National Beverage Corp. Annual Report 2007

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FY2007 Annual Report · National Beverage Corp.

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NATIONAL BEVERAGE CORP.

Think

Hydrations

2007ANNUAL REPORT

Beverage is our world…
Water covers 70% of the earth’s surface and is also the single

largest component of the human body. Fluids feed the body,

providing sustenance, health and wellness. Consumers seek

beverages…first, to replenish or hydrate–second, to quench a

craving–and third, in today’s world–to energize the dynamic

body and mind.

Water is the basis of all life and all beverages.

As consumer needs and preferences continue to evolve, Team

National is focused on the art and science of beverages…making

wonderful tasting liquids that address the health and wellness

demands of all sectors of the American population.

Profoundly energized to innovate beyond existing limits, we are

destined to create new beverages.

We love to…THINK HYDRATIONS.

oi
x
h
o
u

of LaCr
87%
+ b ottles

s consum e

old

a
d

r
e
p

Happenin’

w
a
t
e

million gallons

450
med dail y i n t h e U.S.

a
w

v a porate

ter are e
252
trillion gallons
sphe

daily

a
t
m
o

Envision the freshness and beauty of a natural spring flowing
with healthy and naturally refreshing water. LaCroix captures
the pure essence of that magnificent spring in every bottle.
LaCroix spring and sparkling waters contain no artificial flavors,
sodium or calories, but are loaded with the refreshing good-
ness provided by nature.

A favorite of the Happenin’ generation, LaCroix is a leader
in the U.S. sparkling water category, growing at twice the
rate of that category. Team National’s focus is to continue
to formulate ingredients and waters to provide invigorating,
great-tasting and refreshing hydrations.

National Beverage is hydrating America with the earth’s most
precious resource–one serving at a time!

Smokin’

In its relatively short life, Rip It has gained the ranking as
one of the country’s top energy drinks. The U.S. energy drink
category continued its strong growth in 2006, increasing
volume by more than 56%. Beverage industry experts claim
that Rip It’s volume growth outpaced the category–
once again.

Rip It fuels a diverse population, including college students
who are “rippin’ it and crammin’ it” at exam time. Rip It’s
array of diet and regular flavors and competitive price
points are smokin’ through energy category norms.

Rip It is
the #1
warehouse
delivered
energy drink in
the U.S.

Energy
beverages
fuel ‘action’
America

alue attai n

l
i
a

t
e

e d by the en

r
g

billion

in five years

r
i

b
u
s
i
n
e
s
s

Stylin’

Who is the Chic consumer? She is bright, talented, health-
conscious and demands products that taste good and
look great.

National Beverage delivers this woman an energy drink
developed just for her…Rip It Chic. Chic’s beautiful, slender
cans with eye-catching graphics won the People Magazine
Trendsetters Award for Best New Beverage and were recently
featured at New York’s fashion week–capturing the attention
of women from around the globe.

Complementing its two sugar-free, crisp and distinctive
flavors with an added boost of energy, Chic’s “crowning”
feature is its foil-topped can. Today’s sophisticated woman,
after all, expects her beverage product to be tempting,
convenient and delicious.

Chic is stylin’…just for her.

The beautiful
feeling–Chic

est gr o w t h o pportunity
Women
g energ

g
r

o
w
in

b
e
h
t

t
n
e

y d

inks

F l a v onoid

t s

utrie n
3 reasons to
consume
juices

n
o
t
y
h
P

A
n

tioxida

Livin’

The incomparable aroma and mouth-watering taste of a fresh
apple–the appealing scent and satisfying refreshment of a
“just picked” orange–these are just a sampling of “nature’s
refreshment” and nutrition National Beverage puts in every
bottle of its premium juices and fruit-flavored products.

Everfresh and Mr. Pure juices and ClearFruit flavored
non-carbonated waters excite the palates of consumers
of all ages. Part of the growing non-carbonated category,
Team National will soon announce additional entries of
products with enhanced nutritional properties.

Delicious, replenishing juice products…for daily livin’.

c
-
n
o
n

t e d bevera

arb o
$20
ld in the U.S. in 200

billion

s
o

Faygo w

o
n
N
o
v
e

mber 4, 1907

It’s true that Americans are no longer satisfied with that
“same old cola.” Waters, juices, energy drinks and alternative
beverages today play a major role in America’s consumption
for “share of the stomach.” Yet, with all the choices from
which to choose, carbonated soft drinks (CSDs) remain the
largest beverage category in the U.S.

National Beverage acknowledges the dramatic change in
consumer demands and is hard at work making its flagship
brands more appealing to the demanding consumer. National’s
flavor recognition is without comparison and also features
more diet flavors than any other soft drink company. Shasta
and Faygo maintain their position as strong regional brands–
brands with which consumers “grew up.” New Orleans’ own
Big Shot and Florida’s Ritz “SaborrrrrRitz” flavors complete
CSD offerings of National Beverage.

Chillin’ with a soft drink–it’s as American as apple pie. (Did
we mention that Shasta Apple is a consumer favorite?!)

Chillin’
e’s alu m i n u m usa
422

g
a
r
e
v
e

of C S Ds c

ll o ns

Boeing 747’s
equals Natio

# of g

e
g
a
r
e
v

m
e
d
y
A
m

51gallons
ericans in 2006

0
6

equals National Beverage’s aluminum usage in 2006

e U. S . p o pulation t
52%

th
f
o

a
m
in
s

Healthy
refreshment
for a healthy
lifestyle

r o jected in

s ar e p
ale
250

million cases

s
r
e

of enhan

S
.
n

0
7

p p l em

e
a
c

h ye

a
r.

v i t amin su

ans o
$23
ric
e
m
A

billion
is sp

Nutritional
supplements
on the go!

nce is i m m e diately ab
96%

e
c
s
e
v
r
e

h
e
b
o
dy

Thinkin’

Team National’s vision for the future includes more than the
traditional beverage packaged in a bottle or can. Current
research and development centers around the NutraFizz
line of effervescent tablets that make water taste great
while delivering “good-for-you” supplements and vitamins.
National’s scientists are working on “sticks” containing
vitamins, weight-reduction aids, enhanced waters, fortified
juices and teas–and more.

Tomorrow’s products…National Beverage is thinkin’
about today!

All-Ways
Correcting…

There are similar parallels comparing health, life and business. Each has its spectrum
of broad emotional complexities. We at National Beverage mandate our most revered
emotion–Joy–as our predetermined priority–or shall we say…‘Starting Point.’
So…those who consume our beverages taste and ‘feel’ our most important
ingredient…Joy.

This year’s Annual Report reflects the ‘spirit’ of Team National and its celebration
of turning twenty-one…youthful, ambitious, dynamic and charged!

FY2007 was our best year ever as reflected by revenues and profits. That’s not to
say we didn’t experience significant challenges–some went so far as to test our
very emotional fortitude. Good business health is not so different than life’s good
health…and we are continuously challenged by both the expected and unexpected,
regardless of the ambitious diligence applied. That’s a yes!

As we know, especially those who are charged with the responsibility of managing
risks and business challenges, the name burning brightly on the business marquee
these days is–‘CHANGE IT’!

How?…‘Methodical Profound Corrections’!

REGIONAL SHARE DYNAMICS

CSDs

Good-For-You
Refreshments

Functional &
Nutritional Beverages

We at National Beverage are driving ourselves to the dynamic cutting edge of
innovation to transition from…what we were–and who we are–to what we will be!

In life, intelligence is vision…where we are today was necessary…but today is
coming to a close. We gained experience and learned that our business, our
consumers and our lives demand better…tomorrow. Our planet’s overall health
is provoking the human race to listen–learn–and adopt…a better way! That’s a yes!

