National Beverage Corp.
Annual Report 2002

Plain-text annual report

(cid:2) Good Thoughts, Good Words, Good Deeds, Good Habits, Good Character, (cid:2) (cid:2) (cid:3) (cid:2) Great Destiny! Join Us... National Beverage Corp. 2002 Annual Report (cid:2) (cid:2) (cid:2) (cid:2) (cid:2) 01 (cid:3) The Choice of Choices! (cid:2) 02 Isn’t it wonderful to bring happiness and fond memories to someone? (Feels great just thinking about it!) (cid:2) (cid:2) Good Thoughts (cid:2) Certainly, no one knows what kind of thoughts are in another’s mind…but kindness and charity cannot exist without first thinking good thoughts. So…having the discipline and tenacity to manage one’s mind is a prerequisite for getting superior results…and as Team National knows—“Why accept good when excellent is available!” Get Well…Happy Birthday…Great Game… Cheers…Welcome Home…Enjoy the Picnic… Happy Holidays…Congratulations…are just a few good thoughts that our wonderful soft drinks are associated with…and for good reason. Good thoughts went into giving them the heritage, the delicious taste and always… the great value! G.T. G.T. G.T. Excellent growth capacity… debt/equity ratio is .09 Five-year compounded EPS growth rate of 9.4% 16 beverage plants strategically located in the USA Our thoughts are to be… The Very Best At What We Do…Always! (cid:2) (cid:2) (cid:2) (cid:2) (cid:3) Facts Consistent and stable business strategy Single line of business—beverage Fun consumer products Respected, proven philosophy Excellent financial position Experienced, committed management team Consistent and certifiable operating results Over a century of brand awareness (cid:2) (cid:2) (cid:2) (cid:2) (cid:2) (cid:2) (cid:2) (cid:2) (cid:2) (cid:2) 03 (cid:2) (cid:2) 04 I’ll tell you how I did it…but I’m sure you’ll do it better— smarter—faster! (cid:3) (cid:2) (cid:2) Good Words (cid:2) “What a great job!” “We’re so glad you’re part of our team!” Being able to communicate our good thoughts into good words…then creating the positive atmosphere in which to produce great products…is what we do every day at National Beverage. Whether we are developing exciting new flavors, inspiring innovative ideas or praising our team members for a job well done, good words are essential in motivating the human spirit. G.W. (cid:2) G.W. (cid:2) G.W. (cid:2) Brand growth was almost twice that of the industry Net working capital exceeded debt by $59.2 million Revenues per employee exceeded the industry by 41% National Beverage is proud to add fun and excitement to family traditions celebrated throughout the year. You can count on us to continue producing the finest products…which in turn generates smiles and good words all across America. (cid:2) 05 (cid:2) 06 (cid:2) True caring and kindness, plus a loving heart… is genuine compassion! Positively! (cid:2) (cid:3) (cid:2) Good Deeds (cid:2) At National Beverage, our good deeds show our genuine concern for those in need. Since 1994, St. Nick’s holiday promotion dedicates a portion of its proceeds to support St. Jude Children’s Research Hospital and City of Hope National Medical Center in their treatment of cancer and other life-threatening diseases of the precious children for which they care. Reaching out and giving back is an important part of National Beverage family values. G.D. (cid:2) G.D. (cid:2) G.D. (cid:2) Payroll and benefits exceeded $80 million No restructuring charges…ever! 16 years of increased employee benefits As the ’ole saying goes…’charity begins at home’…and to this point, our daily good deeds begin by growing people, with special caring and mentoring…and consistently providing challenging opportunities. (cid:2) (cid:4) 07 08 (cid:3) Sound principles make life’s journey… a smoother road… paved with Pride! (cid:2) (cid:2) (cid:2) Good Habits (cid:2) If one compares results using the highest standard possible and has the ability to modify their actions to achieve these results…then they have what it takes to do it again and again and again. Good habits are repetitious thoughts and actions that are routinely used to get the results envisioned. Team National does not believe that practice makes perfect…they believe that perfect practice makes perfect…especially if you are filling products at the rate of 1,500 per minute. G.H. (cid:2) G.H. (cid:2) G.H. (cid:2) Net sales grew to $502.8 million EBITDA was $39.4 million EPS climbed to $.91 per share Great philosophy, great people, great products, great income statement, great balance sheet…now, we apply these to much opportunity, and challenge ourselves to outwit, outsell and out-innovate our competition. Well, we call that a good great habit. Dynamics Over the past seven years: (cid:2) (cid:3) Investor cash flow = net income plus depreciation and amortization minus net capital expenditures EBITDA = income before income taxes plus interest expense, depreciation and amortization (cid:2) 09 (cid:2) (cid:2) Ethics—Scruples—Morals God—Country—Family Faith—Trust—Honor… The Right Stuff! 10 (cid:2) (cid:2) (cid:2) Good Character (cid:2) The ultimate is to put it all together…thoughts, words, deeds, habits…and produce, through sound philosophy and high standards… a good character. In a way, every package, every flavor and every soft drink is a good character within itself…and to make them great characters, we need consumers who demand more than just a thirst quencher. Now, add a maturing process (like 100 years or more) and you can create some great soft drink characters. G.C. G.C. G.C. Shareholders’ equity grew to $125.7 million Operating income reached $26.8 million Net income increased to $16.6 million Our strong commitment to excellence and quality, plus these great soft drinks in our family of beverages…Our Destiny! (cid:2) (cid:2) (cid:2) Value Stats Stock Price $46.15 Coca-Cola Bottling Co. Consol. $29.62 Pepsi Bottling Group $21.37 Coca-Cola Enterprises $16.48 Cott Corp. $14.34 PepsiAmericas $11.85 National Beverage Based on closing stock prices as of August 16, 2002. Source: Multex Investor Price/ Earnings Ratio 20.1x 24.5x 49.8x 24.6x 18.6x 13.6x (cid:2) 11 (cid:2) 12 Good Deeds (cid:2) Good Character Good Wo rd s G o o d T h o u g h t s 13 (cid:2) ® (cid:2) G r e a t D e s t i n y ! ! Good Habits (cid:2) 14 (cid:2) (cid:2) ‘Good Bytes’ ‘Good Bytes’ FY2002…Breaking News! 15 If I could define a ‘feeling’…one that I experienced more than any other throughout most of FY2002, it was that ‘pain-in-the-gut ’ anxiety when reading or hearing…Breaking News. These words have conditioned us to feel bad, stressed and to expect more ugliness! Time to turn off the bad—and tune in the good. Personally speaking, if possible, my goals in the future would include buying a newspaper publishing company, along with a TV station, that only carries good programming and reports all good news. You could then be watching a very nice program and suddenly flashing across the screen are the words…‘Good Bytes.’ Wow…one would begin to perk up and instantly become relaxed (again conditioned). “Tranquilized with goodness again,” would be our thoughts as we smiled. Channel 00 on TV and the back page of the newspaper would be used to cover all the other ‘stuff ’—Better, right ? This annual report was designed to show the real personality of Team National and portray the unique character of our Company. If detailed financial information and other data on our business are of interest…everything is contained within this annual report. Should anyone want to know if the officers of the Company and I have signed statements swearing that all of the facts that we are aware of are truly reflected, the answer is yes—16 times in 16 years…every year, so help me. So…from here on, I am going to share some…‘Good Bytes.’ National Beverage is a multi-system distribution Company that manufactures and produces all of the beverages that you see contained herein. We also market and sell everything that is manufactured. From the original thoughts that our ‘idea’ people create to the ‘secret ’ formulas of our chemists, and then on to our brand managers’ analysis with focus groups…Team National does some things no other organization in the world does. First, members of Team National are handpicked by the handpicked ones before them…and each is cared for in a very special way. They are mentored with a motivating philosophy that creates, within each one, an extreme amount of passion for what they do. We market, sell and manufacture Shasta, Faygo, Everfresh, LaCroix, Ritz, Ohana, Crystal Bay, Big Shot and Mr. Pure beverages. No other can make this statement. This is, no doubt, one very large—could even be described as a ‘Huge…Good Byte!’ Second, our marketing and sales people are phenomenal. Recently, during a severe wind storm in San Francisco…the siding of a historic skyscraper was blown away…dramatically revealing a 1950’s Shasta painting covering the entire side of the building. The media quickly dubbed this ‘miracle art.’ Our innovative marketing team immediately developed a soft drink label, and the nostalgic Shasta 12oz. package you see in this annual report was…reborn. Shasta sales are growing significantly and this 1889 brand, together with our 1907 Faygo brand, remain our flagships. I would also say this is a ‘Big…Good Byte!’ (cid:2) 16 Third, our arsenal to equip ourselves and compete in the marketplace is the finest to be found. Our Company has a mature and seasoned management team…a rare combination of youthful energy and dynamics…with titanium stability and valued wisdom. (cid:2) National Beverage has a strong balance sheet with tremendous leverage possibilities. In the current economic atmosphere, this is our second most powerful asset. While interest rates may be at their lowest, credit covenants are tough. Our robust cash position and cash generating capability are offsets to those rugged bank requirements. Our prowess for growth opportunities has never been keener. We are on the ‘scent ’ as they say! Our single most powerful asset is our Philosophy, Passion, Smarts Quotient. We have the philosophy that defines why we do things…the passion that drives how we do things…and the smarts (knowledge/experience) that dictates when we do things. Other organizations may make similar statements, but remember, we are a player in an industry that is controlled by giants and yet, year after year, increased revenues and profits are reflected with NO financial engineering… NONE! No restructuring charges ever since the Company was founded. This is quite a statement to make…regardless of size; after all, we were operating in the same conditions everyone else was who suffered reduced revenues or heavy losses…and worse, bad acquisition write-offs! The foregoing statement is very profound when one understands that the last six operations we acquired were companies that needed significant PPS Quotient, in that, they were all turnaround situations. (cid:2) This is a ‘Priceless…Good Byte!’ So…now the future… One could think that if we play with the giants and do better than okay in that competitive atmosphere…and our fun-flavored, great-tasting soft drinks are growing in the face of declining colas…AND we continue to create dynamics when employing our winning philosophy… we have a Great Destiny! Surely, some may ponder and question this last statement…but it is endowed with the same smart logic we must instinctively use…to live our lives safe and happy. Our goal continues to be…‘The Best At What We Do…Always!’ To our faithful shareholders, our great board members, our customers, suppliers and loyal consumers…and you—each and every one of you, Team National, thank you all for being a part of this wonderful Company! Nick A. Caporella Chairman and Chief Executive Officer P.S. ‘Hang on to your principles… for they bond to the soles of your feet!’ (cid:2) 17 (cid:2) Financial Review Selected Financial Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 Management’s Discussion and Analysis of Financial Condition and Results of Operations . . . . . . . . . . . . 19 Consolidated Balance Sheets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24 Consolidated Statements of Income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25 Consolidated Statements of Shareholders’ Equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26 Consolidated Statements of Cash Flows. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27 Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28 Report of Independent Certified Public Accountants. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35 Market Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36 (cid:2) National Beverage Corp. Selected Financial Data (In thousands, except per share amounts) Statement of Income Data: Net sales Cost of sales Gross profit Selling, general and administrative expenses Interest expense Other income—net Income before income taxes Provision for income taxes Net income Net income per share (1): Basic Diluted Balance Sheet Data: Working capital Property—net Total assets Long-term debt Deferred income taxes Shareholders’ equity Fiscal Year Ended April 27, 2002 April 28, 2001 April 29, 2000 May 1, 1999 May 2, 1998 $502,778 $480,415 $426,269 $402,108 $400,749 339,041 323,743 286,245 268,844 275,083 163,737 136,925 857 867 26,822 10,270 156,672 140,024 133,264 125,666 131,852 120,104 110,246 102,195 2,110 1,506 24,216 9,236 2,789 4,754 21,885 8,302 3,304 1,323 21,037 7,868 4,175 1,633 20,929 7,827 $ 16,552 $ 14,980 $ 13,583 $ 13,169 $ 13,102 $ $ .91 .87 $ .82 .80 $ .74 .71 $ .71 .68 .71 .68 $ 70,164 $ 62,444 $ 54,907 $ 57,504 $ 50,398 60,658 205,685 10,981 12,072 62,215 62,430 56,103 55,945 203,868 197,754 180,404 182,327 24,136 10,208 33,933 8,011 93,686 40,267 8,344 82,005 41,600 8,332 69,980 125,677 108,488 (1)Basic net income per share is computed by dividing earnings applicable to common shares by the weighted-average number of shares outstanding. Diluted net income per share includes the dilutive effect of stock options. National Beverage Corp. 19 Management’s Discussion and Analysis of Financial Condition and Results of Operations General Overview National Beverage Corp. (the “Company”) is a holding company for various operating subsidiaries that develop, manufacture, market and distribute a com- plete portfolio of quality beverage products throughout the United States. The Company’s brands emphasize distinctive flavor variety, including its flagship brands Shasta(cid:2) and Faygo(cid:2), complete lines of multi-flavored and cola soft drinks. In addition, the Company offers an assortment of premium beverages geared toward the health-conscious consumer, including Everfresh(cid:2), Home Juice(cid:2) and Mr. Pure(cid:2) 100% juice and juice- based products; and LaCROIX(cid:2), Mt. Shasta(cid:3), Crystal Bay(cid:2) and ClearFruit(cid:2) flavored and spring water prod- ucts. The Company also produces specialty products, including VooDoo Rain(cid:2), a line of alternative beverages geared toward young consumers, Ohana(cid:2) fruit- flavored drinks and St. Nick’s(cid:2) holiday soft drinks. Substantially all of the Company’s brands are pro- duced in its sixteen manufacturing facilities, which are strategically located in major metropolitan markets throughout the continental United States. The Company also develops and produces soft drinks for retail grocery chains, warehouse clubs, mass-merchandisers and wholesalers (“allied brands”) as well as soft drinks for other beverage companies. The Company’s strategy emphasizes the growth of its branded products by offering a diverse beverage portfolio of proprietary flavors; by supporting the franchise value of regional brands; by developing and acquiring innovative products tailored toward healthy lifestyles; and by appealing to the “quality-price” sensitivity factor of the family consumer. Management believes that the “regional share dynamics” of its brands have a consumer loyalty within local markets that generates more aggressive retailer sponsored manufacturing functions with national and regional retailers marketing/sales expertise to maximize sales for branded and allied branded products. These “Strategic Alliances” provide for retailer promotional support for the Company’s brands and nationally integrated manufacturing and distribution services for the retailer’s allied brands. Over the last several years, the Company has focused on increasing penetration of its brands in the convenience channel through company-owned and independent distributors. The convenience channel is composed of convenience stores, gas stations and other smaller “up-and-down-the-street” accounts. Because of the higher retail prices and margins that typically prevail, the Company has undertaken specific measures to expand its distribution in this channel. These include the development of products specifically targeted to this market, such as VooDoo Rain, ClearFruit, Everfresh, Home Juice and Mr. Pure, and the acquisition of the Ritz(cid:2) and Crystal Bay brands in fiscal 2001. Also, the Company has created pro- prietary and specialized packaging for these products with graphics specifically designed for the discrimi- nating consumer. Management intends to continue its focus on enhancing growth in the convenience channel through both specialized packaging and innovative product development. Beverage industry sales are seasonal with the highest volume typically realized during the summer months. Additionally, the Company’s operating results are subject to numerous factors, including fluctuations in the costs of raw materials, changes in consumer preference for beverage products and competitive pricing in the marketplace. Results of Operations promotional activities. Net Sales: The Company occupies a unique position in the Net sales for fiscal 2002 increased approximately industry as a vertically integrated national company $22.4 million, or 4.7%, to $502.8 million. This sales delivering branded and allied brands through a hybrid growth was due primarily to increased pricing in distribution network to multiple beverage channels. As certain markets, increased volume of the Company’s part of its sales and marketing strategy, the Company branded soft drinks, and sales of the Ritz and Crystal enters into long-term contractual relationships that join Bay brands acquired in September 2000. This improve- the expertise of Company sales, marketing and ment was partially offset by changes in product mix National Beverage Corp. Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued) and the elimination of certain low margin allied $1.4 million for fiscal 2000. The decline in interest branded business. income is due to a reduction in investment yields. In Net sales for fiscal 2001 increased approximately addition, other income for fiscal 2000 includes a gain $54.1 million, or 12.7%, to $480.4 million. This of $3.4 million from the sale of a residual interest in increase was due primarily to volume growth in the an operating lease. Company’s flavored carbonated soft drinks, increased pricing of the Company’s proprietary brands, and sales of the Ritz and Crystal Bay brands acquired in September 2000. This improvement was partially offset by declines related to product mix. Gross Profit: Income Taxes: The Company’s effective tax rate was approximately 38.3% for fiscal 2002, 38.1% for fiscal 2001, and 37.9% for fiscal 2000. The difference between the effective rate and the federal statutory rate of 35% was primarily due to the effects of state income taxes and Gross profit for fiscal 2002, which approximated other nondeductible expenses. See Note 8 of Notes 32.6% of net sales, increased 4.5%, to $163.7 million. to Consolidated Financial Statements. Gross profit was favorably affected by the improved pricing mentioned above and the effect of volume Capital Resources growth on fixed manufacturing costs, partially offset by increased costs and changes in product mix. Gross profit approximated 32.6% and 32.8% of net sales in fiscal 2001 and fiscal 2000, respectively. This change in gross profit reflects increased distrib- ution in the convenience channel which was offset by changes in product mix and increased utility and labor costs. The Company’s current sources of capital are cash flow from operations and borrowings under existing credit facilities. The Company maintains unsecured revolving credit facilities aggregating $45 million of which approximately $43 million was available for future borrowings at April 27, 2002. Management believes that existing capital resources are sufficient to meet the Company’s and the parent company’s Selling, General and Administrative Expenses: capital requirements for the foreseeable future. Selling, general and administrative expenses for fiscal Management views earnings before interest expense, 2002 were $136.9 million or 27.2% of net sales as taxes, depreciation and amortization (“EBITDA”) as a compared to $131.9 million or 27.4% of net sales for key indicator of the Company’s operating performance fiscal 2001. The dollar increase was primarily due to and enterprise value, although not as a substitute for higher distribution and selling costs related to increased cash flow from operations or operating income. The sales volume. The decline as a percent of net sales Company’s EBITDA increased 3.6% to $39.4 million reflects the effect of higher volume on fixed expenses. for fiscal 2002 from $38.1 million for the prior year. Selling, general and administrative expenses for Management believes that EBITDA is sufficient to fiscal 2001 increased $11.7 million, or 9.8%, to support additional growth and debt capacity. $131.9 million. This increase was due to higher dis- tribution and selling costs related to increased sales Summary of Cash Flow volume, higher fuel costs, and integration costs related to the BCI acquisition. The Company’s principal source of cash during fiscal 2002 was $23.4 million provided by operating Interest Expense and Other Income–Net: activities. The Company’s primary uses of cash were Fiscal 2002 and 2001 interest expense decreased net debt repayments of $13.2 million and capital $1.3 million and $.7 million, respectively, due to a expenditures of $7.2 million. reduction in average outstanding debt and interest rates. Net cash provided by operating activities increased Other income includes interest income of $1.1 million to $23.4 million for fiscal 2002 from $21.5 million for fiscal 2002, $1.6 million for fiscal 2001, and last year largely due to an increase in net income and National Beverage Corp. 21 favorable changes in working capital. Net cash used respectively, of common stock. Since January 1998, in investing activities declined to $7.1 million from the Company has purchased 465,810 shares of its $10.0 million reflecting $4.0 million expended for common stock. acquisitions in fiscal 2001. Net cash used in financing Pursuant to a management agreement, the Company activities increased $2.9 million for fiscal 2002 as a incurred a fee to Corporate Management Advisors, result of an increase in debt repayments. Inc. (“CMA”) of approximately $5.0 million for fiscal Financial Condition During fiscal 2002, the Company’s working capital improved to $70.2 million from $62.4 million primarily due to cash generated from operations, an increase in current assets, and a reduction in accounts payable. 2002, $4.8 million for fiscal 2001, and $4.3 million for fiscal 2000. At April 27, 2002, the Company owed $1.3 million to CMA for unpaid fees. See Note 7 of Notes to Consolidated Financial Statements. Changes in Accounting Standards Trade receivables and accrued liabilities increased The Company adopted Statement of Financial Account- as a result of the sales growth while the decline in ing Standards (“SFAS”) No. 133 “Accounting for accounts payable is related to the timing of certain Derivative Instruments and Hedging Activities” in the raw material payments. At April 27, 2002, the current first quarter of fiscal 2002. The adoption of SFAS ratio was 2.3 to 1 compared to 2.1 to 1 for the prior No. 133 did not have a material impact on the year. The debt-to-equity ratio improved to .1 to 1 from Company’s financial position or operating results and .2 to 1 reflecting a reduction in debt and an increase has not resulted in significant changes to its financial in retained earnings. Liquidity The Company continually evaluates capital projects designed to expand capacity and improve efficiency at its manufacturing facilities. The Company presently has no material commitments for capital expenditures and expects that fiscal 2003 capital expenditures will be comparable to fiscal 2002. Debt agreements require subsidiaries to maintain certain financial ratios and contain other restrictions, none of which are expected to have a material impact on the operations or financial position of the Company. At April 27, 2002, retained earnings of approximately $28 million were restricted from distri- bution and the Company was in compliance with all loan covenants. See Note 6 of Notes to Consolidated Financial Statements. In January 1998, the Board of Directors authorized the Company to repurchase up to 800,000 shares of its common stock. In fiscal 2002 and 2001, the Company purchased 23,900 shares and 33,600 shares, risk management practices. Also, in the first quarter of fiscal 2002, the Company adopted SFAS No. 142 “Goodwill and Other Intangible Assets.” The adop- tion of SFAS No. 142 did not materially impact the Company’s financial position or operating results. See Note 4 of Notes to Consolidated Financial Statements. In the fourth quarter of fiscal 2002, the Company adopted the Emerging Issues Task Force (“EITF”) 01-9 “Accounting for Consideration Given by a Vendor to a Customer or Reseller of the Vendor’s Products.” The adoption of EITF 01-9 did not materially impact the Company’s operating results. In October 2001, the Financial Accounting Stan- dards Board issued SFAS No. 144 “Accounting for the Impairment or Disposal of Long-Lived Assets.” This statement supersedes SFAS No. 121 “Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed of ” and addresses financial accounting and reporting for the impairment or disposal of long-lived assets. SFAS No. 144 is effective for the Company’s fiscal year beginning April 28, 2002. The Company does not expect that the adoption of this statement will materially impact its financial position or its operating results. National Beverage Corp. Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued) In May 2002, the Board issued SFAS No. 145 Impairment of Long-Lived Assets “Rescission of FASB Statements No. 4, 44, and 64, All long-lived assets, excluding goodwill and intangible Amendment of FASB Statement No. 13, and Technical assets not subject to amortization, are evaluated for Corrections” which rescinds the automatic treatment of impairment on the basis of undiscounted cash flows gains or losses from extinguishment of debt as extraor- whenever events or changes in circumstances indicate dinary. SFAS No. 145 also requires sale-leaseback that the carrying amount of an asset may not be accounting for certain lease modifications and makes recoverable. An impaired asset is written down to its various technical corrections to existing pronounce- estimated fair market value based on the best informa- ments. The provisions of SFAS No. 145 related to the tion available. Estimated fair market value is generally rescission of FASB No. 4 are effective for fiscal years measured by discounting future cash flows. Goodwill beginning after May 15, 2002 with all other provisions and intangible assets not subject to amortization are effective for transactions occurring after May 15, evaluated for impairment annually or sooner in accord- 2002, with early adoption encouraged. ance with SFAS No. 142 and an impairment loss is recognized if the carrying amount is greater than Critical Accounting Policies its fair value. The preparation of financial statements requires esti- Income Taxes mates and assumptions that affect the reporting of The Company’s effective income tax rate and the tax assets, liabilities, revenues and expenses, and the bases of its assets and liabilities are based on man- disclosure of contingent assets and liabilities. Certain agement’s estimate of taxes which will ultimately be of the Company’s accounting policies are critical to payable. Deferred taxes are recorded to give recog- understanding its financial statements because their nition to temporary differences between the tax bases application places significant demands on manage- of assets or liabilities and their reported amounts in the ment’s judgment, with financial reporting results relying financial statements. Valuation allowances are estab- on estimates of matters that are inherently uncertain. lished when it is deemed, more likely than not, that the Management believes that the critical accounting benefit of deferred tax assets will not be realized. policies described in the following paragraphs affect the most significant estimates and assumptions used in the preparation of its consolidated financial state- ments. For these policies, we caution that future events rarely develop exactly as estimated, and the best estimates routinely require adjustment. Credit Risk The Company sells products to a variety of customers and extends credit based on an evaluation of the customer’s financial condition, generally without requiring collateral. Exposure to losses on receivables varies by customer principally due to the financial condition of each customer. The Company monitors its exposure to credit losses and maintains allowances for anticipated losses. Insurance Programs The Company maintains self-insured and deductible programs for certain liability, medical and workers’ compensation exposures. The Company accrues for known claims and estimated incurred but not reported claims not otherwise covered by insurance, based on actuarial assumptions and historical claims experience. Forward-Looking Statements The Company and its representatives may from time to time make written or oral statements that are “forward- looking” within the meaning of the Private Securities Litigation Reform Act of 1995, including statements contained in this Annual Report, filings with the National Beverage Corp. 23 Securities and Exchange Commission and other reports to the Company’s stockholders. Certain statements, including, without limitation, statements containing the words “believes,” “anticipates,” “intends,” “expects,” and “estimates” constitute “forward-looking Quantitative and Qualitative Disclosures About Market Risk The principal market risks to which the Company is exposed are commodity prices and interest rates. statements” and involve known and unknown risk, Commodities uncertainties and other factors that may cause the The Company purchases various raw materials that actual results, performance or achievements of the fluctuate based on commodity market conditions. These Company to be materially different from any future include aluminum cans, high fructose corn syrup, and results, performance or achievements expressed or various juice concentrates. The Company’s ability to implied by such forward-looking statements. Such recover increased costs through higher pricing may factors include, but are not limited to, the following: be limited by the competitive environment in which general economic and business conditions; pricing it operates. of competitive products; success of the Company’s Strategic Alliance objective; success in acquiring other beverage businesses; success of new product and flavor introductions; fluctuations in the costs of raw materials; the Company’s ability to increase prices; continued retailer support for the Company’s products; changes in consumer preferences; success of imple- menting business strategies; changes in business strategy or development plans; government regulations; regional weather conditions; and other factors refer- enced in this Annual Report. The Company disclaims an obligation to update any such factors or to publicly announce the results of any revisions to any forward- looking statements contained herein to reflect future events or developments. Interest Rates At the end of fiscal 2002, the Company had $10.9 mil- lion of floating-rate term-debt outstanding. If the interest rate changed by 100 basis points (1%), interest expense for fiscal 2002 would have changed by approximately $160,000. Because of its limited expo- sure to interest rate movements, the Company does not currently utilize interest rate swaps or other interest rate hedging products. The Company’s investment portfolio consists prima- rily of short-term money market instruments, the yields of which fluctuate based largely on short-term Treasury rates. If the yield of these instruments had changed by 100 basis points (1%), interest income for fiscal 2002 would have changed by approximately $360,000. National Beverage Corp. Consolidated Balance Sheets As of April 27, 2002 and April 28, 2001 (In thousands, except share amounts) Assets Current assets: Cash and equivalents Trade receivables—net of allowances of $593 (2002) and $559 (2001) Inventories Deferred income taxes Prepaid and other Total current assets Property—net Goodwill Intangible assets—net Other assets Liabilities and Shareholders’ Equity Current liabilities: Accounts payable Accrued liabilities Income taxes payable Total current liabilities Long-term debt Deferred income taxes Other liabilities Commitments and contingencies Shareholders’ equity: Preferred stock, 7% cumulative, $1 par value, aggregate liquidation preference of $15,000 —1,000,000 shares authorized; 150,000 shares issued; no shares outstanding Common stock, $.01 par value —authorized 50,000,000 shares; issued 22,209,312 shares (2002) and 22,134,612 shares (2001); outstanding 18,212,778 shares (2002) and 18,161,978 shares (2001) Additional paid-in capital Retained earnings Treasury stock—at cost: Preferred stock—150,000 shares Common stock—3,996,534 shares (2002) and 3,972,634 shares (2001) Total shareholders’ equity See accompanying Notes to Consolidated Financial Statements. National Beverage Corp. 2002 2001 $ 42,646 $ 39,625 42,955 31,040 1,616 5,621 41,068 31,747 1,333 6,518 123,878 120,291 60,658 13,145 2,043 5,961 62,215 13,145 2,114 6,103 $205,685 $203,868 $ 30,819 $ 37,651 21,020 1,875 53,714 10,981 12,072 3,241 20,131 65 57,847 24,136 10,208 3,189 150 150 222 221 16,526 15,638 126,257 109,705 (5,100) (5,100) (12,378) (12,126) 125,677 108,488 $205,685 $203,868 Consolidated Statements of Income For the Fiscal Years Ended April 27, 2002, April 28, 2001 and April 29, 2000 25 (In thousands, except per share amounts) Net sales Cost of sales Gross profit Selling, general and administrative expenses Interest expense Other income —net Income before income taxes Provision for income taxes Net income Net income per share— Basic Diluted Average common shares outstanding— Basic Diluted See accompanying Notes to Consolidated Financial Statements. 