National Beverage Corp. 2011 Annual Report
Refreshing America…
( No Matter What! )
AmericA : [uh-mer-i-kuh] – noun
1. a new beginning
2. a dream for all
3. opportunity awaiting
4. home of National Beverage Corp.
Synonym: Hope
★ ★ ★ ★ ★
G
rowing up in close proximity with
many who came to America from
another continent…is such a
startling contrast to the eight-year-old texting
on his Smart phone today.
Ideals • Principles • Values – seem to be obscured
these days by Energy • Eco • Green! But, that
young mind requires prioritizing – and needs
to master which values are precious. Are
these sacred values passed from generation to
generation by love – the most profound teacher
of all? Is America, the beacon America, our
great America – a significant ideal for that
wonderful, curious young mind? I wish so…
R eflecting…
★ ★ ★ ★ ★
Capital Markets, Wall Street, the Global Crisis,
Homeland Politics, Wars, the General State of Emotions
in America, etc., etc., etc.
Keeping one’s eye on the ball these days – requires the
characteristic of an Android! Team National’s stellar
execution in these ‘worrisome’ times is a testament to the
fact that – many at National Beverage are doing just that.
The facts listed below translate into commendable results
– only people with genuine excellence can achieve:
• Two special cash payments, totaling $3.65
per share, were paid within the last nineteen months.
• FY2011 Revenues & Earnings –
Both Historic Highs
• FY2011 Operating & Pretax Margin –
Historic Highs
• FY2011 Shareholder Financial Matrix Ratios –
Historic Highs
• FY2011 Owners’ Enterprise Value –
Historic High
• Marketing focus, operational efficiencies
and aggressive innovation
eam National has adopted four strong words
in which all aspects of its dynamic efforts
are encased:
T
FOCUS – FUNCTIONAL – EFFICACY – VALUE
From revenues to our shareholders – From
innovation to our dividend payments…
From caring to our balance sheet – From
refreshing to creating a memory…
AND
From jobs to cultural traditions – From
our energy to your family’s virtues…
“Thank you for allowing us – our beverages, our efforts
and our caring – to be so much a part of your lives.
May our values enrich yours – and a heartfelt wish that…
all of our future results be as refreshing as this excellent –
FY2011!”
Nick A. Caporella
Chairman & Chief Executive Officer
fY2011 financi al HigHligHts
Return on Equity
Return on Assets
Shareholder Return
(including Dividends)
Growth vs. Prior Year
Net Income
Operating Profit
EBITDA
Free Cash Flow Per Share
Cash Conversion Cycle
Working Capital Ratio
Pre-Cash Payment 2-14-11
Working Capital Ratio
After-Cash Payment 2-14-11
FIzz-cetera
36.7%
19.3%
39.8%
24.0%
21.0%
16.2%
$1.35
19.2 Days
3.1:1
1.4:1
• Big Shot Beverages celebrated its 75th Anniversary
and honored Mr. Herman Marshall, an employee
for over 63 years
• Donated over 500,000 8oz servings to community
efforts and victims of disasters
Inherited Values
“ I haven’t learned to worry…
(but I’ve been taught wholesome values!”)
Shasta–with Stature
and Flavors for All!
In 1886, the French gifted the Statue of Liberty to its new friend–
America. Just three years later, Shasta Beverages began its journey
as a taste of American pride. Mineral water was drawn from the
natural springs of California’s majestic Mt. Shasta and loaded into
wood-lined rail tanker cars…the first shipment to a Shasta bottling
plant was made. More than 120 years later, America and Shasta
still stand for wholesome American values and most importantly…
the freedom of choice.
Faygo–Founded on Flavoring Dreams
In 1907, two immigrants arrived in America–the land of dreams
and opportunity–seeking a better life for their families. Their only
possessions were a powerful work ethic and a creative idea for a
unique beverage. These founders of Faygo, bakers in their home-
land, invented carbonated sodas flavored with their frosting recipes.
Faygo today–a revered brand with over 60 flavors distributed in
more than 30 states–was born from the unmitigated hope and
refusal to fail…of American trailblazers.
National Beverage Corp. / 2011 Annual Report / Page Two
My Country–My Game–My Life
“ Refreshing the endorphins…
(energizing my values!”)
Clear Fruit
What is more American than a Sunday
picnic in the park? Just try to imagine the
woven picnic basket, the checkered table
cloth, the ham and cheese sandwiches,
and a splendid array of thirst-quenching
Clear Fruit. Imagine the smooth, non-
carbonated taste of a Peach Fling Clear Fruit
as it clings to your lips…and be thankful
for the simple pleasures of…our America
(without the ants!).