As we have stated throughout this fiscal year, the soft drink industry is in transition…
from what was acceptable to new and better, with more emphasis than ever on
good-for-you ingredients. We are at the forefront with packages, products and
ingredients that will provide healthier hydration in a dynamic and innovative fashion.
For certain, we are forging new ground with ‘Profound Corrections’–from upgrading
our flagship logos, to creating lower caloric soft drinks, to producing REAL vitamin-
enhanced beverages…and engaging at the frontier of the war on obesity.

As we witnessed commodity pricing and energy costs reach levels that just a short
time ago would seem ridiculous, our aggressiveness and decisiveness kept our
target-goals always in view. Yet, as business sometimes penalizes, we experienced
some volume losses in our fourth quarter due to higher pricing to the retail customer.

‘Meticulous Profound Corrections’ is what all sound strategies demand. No sharp
left–right or the vehicle sometimes skids off the track. That’s a yes!

Our National Beverage Company stays primed and ready. The past 21 years in the
soft drink business gave us 7 stars from consumers and investors alike. Our goal
for the future–off the scale!

All-Ways Correcting,

Nick A. Caporella
Chairman and Chief Executive Officer

P.S. Stay Hydrated . . .

Financials

National Beverage Corp.

Selected Financial Data

(In thousands, except per share amounts)

S U M M A RY O F O PE R AT I O N S :
Net sales
Cost of sales(2)

Gross profit
Selling, general and administrative expenses
Interest expense
Other income—net

Income before income taxes
Provision for income taxes

Net income

PE R S H A R E DATA :
Basic net income (3)
Diluted net income (3)
Closing stock price (3)
Cash dividends paid (4)

B A L A N C E S H E E T DATA :
Working capital
Property—net
Total assets
Long-term debt
Deferred income taxes—net
Shareholders’ equity(4)

Fiscal Year Ended

April 28,
2007

April 29,
2006

April 30,
2005

May 1,
2004

May 3,
2003(1)

$ 539,030
365,793

$ 516,802
349,131

$ 495,572
340,206

$ 512,061
343,316

$ 500,430
335,457

173,237
137,212
106
2,587

38,506
13,824

167,671
135,090
105
2,416

34,892
12,666

155,366
130,037
106
1,199

26,422
9,536

168,745
139,058
132
544

30,099
11,408

164,973
136,902
316
706

28,461
10,872

$ 24,682

$ 22,226

$ 16,886

$ 18,691

$ 17,589

.54
.54
13.13
—

.49
.48
12.80
.83

.37
.37
5.92
—

.42
.41
7.57
.83

.40
.38
5.92
—

$ 97,684
57,369
257,632
—
15,217
157,361

$ 75,025
56,027
218,339
—
17,783
130,860

$ 81,962
62,879
224,587
—
15,958
143,296

$ 64,967
59,535
205,378
—
14,930
125,376

$ 79,785
60,432
218,195
300
14,843
143,292

(1) Fiscal 2003 consisted of 53 weeks.
(2) Fiscal 2006 cost of sales includes a fructose settlement gain of $8.4 million.
(3) 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. Net income per share and the closing stock price have been adjusted for the 100% stock dividend distributed on
March 22, 2004 and the 20% stock dividend distributed on June 22, 2007.

(4) In January 2006 and April 2004, the Company paid a cash dividend of $1.00 per share ($.83 per share after adjusting for the 20% stock dividend), aggregating $38.0

million and $38.4 million, respectively.

National Beverage Corp.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

OV E R V I E W

National Beverage Corp. develops, manufactures, markets and
distributes a complete portfolio of quality beverage products
throughout the United States. Incorporated in Delaware in 1985,
National Beverage Corp. is a holding company for various oper-
ating subsidiaries. In this report, the terms “we,” “us,” “our,”
“Company” and “National Beverage” mean National Beverage
Corp. and its subsidiaries.

We consider ourselves to be a leader in the development
and sale of flavored beverage products in the United States,
offering the widest selection of flavored soft drinks, juices, spar-
kling waters and energy drinks. Our flavor development spans
over 100 years originating with our flagship brands, Shasta® and
Faygo®, each of which has over 50 flavor varieties. We also main-
tain a diverse line of flavored beverage products geared to the
health-conscious consumer, including Everfresh®, Home Juice®,
and Mr. Pure® 100% juice and juice-based products; and LaCroix®,
Mt. ShastaTM, Crystal Bay® and ClearFruit® flavored and spring
water products. In addition, we produce energy drinks and pow-
dered beverage products, including Rip It®, Rip It ChicTM, FREEKTM
and PowerBlastTM. Other products include Ohana® fruit-flavored
drinks and St. Nick’s® holiday soft drinks. Substantially all of our
brands are produced in thirteen manufacturing facilities that are
strategically located in major metropolitan markets throughout
the continental United States. To a lesser extent, we develop and
produce soft drinks for certain retailers and beverage companies
(“allied brands”).

Our strategy emphasizes the growth of our products by
offering a branded beverage portfolio of proprietary flavors; by
supporting the franchise value of regional brands and expanding
those brands with distinctive packaging and broader demo-
graphic emphasis; by developing and acquiring innovative prod-
ucts tailored toward healthy lifestyles; and by appealing to the
“quality-price” expectations of the family consumer. We believe
that the “regional share dynamics” of our brands perpetuate

consumer loyalty within local regional markets, resulting in more
retailer sponsored promotional activities.

Over the last several years, we have focused on increasing
penetration of our brands in the convenience channel through
Company-owned and 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
undertaken several measures to expand convenience channel
distribution in recent years. These include development of prod-
ucts specifically targeted to this market, such as ClearFruit,
Crystal Bay, Rip It, Rip It Chic, FREEK and PowerBlast. Additionally,
we have created proprietary and specialized packaging for these
products with distinctive graphics. We intend to continue our
focus on enhancing growth in the convenience channel through
both specialized packaging and innovative product development.
Beverage industry sales are seasonal with the highest vol-
ume typically realized during the summer months. Additionally,
our 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.

R E S U LT S O F O PE R AT I O N S

Net Sales Net sales for fiscal 2007 increased 4.3% to $539.0
million compared to fiscal 2006. Led by higher sales of Rip It, the
case volume of our energy drinks, juices and waters increased
12%. The volume improvement in higher margin products along
with the effect of price increases instituted to recover raw mate-
rial cost increases resulted in a 9% improvement in unit pricing.
This increase was partially offset by a 7% decrease in carbon-
ated soft drink volume, due primarily to a 21% volume decline in
allied brands.

Net sales for fiscal 2006 increased 4.7% to $516.8 million
compared to fiscal 2005, excluding $1.8 million received in fiscal

National Beverage Corp.

Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)

2005 from a customer relative to a recovery of pricing and pro-
motional allowances for product shipped in a previous period.
This increase included a 6% improvement in pricing and a 1%
increase in branded volume, partially offset by a 12% decline in
allied case volume. The increases in unit pricing and branded
volume were led by increased sales of Rip It energy drinks,
Everfresh juices and LaCroix waters. Volume, however, was neg-
atively impacted by the effects of price increases instituted to
recover raw material cost increases and by the effects of major
hurricanes in several of our market areas.

Gross Profit Gross profit approximated 32.1% of net sales for
fiscal 2007 and 30.8% of net sales for fiscal 2006, after excluding
an $8.4 million fructose settlement gain recorded in cost of sales
in fiscal 2006. The gross margin improvement is primarily the
result of the increase in unit pricing noted above, partially offset
by higher manufacturing and raw material costs. Excluding the
fructose settlement, cost of goods sold per unit increased approx-
imately 7%. See Note 10 of Notes to Consolidated Financial
Statements.