2002 2001 2000 $502,778 $480,415 $426,269 339,041 323,743 286,245 163,737 136,925 156,672 140,024 131,852 120,104 857 867 26,822 10,270 2,110 1,506 24,216 9,236 2,789 4,754 21,885 8,302 $ 16,552 $ 14,980 $ 13,583 $ $ .91 .87 $ $ .82 .80 $ $ .74 .71 18,212 18,992 18,160 18,840 18,321 19,018 National Beverage Corp. (In thous share ats) (In thousands, except share amounts) Preferred Stock Beginning and end of year Common Stock Beginning of year Additional Paid-In Capital Beginning of year Stock options exercised End of year Retained Earnings Beginning of year Net income End of year Treasury Stock—Preferred Beginning and end of year Treasury Stock—Common Beginning of year Consolidated Statements of Shareholders’ Equity For the Fiscal Years Ended April 27, 2002, April 28, 2001 and April 29, 2000 2002 2001 2000 Shares Amount Shares Amount Shares Amount 150,000 $ 150 150,000 $ 150 150,000 $ 150 22,134,612 221 22,117,332 221 22,062,012 Stock options exercised 74,700 1 17,280 — 55,320 End of year 22,209,312 222 22,134,612 221 22,117,332 15,638 888 16,526 109,705 16,552 126,257 15,556 82 15,638 94,725 14,980 109,705 221 — 221 15,304 252 15,556 81,142 13,583 94,725 (9,712) (2,154) 150,000 (5,100) 150,000 (5,100) 150,000 (5,100) Purchase of common stock 23,900 (252) 33,600 (260) 265,980 3,972,634 (12,126) 3,939,034 (11,866) 3,673,054 End of year 3,996,534 (12,378) 3,972,634 (12,126) 3,939,034 (11,866) Total Shareholders’ Equity $125,677 $108,488 $ 93,686 See accompanying Notes to Consolidated Financial Statements. National Beverage Corp. Consolidated Statements of Cash Flows For the Fiscal Years Ended April 27, 2002, April 28, 2001 and April 29, 2000 27 (In thousands) Operating Activities: Net income Adjustments to reconcile net income to net cash provided by (used in) operating activities: Depreciation and amortization Deferred income tax provision Loss (gain) on sale of assets Changes in assets and liabilities, net of acquisitions: Trade receivables Inventories Prepaid and other assets Accounts payable Other liabilities, net Net cash provided by operating activities Investing Activities: Property additions Proceeds from sale of assets Acquisitions, net of cash acquired Net cash used in investing activities Financing Activities: Debt borrowings Debt repayments Borrowings (payments) on line of credit, net Purchase of common stock Proceeds from stock options exercised Net cash used in financing activities Net Increase in Cash and Equivalents Cash and Equivalents—Beginning of Year Cash and Equivalents—End of Year Other Cash Flow Information: Interest paid Income taxes paid See accompanying Notes to Consolidated Financial Statements. 2002 2001 2000 $ 16,552 $ 14,980 $ 13,583 11,750 11,739 10,163 1,581 203 2,329 582 95 (3,364) (1,887) (1,948) 707 (2,180) (6,832) 3,463 786 (4,002) 92 (2,604) (677) (1,934) (3,441) 2,809 1,926 23,357 21,467 19,647 (7,162) (6,049) (8,559) 72 — 28 3,557 (3,979) (5,258) (7,090) (10,000) (10,260) — (9,155) (4,000) (252) 161 — (9,106) (1,000) (260) 42 4,000 (8,334) (2,000) (2,154) 103 (13,246) (10,324) (8,385) 3,021 39,625 1,143 1,002 38,482 37,480 $ 42,646 $ 39,625 $ 38,482 $ 935 $ 2,450 $ 2,867 6,671 10,616 7,366 National Beverage Corp. Notes to Consolidated Financial Statements 1. Significant Accounting Policies Organization National Beverage Corp. (the “Company”) is a holding company for various subsidiaries that develop, manu- facture, market and distribute a complete portfolio of cola and multi-flavored soft drinks, juice drinks, water and specialty beverages. Substantially all of the Company’s brands are produced in its sixteen man- ufacturing facilities, which are strategically located in major metropolitan markets across the continental United States. Basis of Presentation “Goodwill and Other Intangible Assets.” The adop- tion of SFAS No. 142 did not materially impact the Company’s financial position or operating results. See Note 4. In the fourth quarter of fiscal 2002, the Company adopted the Emerging Issues Task Force (“EITF”) 01-9 “Accounting for Consideration Given by a Vendor to a Customer or Reseller of the Vendor’s Products.” The adoption of EITF 01-9 did not materially impact the Company’s operating results. In October 2001, the Financial Accounting Stand- ards Board issued SFAS No. 144 “Accounting for the Impairment or Disposal of Long-Lived Assets.” This The consolidated financial statements include the statement supersedes SFAS No. 121 “Accounting for accounts of the Company and its wholly-owned sub- the Impairment of Long-Lived Assets and for Long- sidiaries. All significant intercompany balances have Lived Assets to Be Disposed of ” and addresses finan- been eliminated. The Company’s fiscal year ends cial accounting and reporting for the impairment or the Saturday closest to April 30th. The preparation disposal of long-lived assets. SFAS No. 144 is effective of financial statements in conformity with generally for the Company’s fiscal year beginning April 28, accepted accounting principles requires management 2002. The Company does not expect that the adoption to make estimates and assumptions that affect the of this statement will materially impact its financial amounts reported in the financial statements and position or its operating results. accompanying notes. Although these estimates are In May 2002, the Board issued SFAS No. 145 based on management’s knowledge of current events “Rescission of FASB Statements No. 4, 44, and 64, and actions it may undertake in the future, they may Amendment of FASB Statement No. 13, and Technical ultimately differ from actual results. Certain prior year Corrections” which rescinds the automatic treatment of amounts have been reclassified to conform to the gains or losses from extinguishment of debt as extraor- fiscal 2002 presentation. Cash and Equivalents Cash and equivalents are comprised of cash and highly liquid securities (consisting primarily of short-term money-market investments) with an original maturity or redemption option of three months or less. dinary. SFAS No. 145 also requires sale-leaseback accounting for certain lease modifications and makes various technical corrections to existing pronounce- ments. The provisions of SFAS No. 145 related to the rescission of FASB No. 4 are effective for fiscal years beginning after May 15, 2002 with all other provisions effective for transactions occurring after May 15, 2002, Changes in Accounting Standards with early adoption encouraged. The Company adopted Statement of Financial Accounting Standards (“SFAS”) No. 133 “Accounting for Derivative Instruments and Hedging Activities” in the first quarter of fiscal 2002. The adoption of SFAS No. 133 did not have a material impact on the Company’s financial position or operating results and has not resulted in significant changes to its financial risk management practices. Also, in the first quarter of fiscal 2002, the Company adopted SFAS No. 142 Credit Risk The Company sells products to a variety of customers and extends credit based on an evaluation of the cus- tomer’s financial condition, generally without requiring collateral. Exposure to losses on receivables varies by customer principally due to the financial condition of each customer. The Company monitors its exposure to credit losses and maintains allowances for anticipated losses. At April 27, 2002 and April 28, 2001, the National Beverage Corp. 29 Company did not have any customers that comprised financial statements. Valuation allowances are estab- more than 10% of trade receivables. No one customer lished when it is deemed, more likely than not, that the accounted for more than 10% of net sales for fiscal benefit of deferred tax assets will not be realized. 