Mr. Pure
Shortly after the end of World War II,
Moms began serving their families
healthy and delicious Mr. Pure juices.
A Midwestern staple, Mr. Pure is worthy
of its longevity and its name. Clean,
pure, honest enrichment that has
been enjoyed for generations–
including the Greatest Generation–
Mr. Pure fruit juices equate with
American fortitude.
National Beverage Corp. / 2011 Annual Report / Page Four
Everfresh
Good health begins at home–and with a
nutritious breakfast. An invigorating glass
of Everfresh 100% Orange Juice has been
waking up Midwesterners since the ’50s.
And now, brand-new tempting blends
of Everfresh Pineapple Mango and
Strawberry Banana flavors are joining
eggs and waffles on the breakfast table.
Wholesome Everfresh juices provide
healthy refreshment–no matter what time
you begin your day.
Precious Values
“ Family Values–Loving Times…
(the true meaning of tradition!”)
LaCroix
LaCroix is rocketing and sparkling through
the nation–providing a crisp, clean and
healthy beverage alternative to Americans
in all walks of life. Preserving our natural
resources with a lower carbon footprint
than imported brands, LaCroix sparkling
waters are as pure, refreshing and
confident as…American attitude!
Mega Sport
Weekend warriors and military troops
have much in common–they need peak
performance and America’s Inspiration
beside them…All-Ways! Mega Sport
is an electrolyte-enhanced hydration
performance drink that does it ALL!
National Beverage is mega-proud to
supply those who serve our country with
mega-might. Yes Sir…
Rip It
Rip It serves and honors American heroes.
The soldier who stands alert with an
energy boost, the Olympic-bound athlete
who demands energized focus, the office
worker who is boosted to make an
impending deadline–they all thrive on
Rip It. These self-reliant and confident
loyalists prefer action to words–and they
prefer Rip It.
National Beverage Corp. / 2011 Annual Report / Page Six
Discipline–Discipline–Discipline
“ Mentally Strong–Morally Right…
(it’s the way I enhance my destiny!”)
National Beverage Corp.
Selected Financial Data
Products & Beyond–More Than a Future
“See and Taste Our Imagination…
(we make our dreams–come true!”)
Robust and Innovative Brand-de-licious!
American patriots are known for achieving near-impossible feats, driven by a positive
spirit that characterizes our countrymen. This positive and daring spirit inspires
Americans to be creative and innovative risk-takers. Such is the driving force behind
Team National. We are dreaming the inevitable, innovating the impossible and
reaching the untouchable–over and over again! We never accept good–when better
is available!
Scan Codes to Follow Us:
LaCroix
on Facebook
St. Nicks for St. Jude
on Facebook
Sundance Teas
on Facebook
National Beverage Corp. / 2011 Annual Report / Page Eight
National Beverage Corp.
Financials
National Beverage Corp.
National Beverage Corp.
Selected Financial Data
Selected Financial Data
(In thousands, except per share
and footnote amounts)
April 30,
2011
May 1,
2010
May 2,
2009
May 3,
2008(1)
April 28,
2007
Fiscal Year Ended
S U M M A RY OF O P E R AT IO N S :
Net sales
Cost of sales
Gross profit
Selling, general and administrative
expenses
Interest expense
Other income (expense)—net
Income before income taxes
Provision for income taxes
$ 600,193
381,539
$ 593,465
396,450
$ 575,177
405,322
$ 566,001
393,420
$ 539,030
365,793
218,654
197,015
169,855
172,581
173,237
155,885
99
(20)
62,650
21,896
145,159
120
(351)
51,385
18,532
131,918
107
967
38,797
14,055
138,447
109
1,053
35,078
12,598
137,212
106
2,587
38,506
13,824
Net income
$ 40,754
$ 32,853
$ 24,742
$ 22,480
$ 24,682
P E R S H A R E DATA :
Basic net income (2)
Diluted net income (2)
Closing stock price (2)
Cash dividends paid(3)
$
.88
.88
13.92
2.30
$
.71
.71
11.60
1.35
$
.54
.54
10.47
—
$
.49
.49
8.05
.80
$
.54
.54
13.13
—
B A L A N C E S H E E T DATA :
Cash and equivalents(3)
Working capital(3)
Property, plant and equipment—net
Total assets(3)
Deferred income tax liability
Shareholders’ equity(3)
Cash dividends paid(3)
$ 7,372
30,930
55,337
182,810
14,548
80,336
106,314
$ 68,566
92,898
53,401
240,359
15,597
141,572
62,295
$ 84,140
117,840
56,141
265,682
16,517
170,012
—
$ 51,497
89,396
57,639
239,122
16,624
144,625
36,711
$ 65,579
97,684
57,369
257,632
15,217
157,361
—
(1) Fiscal 2008 consisted of 53 weeks.