Gross profit approximated 32.4% of net sales for fiscal 2006
and 31.4% of net sales for fiscal 2005. This improvement was
due to net proceeds of $8.4 million received from a fructose set-
tlement partially offset by the effects of higher cost of goods sold,
lower allied case volume, and the $1.8 million noted above.
Excluding the fructose settlement, cost of goods sold per unit
increased approximately 7%, primarily due to higher manufactur-
ing and raw material costs. See Note 10 of Notes to Consolidated
Financial Statements.

Shipping and handling costs are included in selling, general
and administrative expenses, the classification of which is consis-
tent 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 Consoli-
dated Financial Statements.

Selling, General and Administrative Expenses Selling, general
and administrative expenses were $137.2 million or 25.5% of net
sales for fiscal 2007 compared to $135.1 million or 26.1% of net
sales for last year. The $2.1 million increase is due to higher mar-
keting costs primarily related to new product introductions asso-
ciated with energy drinks and increased cooperative advertising.
Selling, general and administrative expenses were $135.1
million or 26.1% of net sales for fiscal 2006 compared to $130.0
million or 26.2% of net sales for the prior year. The $5.1 million
increase is due to higher marketing and administrative costs
including increased costs related to product development and
new product introduction.

Interest expense
Interest Expense and Other Income—Net
is comprised of financing costs related to maintaining lines of
credit. Other income includes interest income of $1,701,000 for
fiscal 2007, $1,450,000 for fiscal 2006, and $581,000 for fiscal
2005. The increase in interest income for fiscal 2007 and fiscal
2006 is primarily due to an increase in investment yields and aver-
age invested balances. In addition, other income includes gains
related to a contract settlement with a customer of $895,000
for fiscal 2007, $1.1 million for fiscal 2006, and $633,000 for
fiscal 2005.

Income Taxes Our effective tax rate was approximately 35.9%
for fiscal 2007, 36.3% for fiscal 2006, and 36.1% for fiscal 2005.
The difference between the effective rate and the federal statu-
tory rate of 35% was primarily due to the effects of state income
taxes, nondeductible expenses, and nontaxable interest income.
See Note 7 of Notes to Consolidated Financial Statements.

National Beverage Corp.

L I Q U I D I T Y A N D F I N A N C I A L C O N D I T I O N

Capital Resources Our current sources of capital are cash
flow from operations and borrowings under existing credit facili-
ties. The Company maintains unsecured revolving credit facilities
aggregating $45 million, of which $3.2 million is utilized for
standby letters of credit at April 28, 2007. We believe that existing
capital resources are sufficient to meet our capital requirements
and those of the parent company for the foreseeable future.

Cash Flows During fiscal 2007, $32.8 million was provided
from operating activities, which was partially offset by $10.9 mil-
lion used for investing activities. Cash provided by operating
activities increased $4.3 million due primarily to an increase in
earnings and accounts payable. Cash used in investing activities
increased $5.8 million due to an increase in net capital expendi-
tures. Cash provided by financing activities aggregated $1.5 million
in fiscal 2007 and was comprised of proceeds and tax benefits
from stock options exercised.

During fiscal 2006, $28.6 million was provided from operat-
ing activities, which was offset by $5.1 million used for investing
activities and $35.9 million used for financing activities. Cash
provided by operating activities decreased $4.3 million due to an
increase in trade receivables, inventories and other assets. Cash
used in investing activities increased $1.2 million due to the net
change in marketable securities purchased and sold. Cash used
in financing activities increased $36.1 million due primarily to the
$38 million cash dividend paid in January 2006.

Financial Position During fiscal 2007, our working capital
increased $22.7 million to $97.7 million primarily due to cash
provided from operations. Trade receivables increased $3.7 mil-
lion due to higher sales in April 2007. Inventory increased $9.6
million due to the effects of new products and cost increases. At
April 28, 2007, the current ratio was 2.3 to 1 compared to 2.2 to
1 at April 29, 2006.

During fiscal 2006, our working capital decreased $6.9 mil-
lion to $75 million primarily due to the $38 million cash dividend
paid in January 2006. Trade receivables increased $2.1 million
due to higher sales. Inventory increased $4.7 million due to the
effects of new products and cost increases. Prepaid and other
assets increased $1.6 million due to an increase in income tax
refund receivables. At April 29, 2006, the current ratio was 2.2 to
1 compared to 2.4 to 1 at April 30, 2005.

Liquidity Although we continually evaluate capital projects
designed to expand capacity, enhance packaging capabilities
and improve efficiencies at our manufacturing facilities, the
Company did not have any material capital expenditure commit-
ments as of April 28, 2007. We anticipate that fiscal 2008 expen-
ditures will be comparable to historical amounts.

In January 1998, the Board of Directors authorized the pur-
chase of up to 800,000 shares of National Beverage common
stock. There were no shares purchased during the last three
fiscal years. Aggregate shares purchased since January 1998
were 502,060.

Pursuant to a management agreement, we incurred a fee to
Corporate Management Advisors, Inc. (“CMA”) of approximately
$5.4 million for fiscal 2007, $5.2 million for fiscal 2006, and $5.0
million for fiscal 2005. At April 28, 2007, we owed $2.5 million to
CMA for unpaid fees. See Note 5 of Notes to Consolidated
Financial Statements.

National Beverage Corp.

Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)

C O N T R AC T UA L O B L I G AT I O N S

Long-term contractual obligations at April 28, 2007 are payable as follows:

(In thousands)

Operating leases

Purchase commitments

Total

We have guaranteed the residual value of certain leased
property in the amount of $11.3 million. Management believes
that the net realizable value of the equipment will be in excess of
the guaranteed amount when the lease terminates in July 2012.

We contribute to certain pension plans under collective
bargaining agreements based on hours worked and to a discre-
tionary profit sharing plan, neither of which have any long-term
contractual funding requirements. Contributions were $2.2 million
for fiscal 2007, $2.2 million for fiscal 2006, and $2.3 million for
fiscal 2005.

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 claims settlement varies signifi-
cantly, we are not able to reasonably estimate future payments
for the periods indicated.

We have standby letters of credit aggregating $3 million
related to our self-insurance programs, which expire in fiscal
2008. We expect to renew these standby letters of credit until
they are no longer required.

Total

2008

2009–

2010

2011–

2012

Thereafter

$ 22,228

$ 6,211

$ 9,099

$5,014

$1,904

93,249

37,202

56,047

—

$ 115,477

$ 43,413

$ 65,146

$5,014

$1,904

O F F- B A L A N C E S H E E T A R R A N G E M E N T S

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.

C R I T I CA L AC C O U N T I N G P O L I C I E S

The preparation of financial statements in conformity with gener-
ally 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 knowl-
edge 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
affect 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.

National Beverage Corp.

Impairment of Long-Lived Assets All long-lived assets,
excluding goodwill and intangible assets not subject to amortiza-
tion, 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 market value
based on the best information available. Estimated fair market
value is generally measured by discounting future cash flows.
Goodwill and intangible assets not subject to amortization are
evaluated for impairment annually or sooner in accordance with
SFAS No. 142. An impairment loss is recognized if the carrying
amount, or for goodwill, the carrying amount of its reporting unit,
is greater than its fair value.

Income Taxes Our effective income tax rate and the tax bases
of assets and liabilities are based on estimates of taxes which will
ultimately be payable. Deferred taxes are recorded to give recog-
nition to temporary differences between the tax bases of assets
or liabilities and their reported amounts in the financial state-
ments. Valuation allowances are established 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.

Sales Incentives We offer various sales incentive arrange-
ments to our customers, which require customer performance
or achievement of certain sales volume targets. In those circum-
stances when the incentive is paid in advance, we amortize the
amount paid over the period of benefit or contractual sales volume.
When the incentive is paid in arrears, we accrue the expected
amount to be paid over the period of benefit or expected sales
volume. The recognition of expense for 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
revenues and actual amounts may vary from reported amounts.

