National Beverage Corp. Annual Report 2008

FY2008 Annual Report · National Beverage Corp.

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✓
❏ Right Choice

NatioNal Beverage Corp.
2008 aNNual report

✓
❏ Right Choice

The most essential element of
living is…healthy longevity.

Nutrition, exercise, stress-relief, healthy hydration…
these vital ingredients are conducive to the
wholesome lifestyle desired by today’s consumer.
National Beverage offers a variety of products
to refresh the body and satisfy the soul…
healthy balance that makes you say ‘aaaaah!’

2 NatioNal Beverage Corp.

LaCroix waters provide it all—pure refreshment and great
flavor without artificial “anything.” One of the nation’s top-selling
sparkling water brands, LaCroix’s healthy refreshment is available
in spring water and seven sparkling water flavors: Pure, Lemon,
Lime, Berry, Cran-Raspberry, Orange and, the delicious grapefruit
offering, Pamplemousse. Naturally flavored with pure essence,
LaCroix waters have no calories, artificial sweeteners, or
preservatives…just pure enjoyment!

LaCroix is honored to play a role in raising awareness about
breast cancer as an official sponsor of the Breast Cancer 3-Day
benefiting Susan G. Komen for the Cure. As part of this mission,
National Beverage spearheaded the development of the first
video-based global online community giving a voice to courage
and commitment in hopes of finding a cure for breast cancer.
The Her Voice website at www.hervoicecampaign.com features
Breast Cancer 3-Day walk participants and their video stories of
inspiration. Through this revolutionary and vital website, LaCroix
is able to broaden its commitment to health and wellness.

HeALTHy HyDRATiON—HeALTHy LifeSTyLe—HeALTHy
LONGeviTy…wiTH LACROix!

2008 aNNual report 3

✓
❏ Right Choice

Real energy for real people…

work hard—play hard!

whether functioning in an office or skiing down a snow-covered
slope, Rip it provides that crucial boost of energy and refreshment.
Different from the traditional, medicinal-tasting energy drinks, the
flavor variety of great-tasting Rip it energy fuel is the choice of
discriminating energy drinkers. Consumers are trading in the ‘old’
energy taste to Rip it’s great flavor variety and value. Responding
to overwhelming consumer requests, Rip it is now launching
20-ounce resealable bottles with even more exceptional flavors.

endorsed by several professional athletes including
Detroit Pistons’ All-Star guard Richard “Rip” Hamilton,
Rip it is the energy fuel of choice for athletes…
and energy cravers everywhere!

NatioNal Beverage Corp.

Shasta and faygo…brands to
celebrate with!

Our multi-flavored carbonated soft drinks have provided
delicious refreshment to loyal consumers for over a century—
Shasta since 1889 and faygo since 1907. from the beginning,
our Company has thrived on innovation and taste and our
brand initiatives have changed the complexion of the soft-drink
beverage industry across America.

Today, National Beverage continues its innovative brand and
packaging dynamics and is known far and wide for its exotic
flavors. Our steadfast commitment is to lead the development
for flavor and diet enthusiasts at incomparable value.

2008 aNNual report 5

✓
❏ Right Choice

we tried to fit the whole fruit in
the bottle…and we did it!

The mouth-watering taste of apple, plum, pear, pineapple, kiwi,
grape, strawberry, raspberry, coconut…the list of fresh flavors
developed by National Beverage ‘flavorites’ goes on and on.
Health-conscious and taste-loving hydrators thirst for our luscious
juices and revitalizing flavored-water beverages. we constantly
challenge ourselves to meet the ever-changing needs and
demographics of flavor consumers everywhere.

Our dedicated mission is to create healthier–fun beverages…
that are known for their extremely delicious flavors. Our juices
and waters exceed our expectations—no wonder—we put the
entire fruit in every bottle!

NatioNal Beverage Corp.

✓
❏ Right Choice

Functional beverages that provide a
real nutritional benefit…not hype.

National Beverage is applying the most advanced nutritional
research and technology towards developing great-tasting and
convenient products that truly function. Our newest formulations
of NutraFizz Effervescent Dietary Supplement sticks and tablets,
BodywoRX Functional Waters, and Sundance Organic Life SuperFruit
Blends contain premium formulas that make a difference in everyday
health. Many contain special bioactive ingredients that specifically
address such health conditions as mood enhancement, weight
loss, immunization and joint relief. National Beverage is positioned
to capture a piece of the functional foods and beverage category
that is forecasted to grow to $109 billion by 2010.

NatioNal Beverage Corp.

✓
❏ Manage

S m a r tS

p a S Si o n

i n n o v a t i o n

r e S i l i e n c e

if a business was limited only to its management traits (which most often it

is) and only four could be chosen, the above would certainly be qualifiers

to enter the race to succeed. national Beverage’s core philosophy is

formulated, administered and employed by all, each and every day, toward

achieving our performance objectives.

Globalization’s competitiveness is fed through the conversion of raw

materials into finished products. those nations that have advancing civil

liberties sometimes are disadvantaged by the actual cost of this progression.

nations producing products with low cost labor can affect the commodity

index worldwide, thus shifting competitive edge. Here in the U.S., world
commodity pricing continues to challenge the beverage industry.

national Beverage’s size and agility have allowed us to more swiftly adjust

with minimal effect on results. FY2008 was affected by this runaway
commodity escalation, but results were only slightly impacted…thanks to

the engrained philosophy that directs us.

✓
❏ Compete

Discipline and Passion are the dynamics that provide the power to drive

our competitive prowess…but in today’s environment, that alone is not

enough. innovation is the reactor that powers the intensity of our discipline

and passion.

Superior strategic judgment is required to be an aggressive competitor.

the location and use of hard assets, coupled with a vision of the future

achievement, driven by leadership’s zest to excel, are prerequisites. now,

introduce national Beverage’s distinctive innovation and that outclasses us

from others.

team national challenges itself to innovate in all aspects of its business,

from discovery of new and enriching ingredients, to challenging vendors

for state-of-the-art packaging. all this, while luring the most talented to

become a part of our one-of-a-kind, soft drink company.

most recently, our strategic growth plan has been modified to maximize
opportunities resulting from the current challenging economic marketplace.

national Beverage’s retail partners have requested that a more concentrated

effort for joint ventures and strategic alliances be combined with our brand

growth as our new, ongoing growth profile. We began this aggressive

program in the fourth quarter of FY2008 and have experienced good results.

more will be disclosed throughout FY2009 about this compelling modification

of our growth plan.