(2) 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 20% stock dividend distributed on June 22, 2007.
(3) The Company paid special cash dividends of $106,314,000 ($2.30 per share), $62,295,000 ($1.35 per share) and $36,711,000
($.80 per share) on February 14, 2011, January 22, 2010 and August 17, 2007, respectively.
National Beverage Corp. / 2011 Annual Report / Page Ten
National Beverage Corp.
National Beverage Corp.
Management’s Discussion and Analysis of
Management’s Discussion and Analysis of
Financial Condition and Results of Operations
Financial Condition and Results of Operations
OV E RV 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 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 prod-
ucts in the United States, offering a wide selection
of flavored soft drinks, juices, sparkling waters,
energy drinks and nutritionally-enhanced waters.
Our flavor development spans over 100 years orig-
inating with our flagship brands, Shasta® and
Faygo®, each of which has over 50 flavor varieties.
We also offer the health-conscious consumer a
diverse line of flavored beverage products, includ-
ing Everfresh®, Home Juice® and Mr. Pure® 100%
juice and juice-based products; LaCroix®, Crystal
Bay® and ClearFruit® flavored, sparkling and spring
water products; and ÀSanté® nutritionally-enhanced
waters. In addition, we produce and market Rip It®
energy drinks, Ohana® fruit-flavored drinks, St. Nick’s®
holiday soft drinks, as well as effervescent powder
beverage enhancers sold under the NutraFizz®
brand name. Substantially all of our brands are
produced in twelve manufacturing facilities that
are strategically located near major metropolitan
markets throughout the continental United States.
To a lesser extent, we develop and produce soft
drinks for certain retailers and beverage compa-
nies (“allied brands”).
Our strategy emphasizes the growth of our
products by offering a branded beverage portfolio
of proprietary flavors, supporting the franchise
value of regional brands and expanding those
brands with distinctive packaging and broad
demographic emphasis, developing and acquiring
innovative products tailored toward healthy life-
styles and appealing to the “quality-value” expec-
tations of the family consumer. We believe the
“regional share dynamics” of our brands results in
more retailer sponsored promotional activities which
perpetuate consumer loyalty within local markets.
Our focus is to increase 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 in
this market, we have undertaken several measures
to expand convenience channel distribution. These
measures include development of new products
and serving sizes specifically targeted for this
market, such as ClearFruit, Crystal Bay, Rip It and
ÀSanté. Additionally, we have created proprietary
and specialized packaging with distinctive graph-
ics 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
highest volume typically realized during the sum-
mer 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 OF O P E R AT IO N S
Net Sales Net sales for the fiscal year ended
April 30, 2011 (“Fiscal 2011”) increased 1.1% to
$600,193,000 as compared to $593,465,000 for
the fiscal year ended May 1, 2010 (“Fiscal 2010”).
The sales improvement is due to case volume
growth of 13.2% for our premium brand portfolio,
and a 1.2% increase in unit pricing resulting from
favorable product mix changes. This sales improve-
ment was partially offset by a 2.1% volume decline
for branded carbonated soft drinks due to weak
demand in certain regional markets.
Net sales for the fiscal year ended May 1, 2010
increased 3.2% to $593,465,000 as compared to
$575,177,000 for the fiscal year ended May 2,
2009 (“Fiscal 2009”). The net sales increase
reflects case volume growth of 1.2% for our energy
National Beverage Corp. / 2011 Annual Report / Page Eleven
National Beverage Corp.
National Beverage Corp.
Management’s Discussion and Analysis of
Financial Condition and Results of Operations (continued)
Selected Financial Data
drinks, juices and waters and 5.1% for branded
carbonated soft drinks. In addition, unit pricing
increased .9% largely due to favorable product mix
changes. This improvement was partially offset by
a decline in allied branded volume.
Gross Profit Gross profit approximated 36.4%
of net sales for Fiscal 2011, which represents a
3.2% margin improvement over Fiscal 2010. This
gross margin improvement is primarily due to
favorable changes in brand and package mix.
Cost of sales decreased 3.7% on a per case basis.
Gross profit approximated 33.2% of net sales
for Fiscal 2010 and 29.5% of net sales for Fiscal
2009. The gross margin improvement was due to
higher sales volume, favorable changes in product
mix and lower raw material costs. Cost of sales
decreased 4.4% on a per case basis.