2002, 2001 or 2000. Customer Contracts Insurance Programs The Company maintains self-insured and deductible The Company incurs certain costs related to long-term programs for certain liability, medical and workers’ contractual relationships with national and regional compensation exposures. The Company accrues for retailers to manufacture and market Company and known claims and estimated incurred but not reported retailer branded products. These costs are deferred claims not otherwise covered by insurance, based on and amortized based on the contractual unit volume actuarial assumptions and historical claims experience. or the straight-line method over the lesser of the period of benefit or the non-cancelable period of the contract. It is the Company’s policy to periodically review and evaluate the future benefits associated with these costs to determine that deferral and amortization is justified. Of these costs, amounts associated with remaining periods of one year or less are included in other cur- rent assets and all other amounts are included in other Inventories Inventories are stated at the lower of first-in, first-out cost or market. Inventories at April 27, 2002 are comprised of finished goods of $17,531,000 and raw materials of $13,509,000. Inventories at April 28, 2001 are comprised of finished goods of $17,721,000 and raw materials of $14,026,000. assets. Advertising costs are expensed as incurred. Net Income Per Share 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 Basic net income per share is computed by dividing net income by the weighted-average number of common shares outstanding. Diluted net income per share includes the dilutive effect of stock options. whenever events or changes in circumstances indicate Property that the carrying amount of an asset may not be Property is recorded at cost. Depreciation is computed recoverable. An impaired asset is written down to its by the straight-line method over estimated useful lives estimated fair market value based on the best informa- of 7 to 30 years for buildings and improvements, and tion available. Estimated fair market value is generally 3 to 15 years for machinery and equipment. When measured by discounting future cash flows. Goodwill assets are retired or otherwise disposed, the cost and intangible assets not subject to amortization are and accumulated depreciation are removed from the evaluated for impairment annually or sooner in accord- respective accounts and any related gain or loss is ance with SFAS No. 142 and an impairment loss is recognized. Maintenance and repair costs are recognized if the carrying amount is greater than its charged to expense as incurred, and renewals and fair value. Income Taxes improvements that extend the useful lives of assets are capitalized. The Company’s effective income tax rate and the tax Revenue Recognition bases of its assets and liabilities are based on man- Revenue from product sales is recognized by the agement’s estimate of taxes which will ultimately be Company when title and risk of loss passes to the payable. Deferred taxes are recorded to give recog- customer, which generally occurs upon delivery. nition to temporary differences between the tax bases of assets or liabilities and their reported amounts in the National Beverage Corp. Notes to Consolidated Financial Statements (continued) Segment Reporting 3. Property The Company operates in a single operating segment for purposes of presenting financial information and evaluating performance. As such, the accompanying Property at April 27, 2002 and April 28, 2001 consisted of the following: consolidated financial statements present financial (In thousands) information in a format that is consistent with the Land internal financial information used by management. Shipping and Handling Costs Buildings and improvements Machinery and equipment Shipping and handling costs are reported in “Selling, Total 2002 2001 $ 10,625 $ 10,625 35,437 98,195 35,088 94,356 144,257 140,069 general and administrative expenses” in the accompa- Less accumulated depreciation (83,599) (77,854) nying statements of income. Such costs aggregated Property—net $ 60,658 $ 62,215 $39.7 million in fiscal 2002, $37.0 million in fiscal 2001, and $31.2 million in fiscal 2000. 2. Acquisitions In September 2000, the Company acquired certain operations and assets of Beverage Canners International, Inc., a Miami-based producer and distributor of car- bonated soft drinks and sparkling waters. The assets acquired included a leased manufacturing facility, inventory and the Ritz(cid:2) and Crystal Bay (cid:2) brands. The acquisition has been accounted for using the purchase Depreciation expense was $8,444,000 for fiscal 2002, $7,996,000 for fiscal 2001, and $6,966,000 for fiscal 2000. Other income for the fourth quarter of fiscal 2000 includes a gain of $3.4 million from the sale of a residual interest in an operating lease. 4. Intangible Assets In accordance with SFAS No. 142 adopted in the first quarter of fiscal 2002, the Company discontinued the amortization of goodwill and certain intangible assets method of accounting and, accordingly, the purchase that were determined to have an indefinite life. Had price has been allocated to the assets acquired based the Company applied the non-amortization provisions upon their estimated fair values at the date of acqui- of SFAS No. 142 at the beginning of fiscal 2001, net sition. Operating results of the acquired business, which income would have increased by $361,000 (approxi- are not material to consolidated results, have been mately $.02 per share). Intangible assets at April 27, included in the consolidated statements of income from 2002 and April 28, 2001 consisted of the following: the date of acquisition. In May 1999, the Company acquired the operations and assets of Home Juice, a Chicago-based producer and distributor of premium juice and juice products. The assets acquired included a manufacturing facility, receivables, inventory and the Mr. Pure(cid:2) and Home Juice (cid:2) trademarks. The operating results of Home Juice, which are not material to consolidated results, have (In thousands) 2002 2001 Unamortized trademarks $ 1,587 $ 1,601 Amortizable distribution rights Less accumulated amortization Net $ $ 855 (399) 456 $ $ 855 (342) 513 Amortization expense related to intangible assets been included in the consolidated statements of income was $57,000 and $144,000 for fiscal 2002 and fiscal from the date of acquisition. The acquisition has been 2001, respectively. accounted for using the purchase method and, accord- ingly, the purchase price has been allocated to the assets acquired based upon their estimated fair values at the date of acquisition. National Beverage Corp. 31 5. Accrued Liabilities Accrued liabilities at April 27, 2002 and April 28, 2001 consisted of the following: The long-term portion of debt at April 27, 2002 matures as follows: $10,381,000 in fiscal 2004 and $600,000 in fiscal 2005. The fair value of debt has been estimated using (In thousands) Accrued promotions Accrued compensation Other accrued liabilities Total 6. Debt 2002 2001 discounted cash flow models incorporating discount $ 7,307 $ 5,951 5,487 8,226 5,595 8,585 $21,020 $20,131 rates based on current market interest rates for similar types of instruments. At April 27, 2002 and April 28, 2001, the difference between the estimated fair value and the carrying value of debt instruments was not material. 7. Capital Stock and Transactions with Long-term debt at April 27, 2002 and April 28, 2001 Related Parties consisted of the following: (In thousands) Credit Facilities Term Loan Facilities Other Total 2002 2001 the Company to repurchase up to 800,000 shares In January 1998, the Board of Directors authorized $ — $ 4,000 of its common stock. In fiscal 2002 and 2001, the 10,900 19,900 81 236 Company purchased 23,900 shares and 33,600 shares, respectively, of common stock on the open $10,981 $24,136 market. Such shares are classified as treasury stock. The Company is a party to a management agree- Certain subsidiaries of the Company maintain ment with Corporate Management Advisors, Inc. unsecured revolving credit facilities aggregating (“CMA”), a corporation owned by the Company’s $45 million (the “Credit Facilities”) and unsecured Chairman and Chief Executive Officer. Under the agree- term loan facilities (“Term Loan Facilities”) with banks. ment, the employees of CMA provide the Company The Credit Facilities expire through December 10, 2003 with corporate finance, strategic planning, business and bear interest at 1⁄2 % below the banks’ reference development and other management services for an rate or 1% above LIBOR, at the subsidiaries’ election. annual base fee equal to one percent of consolidated The Term Loan Facilities are repayable in