✓
❏ Succe e d

Success is a continual work in process. Yes…one can achieve the quarterly

goal or the year’s target plan, but real success is All-Ways achieving the

plan. All-Ways is the culprit in this statement. it is inconceivable to always

in All-Ways succeed. So, as part of any successful organization, there

always is an undisclosed plan ‘B’ for those unforeseen events. managing

this plan is the most difficult part of managing a business.

last year’s ‘instant’ energy price acceleration, jobless consumers, record

foreclosures and runaway costs gave designers of our plan ‘B’ a real

migraine. ‘Scrambling’ was the mantra for our champion managers—and

they did a great job. if after all the aforementioned, a company only slightly

misses its preset target…well, that’s called national Beverage, or better

said—Team National.

missing a target once or twice over many, many years or never experiencing

a significant write-off of a bad experience or ill-advised acquisition…may
be viewed by some as too conservative. We at national Beverage corp.

have another description for it…for us…it’s called Success.

✓
❏ Share holde r Enr ichme nt

Shareholders are the owners of our company and, deservingly, are foremost

in our hearts. From succession planning to squeezing the last 1 mill ($.001)

from the cost of a beverage container, to a hard-fisted approach to

everything…our owners’ interests are mind’s eye focused! the company

today is undergoing an efficiency exam and areas where extra capital will

significantly improve efficiencies, that capital will be injected—all others are

being expelled and disposed of.

maintaining an aggressive posture on opportunities that will maximize

enterprise value will be priority number one. our opportunistic, no-debt

balance sheet can be utilized in many ways to reward shareholders. We shall

keep a vigilant eye on external investment opportunities as well as the

proposed policies of the newly-elected to insure preferential treatment for

our investors.

national Beverage corp. is playing on the turf of giants…but as most know
throughout the universe, hoards of replicas and statues exist of David—nary

a one of Goliath. national Beverage corp. has earned the genuine respect

of its peers…and the giants. Shareholder enrichment…par excellence!

Safeguarding Your Choice!

Nick A. Caporella
chairman and chief executive officer

✓
❏ National Beve rage Cor p.

National Beverage Corp.

✓
❏ Financials

2008 AnnuAl RepoRt 9

Selected Financial Data

(In thousands, except per share amounts)

S U M M A R Y O F O P E 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

P E 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
Deferred income taxes—net
Shareholders’ equity(4)

Fiscal Year Ended

May 3,
2008(1)

April 28,
2007

April 29,
2006

April 30,
2005

May 1,
2004

$ 566,001
393,420

$ 539,030
365,793

$ 516,802
349,131

$ 495,572
340,206

$ 512,061
343,316

172,581
138,447
109
1,053

35,078
12,598

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

$ 22,480

$ 24,682

$ 22,226

$ 16,886

$ 18,691

.49
.49
8.05
.80

.54
.54
13.13
—

.49
.48
12.80
.83

.37
.37
5.92
—

.42
.41
7.57
.83

$ 89,396
57,639
239,122
16,624
144,625

$ 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

(1) Fiscal 2008 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. In addition, in August 2007, the Company paid a cash dividend of $.80 per share,
aggregating $36.7 million.

nAtionAl BeveRAge CoRp.

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

O V 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 operating sub-
sidiaries. 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 devel-
opment and sale of flavored beverage products in the
United States, offering the widest selection of flavored
soft drinks, juices, sparkling waters and energy drinks.
Our flavor development spans over 100 years originat-
ing with our flagship brands, Shasta® and Faygo®, each
of which has over 50 flavor varieties. We also maintain 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. Shasta®, Crystal Bay® and
ClearFruit® flavored, sparkling, and spring water prod-
ucts; and ÀSanté™ nutritionally-enhanced waters. In
addition, we produce Rip It® energy drinks, 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 pro-
duce soft drinks for certain retailers and beverage com-
panies (“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 demographic emphasis; by
developing and acquiring innovative products 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 promo-
tional 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 con-
venience 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 products specifically targeted to this
market, such as ClearFruit, Crystal Bay, Rip It, ÀSanté
and Sundance®. Additionally, we have created proprie-
tary and specialized packaging with distinctive graphics
for these products. 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 high-
est volume typically realized during the summer months.
Additionally, our operating results are subject to numer-
ous 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 P E R AT I O N S

Net Sales Net sales for fiscal 2008 increased 5.0% to
$566.0 million compared to fiscal 2007. The net sales
increase reflects case volume growth of 9% for our
energy drinks, juices and waters along with the effect of
an 11% improvement in unit pricing due to product mix
and price increases instituted to recover higher raw
material costs. These increases were partially offset by
a 6% decline in branded carbonated soft drink volume
as well as the phase-out of certain allied brands.

Net sales for fiscal 2007 increased 4.3% to $539.0
million compared to fiscal 2006. Led by higher sales of

2008 AnnuAl RepoRt 11

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

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 material cost
increases resulted in a 9% improvement in unit pricing.
This increase was partially offset by a 7% decrease in
carbonated soft drink volume, due primarily to a 21%
volume decline in allied brands.

Gross Profit Gross profit approximated 30.5% of net
sales for fiscal 2008 and 32.1% of net sales for fiscal
2007. The decline in gross margin was due to higher
manufacturing and raw material costs and the effect of
lower volume. This was partially offset by the higher unit
pricing noted above and a $1.4 million business inter-
ruption insurance recovery. Cost of goods sold per unit
increased approximately 14%.

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 manufac-
turing and raw material costs. Excluding the fructose
settlement, cost of goods sold per unit increased
approximately 7%. 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 consistent with many beverage companies.
However, our gross margin may not be comparable to
companies that include shipping and handling costs in
cost of sales. See Note 1 of Notes to Consolidated
Financial Statements.