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
$155,885,000 or 26.0% of net sales for Fiscal 2011
compared to $145,159,000 or 24.5% of net sales
for Fiscal 2010. The increase in expenses was pri-
marily due to additional investment in expanded
distribution, including expanded marketing and
selling programs. Marketing costs reflect increased
cooperative advertising programs with customers
and increased brand support expenditures.
Selling, general and administrative expenses
were $145,159,000 or 24.5% of net sales for Fiscal
2010 compared to $131,918,000 or 22.9% of net
sales for Fiscal 2009. The increase in expenses was
primarily due to higher marketing and administrative
costs. Marketing costs reflect increased coopera-
tive advertising programs with customers and
increased brand support expenditures.
Interest Expense and Other Income—Net
Interest expense is comprised of interest on bor-
rowings and fees related to maintaining lines of
credit. Other income includes interest income of
$140,000 for Fiscal 2011, $229,000 for Fiscal 2010
and $865,000 for Fiscal 2009. The decline in inter-
est income for Fiscal 2011 and Fiscal 2010 was
primarily due to lower investment yields. Other
income for Fiscal 2009 includes a gain of $728,000
related to a legal settlement concerning certain
leased property. See Note 7 of Notes to Con soli-
dated Financial Statements.
Income Taxes Our effective tax rate was approx-
i mately 34.9% for Fiscal 2011, 36.1% for Fiscal
2010 and 36.2% for Fiscal 2009. The difference
between the effective rate and the federal statutory
rate of 35% was primarily due to the effects of the
manufacturing deduction and state income taxes.
See Note 8 of Notes to Consolidated Financial
Statements.
L IQ U I DI T Y A N D F I N A N C I A L C O N DI T IO N
Liquidity and Capital Resources Our principal
source of funds is cash generated from opera-
tions, which may be supplemented by borrowings
available under our credit facilities. The Company
maintains a $50,000,000 unsecured revolving
credit facility of which $2,639,000 was utilized for
standby letters of credit at April 30, 2011. On
July 8, 2011, we entered into an additional revolv-
ing credit facility which increased our total credit
availability to $75,000,000. We believe that existing
capital resources will be sufficient to meet our
capital requirements for the foreseeable future.
See Note 4 of Notes to Consolidated Financial
Statements.
We continually evaluate capital projects to
expand our production capacity, enhance packag-
ing capabilities or improve efficiencies at our
manufacturing facilities. Expenditures for property,
plant and equipment amounted to $11,389,000 for
Fiscal 2011; there were no material capital expen-
diture commitments at April 30, 2011.
National Beverage Corp. / 2011 Annual Report / Page Twelve
National Beverage Corp.
Management’s Discussion and Analysis of
Financial Condition and Results of Operations
The Company paid special cash dividends of
$106,314,000 ($2.30 per share) on February 14,
2011 and $ 62,295,000 ($1.35 per share) on
January 22, 2010.
Pursuant to a management agreement, we
incurred a fee to Corporate Management Advisors,
Inc. (“CMA”) of approximately $6,002,000 for
Fiscal 2011, $5,935,000 for Fiscal 2010 and
$5,752,000 for Fiscal 2009. At April 30, 2011, man-
agement fees payable to CMA were $1,519,000.
See Note 5 of Notes to Consolidated Financial
Statements.
Cash Flows During Fiscal 2011 and Fiscal 2010,
cash flow was significantly impacted by the pay-
ment of two special cash dividends aggregating
$168,609,000.
During Fiscal 2011, $55,302,000 was provided
by operating activities, offset by $11,312,000 used
in investing activities and a special cash dividend
payment of $106,314,000. Cash provided by oper-
ating activities increased $917,000 primarily due
to higher earnings and cash used in investing
activities increased $2,998,000 due to expanded
capital investments.
During Fiscal 2010, $54,385,000 was pro-
vided by operating activities, which was offset
by $8,314,000 used in investing activities and
$61,645,000 used in financing activities. Cash pro-
vided by operating activities increased $18,556,000
primarily due to higher earnings. Cash used in
investing activities increased $4,823,000 due to
changes in net marketable securities transactions
and higher capital expenditures. Cash used in
financing activities includes a special cash divi-
dend payment of $62,295,000.