FO R WA R D - LO O K I N G S TAT E M E N T S

National Beverage and its representatives may from time to time
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, filings with the Securities and Exchange Commission
and other reports to our stockholders. Certain statements includ-
ing, without limitation, statements containing the words “believes,”
“anticipates,” “intends,” “plans,” “expects,” and “estimates” con-
stitute “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

National Beverage Corp.

Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)

statements. Such factors include, but are not limited to, the
following: general economic and business conditions; pricing of
competitive products; success in acquiring other beverage busi-
nesses; success of new product and flavor introductions; fluctu-
ations in the costs of raw materials and packaging supplies, and
the ability to pass along any cost increases to our customers; our
ability to increase prices for our products; labor strikes or work
stoppages or other interruptions or difficulties in the employment
of labor; continued retailer support for our products; changes in
consumer preferences and our success in creating products
geared toward consumers’ tastes; success of implementing busi-
ness strategies; changes in business strategy or development
plans; government regulations; unseasonably cold or wet weather
conditions; and other factors referenced in this report. 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.

Q UA N T I TAT I V E A N D Q UA L I TAT I V E D I S C LO S U R E S A B O U T

M A R K E T R I S K

Commodities We purchase various raw materials, including
aluminum cans, plastic bottles, high fructose corn syrup, and
various 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.

Interest Rates We had no outstanding debt or debt related
interest rate exposure during fiscal 2007. Our investment portfolio
is comprised of highly liquid securities consisting primarily of short-
term money market instruments, the yields of which fluctuate based
largely on short-term Treasury rates. If the yield of these instru-
ments had changed by 100 basis points (1%), interest income for
fiscal 2007 would have changed by approximately $400,000.

National Beverage Corp.

Consolidated Balance Sheets
As of April 28, 2007 and April 29, 2006

(In thousands, except share amounts)

A S S E T S
Current assets:
Cash and equivalents
Trade receivables—net of allowances of $325 (2007) and $562 (2006)

Inventories

Deferred income taxes—net
Prepaid and other assets

Total current assets
Property—net
Goodwill
Intangible assets—net
Other assets

L I A B I L I T I E S A N D S H A R E H O L D E R S’ E Q U I T Y
Current liabilities:
Accounts payable
Accrued liabilities

Income taxes payable

Total current liabilities
Deferred income taxes—net
Other liabilities
Shareholders’ equity:
Preferred stock, 7% cumulative, $1 par value, aggregate liquidation preference of $15,000—

2007

2006

$ 65,579
51,976
44,062
2,209
9,681

173,507
57,369
13,145
1,899
11,712

$ 42,119
48,236
34,429
1,940
9,287

136,011
56,027
13,145
1,653
11,503

$ 257,632

$ 218,339

$ 54,333
19,271
2,219

$ 38,041
20,576
2,369

75,823
15,217
9,231

60,986
17,783
8,710

1,000,000 shares authorized; 150,000 shares issued; no shares outstanding

150

Common stock, $.01 par value—authorized 50,000,000 shares; issued 49,538,370 shares (2007) and

41,511,193 shares (2006); outstanding 45,505,586 shares (2007) and 37,478,409 shares (2006)(1)

Additional paid-in capital
Retained earnings
Treasury stock—at cost:

Preferred stock—150,000 shares
Common stock—4,032,784 shares

Total shareholders’ equity

(1) 2007 share amounts restated for the 20% stock dividend distributed on June 22, 2007.

See accompanying Notes to Consolidated Financial Statements.

496
24,847
149,868

415
23,033
125,262

(5,100)
(12,900)

157,361

130,860

$ 257,632

$ 218,339

National Beverage Corp.

Consolidated Statements of Income
For the Fiscal Years Ended April 28, 2007, April 29, 2006 and April 30, 2005

(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 (1)
Basic
Diluted

Average common shares outstanding (1)
Basic
Diluted

(1) Adjusted for the 20% stock dividend distributed on June 22, 2007.

See accompanying Notes to Consolidated Financial Statements.

2007

2006

2005

$ 539,030
365,793

$ 516,802
349,131

$ 495,572
340,206

173,237
137,212
106
2,587

38,506
13,824

167,671
135,090
105
2,416

34,892
12,666

155,366
130,037
106
1,199

26,422
9,536

$ 24,682

$ 22,226

$ 16,886

$
$

.54
.54

$
$

.49
.48

$
$

.37
.37

45,763
46,073

45,367
45,946

45,095
45,905

National Beverage Corp.

Consolidated Statements of Shareholders’ Equity
For the Fiscal Years Ended April 28, 2007, April 29, 2006 and April 30, 2005

(In thousands, except share amounts)

Amount

2007

2006

2005

PR E F E R R E D S TO C K
Beginning and end of year

C O M M O N S TO C K
Beginning of year
Stock options exercised(1)
20% stock dividend (2)

End of year

A D D I T I O N A L PA I D - I N CA PI TA L
Beginning of year
Stock options exercised
Stock-based compensation
Stock-based tax benefits

End of year

R E TA I N E D E A R N I N G S
Beginning of year
Net income
Cash dividends paid
20% stock dividend (2)

End of year

T R E A S U RY S TO C K— PR E F E R R E D
Beginning and end of year

T R E A S U RY S TO C K— C O M M O N
Beginning and end of year

150,000

150

150,000

150

150,000

150

41,511,193
443,050
7,584,127

415
5
76

41,018,960
492,233
—

410
5
—

40,894,440
124,520
—

49,538,370

496

41,511,193

415

41,018,960

23,033
319
318
1,177

24,847

125,262
24,682
—
(76)

149,868

19,679
1,000
1,254
1,100

23,033

141,057
22,226
(38,021)
—

125,262

409
1
—

410

18,646
145
78
810

19,679

124,171
16,886
—
—

141,057

150,000

(5,100)

150,000

(5,100)

150,000

(5,100)

4,032,784

(12,900)

4,032,784

(12,900)

4,032,784

(12,900)

TOTA L S H A R E H O L D E R S’ E Q U I T Y

$ 157,361

$ 130,860

$ 143,296

(1) Includes issuance of deferred delivery shares of 343,150 (2007), 38,800 (2006), and 68,400 (2005).
(2) Reflects the 20% stock dividend distributed on June 22, 2007.

See accompanying Notes to Consolidated Financial Statements.

National Beverage Corp.

Consolidated Statements of Cash Flows
For the Fiscal Years Ended April 28, 2007, April 29, 2006 and April 30, 2005

(In thousands)

O PE R AT I N G AC T I V I T I E S :
Net income
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization
Deferred income tax (benefit) provision
Loss (gain) on disposal of property, net
Stock-based compensation
Changes in assets and liabilities:

Trade receivables

Inventories

Prepaid and other assets
Accounts payable
Accrued and other liabilities, net

2007

2006

2005

$ 24,682

$ 22,226

$ 16,886

11,650
(2,835)
9
318

(3,740)
(9,633)
(3,193)
16,292
(715)

13,587
1,644
(51)
291

(2,101)
(4,691)
(4,675)
29
2,293

12,464
891
15
89

2,641
16
(1,165)
874
186

Net cash provided by operating activities

32,835

28,552

32,897

I N V E S T I N G AC T I V I T I E S :
Marketable securities purchased
Marketable securities sold
Property additions
Proceeds from sale of assets

Net cash used in investing activities

F I N A N C I N G AC T I V I T I E S :
Common stock cash dividend
Proceeds from stock options exercised
Stock-based tax benefits

Net cash provided by (used in) financing activities

N E T I N C R E A S E ( D E C R E A S E ) I N CA S H A N D E Q U I VA L E N T S

C A S H A N D E Q U I VA L E N T S — B E G I N N I N G O F Y E A R

(524,980)
524,980
(10,975)
99

(352,775)
352,775
(7,964)
2,890

(233,900)
242,900
(13,003)
152

(10,876)

(5,074)

(3,851)

—
324
1,177

1,501

23,460
42,119

(38,021)
1,005
1,100

(35,916)

(12,438)
54,557

—
146
—

146

29,192
25,365

C A S H A N D E Q U I VA L E N T S — E N D O F Y E A R

$ 65,579

$ 42,119

$ 54,557

OT H E R CA S H F LO W I N FO R M AT I O N :
Interest paid
Income taxes paid

See accompanying Notes to Consolidated Financial Statements.