Selling, General and Administrative Expenses Selling,
general and administrative expenses were $138.4 mil-
lion or 24.5% of net sales for fiscal 2008 compared to
$137.2 million or 25.5% of net sales for last year. The
increase in expenses is due primarily to higher distribution

costs, which were affected by increases in fuel and
energy costs.

Selling, general and administrative expenses were
$137.2 million or 25.5% of net sales for fiscal 2007 com-
pared to $135.1 million or 26.1% of net sales for last
year. The $2.1 million increase is due to higher market-
ing costs primarily related to new product introductions
associated with energy drinks and increased coopera-
tive advertising.

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
$1,218,000 for fiscal 2008, $1,701,000 for fiscal 2007,
and $1,450,000 for fiscal 2006. The decline in interest
income for fiscal 2008 is due to lower investment yields
and average invested balances, reflecting the effects of
declining rates and the $36.7 million dividend paid in
August 2007. The increase in interest income for fiscal
2007 is due to an increase in investment yields and
average invested balances. In addition, other income
includes gains related to a contract settlement with a
customer of $895,000 for fiscal 2007 and $1.1 million
for fiscal 2006. See Note 6 of Notes to Consolidated
Financial Statements.

Income Taxes Our effective tax rate was approximately
35.9% for fiscal 2008 and fiscal 2007, and 36.3% for
fiscal 2006. The difference between the effective rate
and the federal statutory 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.

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 facilities. A subsidiary of the Company maintains
unsecured revolving credit facilities aggregating $45

nAtionAl BeveRAge CoRp.

million, of which $2.7 million is utilized for standby letters
of credit at May 3, 2008. We believe that existing capital
resources are sufficient to meet our capital require-
ments and those of the parent company for the fore-
seeable future.

On June 22, 2007, the Company distributed a 20%
stock dividend to shareholders of record on June 4,
2007. On August 17, 2007, the Company paid a cash
dividend of $.80 per share, aggregating $36.7 million, to
shareholders of record on July 20, 2007.

Cash Flows During fiscal 2008, $34 million was provided
from operating activities, which was partially offset by
$12.7 million used for investing activities. Cash provided
by operating activities increased $1.2 million due pri-
marily to a favorable change in deferred income taxes.
Cash used in investing activities increased $1.8 million
due to a net increase in marketable securities purchased.
Cash used in financing activities aggregated $35.4 mil-
lion in fiscal 2008 and was comprised of a $36.7 million
dividend payment partially offset by proceeds and tax
benefits from stock options exercised.

During fiscal 2007, $32.8 million was provided from
operating activities, which was partially offset by $10.9
million 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 expenditures. Cash provided
by financing activities aggregated $1.5 million in fiscal
2007 and was comprised of proceeds and tax benefits
from stock options exercised.

Financial Position During fiscal 2008, our working cap-
ital decreased $8.3 million to $89.4 million due to the
August 2007 cash dividend payment. Trade receivables
decreased $2.8 million due to changes in customer mix
and timing of customer payments. Inventory decreased
$5.3 million due to the elimination of certain inventory

items and improved inventory management. Prepaid
and other assets increased $2.3 million due to an
increase in income tax refund receivable. At May 3,
2008 and April 27, 2007, the current ratio was 2.3 to 1.

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 million 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.

Liquidity Although we continually evaluate capital proj-
ects designed to expand capacity, enhance packaging
capabilities and improve efficiencies at our manufactur-
ing facilities, the Company did not have any material
capital expenditure commitments as of May 3, 2008.
We anticipate that fiscal 2009 expenditures will be
comparable to historical amounts.

On May 25, 2007, the Company declared a 20%
stock dividend payable on June 22, 2007 to sharehold-
ers 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 January 27, 2006, the
Company paid a cash dividend of $1.00 per share ($.83
per share adjusted for the 20% stock dividend).

In January 1998, the Board of Directors authorized
the purchase of up to 800,000 shares of National
Beverage common stock of which 502,060 shares have
been purchased. There were no shares purchased dur-
ing the last three fiscal years.

Pursuant to a management agreement, we incurred
a fee to Corporate Management Advisors, Inc. (“CMA”)
of approximately $5.7 million for fiscal 2008, $5.4 million
for fiscal 2007, and $5.2 million for fiscal 2006. At May 3,
2008, we owed $2.7 million to CMA for unpaid fees.
See Note 5 of Notes to Consolidated Financial Statements.

2008 AnnuAl RepoRt 13

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 May 3, 2008 are payable as follows:

(In thousands)

Operating leases

Purchase commitments

Total

2009

2010–

2011

2012–

2013

Thereafter

$ 17,516

$ 6,122

$ 7,289

$ 3,822

65,629

47,504

18,125

—

$ 83,145

$ 53,626

$ 25,414

$ 3,822

$283

—

$283

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

We contribute to certain pension plans under col-
lective bargaining agreements based on hours worked
and to a discretionary profit sharing plan, none of which
have any long-term contractual funding requirements.
Contributions were $2.2 million for fiscal 2008, fiscal
2007, and fiscal 2006.

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 $2.7
million related to our self-insurance programs, which
expire in fiscal 2009. We expect to renew these standby
letters of credit until they are no longer required.

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 C A 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 generally accepted accounting principles requires
management to make estimates and assumptions that
affect the amounts reported in the financial statements
and accompanying notes. Although these estimates are
based on management’s knowledge of current events
and actions it may undertake in the future, they may
ultimately differ from actual results. We believe that the
critical accounting policies described in the following
paragraphs 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.

Credit Risk We sell products to a variety of customers
and extend credit based on an evaluation of each cus-
tomer’s financial condition, generally without requiring
collateral. Exposure to credit losses varies by customer
principally due to the financial condition of each cus-
tomer. We monitor our exposure to credit losses and
maintain allowances for anticipated losses based on
specific customer circumstances, credit conditions, and
historical write-offs.

nAtionAl BeveRAge CoRp.