Financial Position During Fiscal 2011, our work-
ing capital decreased $61,968,000 to $30,930,000
due to the special cash dividend paid in February
2011. Inventory decreased $1,319,000 due to
reduced inventory quantities. Prepaid and other
assets increased $4,219,000 primarily due to an
increase in derivative assets. See Note 6 of Notes
to Consolidated Financial Statements. At April 30,
2011, the current ratio was 1.4 to 1, as compared
to 2.3 to 1 at May 1, 2010.
During Fiscal 2010, our working capital
decreased $24,942,000 to $92,898,000 due to
the special cash dividend paid in January 2010.
Inventory decreased $4,940,000 due to lower raw
material costs and reduced inventory levels. Prepaid
and other assets decreased $1,368,000 primarily
due to changes in income tax receivables. At
May 1, 2010, the current ratio was 2.3 to 1, as
compared to 2.7 to 1 at May 2, 2009.
C O N T R AC T UA L O B L IG AT IO N S
Contractual obligations at April 30, 2011 are payable as follows:
(In thousands)
Operating leases
Purchase commitments
Total
Less
Than
1 Year
Total
1 to 3
Years
3 to 5
Years
$17,202
77,571
$ 4,842
49,874
$ 4,946
27,697
$3,376
—
More
Than 5
Years
$4,038
—
$94,773
$ 54,716
$ 32,643
$3,376
$4,038
We have guaranteed the residual value of cer-
tain leased equipment in the amount of $11,300,000.
If the proceeds from sale of such equipment are
less than the balance required by the lease when
the lease terminates in July 2012, the Company
shall be required to pay the difference up to such
guaranteed amount.
We contribute to certain pension plans under
collective bargaining agreements based on hours
worked and to a discretionary profit sharing plan.
Contributions were $2,534,000 for Fiscal 2011,
$2,309,000 for Fiscal 2010 and $2,304,000 for
Fiscal 2009.
National Beverage Corp. / 2011 Annual Report / Page Thirteen
National Beverage Corp.
National Beverage Corp.
Management’s Discussion and Analysis of
Financial Condition and Results of Operations (continued)
Selected Financial Data
We maintain self-insured and deductible pro-
grams for certain liability, medical and workers’
compensation exposures. Other long-term liabili-
ties include known claims and estimated incurred
but not reported claims not otherwise covered by
insurance, based on actuarial assumptions and
historical claims experience. Since the timing and
amount of claim payments vary significantly, we
are not able to reasonably estimate future pay-
ments for the specific periods indicated in the
table above. In connection with our self-insurance
programs, we have standby letters of credit aggre-
gating $2,639,000, which expire in fiscal 2012. We
expect to renew these standby letters of credit.
OF 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 IC 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 confor-
mity 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 manage-
ment’s knowledge of current events and actions it
may undertake in the future, they may ultimately
differ from actual results. We believe that the critical
accounting policies described in the following
paragraphs comprise the most significant estimates
and assumptions used in the preparation of our
consolidated financial statements. For these poli-
cies, we caution that future events rarely develop
exactly as estimated and the best estimates rou-
tinely require adjustment.
Credit Risk We sell products to a variety of cus-
tomers and extend credit based on an evaluation
of each customer’s financial condition, generally
without requiring collateral. Exposure to credit
losses varies by customer principally due to the
financial condition of each customer. We monitor
our exposure to credit losses and maintain
allowances for anticipated losses based on spe-
cific customer circumstances, credit conditions
and historical write-offs.
Impairment of Long-Lived Assets All long-lived
assets, excluding goodwill and intangible assets not
subject to amortization, are evaluated for impair-
ment 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 impair-
ment annually or sooner if we believe such assets
may be impaired. An impairment loss is recog-
nized if the carrying amount or, for goodwill, the
carrying amount of its reporting unit, is greater
than its fair value.
Income Taxes Our effective income tax rate is
based on estimates of taxes which will ultimately
be payable. Deferred taxes are recorded to give
recognition to temporary differences between the
tax bases of assets or liabilities and their reported
amounts in the financial statements. Valuation
allowances are established to reduce the carrying
amounts of deferred tax assets when it is deemed,
more likely than not, that the benefit of deferred
tax assets will not be realized.
Insurance Programs We maintain self-insured
and deductible programs for certain liability, medi-
cal and workers’ compensation exposures. Accord-
ingly, we accrue for known claims and estimated
incurred but not reported claims not otherwise
covered by insurance based on actuarial assump-
tions and historical claims experience.
Sales Incentives We offer various sales incen-
tive arrangements to our customers which require
customer performance or achievement of certain
sales volume targets. In those circumstances
National Beverage Corp. / 2011 Annual Report / Page Fourteen
National Beverage Corp.