National Beverage Corp.

106
13,325

105
10,754

106
6,910

Notes to Consolidated Financial Statements

National Beverage Corp. develops, manufactures, markets and
distributes a complete portfolio of multi-flavored soft drinks, juice
drinks, water and specialty beverages throughout the United
States. Incorporated in Delaware in 1985, National Beverage
Corp. is a holding company for various operating subsidiaries.
When used in this report, the terms “we,” “us,” “our,” “Company”
and “National Beverage” mean National Beverage Corp. and its
subsidiaries.

1. S I G N I F I CA N T AC C O U N T I N G P O L I C I E S

Basis of Presentation The consolidated financial statements
include the accounts of National Beverage Corp. and all subsid-
iaries. All significant intercompany balances have been eliminated.
Our fiscal year ends the Saturday closest to April 30th and, as a
result, a 53rd week is added every five or six years. Fiscal 2007,
2006 and 2005 consist of 52 weeks.

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 of three
months or less.

In June 2006, FASB issued
Changes in Accounting Standards
FASB Interpretation No. 48, “Accounting for Uncertainty in Income
Taxes.” This Interpretation clarifies the accounting for uncertainty
in income taxes recognized by prescribing a recognition threshold
and measurement attribute for the financial statement recognition
and measurement of a tax position taken or expected to be taken
in a tax return. The Interpretation also provides guidance on
derecognition, classification, interest and penalties, accounting in
interim periods and disclosure. The Interpretation is effective for

fiscal years beginning after December 15, 2006. The Company is
in the process of determining the impact of this Interpretation on
our consolidated financial statements.

In September 2006, FASB issued SFAS No. 157, “Fair Value
Measurements.” This Statement defines fair value, establishes a
framework for measuring fair value in generally accepted account-
ing principles and expands disclosures about fair value mea-
surements. The Statement does not require any new fair value
measurements but could change the current practice in measur-
ing current fair value measurements. The Statement is effective
for fiscal years beginning after November 15, 2007. The Company
is in the process of determining the impact of this Statement on
our consolidated financial statements.

Credit Risk We sell products to a variety of customers and
extend credit based on an evaluation of each customer’s finan-
cial condition, generally without requiring collateral. Exposure to
losses on receivables varies by customer principally due to the
financial condition of each customer. We monitor our exposure to
credit losses and maintain allowances for anticipated losses
based on specific customer circumstances, credit conditions,
and historical write-offs and collections. At April 28, 2007 and
April 29, 2006, we did not have any customer that comprised
more than 10% of trade receivables. No one customer accounted
for more than 10% of net sales during any of the last three
fiscal years.

Fair Value of Financial Instruments The fair values of financial
instruments are estimated based on market rates. The carrying
amounts of financial instruments reflected in the balance sheets
approximate their fair values.

National Beverage Corp.

Notes to Consolidated Financial Statements (continued)

Impairment of Long-Lived Assets All long-lived assets, exclud-
ing 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 market value
based on the best information available. Estimated fair market
value is generally measured by discounting future cash flows.
Goodwill and intangible assets not subject to amortization are
evaluated for impairment annually or sooner in accordance with
SFAS No. 142. An impairment loss is recognized if the carrying
amount, or for goodwill, the carrying amount of its reporting unit,
is greater than its fair value.

Income Taxes Our effective income tax rate and the tax bases
of assets and liabilities are based on estimates of taxes which will
ultimately be payable. Deferred taxes are recorded to give recog-
nition to temporary differences between the tax bases of assets
or liabilities and their reported amounts in the financial statements.
Valuation allowances are established 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 esti-
mated incurred but not reported claims not otherwise covered
by insurance, based on actuarial assumptions and historical
claims experience.

Intangible assets as of April 28, 2007 and
Intangible Assets
April 29, 2006 consisted of nonamortizable trademarks aggregat-
ing $1,899,000 and $1,653,000, respectively. Amortization expense

related to distribution rights, which were relinquished in fiscal 2006,
was $285,000 for fiscal 2006 and $83,000 for fiscal 2005.

Inventories are stated at the lower of first-in, first-
Inventories
out cost or market. Inventories at April 28, 2007 are comprised of
finished goods of $24,356,000 and raw materials of $19,706,000.
Inventories at April 29, 2006 are comprised of finished goods of
$18,997,000 and raw materials of $15,432,000.

Marketing Costs We are involved in a variety of marketing
programs, including cooperative advertising programs with cus-
tomers, which advertise and promote our products to consumers.
Marketing costs are expensed when incurred, except for prepaid
advertising and production costs of future media advertising.
Marketing costs, which are included in selling, general and
administrative expenses, were $42.4 million in fiscal 2007, $37.9
million in fiscal 2006, and $35.6 million in fiscal 2005.

Net Income Per Share Basic net income per share is computed
by dividing net income by the weighted average number of com-
mon shares outstanding during the period. Included in average
common shares outstanding are shares of common stock of which
option holders have elected to defer physical delivery following
the exercise of stock options. Diluted net income per share is cal-
culated in a similar manner, but include the dilutive effect of stock
options, which amounted to 310,000 shares (2007), 579,000
shares (2006), and 810,000 shares (2005). Net income per share
and average common shares outstanding have been adjusted for
the 20% stock dividend paid on June 22, 2007 (see note 5).

Property Property is recorded at cost. Property additions,
replacements and betterments are capitalized, while mainte-
nance and repairs that do not extend the useful life of an asset

National Beverage Corp.

are expensed as incurred. Depreciation is recorded using the
straight-line method over estimated useful lives of 7 to 30 years
for buildings and improvements, and 3 to 15 years for machinery
and equipment. Leasehold improvements are amortized using
the straight-line method over the shorter of the remaining lease
term or the estimated useful life of the improvement. When assets
are retired or otherwise disposed, the cost and accumulated
depreciation are removed from the respective accounts and any
related gain or loss is recognized.

Reclassifications Reclassifications have been made to prior
year amounts to conform to the current year presentation.

Revenue Recognition Revenue from product sales is recog-
nized when title and risk of loss passes to the customer, which
generally occurs upon delivery. Our policy is not to allow the return
of products once they have been accepted by the customer.
However, on occasion, we have accepted returns or issued credit
to customers, primarily for damaged goods. The amounts have
been immaterial and, accordingly, we do not provide a specific
valuation allowance for sales returns.

Sales Incentives We offer various sales incentive arrange-
ments to our customers, which require customer performance or
achievement of certain sales volume targets. In those circum-
stances when the incentive is paid in advance, we amortize the
amount paid over the period of benefit or contractual sales volume.
When the incentive is paid in arrears, we accrue the expected
amount to be paid over the period of benefit or expected sales
volume. The recognition of expense for 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
revenues and actual amounts may vary from reported amounts.

Segment Reporting We operate as a single operating segment
for purposes of presenting financial information and evaluating
performance. As such, the accompanying consolidated financial
statements present financial information in a format that is con-
sistent with the internal financial information used by management.
We do not accumulate revenues by product classification and,
therefore, it is impractical to present such information.