installments net sales, plus incentive compensation based on certain through July 31, 2004, and bear interest at the banks’ factors to be determined by the Compensation Com- reference rate or 11⁄4 % above LIBOR, at the sub- mittee of the Company’s Board of Directors. The sidiaries’ election. The Company intends to utilize its Company incurred fees to CMA of $5.0 million, existing long-term Credit Facilities to fund the current $4.8 million, and $4.3 million for fiscal 2002, 2001 principal payments due on its Term Loan Facilities. and 2000, respectively. No incentive compensation Debt agreements require subsidiaries to maintain has been incurred or approved under the management certain financial ratios and contain other restrictions, agreement since its inception. Included in accounts none of which are expected to have a material impact payable in the accompanying consolidated balance on the operations or financial position of the Company. sheets at April 27, 2002 and April 28, 2001 were At April 27, 2002, retained earnings of approximately amounts due CMA of $1,258,000 and $430,000, $28 million were restricted from distribution and the respectively. Company was in compliance with all loan covenants. National Beverage Corp. Notes to Consolidated Financial Statements (continued) 8. Income Taxes 9. Leases The provision for income taxes consisted of the following: Future minimum rental commitments for non-cancelable (In thousands) 2002 2001 2000 operating leases at April 27, 2002 are as follows: Current Deferred Total $ 8,689 $6,907 $7,720 1,581 2,329 582 $10,270 $9,236 $8,302 The reconciliation of the statutory federal income tax rate to the Company’s effective tax rate is as follows: (In thousands) Fiscal 2003 Fiscal 2004 Fiscal 2005 Fiscal 2006 Fiscal 2007 Thereafter $ 5,166 3,995 2,421 1,026 926 298 2002 2001 2000 Total minimum lease payments $13,832 Statutory federal income tax rate 35.0% 35.0% 35.0% State income taxes, net of federal benefit Goodwill and other permanent differences Other, net 2.6 2.5 2.4 .7 — .6 — .8 (.3) Rental expense was $9,415,000 for fiscal 2002, $10,164,000 for fiscal 2001, and $8,179,000 for fiscal 2000. 10. Incentive and Retirement Plans Effective income tax rate 38.3% 38.1% 37.9% The Company’s 1991 Omnibus Incentive Plan (the “Omnibus Plan”) provides for compensatory awards Deferred taxes are recorded to give recognition to consisting of (i) stock options or stock awards for up temporary differences between the tax bases of assets to 2,000,000 shares of common stock of the Company, or liabilities and their reported amounts in the financial (ii) stock appreciation rights, dividend equivalents, statements. Valuation allowances are established when other stock-based awards in amounts up to 2,000,000 it is deemed, more likely than not, that the benefit of shares of common stock of the Company and (iii) per- deferred tax assets will not be realized. The Company’s formance awards consisting of any combination of deferred tax assets and liabilities as of April 27, 2002 the above. The Omnibus Plan is designed to provide and April 28, 2001 consisted of the following: an incentive to the officers (including those who are (In thousands) Deferred tax assets: 2002 2001 Accrued expenses and other $ 1,857 $ 3,477 Inventory and amortizable assets 452 522 Total deferred tax assets 2,309 3,999 Deferred tax liabilities: Property and intangibles 12,765 12,874 Net deferred tax liabilities $10,456 $ 8,875 also directors) and certain other key employees and consultants of the Company by making available to them an opportunity to acquire a proprietary interest or to increase such interest in the Company. The number of shares or options which may be issued under stock based awards to an individual is limited to 700,000 during any year. Awards may be granted for no cash consideration or such minimal cash consideration as may be required by law. Options generally vest over a five-year period and expire after ten years. National Beverage Corp. 33 Pursuant to a Special Stock Option plan, the the participant. The options are granted at an initial Company has authorized the issuance of options to exercise price of 60% of the purchase price paid purchase up to an aggregate of 500,000 shares for the shares acquired and reduces to the par value of common stock. Options may be granted for such of the Company’s stock at the end of the six-year vesting consideration as determined by the Board or a period. The difference between the exercise price and Committee of the Board. The Company also author- the fair market value of the stock on date of grant is ized the issuance of options to purchase up to amortized over the vesting period. 50,000 shares of common stock to be issued at the On October 26, 2001, the Company’s stockholders direction of the Chairman. approved an amendment to the Company’s Omnibus In March 1997, the Company’s Board of Directors Incentive Plan and Special Stock Option Plan to increase adopted the Key Employee Equity Partnership Program the number of shares available for award by 600,000 (“KEEP”), which provides for the granting of stock and 100,000 shares, respectively. options to purchase up to 100,000 shares of common The Company’s 1991 Stock Purchase Plan (the stock to key employees, consultants, directors and “Stock Purchase Plan”) provides for the purchase of officers of the Company. Participants who purchase up to 640,000 shares of common stock by employees shares of the Company’s stock in the open market of the Company who (i) have been employed by the receive grants of stock options equal to 50% of the Company for at least two years, (ii) are not part-time number of shares purchased, up to a maximum of employees of the Company and (iii) are not owners 6,000 shares in any two-year period. Options under of five percent (5%) or more of the common stock the KEEP program are automatically forfeited in the of the Company. As of April 27, 2002, no shares have event of the sale of shares originally acquired by been issued under the Stock Purchase Plan. The following is a summary of stock option activity: 2002 2001 2000 (Options in thousands) Shares Price Shares Price Shares Weighted- Average Exercise Weighted- Average Exercise Weighted- Average Exercise Price Options outstanding at beginning of year 1,274 $3.71 1,122 $ 3.28 1,191 $3.29 Options granted Options exercised Options canceled Options outstanding at end of year Options exercisable at end of year Options available for grant at end of year 89 (257) (110) 996 751 1,155 8.84 .84 6.45 208 (17) (39) 7.26 2.65 10.61 8 (55) (22) 4.61 1,274 3.71 1,122 5.24 2.28 7.08 3.28 954 387 921 586 Weighted-average fair value of options granted $7.88 $ 5.04 $6.46 National Beverage Corp. Notes to Consolidated Financial Statements (continued) The following is a summary of stock options outstanding at April 27, 2002: (Options in thousands) Range of Exercise Price $2.09 $2.25–$4.95 $5.00 $5.06–$8.54 $9.00–$9.88 Options Outstanding Options Exercisable Weighted- Average Remaining Contractual Life 2 years 4 years 4 years 8 years 8 years Weighted- Average Exercise Price $2.09 2.63 5.00 7.02 9.45 4.61 Shares 392 135 144 156 169 996 Weighted- Average Exercise Price $2.09 2.53 5.00 6.87 9.88 3.49 Shares 392 127 144 35 53 751 The option price range for all options outstanding interest rates of approximately 5% for fiscal 2002, at the end of the fiscal year was $2.09 to $9.88 for 5% for 2001 and 6% for 2000; and no dividend pay- 2002, $.13 to $9.88 for 2001, and $.13 to $13.50 ments. Had compensation cost for the Company’s for 2000. The option price range for options exercised option plans been determined and recorded consistent during the fiscal year was $.13 to $5.00 for 2002, with the Black-Scholes option-pricing model in accord- $2.09 to $5.00 for 2001, and $.63 to $5.00 for ance with SFAS 123, the Company’s net income and 2000. During fiscal 2002, approximately $727,000 earnings per share for fiscal 2002, 2001 and 2000 of accrued compensation and tax benefits related to would have been reduced on a pro forma basis by less stock options exercised was recorded to additional than $200,000 ($.01 per share) for each year. paid-in capital. The Company contributes to various defined con- The Company applies Accounting Principles Board tribution retirement plans (which cover employees Opinion No. 25, “Accounting for Stock Issued to under various collective bargaining agreements) and Employees” (“APB 25”), and related interpretations, discretionary profit sharing plans (which cover all in accounting for stock-based awards to employees. non-union employees). Contributions were $1.7 million Under APB 25, the Company generally recognizes for fiscal 2002, $1.5 million for fiscal 2001, and no compensation expense with respect to such awards $1.3 million for fiscal 2000. unless the exercise price of options granted is less than the market price on the date of grant. 