Management’s Discussion and Analysis of
Financial Condition and Results of Operations
when the incentive is paid in advance, we amortize
the amount paid over the period of benefit or con-
tractual 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 perfor-
mance and sales volume estimates that are made
based on historical experience and other factors.
Sales incentives are accounted for as a reduction
of sales and actual amounts ultimately realized
may vary from accrued amounts.
Q UA N T I TAT I V E A N D Q UA L I TAT 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 materi-
als, 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. At
times, we manage our exposure to this risk through
the use of supplier pricing agreements that enable
us to establish the purchase prices for certain
commodities. Additionally, we use derivative finan-
cial instruments to partially mitigate our exposure
to changes in certain raw material costs.
Interest Rates We had no debt-related interest
rate exposure during Fiscal 2011. Our investment
portfolio is comprised of highly liquid securities
consisting primarily of short-term money market
investments, the yields of which fluctuate based
largely on short-term Treasury rates.
F ORWA R D -L O OK I N G S TAT E M E N T S
National Beverage and its representatives may
make written or oral statements relating to future
events or results relative to our financial, opera-
tional 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, 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, perfor-
mance or achievements of our Company to be
materially different from any future results, perfor-
mance or achievements expressed or implied by
such forward-looking statements. Such factors
include, but are not limited to, the following: gen-
eral 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, ability to
pass along cost increases to our customers, labor
strikes or work stoppages or other interruptions in
the employment of labor, continued retailer sup-
port for our products, changes in consumer pref-
erences and our success in creating products
geared toward consumers’ tastes, success in
implementing business strategies, changes in
business strategy or development plans, govern-
ment regulations, taxes or fees imposed on the
sale of our products, unseasonably cold or wet
weather conditions and other factors referenced in
this report, filings with the Securities and Exchange
Commission and other reports to our stockholders.
We disclaim an obligation to update any such fac-
tors or to publicly announce the results of any revi-
sions to any forward-looking statements contained
herein to reflect future events or developments.
National Beverage Corp. / 2011 Annual Report / Page Fifteen
National Beverage Corp.
National Beverage Corp.
Consolidated Balance Sheets
Selected Financial Data
(In thousands, except share amounts)
A S S E T S
Current assets:
Cash and equivalents
Trade receivables—net of allowances of $452 (2011) and $509 (2010)
Inventories
Deferred income taxes—net
Prepaid and other assets
Total current assets
Property, plant and equipment—net
Goodwill
Intangible assets
Other assets
L I A B I L I T I E S A N D S H A R E H O L DE 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—1,000,000 shares authorized;
150,000 shares issued
Common stock, $.01 par value—75,000,000 shares authorized;
50,262,139 shares (2011) and 50,188,819 shares (2010) issued
Additional paid-in capital
Retained earnings
Accumulated other comprehensive income
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.
April 30,
2011
May 1,
2010
$ 7,372
55,912
33,353
1,493
8,403
106,533
55,337
13,145
1,615
6,180
$ 68,566
53,834
34,672
3,367
4,184
164,623
53,401
13,145
1,615
7,575
$ 182,810
$ 240,359
$ 49,257
26,214
132
$ 48,428
23,170
127
75,603
14,548
12,323
71,725
15,597
11,465
150
150
503
29,725
65,207
2,751
502
28,150
130,767
3
(5,100)
(12,900)
(5,100)
(12,900)
80,336
141,572
$182,810
$ 240,359
National Beverage Corp. / 2011 Annual Report / Page Sixteen
National Beverage Corp.
National Beverage Corp.
Management’s Discussion and Analysis of
Consolidated Statements of Income
Financial Condition and Results of Operations
(In thousands, except per share amounts)
Net sales
Cost of sales
Gross profit
Selling, general and administrative expenses
Interest expense
Other income (expense)—net
Income before income taxes
Provision for income taxes
Net income
Net income per share:
Basic
Diluted
Weighted average common shares outstanding:
Basic
Diluted
See accompanying Notes to Consolidated Financial Statements.
Fiscal Year Ended
April 30,
2011
May 1,
2010
May 2,
2009
$ 600,193
381,539
$ 593,465
396,450
$ 575,177
405,322
218,654
155,885
99
(20)
62,650
21,896
197,015
145,159
120
(351)
51,385
18,532
169,855
131,918
107
967
38,797
14,055
$ 40,754
$ 32,853
$ 24,742
$
$
.88
.88
$
$
.71
.71
$
$
.54
.54
46,188
46,373
46,065
46,294
45,999
46,191
National Beverage Corp. / 2011 Annual Report / Page Seventeen
National Beverage Corp.