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 amortiza-
tion 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 recognition to temporary differ-
ences 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 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 circumstances 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 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.

N E W AC C O U N T I N G S TA N D A R D S

See Note 1 of Notes to Consolidated Financial State-
ments for information about recently issued accounting
standards.

F O 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, oper-
ational 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 including, with-
out limitation, statements containing the words
“believes,” “anticipates,” “intends,” “plans,” “expects,”
and “estimates” constitute “forward-looking statements”
and involve known and unknown risk, uncertainties and
other factors that may cause the actual results, perfor-
mance or achievements of our Company to be materi-
ally different from any future results, performance or
achievements expressed or implied by such forward-
looking statements. Such factors include, but are not
limited to, the following: general economic and business
conditions; pricing of competitive products; success in
acquiring other beverage businesses; success of new
product and flavor introductions; fluctuations in the
costs of raw materials and packaging supplies, and the
ability to pass along any cost increases to our custom-
ers; our ability to increase prices for our products; labor

2008 AnnuAl RepoRt 15

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

strikes or work stoppages or other interruptions or diffi-
culties in the employment of labor; continued retailer
support for our products; changes in consumer pref-
erences and our success in creating products geared
toward consumers’ tastes; success of implementing
business strategies; changes in business strategy or
development plans; government regulations; unseason-
ably cold or wet weather conditions; and other factors
referenced in this report and the Company’s Securities
and Exchange Commission filings. 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 U A N T I T A T I V E A N D Q U A L I T A T I V E D I S C L O 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 2008. Our
investment portfolio is comprised of highly liquid securi-
ties 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 2008 would have changed by approxi-
mately $400,000.

nAtionAl BeveRAge CoRp.

Consolidated Balance Sheets
As of May 3, 2008 and April 28, 2007

(In thousands, except share amounts)

2008

2007

AS S E T S
Current assets:
Cash and equivalents
Marketable securities
Trade receivables—net of allowances of $266 (2008) and $325 (2007)

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
Income tax liability
Other liabilities
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 75,000,000 shares; issued 49,982,838

shares (2008) and 49,538,370 shares (2007); outstanding 45,950,054 shares (2008)
and 45,505,586 shares (2007)

Additional paid-in capital
Retained earnings
Treasury stock—at cost:
Preferred stock—150,000 shares
Common stock—4,032,784 shares

Total shareholders’ equity

See accompanying Notes to Consolidated Financial Statements.

$ 51,497
3,000
49,186
38,754
2,895
12,009

157,341
57,639
13,145
1,899
9,098

$ 65,579
—
51,976
44,062
2,209
9,681

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

$ 239,122

$ 257,632

$ 49,803
17,965
177

$ 54,333
19,271
2,219

67,945
16,624
3,166
6,762

75,823
15,217
—
9,231

150

500
26,508
135,467

496
24,847
149,868

(5,100)
(12,900)

144,625

157,361

$ 239,122

$ 257,632

2008 AnnuAl RepoRt 17

Consolidated Statements of income
For the Fiscal Years Ended May 3, 2008, April 28, 2007 and April 29, 2006

(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.

2008

2007

2006

$ 566,001
393,420

$ 539,030
365,793

$ 516,802
349,131

172,581
138,447
109
1,053

35,078
12,598

173,237
137,212
106
2,587

38,506
13,824

167,671
135,090
105
2,416

34,892
12,666

$ 22,480

$ 24,682

$ 22,226

$
$

.49
.49

$
$

.54
.54

$
$

.49
.48

45,894
46,109

45,763
46,073

45,367
45,946

18
18

nAtionAl BeveRAge CoRp.
nAtionAl BeveRAge CoRp.

Consolidated Statements of Shareholders’ equity
For the Fiscal Years Ended May 3, 2008, April 28, 2007 and April 29, 2006

(In thousands)

N U M B E R O F C O M M O N S H A R E S I S S U E D
Beginning of year
Stock options exercised(1)
20% stock dividend

End of year

P R E F E R R E D S T O C K
Beginning and end of year

C O M M O N S T O C K
Beginning of year
Stock options exercised
20% stock dividend

End of year

AD D I T I O N A L PA I D - I N C A P I 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
FIN 48 adoption
20% stock dividend

End of year

T R E A S U R Y S T O C K — P R E F E R R E D
Beginning and end of year

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

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

(1) Includes issuance of deferred delivery shares of 288 (2008), 343 (2007) and 39 (2006).

See accompanying Notes to Consolidated Financial Statements.

2008

2007

2006

49,538
444
—

41,511
443
7,584

41,019
492
—

49,982

49,538

41,511

150

496
4
—

500

415
5
76

496

410
5
—

415

24,847
329
311
1,021

23,033
319
318
1,177

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

26,508

24,847

23,033

149,868
22,480
(36,711)
(170)
—

125,262
24,682
—
—
(76)

141,057
22,226
(38,021)
—
—

135,467

149,868

125,262

(5,100)

(12,900)

$ 144,625

$ 157,361

$ 130,860

2008 AnnuAl RepoRt 19

Consolidated Statements of Cash Flows
For the Fiscal Years Ended May 3, 2008, April 28, 2007 and April 29, 2006

(In thousands)

2008

2007

2006

O P E 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

$ 22,480

$ 24,682

$ 22,226

11,584
1,254
196
311

2,790
5,308
(2,824)
(4,530)
(2,581)

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

Net cash provided by operating activities

33,988

32,835

28,552

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 C A 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

(302,195)
299,195
(9,725)
12

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

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

(12,713)

(10,876)

(5,074)

(36,711)
333
1,021

(35,357)

(14,082)
65,579

—
324
1,177

1,501

23,460
42,119

(38,021)
1,005
1,100

(35,916)

(12,438)
54,557

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

$ 51,497

$ 65,579

$ 42,119

O T H E R C A S H F LO W I N F O R M AT I O N :
Interest paid
Income taxes paid

See accompanying Notes to Consolidated Financial Statements.

107
13,767

106
13,325

105
10,754

nAtionAl BeveRAge CoRp.