Shipping and Handling Costs Shipping and handling costs
are reported in selling, general and administrative expenses in
the accompanying statements of income. Such costs aggregated
$43.2 million in fiscal 2007, $44.1 million in fiscal 2006, and $41.4
million in fiscal 2005. Although our classification is consistent
with many beverage companies, our gross margin may not be
comparable to companies that include shipping and handling
costs in cost of sales.

Stock-Based Compensation At the beginning of the fourth
quarter of fiscal 2006, we adopted SFAS No. 123R “Stock-Based
Compensation” pursuant to the modified prospective application
and, accordingly, prior period amounts have not been restated.
Stock-based compensation expense was recorded based on the
fair value method for all awards granted on or after the date of
adoption and for the portion of previously granted awards that
remained unvested at the date of adoption.

Prior to the fourth quarter of fiscal 2006, we applied the
provisions of APB No. 25, “Accounting for Stock Issued to Employ-
ees,” as permitted under SFAS No. 148, “Accounting for Stock-
Based Compensation—Transition and Disclosure—an amendment
of FASB Statement No. 123.” Under APB 25, stock-based com-
pensation expense was generally not recognized unless the
exercise price of options granted was less than the market price
on the date of grant. Had compensation cost for options granted
to employees been recorded based on the fair value method

National Beverage Corp.

Notes to Consolidated Financial Statements (continued)

under SFAS No. 123, “Accounting for Stock-Based Compensation”
prior to the adoption date, net income and net income per share
would have been impacted on a pro forma basis by less than
$200,000 and $.01 per share for such fiscal years.

Use of Estimates The preparation of financial statements in
conformity with 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 anticipated future actions,
actual results may vary from reported amounts.

2. PR O PE R T Y

Property as of April 28, 2007 and April 29, 2006 consisted of
the following:

(In thousands)

Land

Buildings and improvements

Machinery and equipment

Total

Less accumulated depreciation

Property—net

2007

2006

8,915

$ 8,915

38,898

123,556

38,101

115,379

171,369

162,395

(114,000)

(106,368)

$ 57,369

$ 56,027

Depreciation expense was $9,525,000 for fiscal 2007,

$10,147,000 for fiscal 2006, and $9,492,000 for fiscal 2005.

3 . AC C R U E D L I A B I L I T I E S

Accrued liabilities as of April 28, 2007 and April 29, 2006 consisted
of the following:

(In thousands)

Accrued promotions

Accrued compensation

Accrued insurance

Other

Total

4 . D E B T

2007

2006

$ 5,710
4,427
1,919
7,215

$ 5,609

4,444

3,603

6,920

$ 19,271

$ 20,576

A subsidiary of the Company maintains unsecured revolving
credit facilities aggregating $45 million (the “Credit Facilities”) with
banks. The Credit Facilities expire through December 2008 and
bear interest at ½% below the banks’ reference rate or .6% above
LIBOR, at the subsidiary’s election. At April 28, 2007, there was
no outstanding debt under the Credit Facilities and approximately
$42 million was available for future borrowings.

The Credit Facilities require the subsidiary to maintain certain
financial ratios and contain other restrictions, none of which are
expected to have a material impact on our operations or financial
position. Significant financial ratios and restrictions include: fixed
charge coverage; net worth ratio; and limitations on incurrence
of debt. At April 28, 2007, we were in compliance with all loan
covenants and approximately $25 million of retained earnings
were restricted from distribution.

National Beverage Corp.

5 . C A PI TA L S TO C K A N D T R A N S AC T I O N S W I T H

R E L AT E D PA R T I E S

On May 25, 2007, the Company declared a 20% stock dividend
payable on June 22, 2007 to shareholders of record on June 4,
2007. On June 15, 2007, the Company declared a cash dividend
of $.80 per share payable on or before August 17, 2007 to share-
holders of record on July 20, 2007. Net income per share, average
common shares outstanding and share amounts have been
restated to give retroactive effect to the 20% stock dividend.

On January 27, 2006, the Company paid a cash dividend
of $1.00 per share ($.83 per share adjusted for the 20% stock
dividend) to shareholders of record on January 5, 2006, including
holders of deferred shares.

In January 1998, the Board of Directors authorized the pur-
chase of up to 800,000 shares of National Beverage common
stock. There were no shares purchased during the three fiscal
years ended April 28, 2007. Aggregate shares purchased since
January 1998 were 502,060.

The Company is a party to a management agreement with
Corporate Management Advisors, Inc. (“CMA”), a corporation
owned by the Company’s Chairman and Chief Executive Officer.
Under the agreement, the employees of CMA provide our Company
with corporate finance, strategic planning, business development

and other management services for an annual base fee equal to
one percent of consolidated net sales plus incentive compensa-
tion based on certain factors to be determined by the Compen-
sation Committee of our Company’s Board of Directors. In July
2005, in connection with providing services under the manage-
ment agreement, CMA became a twenty percent joint owner of
an aircraft used by the Company. We incurred fees to CMA of
$5.4 million for fiscal 2007, $5.2 million for fiscal 2006, and $5.0
million for fiscal 2005. No incentive compensation has been
incurred or approved under the management agreement since its
inception. Included in accounts payable at April 28, 2007 and
April 29, 2006 were amounts due CMA of $2.5 million and $1.3
million, respectively.

6 . OT H E R I N C O M E

Other income consisted of the following:

(In thousands)

Interest income

Gain on contract settlement

Gain (loss) on disposal of property, net

Relinquishment of distribution rights

Total

2007

2006

2005

$ 1,701
895

(9)

—

$ 1,450

$ 581

1,143

(228)

633

(15)

—

$ 2,587

$ 2,416

$ 1,199

National Beverage Corp.

Notes to Consolidated Financial Statements (continued)

7. I N C O M E TA X E S

The provision for income taxes consisted of the following:

that the benefit of deferred tax assets will not be realized. Our
deferred tax assets and liabilities as of April 28, 2007 and April 29,
2006 consisted of the following:

(In thousands)

Current

Deferred

Total

2007

2006

2005

(In thousands)

$16,659
(2,835)

$11,022

$8,645

1,644

891

Deferred tax assets:

Accrued expenses and other

$13,824

$12,666

$9,536

Inventory and amortizable assets

The reconciliation of the statutory federal income tax rate to

our effective tax rate was as follows:

Total deferred tax assets

Deferred tax liabilities:

Property

2007

2006

2005

Intangibles and other

Statutory federal income tax rate

State income taxes, net of federal benefit

Other differences

35.0% 35.0% 35.0%
2.9

3.0

(1.6)

(1.9)

3.0
(2.1)

Total deferred tax liabilities

Net deferred tax liabilities

2007

2006

$ 4,215
269

$ 2,161

155

4,484

2,316

17,426

18,048

111

17,492

18,159

$ 13,008

$ 15,843

Effective income tax rate

35.9% 36.3% 36.1%

Current deferred tax assets—net

$ 2,209

$ 1,940

Noncurrent deferred tax liabilities—net

$ 15,217

$ 17,783

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 allow-
ances are established when it is deemed, more likely than not,

8 . S TO C K- B A S E D C O M PE N S AT I O N

The 1991 Omnibus Incentive Plan (the “Omnibus Plan”) provides
for compensatory awards consisting of (i) stock options or stock
awards for up to 4,800,000 shares of common stock, (ii) stock
appreciation rights, dividend equivalents, other stock-based
awards in amounts up to 4,800,000 shares of common stock
and (iii) performance awards consisting of any combination of the
above. The Omnibus Plan is designed to provide an incentive to
the officers (including those who are also directors) and certain

National Beverage Corp.

other key employees and consultants of our Company by making
available to them an opportunity to acquire a proprietary interest
or to increase such interest in National Beverage. The number of
shares or options which may be issued under stock-based
awards to an individual is limited to 1,680,000 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.