National Beverage Corp.
Consolidated Statements of Shareholders’ Equity
Selected Financial Data
(In thousands)
N U M B E R OF C O M M O N S H A R E S I S S U E D
Beginning of year
Stock options exercised
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
End of year
A D DI T IO 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
End of year
AC C U M U L AT E D O T H E R C O M P R E H E N S I V E I N C O M E
Beginning of year
Cash flow hedges
End of year
T R E A S U RY 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 RY 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 DE R S ’ E Q U I T Y
C O M P R E H E N S I V E I N C O M E
Net income
Cash flow hedges
Comprehensive income
See accompanying Notes to Consolidated Financial Statements.
Fiscal Year Ended
April 30,
2011
May 1,
2010
May 2,
2009
50,189
73
50,262
50,045
144
50,189
49,982
63
50,045
$
150
$
150
$
150
502
1
503
28,150
208
446
921
29,725
500
2
502
27,153
264
349
384
28,150
500
—
500
26,508
245
340
60
27,153
130,767
40,754
(106,314)
160,209
32,853
(62,295)
135,467
24,742
—
65,207
130,767
160,209
3
2,748
2,751
—
3
3
—
—
—
(5,100)
(5,100)
(5,100)
(12,900)
(12,900)
(12,900)
$ 80,336
$ 141,572
$170,012
$ 40,754
2,748
$ 32,853
3
$ 24,742
—
$ 43,502
$ 32,856
$ 24,742
National Beverage Corp. / 2011 Annual Report / Page Eighteen
National Beverage Corp.
National Beverage Corp.
Management’s Discussion and Analysis of
Consolidated Statements of Cash Flows
Financial Condition and Results of Operations
(In thousands)
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
Loss 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
Fiscal Year Ended
April 30,
2011
May 1,
2010
May 2,
2009
$ 40,754
$ 32,853
$ 24,742
11,356
(694)
82
446
(2,078)
1,319
(1,215)
829
4,503
12,350
(1,026)
791
349
(99)
4,940
8
423
3,796
11,782
(474)
363
340
(4,549)
(858)
2,774
(1,798)
3,507
Net cash provided by operating activities
55,302
54,385
35,829
I N V E S T I N G AC T I V I T I E S :
Marketable securities purchased
Marketable securities sold
Additions to property, plant and equipment
Proceeds from sale of property, plant and equipment
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 ( DE C R E A S E ) I N 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 OF Y E A R
C A S H A N D E Q U I VA L E N T S — E N D OF Y E A R
O T H E R C A S H F L OW I N F OR M AT IO N :
Interest paid
Income taxes paid
See accompanying Notes to Consolidated Financial Statements.
—
—
(11,389)
77
— (109,450)
112,450
—
(6,658)
(8,349)
167
35
(11,312)
(8,314)
(3,491)
(106,314)
209
921
(62,295)
266
384
(105,184)
(61,645)
—
245
60
305
(61,194)
68,566
(15,574)
84,140
32,643
51,497
$
7,372
$ 68,566
$ 84,140
$
101
20,816
$
124
18,541
$
107
11,114
National Beverage Corp. / 2011 Annual Report / Page Nineteen
National Beverage Corp.
National Beverage Corp.
Notes to Consolidated Financial Statements
Selected Financial Data
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.
Fair Value The fair values of our cash and cash
equivalents, trade receivables and accounts pay-
able approximate their carrying amounts due to
their short-term nature. The estimated fair values
of our derivative financial instruments are calculated
based on market rates to settle the instruments.
These values represent the estimated amounts
we would receive upon sale, taking into consider-
ation current market prices and creditworthiness.
See Note 6.
1 . S IG N I F IC A N T AC C O U N T I N G P O L I C I E S
Basis of Presentation Our consolidated finan-
cial statements are prepared in accordance with
accounting principles generally accepted in the
United States. The consolidated financial state-
ments include the accounts of National Beverage
Corp. and all subsidiaries. All significant intercom-
pany transactions and accounts have been elimi-
nated. Our fiscal year ends the Saturday closest to
April 30 and, as a result, an additional week is
added every five or six years. Fiscal 2011, Fiscal
2010 and Fiscal 2009 consisted 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.
Derivative Financial Instruments We use deriv-
ative financial instruments to partially mitigate our
exposure to changes in raw material costs. All
derivative financial instruments are recorded at fair
value in our Consolidated Balance Sheets. We do
not use derivative financial instruments for trading
or speculative purposes. Credit risk related to
derivative financial instruments is managed by
requiring high credit standards for counterparties
and frequent cash settlements. See Note 6.