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 C A 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 state-
ments include the accounts of National Beverage Corp.
and all subsidiaries. All significant intercompany balances
have been eliminated. Our fiscal year ends the Saturday
closest to April 30th and, as a result, an additional week is
added every five or six years. Fiscal 2008 consists of 53
weeks while fiscal 2007 and 2006 consist of 52 weeks.

Cash and Equivalents Cash and equivalents are com-
prised of cash and highly liquid securities (consisting
primarily of short-term money-market investments) with
an original maturity of three months or less.

Fair Value of Financial Instruments The fair values of
financial instruments including marketable securities,
trade receivables and accounts payable are estimated
based on market rates. The carrying amounts of financial
instruments reflected in the balance sheets approximate
their fair values.

Impairment of Long-Lived Assets All long-lived assets,
excluding goodwill and intangible assets not subject to
amortization, are evaluated for impairment on the basis
of undiscounted cash flows whenever events or changes
in circumstances indicate that the carrying amount of
an asset may not be recoverable. An impaired asset is
written down to its estimated fair 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 impair-
ment 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 We account for income taxes under
Statement of Financial Accounting Standards (“SFAS”)
No. 109, “Accounting for Income Taxes” (“SFAS 109”).
Under SFAS 109, deferred tax assets and liabilities are
recognized for future tax consequences attributable to
differences between the financial statement carrying
amounts of existing assets and liabilities and their
respective tax bases. Deferred tax assets and liabilities
are measured using enacted tax rates expected to apply
to taxable income in the years in which those temporary
differences are expected to reverse. The effect on
deferred tax assets and liabilities of a change in tax
rates is recognized in income in the period that includes
the enactment date.

At the beginning of fiscal 2008, we adopted the
Financial Accounting Standards Board’s (“FASB”) Inter-
pretation Number 48, “Accounting for Uncertainty in
Income Taxes” (“FIN 48”). FIN 48 clarified the accounting
for uncertainty in an enterprise’s financial statements 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. FIN 48 requires us to evaluate our
open tax positions that exist on the date of initial adop-
tion in each jurisdiction.

When tax returns are filed, it is highly certain that
some positions taken would be sustained upon exami-
nation by the taxing authorities, while others are subject
to uncertainty about the merits of the position taken or
the amount of the position that would be ultimately sus-
tained. The benefit of a tax position is recognized in the
financial statements in the period during which, based

2008 AnnuAl RepoRt 21

notes to Consolidated Financial Statements (continued)

on all available evidence, we believe it is more likely than
not that the position will be sustained upon examina-
tion, including the resolution of appeals or litigation pro-
cesses, if any. Tax positions taken are not offset or
aggregated with other positions. Tax positions that meet
the more-likely-than-not recognition threshold are mea-
sured as the largest amount of tax benefit that is more
than 50 percent likely of being realized upon settlement
with the applicable taxing authority. The portion of the
benefits associated with tax positions taken that exceeds
the amount measured as described above is reflected
as a liability for unrecognized tax benefits in the accom-
panying balance sheet along with any associated interest
and penalties that would be payable to the taxing
authorities upon examination. Interest and penalties
associated with unrecognized tax benefits are classified
as income tax expense in the statement of operations.

Intangible assets as of May 3, 2008
Intangible Assets
and April 28, 2007 consisted of nonamortizable trade-
marks aggregating $1,899,000. Amortization expense
related to relinquished distribution rights was $285,000
for fiscal 2006.

Inventories are stated at the lower of first-
Inventories
in, first-out cost or market. Inventories at May 3, 2008
are comprised of finished goods of $20,913,000 and
raw materials of $17,841,000. Inventories at April 28,
2007 are comprised of finished goods of $24,356,000
and raw materials of $19,706,000.

Marketable Securities Marketable securities are income
yielding securities that generally can be readily converted
into cash. All of our marketable securities are classified

as trading securities and are reported as current assets
at their estimated fair market values. The reported fair
value is based on a variety of factors and assumptions
including quoted market prices when available. Accord-
ingly, the fair value may not represent actual value of the
securities that could have been realized as of May 3,
2008, or that will be realized in the future and do not
include expenses that could be incurred in an actual
sale or settlement.

Marketing Costs We are involved in a variety of market-
ing programs, including cooperative advertising programs
with customers, to advertise and promote our products
to consumers. Marketing costs are expensed when
incurred, except for prepaid advertising and production
costs which are expensed when the advertising takes
place. Marketing costs, which are included in selling,
general and administrative expenses, were $39.5 million
in fiscal 2008, $42.4 million in fiscal 2007, and $37.9 mil-
lion in fiscal 2006.

Net Income Per Share Basic net income per share is
computed by dividing net income by the weighted aver-
age number of common shares outstanding during the
period. Included in average common shares outstand-
ing are shares of common stock of which option hold-
ers have elected to defer physical delivery following the
exercise of stock options. Diluted net income per share
is calculated in a similar manner, but includes the dilu-
tive effect of stock options, which amounted to 215,000
shares (2008), 310,000 shares (2007), and 579,000
shares (2006). Net income per share and average com-
mon shares outstanding have been adjusted for the
20% stock dividend paid on June 22, 2007 (see note 5).

In September 2006, the
New Accounting Standards
FASB issued SFAS 157, “Fair Value Measurements” (“SFAS
157”), which defines fair value, establishes a framework
for measuring fair value, and expands disclosures about
fair value measurements. The provisions of SFAS 157
are effective as of the beginning of our 2009 fiscal year.

nAtionAl BeveRAge CoRp.

However, as it relates to fair value measurement require-
ments for nonfinancial assets and liabilities that are
not remeasured at fair value on a recurring basis, the
FASB deferred the effective date of SFAS 157 until the
beginning of our 2010 fiscal year. We are currently eval-
uating the impact of adopting SFAS 157 on our financial
statements.

In February 2007, the FASB issued SFAS 159, “The
Fair Value Option for Financial Assets and Financial
Liabilities” (“SFAS 159”), which permits entities to
choose to measure many financial instruments and cer-
tain other items at fair value. The provisions of SFAS 159
are effective as of the beginning of our 2009 fiscal year.
We are currently evaluating the impact of adopting SFAS
159 on our financial statements.