Pursuant to a Special Stock Option Plan, National Beverage
has authorized the issuance of options to purchase up to an
aggregate of 1,800,000 shares of common stock. Options may
be granted for such consideration as determined by the Board of
Directors. The Board of Directors also authorized the issuance
of options to purchase up to 120,000 shares of common stock to
be issued at the direction of the Chairman.

The Key Employee Equity Partnership Program (“KEEP
Program”) provides for the granting of stock options to purchase
up to 240,000 shares of common stock to key employees, con-
sultants, directors and officers of the Company. Participants who
purchase shares of stock in the open market receive grants of
stock options equal to 50% of the number of shares purchased,
up to a maximum of 6,000 shares in any two-year period. Options
under the KEEP Program are automatically forfeited in the event
of the sale of shares originally acquired by the participant. Options
are granted at an initial exercise price of 60% of the purchase
price paid for the shares acquired and reduce to the par value of
the stock at the end of the six-year vesting period.

The fair value of option grants was estimated on the date of
grant using a Black-Scholes option-pricing model with the follow-
ing assumptions: weighted average expected life of 8 years for

fiscal 2007, 7.7 years for 2006, and 10 years for 2005; weighted
average expected volatility of 33.2% for fiscal 2007, 30.5% for
2006, and 41% for 2005; weighted average risk free interest rates
of 5% for fiscal 2007, 4.5% for 2006, and 5% for 2005; and no
expected dividend payments. Subsequent to adopting SFAS
No. 123R, forfeitures were estimated based on historical experi-
ence. Prior to adoption, forfeitures were recorded as they
occurred. In fiscal 2007 and 2006, the expected life of stock
options was estimated based on historical experience. Prior to
fiscal 2006, the expected life was based on contractual term. The
expected volatility was estimated based on historical stock prices
for a period consistent with the expected life of stock options.
The risk free interest rate was based on the U.S. Treasury constant
maturity interest rate whose term is consistent with the expected
life of stock options.

The following is a summary of stock option activity for

fiscal 2007:

Weighted

Average

Exercise

Price

Options outstanding, beginning of year

971,251

$2.67

Granted

Exercised

Cancelled

Options outstanding, end of year

Options exercisable, end of year

1,536

(119,880)

(17,700)

835,207

452,040

6.99

2.70

3.23

4.23

2.68

National Beverage Corp.

Notes to Consolidated Financial Statements (continued)

Stock-based compensation expense for fiscal 2007, fiscal
2006 and fiscal 2005 was $318,000, $291,000, and $89,000,
respectively. The total fair value of shares vested for fiscal 2007,
fiscal 2006 and fiscal 2005 was $258,000, $218,000, and
$136,000, respectively. The total intrinsic value for stock options
exercised during fiscal 2007, fiscal 2006 and fiscal 2005 was $1.1
million, $2.7 million, and $353,000, respectively. The weighted
average fair value for stock options granted in fiscal 2007, fiscal
2006 and fiscal 2005 was $13.84, $5.18, and $6.01, respectively.
As of April 28, 2007, unrecognized compensation expense
related to the unvested portion of the Company’s stock options
was $1.4 million, which is expected to be recognized over a
weighted average period of 3.9 years. The weighted average
remaining contractual term and the aggregate intrinsic value for
options outstanding as of April 28, 2007 was 5.5 years and $7.4
million, respectively. The weighted average remaining contractual
term and the aggregate intrinsic value for options exercisable as
of April 28, 2007 was 3.3 years and $4.7 million, respectively.

For fiscal 2007, net cash proceeds from the exercise of stock
options were $324,000 and the associated income tax benefit
was $1,177,000.

The Company has a stock purchase plan which provides for
the purchase of up to 1,536,000 shares of common stock
by employees who (i) have been employed by our Company for
at least two years, (ii) are not part-time employees and (iii) are
not owners of five percent or more of National Beverage com-
mon stock. As of April 28, 2007, no shares have been issued
under the plan.

The share amounts reflected above have been restated to
give retroactive effect to the 20% stock dividend distributed on
June 22, 2007.

9. C O M M I T M E N T S A N D C O N T I N G E N C I E S

We lease buildings, machinery and equipment under various
non-cancelable operating lease agreements expiring at various
dates through 2016. Certain of these leases contain scheduled
rent increases and/or renewal options. Contractual rent increases
are taken into account when calculating the minimum lease pay-
ment and recognized on a straight-line basis over the lease term.
Rent expense under operating lease agreements totaled approx-
imately $8,211,000 for fiscal 2007, $8,507,000 for fiscal 2006,
and $9,298,000 for fiscal 2005.

National Beverage Corp.

Our minimum lease payments under non-cancelable operat-

ing leases as of April 28, 2007 are as follows:

(In thousands)

Fiscal 2008

Fiscal 2009

Fiscal 2010

Fiscal 2011

Fiscal 2012

Thereafter

Total minimum lease payments

$ 6,211

5,345

3,754

2,711

2,303

1,904

$ 22,228

We have guaranteed the residual value of certain leased
property in the amount of $11.3 million. No liability has been
recorded as management believes that the net realizable value
of the equipment will be in excess of the guaranteed amount
when the lease terminates in July 2012 and that the fair market
value of the guarantee is immaterial.

The Company contributes to certain pension plans under
collective bargaining agreements based on hours worked and to
a discretionary profit sharing plan, neither of which have any
long-term contractual funding requirements. Contributions were
$2.2 million for fiscal 2007, $2.2 million for fiscal 2006, and $2.3
million for fiscal 2005.

We enter into various agreements with suppliers for the pur-
chase of raw materials, the terms of which may include variable

or fixed pricing and minimum purchase quantities. As of April 28,
2007, we had purchase commitments for raw materials of
$93.2 million.

From time to time, we are a party to various litigation matters
arising in the ordinary course of business. In our opinion, the
ultimate disposition of such matters will not have a material
adverse effect on our consolidated financial position or results
of operations.

10 . F R U C TO S E S E T T L E M E N T

In June 2005, we received a partial payment of $7.7 million from
the settlement of our claim in a class action lawsuit known as “In
re: High Fructose Corn Syrup Antitrust Litigation Master File No.
95-1477 in the United States District Court for the Central District
of Illinois.” The lawsuit related to purchases of high fructose corn
syrup made by the Company and others. The settlement amount
was allocated to each class action recipient based on the pro-
portion of its purchases to total purchases by all class action
recipients. The amount received, less offsets and expenses of
$.5 million, was recorded as a reduction in cost of sales in the
first quarter of fiscal 2006. In November 2005, the Company
received $1.2 million, representing the final payment due under
the settlement. Such amount was recorded in the third quarter of
fiscal 2006 as a reduction in cost of sales.

National Beverage Corp.

Notes to Consolidated Financial Statements (continued)

11. Q UA R T E R LY F I N A N C I A L DATA ( U N AU D I T E D )

(In thousands, except per share amounts)

First Quarter

Second Quarter

Third Quarter

Fourth Quarter

Fiscal 2007
Net sales

Gross profit

Net income
Net income per share—basic (1)
Net income per share—diluted (1)

Fiscal 2006

Net sales
Gross profit(2)
Net income
Net income per share—basic (1)
Net income per share—diluted (1)

$150,136
49,955
9,759
$ .21
$ .21

$142,363

49,328

9,683
$ .21
$ .21

$135,818
43,913
5,749
$ .13
$ .12

$131,502

41,220

4,574
$ .10
$ .10

$117,123
37,841
3,034
$ .07
$ .07

$109,587

34,920

2,297
$ .05
$ .05

$135,953
41,528
6,140
$ .13
$ .13

$133,350

42,203

5,672
$ .12
$ .12

(1) Net income per share has been adjusted for the 20% stock dividend distributed on June 22, 2007.
(2) Gross profit in the first quarter and third quarter includes a fructose settlement gain of $7.2 million and $1.2 million, respectively.