11. Commitments and Contingencies Pro forma information regarding net income and earnings per share is required by Statement of Financial Accounting Standards No. 123 “Accounting and Disclosure of Stock-Based Compensation” (“SFAS 123”) for awards granted after December 15, 1994, as if the Company had accounted for its stock-based awards to employees under the fair value method of SFAS 123. The fair value of stock option grants was estimated using a Black-Scholes option-pricing model with the following assumptions used for grants: expected life of 10 years; volatility factor of 43% for fiscal 2002, 45% for 2001, and 46% for 2000; risk-free From time to time, the Company is a party to various litigation matters arising in the ordinary course of business. In the opinion of management, the ultimate disposition of such matters will not have a material adverse effect on the Company’s consolidated financial position or results of operations. In the ordinary course of its business, the Company enters into commitments for the supply of certain raw materials, none of which are material to the Company’s financial position. National Beverage Corp. 35 12. Quarterly Financial Data (Unaudited) (In thousands, except per share amounts) First Quarter Second Quarter Third Quarter Fourth Quarter Fiscal 2002 Net sales Gross profit Net income Net income per common share: Basic Diluted Fiscal 2001 Net sales Gross profit Net income Net income per common share: Basic Diluted $ 152,385 $ 124,124 $100,409 $ 125,860 50,126 7,616 39,980 3,589 32,587 930 41,044 4,417 $ $ .42 .40 $ $ .20 .19 $ $ .05 .05 $ $ .24 .23 $140,226 $120,760 $ 97,096 $122,333 46,053 6,950 38,917 3,315 30,249 532 41,453 4,183 $ $ .38 .37 $ $ .18 .18 $ $ .03 .03 $ $ .23 .22 Report of Independent Certified Public Accountants To the Board of Directors and Shareholders of National Beverage Corp. In our opinion, the accompanying consolidated balance sheets and the related consolidated statements of income, shareholders’ equity and cash flows present fairly, in all material respects, the financial position of National Beverage Corp. and its subsidiaries at April 27, 2002 and April 28, 2001, and the results of their operations and their cash flows for each of the three years in the period ended April 27, 2002, in conformity with accounting principles generally accepted in the United States of America. These financial statements are the responsibility of the Company’s management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with auditing standards generally accepted in the United States of America, which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. As described in Note 4 to the consolidated financial statements, the Company adopted the provisions of Statement of Financial Accounting Standards No. 142, “Goodwill and Other Intangible Assets” effective April 29, 2001. PricewaterhouseCoopers LLP Miami, Florida July 23, 2002 National Beverage Corp. Market Information The common stock of the Company, par value $.01 per Excluding beneficial owners of the Company’s share, (“the Common Stock”) is listed on the American Common Stock whose securities are held in the names Stock Exchange (“AMEX”) under the symbol “FIZ.” The of various dealers and/or clearing agencies, there following table shows the range of high and low sale were approximately 1,000 shareholders of record at prices per share of the Common Stock as reported by July 19, 2002, according to records maintained by the AMEX for the fiscal quarters indicated: the Company’s transfer agent. Fiscal 2002 Fiscal 2001 High Low High Low First Quarter $10.35 $ 8.90 $ 9.75 $7.63 Second Quarter $10.94 $ 9.66 $ 8.13 $6.69 Third Quarter $13.34 $10.30 $10.25 $6.63 Fourth Quarter $14.40 $12.35 $10.00 $7.94 The Company has not paid any cash dividends with respect to its Common Stock during the last three fiscal years and the Company’s Board of Directors has no present plans for declaring any such cash dividends. See Note 6 of Notes to Consolidated Financial Statements for certain restrictions on the payment of dividends. National Beverage Corp. (cid:2) Corporate Data (cid:2) Directors Nick A. Caporella Chairman of the Board & Chief Executive Officer National Beverage Corp. Joseph G. Caporella Executive Vice President National Beverage Corp. Samuel C. Hathorn, Jr.* President Trendmaker Development Co. S. Lee Kling* Chairman of the Board The Kling Company Joseph P. Klock, Jr., Esq.* Chairman and Managing Partner Steel, Hector & Davis *Member Audit Committee Corporate Management Nick A. Caporella Chairman of the Board & Chief Executive Officer Joseph G. Caporella Executive Vice President George R. Bracken Senior Vice President–Finance Dean A. McCoy Senior Vice President–Controller Raymond J. Notarantonio Executive Director–IT John S. Bartley Director–Internal Audit Brent R. Bott Director–Consumer Marketing Gregory J. Kwederis Director–Beverage Analyst Janet M. McCabe Director–Insurance Lawrence P. Parent Director–Credit Management John S. Shaub Director–Tax Subsidiary Management Subsidiaries Stock Listing National Beverage Corp.’s Common Stock is listed on the American Stock Exchange–ticker symbol FIZ. Registrar and Transfer Agent Mellon Investor Services LLC 85 Challenger Rd. Overpeck Centre Ridgefield Park, NJ 07667 800-756-3353 Independent Auditors PricewaterhouseCoopers LLP Miami, FL Thanks A very special thanks to our wonderful National Beverage Team for a great year. This entire Annual Report reflects people, products and results that are truly…Ours! To all those members of the National Beverage Family who appeared in this Annual Report…Thanks! Mike Bahr Nina Blasquez Austin and Spencer Bott Eugene Bristol Joe Caporella Al Chittaro Greg Cook Roberto Diaz Ed Grant Jessica Keene Ed Knecht Joe Okabe Jeanette Owens Roberto Pavon Nick Perez Shirley Raff Page 4 Page 2 Page 7 Page 10 Page 14 Page 11 Page 3 Page 10 Page 8 Page 6 Inside Front Cover Page 4 Page 9 Page 10 Page 5 Page 6 BevCo Sales, Inc. Beverage Corporation International, Inc. Everfresh Beverages, Inc. Faygo Beverages, Inc. Home Juice Corp. National Retail Brands, Inc. NewBevCo, Inc. PACO, Inc. PETCO, Inc. Shasta Beverages, Inc. Shasta Beverages International, Inc. Shasta Midwest, Inc. Shasta Northwest, Inc. Shasta Sales, Inc. Shasta Sweetener Corp. Shasta West, Inc. Winnsboro Beverage Packers, Inc. Corporate Offices One North University Drive Fort Lauderdale, FL 33324 954-581-0922 Annual Meeting The Annual Meeting of Shareholders will be held on Friday, September 27, 2002 at 2:00 p.m. local time at the Hyatt Regency Orlando International Airport, 9300 Airport Boulevard, Orlando, Florida 32827. Financial and Other Information Copies of National Beverage Corp.’s Annual Report, Annual Report on Forms 10-K and supplemental quarterly financial data are available free of charge. Requests should be directed to the Company at P.O. Box 16720, Fort Lauderdale, FL 33318. Attention: Shareholder Relations. Earnings and other financial results, corporate news and other Company information are available on National Beverage’s website at www.nationalbeverage.com. Edward F. Knecht President Shasta Sweetener Corp. PACO, Inc. Sanford E. Salzberg President Shasta Northwest, Inc. Stanley M. Sheridan President Faygo Beverages, Inc. Michael J. Bahr Executive Vice President Shasta West, Inc. Alan D. Domzalski Executive Vice President Everfresh Beverages, Inc. Brian M. Gaggin Executive Vice President National Retail Brands, Inc. James M. Lee Executive Vice President Beverage Corporation International, Inc. Charles A. Maier Executive Vice President Foodservice Shasta Sales, Inc. Michael J. Perez Executive Vice President Shasta Midwest, Inc. William R. Phillips Executive Vice President National BevPak Dennis L. Thompson Executive Vice President BevCo Sales, Inc. John F. Hlebica Vice President Shasta Beverages International, Inc. Worth B. Shuman, III Vice President Military Sales Gregory L. Kimbrough General Manager PETCO, Inc. Martin J. Rose General Manager Shasta Vending m o c . s r o n n o c - n a r r u c . w w w / . c n I , s r o n n o C & n a r r u C y b d e n g i s e D (cid:2) (cid:2) (cid:3) (cid:2) National Beverage Corp. One North University Drive Fort Lauderdale, FL 33324 

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