In December 2007, the FASB issued SFAS 141
(revised 2007), “Business Combinations” (“SFAS 141R”),
and SFAS 160, “Noncontrolling Interests in Consolidated
Financial Statements” (“SFAS 160”), to improve, sim-
plify, and converge internationally the accounting for
business combinations and the reporting of noncontrol-
ling interests in consolidated financial statements. The
provisions of SFAS 141R and SFAS 160 are effective as
of the beginning of our 2010 fiscal year. We are currently
evaluating the impact of adopting SFAS 141R and SFAS
160 on our financial statements.

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

Revenue Recognition Revenue from product sales is
recognized 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 pro-
vide 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 circumstances 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 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 accompany-
ing consolidated financial statements present financial
information in a format that is consistent with the inter-
nal 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.

2008 AnnuAl RepoRt 23

notes to Consolidated Financial Statements (continued)

Such costs aggregated $45.3 million in fiscal 2008,
$43.2 million in fiscal 2007, and $44.1 million in fiscal
2006. 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 Employees,” 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 compensation
expense was generally not recognized unless the exer-
cise 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 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 fiscal 2006.

Trade Receivables We record trade receivables at net
realizable value, which includes an appropriate allow-
ance for doubtful accounts. We extend credit based on
an evaluation of each customer’s financial condition,
generally without requiring collateral. Exposure to credit
losses varies by customer principally due to the financial
condition of each customer. We monitor our exposure
to credit losses and maintain allowances for anticipated
losses based on specific customer circumstances,

credit conditions, and historical write-offs. Activity in the
allowance for doubtful accounts was as follows:

(In thousands)

2008

2007

2006

Balance at beginning of year

$ 325

$ 562

$ 585

Charged (credited) to expense

Net recoveries (charge-offs)

(244)

(150)

227

(250)

Balance at end of year

$ 266

$ 325

$ 562

As of May 3, 2008 and April 28, 2007, 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.

Use of Estimates The preparation of financial state-
ments 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 knowl-
edge of current events and anticipated future actions,
actual results may vary from reported amounts.

2 . P R O P E R T Y

Property as of May 3, 2008 and April 28, 2007 consisted
of the following:

(In thousands)

Land

Buildings and improvements

Machinery and equipment

Total

2008

2007

$ 8,954

$ 8,915

41,697

124,797

38,898

123,556

175,448

171,369

Less accumulated depreciation

(117,809)

(114,000)

Property—net

$ 57,639

$ 57,369

Depreciation expense was $9,247,000 for fiscal
2008, $9,525,000 for fiscal 2007, and $10,147,000 for
fiscal 2006.

nAtionAl BeveRAge CoRp.

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

Accrued liabilities as of May 3, 2008 and April 28, 2007
consisted of the following:

(In thousands)

Accrued promotions

Accrued compensation

Accrued insurance

Other

Total

4 . D E B T

2008

2007

$ 5,340

$ 5,710

5,065

2,783

4,777

4,427

1,919

7,215

$ 17,965

$19,271

At May 3, 2008, a subsidiary of the Company main-
tained unsecured revolving credit facilities with banks
aggregating $45 million (the “Credit Facilities”). The
Credit Facilities expire through December 2009 and
bear interest at ½% below the banks’ reference rate or
.6% above LIBOR, at the subsidiary’s election. At May 3,
2008, $2.7 million of the Credit Facilities was used for
standby letters of credit and $42.3 million was available
for borrowings.

The Credit Facilities require the subsidiary to main-
tain certain financial ratios and contain other restric-
tions, 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 May 3, 2008, we were in compliance with all
loan covenants and approximately $25 million of retained
earnings were restricted from distribution.

In June 2008, the Credit Facilities were increased
to $75 million and the maturity date extended through
December 2013.

5 . C A P I TA L S T O 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 shareholders 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.

The Company is a party to a management agree-
ment with Corporate Management Advisors, Inc. (“CMA”),
a corporation owned by our Chairman and Chief
Executive Officer. Under the agreement, the employees
of CMA provide us 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 compensation
based on certain factors to be determined by the
Compensation Committee of our Board of Directors. In
July 2005, in connection with providing services under
the management agreement, CMA became a twenty
percent joint owner of an aircraft used by the Company.
We incurred fees to CMA of $5.7 million for fiscal 2008,
$5.4 million for fiscal 2007, and $5.2 million for fiscal
2006. No incentive compensation has been incurred or
approved under the management agreement since its
inception. Included in accounts payable at May 3, 2008
and April 28, 2007 were amounts due CMA of $2.7 mil-
lion and $2.5 million, respectively.

2008 AnnuAl RepoRt 25

notes to Consolidated Financial Statements (continued)

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

Other income consisted of the following:

(In thousands)

2008

2007

2006

Interest income
Gain on contract settlement
Gain (loss) on disposal
of property, net
Other income (loss), net

$1,218
—

$1,701
895

$1,450
1,143

(196)
31

(9)
—

51
(228)

Total

$1,053

$2,587

$2,416

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

The provision for income taxes consisted of the following:

(In thousands)

2008

2007

2006

Current
Deferred

Total

$11,344
1,254

$16,659
(2,835)

$11,022
1,644

$12,598

$13,824

$12,666

Deferred taxes are recorded to give recognition to
temporary differences between the tax bases of assets
or liabilities and their reported amounts in the financial
statements. Valuation allowances are established when
it is deemed, more likely than not, that the benefit of
deferred tax assets will not be realized. Deferred tax
assets and liabilities as of May 3, 2008 and April 28,
2007 consisted of the following:

(In thousands)

2008

2007

Deferred tax assets:
Accrued expenses and other

Inventory and amortizable assets

$ 4,704
359

$ 4,215
269

Total deferred tax assets

5,063

4,484

Deferred tax liabilities:
Property

Intangibles and other

18,703
89

17,426
66

Total deferred tax liabilities

18,792

17,492

Net deferred tax liabilities

$ 13,729

$ 13,008

Current deferred tax assets—net

$ 2,895

$ 2,209

Noncurrent deferred tax liabilities—net

$ 16,624

$ 15,217

The reconciliation of the statutory federal income

tax rate to our effective tax rate was as follows:

2008

2007

2006

Statutory federal income tax rate

35.0% 35.0% 35.0%

State income taxes,

net of federal benefit

Other differences

2.8

(1.9)

3.0

(2.1)

2.9

(1.6)

Effective income tax rate

35.9% 35.9% 36.3%

In June 2006, the FASB issued FIN No. 48, “Account-
ing for Uncertainty in Income Taxes” (“FIN 48”), which
provides guidance on the financial statement recogni-
tion, measurement, reporting and disclosure of uncertain
tax positions taken or expected to be taken in a tax
return. We adopted FIN 48 at the beginning of fiscal
2008 and recorded a $703,000 increase in liabilities for
uncertain tax positions, a $533,000 decrease in deferred
tax liability and a $170,000 decrease to retained earnings.
As of May 3, 2008, the gross amount of unrecog-
nized tax benefits was approximately $3.2 million, of
which approximately $424,000 was recognized as tax
expense in fiscal 2008. If we were to prevail on all uncer-
tain tax positions, the net effect would be to reduce our
tax expense by approximately $2.6 million. A reconcilia-
tion of the changes in the gross balance of unrecognized
tax benefits amounts during fiscal 2008 follows:

(In thousands)

Beginning balance

Increases due to current period tax positions

Decreases due to lapse of statue of limitations

Ending balance

$2,694

630

(158)

$3,166

We recognize accrued interest and penalties related
to unrecognized tax benefits in income tax expense.
As of May 3, 2008, we had accrued $393,000 in inter-
est related to unrecognized tax benefits, of which
approximately $90,000 was recognized as tax expense
in fiscal 2008.

We file annual income tax returns in the United
States and in various state and local jurisdictions. A
number of years may elapse before an uncertain tax

nAtionAl BeveRAge CoRp.

position, for which we have unrecognized tax benefits,
is audited and finally resolved. While it is often difficult to
predict the final outcome or the timing of resolution of
any particular uncertain tax position, we believe that our
unrecognized tax benefits reflect the most probable
outcome. We adjust these unrecognized tax benefits,
as well as the related interest, in light of changing facts
and circumstances. The resolution of any particular
uncertain tax position could require the use of cash and
an adjustment to our provision for income taxes in the
period of resolution. The Internal Revenue Service has
concluded its examination of our federal income tax
returns through fiscal 2004 and income tax returns for
subsequent fiscal years are subject to examination.
Generally, the income tax returns for the various state
jurisdictions are subject to examination for fiscal years
ending on or after fiscal 2003.

8 . S T O C K- B A S E D C O M P E 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 other key employees and consultants 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 consider-
ation 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 con-
sideration 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, consultants, directors and offi-
cers. 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 maxi-
mum 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 the exercise price reduces to the stock
par value 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 following assumptions: weighted average
expected life of 7.6 years for fiscal 2008, 8 years for 2007,
and 7.7 years for 2006; weighted average expected
volatility of 36.3% for fiscal 2008, 33.2% for 2007, and
30.5% for 2006; weighted average risk free interest
rates of 4.6% for fiscal 2008, 5% for 2007, and 4.5% for
2006; and no expected dividend payments. Subsequent
to adopting SFAS No. 123R, forfeitures were estimated
based on historical experience. Prior to adoption, forfei-
tures were recorded as they occurred. The expected life
of stock options was estimated based on historical
experience. 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.

2008 AnnuAl RepoRt 27

notes to Consolidated Financial Statements (continued)

The following is a summary of stock option activity

for fiscal 2008:

Price (a)

Options outstanding, beginning of year

835,207

$4.23

Granted

Exercised

Cancelled

Options outstanding, end of year

41,200

(156,468)

(43,020)

676,919

8.85

2.13

6.06

4.47

Options exercisable, end of year

361,848

3.24

(a) Weighted average exercise price.

Stock-based compensation expense for fiscal 2008,
fiscal 2007 and fiscal 2006 was $311,000, $318,000,
and $291,000, respectively. The total fair value of shares
vested for fiscal 2008, fiscal 2007 and fiscal 2006 was
$292,000, $258,000, and $218,000, respectively. The
total intrinsic value for stock options exercised during
fiscal 2008, fiscal 2007 and fiscal 2006 was $1.2 million,
$1.1 million, and $2.7 million, respectively. The weighted
average fair value for stock options granted in fiscal
2008, fiscal 2007 and fiscal 2006 was $7.02, $13.84,
and $5.18, respectively.

As of May 3, 2008, unrecognized compensation
expense related to the unvested portion of our stock
options was $1.3 million, which is expected to be recog-
nized over a weighted average period of 3.2 years. The
weighted average remaining contractual term and the
aggregate intrinsic value for options outstanding as of
May 3, 2008 was 5.3 years and $2.4 million, respec-
tively. The weighted average remaining contractual term
and the aggregate intrinsic value for options exercisable
as of May 3, 2008 was 3.5 years and $1.7 million,
respectively.

For fiscal 2008, net cash proceeds from the exer-
cise of stock options were $333,000 and stock based
income tax benefits aggregated $1 million.

We have 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 for at
least two years, (ii) are not part-time employees and
(iii) are not owners of five percent or more of National
Beverage common stock. As of May 3, 2008, no shares
have been issued under the plan.

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 2017. Certain of these
leases contain scheduled rent increases and/or renewal
options. Contractual rent increases are taken into
account when calculating the minimum lease payment
and recognized on a straight-line basis over the lease
term. Rent expense under operating lease agreements
totaled approximately $8.3 million for fiscal 2008, $8.2
million for fiscal 2007, and $8.5 million for fiscal 2006.

Our minimum lease payments under non-cancelable

operating leases as of May 3, 2008 are as follows:

(In thousands)

Fiscal 2009

Fiscal 2010

Fiscal 2011

Fiscal 2012

Fiscal 2013

Thereafter

$ 6,122

4,246

3,043

2,278

1,544

283

Total minimum lease payments

$17,516

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

nAtionAl BeveRAge CoRp.