National Beverage Corp.

Report of Independent Registered Public Accounting Firm

To the Board of Directors
National Beverage Corp.

We have audited the accompanying balance sheet of National Beverage Corp. as of April 28, 2007, and the related statements of
income, stockholders’ equity, and cash flows for the year ended April 28, 2007. 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 audit. The financial
statements of the Company for the two years ended April 29, 2006 were audited by other auditors whose opinion, dated July 28, 2006,
expressed an unqualified opinion on those financial statements.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States).
Those standards 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. An audit also includes assessing the accounting principles used and significant estimates made by management,
as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all materials respects, the financial position of National
Beverage Corp. as of April 28, 2007, and the results of its operations and its cash flows for the year ended April 28, 2007, in conformity
with U.S. generally accepted accounting principles.

Ft. Lauderdale, Florida
July 12, 2007

National Beverage Corp.

300

250

200

150

100

Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
4/28/07

5/01/04

4/29/05

4/27/02

5/03/03

4/29/06

The common stock of National Beverage Corp., par value $.01
per share, (“Common Stock”) is listed on the NASDAQ Global
Select Market under the symbol “FIZZ.” Prior to June 12, 2007,
the Common Stock was listed on the American Stock Exchange
(“AMEX”) under the symbol “FIZ.” The following table shows the
range of high and low sale prices per share of the Common Stock
as reported by the AMEX for the fiscal quarters indicated:

First Quarter

Second Quarter

Third Quarter

Fourth Quarter

Fiscal 2007

Fiscal 2006

High

Low

High

Low

$14.63

$14.42

$12.75

$15.02

$ 9.79
$ 9.08
$ 9.38
$ 10.71

$ 7.22

$ 7.30

$ 8.33

$ 13.33

$5.98

$5.89

$5.83

$6.93

Of the estimated 5,500 holders of our Common Stock,
including those whose securities are held in the names of various
dealers and/or clearing agencies, there were approximately 700
shareholders of record at July 2, 2007, according to records
maintained by our transfer agent.

On May 25, 2007, the Company declared a 20% stock divi-
dend payable on June 22, 2007 to shareholders of record on
June 4, 2007. On June 15, 2007, the Company declared a cash
dividend of $.80 per share payable on or before August 17, 2007
to shareholders of record on July 20, 2007. On December 23,
2005, the Company declared a cash dividend of $1.00 per share
($.83 per share adjusted for the 20% stock dividend), which was
paid on January 27, 2006 to shareholders of record on January 5,
2006. The stock prices above have been restated to give retro-
active effect to the 20% stock dividend.

Currently, the Board of Directors has no plans to declare
additional cash dividends. See Note 5 of Notes to Consolidated
Financial Statements for certain restrictions on the payment of
dividends.

PE R FO R M A N C E G R A PH

The following graph compares the cumulative total shareholder
return on the Company’s Common Stock for the period from
April 27, 2002 through April 28, 2007 with the cumulative total
return of the S&P 500 Stock Index and a Company constructed
index of peer companies. Included in the Company constructed
peer group index are Coca-Cola Enterprises Inc., Coca-Cola
Bottling Company Consolidated, Cott Corporation and Pepsi
Americas, Inc. The graph assumes that the value of the invest-
ment in Common Stock was $100.00 on April 27, 2002 and that
all dividends, if any, were reinvested.

$300

$250

$200

$150

$100

$50

4/27/02

5/03/03

5/01/04

4/29/05

4/29/06

4/28/07

National Beverage Corp.

S&P 500 Index

Peer Group

National Beverage Corp.

Corporate Data

D I R E C T O R S

Nick A. Caporella
Chairman of the Board &
Chief Executive Officer
National Beverage Corp.

Joseph G. Caporella
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.*
Partner
Epstein Becker & Green, P.C.

*Member Audit Committee

C O R P O R AT E M A N AG E M E N T

Nick A. Caporella
Chairman of the Board &
Chief Executive Officer

Joseph G. Caporella
President

Edward F. Knecht
Executive Vice President—

Procurement

George R. Bracken
Senior Vice President—Finance

Dean A. McCoy
Senior Vice President &

Chief Accounting Officer

Raymond J. Notarantonio
Executive Director—IT

Richard S. Berkes
Director—Risk Management

Brent R. Bott
Director—Consumer Marketing

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Gregory J. Kwederis
Director—Beverage Analyst

Lawrence P. Parent
Director—Credit Management

Gregory P. Cook
Controller

S U B S I D I A R Y M A N AG E M E N T

Edward F. Knecht
President
Shasta Sweetener Corp.
PACO, Inc.

Sanford E. Salzberg
President
Shasta, Inc.

Michael J. Bahr
Executive Vice President
Shasta West, Inc.

Alan A. Chittaro
Executive Vice President
Faygo Beverages, Inc.

Alan D. Domzalski
Executive Vice President
Everfresh Beverages, Inc.

Brian M. Gaggin
Executive Vice President
National Retail Brands, Inc.

Charles A. Maier
Executive Vice President
Foodservice
Shasta Sales, Inc.

John S. Munroe
Executive Vice President
National BevPak

Victor R. Nastasia
Executive Vice President
Sundance Beverage Company

Dennis L. Thompson
Executive Vice President
BevCo Sales, Inc.

F I N A N C I A L A N D O T H E R
I N F O R M AT I O N

Copies of National Beverage Corp.’s
Annual Report, Annual Report
on Form 10-K and supplemental
quarterly financial data are available
free of charge on our website or
contact our Shareholder Relations
department at the Company’s
corporate address or at
877-NBC-FIZZ (877-622-3499).

Earnings and other financial results,
corporate news and other Company
information are available on
National Beverage’s website at
www.nationalbeverage.com.

S T O C K E XC H A N G E L I S T I N G

Common Stock is listed on the
NASDAQ Global Select Market—
symbol FIZZ.

T R A N S F E R AG E N T A N D
R E G I S T R A R

Mellon Investor Services LLC
P.O. Box 358015
Pittsburgh, PA 15252
888-313-1476
www.melloninvestor.com/isd

I N D E P E N D E N T R E G I S T E R E D
C E R T I F I E D P U B L I C
AC C O U N T I N G F I R M

McGladrey & Pullen, LLP
Fort Lauderdale, FL

John F. Hlebica
Vice President
Shasta Beverages International, Inc.

Worth B. Shuman III
Vice President
Military Sales

Martin J. Rose
General Manager
Shasta Vending

S U B S I D I A R I E S

BevCo Sales, Inc.
Beverage Corporation
International, Inc.

Big Shot Beverages, Inc.
Everfresh Beverages, Inc.
Faygo Beverages, Inc.
Home Juice Corp.
National Retail Brands, Inc.
NewBevCo, Inc.
PACO, Inc.
Shasta Beverages, Inc.
Shasta Beverages International, Inc.
Shasta Sales, Inc.
Shasta Sweetener Corp.
Shasta West, Inc.
Sundance Beverage Company

C O R P O R AT E O F F I C E S

One North University Drive
Fort Lauderdale, FL 33324
954-581-0922

A N N UA L M E E T I N G

The Annual Meeting of Shareholders
will be held on Friday, October 5,
2007 at 2:00 p.m. local time at the
Hyatt Regency Orlando International
Airport, 9300 Airport Boulevard,
Orlando, FL 32827

Think…

N AT I O N A L B E V E R A G E C O R P.
O n e N o r t h U n i v e r s i t y D r i v e
F o r t L a u d e r d a l e , F l o r i d a 3 3 3 24

9 5 4 - 5 81- 0 9 2 2

W W W. N AT I O N A L B E V E R A G E . C O M

NATIONAL BEVERAGE CORP.

Think

Hydrations

2007ANNUAL REPORT