserved for standby letters of credit. Cash generated from operations is our principal source of funds. We believe that existing capital resources will be sufficient to meet our liquidity and capital requirements for the next twelve months. See Note 5 of Notes to Consolidated Financial Statements. Expenditures for property, plant and equipment amounted to $23.9 million for Fiscal 2020 primarily to expand production capacity. We continually evaluate capital projects to expand our production capacity, enhance packaging capabilities or improve efficiencies at our production facilities. We intend to continue production capacity and efficiency improvement projects in fiscal year 2021 and expect capital expenditures to be comparable to Fiscal 2020. The Company paid special cash dividends on Common Stock of $135.2 million ($2.90 per share) on January 29, 2019 and $69.9 million ($1.50 per share) on August 4, 2017. The Board of Directors has authorized the Company to repurchase up to 1.6 million shares of common stock. During Fiscal 2020, the Company purchased an aggregate 154,512 shares for a cost of $6.2 million. As of May 2, 2020, 656,572 shares were purchased under the program and 943,428 shares were available for repurchase. Pursuant to a management agreement, we incurred a fee to Corporate Management Advisors, Inc. (CMA) of $10.0 million for Fiscal 2020 and $10.2 million for Fiscal 2019. At May 2, 2020, management fees payable to CMA were $2.6 million. See Note 6 of Notes to Consolidated Financial Statements. ### Cash Flows During Fiscal 2020, $177.7 million was provided by operating activities, $23.9 million was used in investing activities and $5.5 million was used in financing activities. Cash provided by operating activities increased $38.3 million primarily due to decreased working capital requirements and increased depreciation and amortization offset in part by lower net income. Cash used in investing activities decreased due to reduced capital expenditures. Cash used in financing activities includes the $6.2 million of stock repurchased during Fiscal 2020. In Fiscal 2019, $135.2 million ($2.90 per share) special cash dividend was paid on January 29, 2019. ### Financial Position During Fiscal 2020, our working capital increased to $319.0 million from $224.4 million at April 27, 2019. The increase in working capital resulted from increased cash and equivalents generated by operations and reduced inventories offset in part by increased current liabilities. Current liabilities in Fiscal 2020 increased in part due to the adoption of the new lease Accounting Standards Update No. 2016-02, “Leases.” (Topic 842). Trade receivables increased slightly and days sales outstanding was 29.5 days compared to 32.2 days for 2019. Inventories decreased $7.2 million or 10.2% as a result of reductions in finished goods and raw materials. Annual inventory turns increased to 9.4 from 8.8 times. As of May 2, 2020 and April 27, 2019, the current ratio was 3.3 to 1. 20 ### CONTRACTUAL OBLIGATIONS Contractual obligations at May 2, 2020 are payable as follows: *(In thousands)* | | Total | 1 Year Or less | 2 to 3 Years | 3 to 5 Years | More Than 5 Years | | --- | ---: | ---: | ---: | ---: | ---: | | Operating leases | $52,394 | $14,206 | $22,251 | $11,836 | $4,101 | | Purchase commitments | 22,598 | 17,505 | 5,093 | - | - | | Total | $74,992 | $31,711 | $27,344 | $11,836 | $4,101 | We contribute to certain pension plans under collective bargaining agreements and to a discretionary profit sharing plan. Annual contributions were $3.6 million for Fiscal 2020, $3.8 million for Fiscal 2019 and $3.4 million for Fiscal 2018. See Note 11 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 $3.4 million have been issued in connection with our self-insurance programs. These standby letters of credit expire through June 2021 and are expected to be renewed. ### OFF-BALANCE SHEET ARRANGEMENTS AND ESTIMATES We do not have any off-balance sheet arrangements that have, or are reasonably likely to have, a current or future material effect on our financial condition. ### CRITICAL ACCOUNTING POLICIES The preparation of financial statements in conformity with United States generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Although these estimates are based on management'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 our experience with past due accounts, collectability and our analysis of customer data. 21 ### Impairment of Long-Lived Assets All long-lived assets, excluding goodwill and intangible assets not subject to amortization, are evaluated for impairment on the basis of undiscounted cash flows whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. An impaired asset is written down to its estimated fair value based on the best information available. Estimated fair value is generally measured by discounting future cash flows. Goodwill and intangible assets not subject to amortization are evaluated for impairment annually or sooner if we believe such assets may be impaired. An impairment loss is recognized if the carrying amount or, for goodwill, the carrying amount of its reporting unit, is greater than its fair value. ### Income Taxes The Company's effective income tax rate is based on estimates of taxes which will ultimately be payable. Deferred taxes are recorded to give recognition to temporary differences between the tax bases of assets or liabilities and their reported amounts in the financial statements. Valuation allowances are established to reduce the carrying amounts of deferred tax assets when it is deemed, more likely than not, that the benefit of deferred tax assets will not be realized. ### Insurance Programs We maintain self-insured and deductible programs for certain liability, medical and workers’ compensation exposures. Accordingly, we accrue for known claims and estimated incurred but not reported claims not otherwise covered by insurance based on actuarial assumptions and historical claims experience. ### 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. 22 ### FORWARD-LOOKING STATEMENTS National Beverage Corp. and its representatives may make written or oral statements relating to future events or results relative to our financial, operational and business performance, achievements, objectives and strategies. These statements are “forward-looking” 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. ## Market risk As filed, 828 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. ### Interest Rates At May 2, 2020, the Company had no borrowings outstanding. We had no debt-related interest rate exposure during Fiscal 2020. 23 ## Controls and procedures As filed, 2,876 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 is (1) recorded, processed, summarized and reported within the time periods specified in SEC rules and forms and (2) accumulated and communicated to our management, including our Chief Executive Officer and Principal Financial Officer, to allow timely decisions regarding required disclosure. ### Report on Internal Control over Financial Reporting Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Rule 13a-15(f) of the Exchange Act. Under the supervision and with the participation of our management, including our Chief Executive Officer and Principal Financial Officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission in 2013. Based on that evaluation, our management concluded that our internal control over financial reporting was effective as of May 2, 2020. Management recognizes that there are inherent limitations in the effectiveness of any internal control over financial reporting, including the possibility of human error and the circumvention or overriding of internal control. Accordingly, even effective internal control over financial reporting can provide only reasonable assurance with respect to financial statement preparation. Further, because of changes in conditions, the effectiveness of internal control may vary over time. RSM US LLP, an independent registered public accounting firm, has audited the consolidated financial statements included in this Annual Report on Form 10-K and, as part of their audit, has issued their report, included herein, on the effectiveness of our internal control over financial reporting. ### Changes in Internal Control over Financial Reporting There were no changes in our internal control over financial reporting during the quarter ended May 2, 2020 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. 45 Filed Jul 1, 2020. Source: SEC EDGAR, the filing index for accession 0001437749-20-014395. Last ingested by Listed: Oct 24, 2026, 14:53 ET. No prices; not investment advice.