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 require-
ments. Contributions were $2.2 million for fiscal 2008,
fiscal 2007, and fiscal 2006.

We enter into various agreements with suppliers for
the purchase of raw materials, the terms of which may
include variable or fixed pricing and minimum purchase
quantities. As of May 3, 2008, we had purchase com-
mitments for raw materials of $65.6 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 T O S E S E T T L E M E N T

In June 2005, we received a partial payment of $7.7 mil-
lion 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 proportion of its purchases to total pur-
chases 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 quar-
ter of fiscal 2006. In November 2005, we 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.

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

(In thousands, except per share amounts)

First Quarter

Second Quarter

Third Quarter

Fourth Quarter

Fiscal 2008 (1)
Net sales

Gross profit

Net income

Net income per share—basic

Net income per share—diluted

Fiscal 2007

Net sales

Gross profit

Net income
Net income per share—basic(2)
Net income per share—diluted(2)

$151,764

$143,528

$123,182

$147,527

46,391

7,185

$ .16

44,525

6,477

$ .14

37,669

3,254

$ .07

43,996

5,564

$ .12

$150,136

$135,818

$117,123

$135,953

49,955

9,759

$ .21

43,913

5,749

$ .13

$ .12

37,841

3,034

$ .07

41,528

6,140

$ .13

(1) Fiscal 2008 fourth quarter included fourteen weeks while other quarters included thirteen weeks.
(2) Net income per share has been adjusted for the 20% stock dividend distributed on June 22, 2007.

2008 AnnuAl RepoRt 29

Report of independent Registered public Accounting Firm

To the Board of Directors
National Beverage Corp.

We have audited the accompanying balance sheets of National Beverage Corp. as of May 3, 2008 and April 28,
2007, and the related statements of income, stockholders’ equity and cash flows for each of the years in the two-year
period ended May 3, 2008. 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. The financial statements of
the Company for the year 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 audits 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 audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial posi-
tion of National Beverage Corp. as of May 3, 2008 and April 28, 2007, and the results of its operations and its cash
flows for each of the years in the two-year period ended May 3, 2008, in conformity with U.S. generally accepted
accounting principles.

Ft. Lauderdale, Florida
July 17, 2008

nAtionAl BeveRAge CoRp.

300

250

200

150

100

Market for Registrant’s Common equity, Related Stockholder Matters and
issuer purchases of equity Securities

5/3/03

5/01/04

4/30/05

4/29/06

4/28/07

5/3/08

P E R F O R M A N C E G R A P H

The following graph shows a comparison of the five-
year cumulative returns of an investment of $100 cash
on May 3, 2003 in (i) our common stock, (ii) the NASDAQ
Composite Index and (iii) a company constructed peer
group consisting of Coca-Cola Enterprises, Inc., Coca-
Cola Bottling Company Consolidated, Cott Corporation
and PepsiAmericas, Inc. The graph assumes that all
dividends have been reinvested.

$300

$250

$200

$150

$100

$50

5/03/03

5/01/04

4/30/05

4/29/06

4/28/07

5/03/08

National Beverage Corp.

NASDAQ Composite Index

Peer Group Only

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 under the symbol
“FIZ.” The following table shows the range of high and
low prices per share of the Common Stock for the fiscal
quarters indicated:

Fiscal 2008

Fiscal 2007

High

Low

High

Low

$ 14.65

$ 10.59

$ 8.65

$ 8.25

$ 9.40

$ 7.95

$ 6.76

$ 7.01

$ 14.63

$ 9.79

$ 14.42

$ 9.08

$ 12.75

$ 9.38

$ 15.02

$ 10.71

First Quarter

Second Quarter

Third Quarter

Fourth Quarter

Of the estimated 5,000 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, 2008, according to records maintained by our
transfer agent.

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 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 retroactive effect to the 20%
stock dividend.

Currently, the Board of Directors has no plans to
declare additional cash dividends. See Note 4 of Notes
to Consolidated Financial Statements for certain restric-
tions on the payment of dividends.

2008 AnnuAl RepoRt 31

Corporate Data

DI 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.*
Former 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
** S. Lee Kling, a Board Member
since 1993, passed away on
July 25, 2008.

C O R P O R AT E M A N A G 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

nAtionAl BeveRAge CoRp.

Gregory J. Kwederis
Director—Beverage Analyst

Lawrence P. Parent
Director—Credit Management

Vanessa C. Walker
Director—Strategic Brand

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
Sundance Beverage Company

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

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

John F. Hlebica
Vice President
Shasta Beverages Int’l., 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.
NutraFizz Products Corp.
PACO, Inc.
Shasta Beverages, Inc.
Shasta Beverages Int’l., Inc.
Shasta Sales, Inc.
Shasta Sweetener Corp.
Shasta West, Inc.
Sundance Beverage Company

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

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

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

The Annual Meeting of Share-
holders will be held on Friday,
October 3, 2008 at 2:00 p.m.
local time at the Gaylord Palms
Resort & Convention Center,
6000 W. Osceola Parkway,
Orlando, FL 34746.

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

IN 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 depart-
ment 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.

ST 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

BNY Mellon Shareowner

Services

P.O. Box 358015
Pittsburgh, PA 15252-8015
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

P U B L I C A C C O U N T I N G F I R M

McGladrey & Pullen, LLP
Fort Lauderdale, FL

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In memory of S. Lee Kling

Some men stay down in the rut,
While others lead the throng.

All men are created equal but,
They don’t stay that way long.

There’s many a man with a gallant air,
That goes galloping through the fray.

But the valuable man is the man that’s there,
When the smoke has cleared away.

Some–don’t get nothing out of life,
And when their whines begin.

You often can remind them,
That they didn’t put anything in!

“Well, we are all here today because of a man who not only
knew how to put something in…in spades–but induced others
through his mentoring to put all they could–in!”

Nick A. Caporella
Excerpt from Eulogy
July 29, 2008