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 circum-
stances 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 discount-
ing future cash flows. Goodwill and intangible
assets not subject to amortization are evaluated
for impairment annually or sooner if we believe
such assets may be impaired. An impairment loss
is recognized if the carrying amount or, for good-
will, the carrying amount of its reporting unit, is
greater than its fair value.
Income Taxes Our effective income tax rate is
based on estimates of taxes which will ultimately
be payable. Deferred taxes are recorded to give
recognition to temporary differences between the
tax bases of assets or liabilities and their reported
amounts in the financial statements. Valuation
allowances are established to reduce the carrying
amounts of deferred tax assets when it is deemed,
more likely than not, that the benefit of deferred
tax assets will not be realized.
National Beverage Corp. / 2011 Annual Report / Page Twenty
National Beverage Corp.
Management’s Discussion and Analysis of
Financial Condition and Results of Operations
Insurance Programs We maintain self-insured
and deductible programs for certain liability, medi-
cal and workers’ compensation exposures. Accord-
ingly, we accrue for known claims and estimated
incurred but not reported claims not otherwise
covered by insurance, based on actuarial assump-
tions and historical claims experience.
Intangible assets as of April 30,
Intangible Assets
2011 and May 1, 2010 consisted of non-amortizable
trademarks.
Inventories
Inventories are stated at the lower
of first-in, first-out cost or market. Inventories at
April 30, 2011 are comprised of finished goods of
$20,215,000 and raw materials of $13,138,000.
Inventories at May 1, 2010 are comprised of fin-
ished goods of $21,104,000 and raw materials of
$13,568,000.
Marketing Costs We are involved in a variety of
marketing programs, including cooperative adver-
tising 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, totaled
$52,926,000 in Fiscal 2011, $44,749,000 in Fiscal
2010 and $34,860,000 in Fiscal 2009.
Net Income Per Share Basic net income per
share is computed by dividing net income by the
weighted average number of common shares out-
standing during the period. Diluted net income per
share is calculated in a similar manner, but includes
the dilutive effect of stock options, which amounted
to 185,000 shares in Fiscal 2011, 229,000 shares
in Fiscal 2010 and 192,000 shares in Fiscal 2009.
Options to purchase 291,000 shares in Fiscal 2011,
18,000 shares in Fiscal 2010 and 33,000 shares in
Fiscal 2009 were not included in the calculation of
diluted net income per share because these
options were antidilutive.
Property, Plant and Equipment Property, plant
and equipment are recorded at cost. Additions,
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 improve-
ments 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 pass
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 incen-
tive arrangements 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 con-
tractual 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
National Beverage Corp. / 2011 Annual Report / Page Twenty-one
National Beverage Corp.
National Beverage Corp.
Notes to Consolidated Financial Statements (continued)
Selected Financial Data
involves the use of judgment related to perfor-
mance and sales volume estimates that are made
based on historical experience and other factors.
Sales incentives are accounted for as a reduction
of sales and actual amounts ultimately realized
may vary from accrued amounts.
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 consistent with the internal financial informa-
tion used by management. We do not accumulate
revenues by product classification and, there fore,
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
$45,071,000 in Fiscal 2011, $43,004,000 in Fiscal
2010 and $44,096,000 in Fiscal 2009. Although
our classification is consistent with many beverage
companies, our gross margin may not be compa-
rable to companies that include shipping and han-
dling costs in cost of sales.
Stock-Based Compensation Compensation
expense for stock-based compensation awards is
recognized over the vesting period based on the
grant-date fair value estimated using the Black-
Scholes model. See Note 9.
Trade Receivables We record trade receivables
at net realizable value, which includes an appropri-
ate allowance 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)
Balance at beginning
of year
Net charge to expense
Net charge-off
Fiscal
2011
Fiscal
2010
Fiscal
2009
$ 509
67
(124)
$ 445
340
(276)
$266
221
(42)
Balance at end of year
$ 452
$ 509
$445
As of April 30, 2011 and May 1, 2010, 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
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 . P RO P E R T Y, P L A N T A N D E Q U I P M E N T
Property, plant and equipment as of April 30, 2011
and May 1, 2010 consisted of the following:
(In thousands)
2011
2010
Land
Buildings and improvements
Machinery and equipment
$
9,779
47,374
132,709
$ 9,779
44,415
128,029
Total
Less accumulated
depreciation
Property, plant and
equipment—net
189,862
182,223
(134,525)
(128,822)
$ 55,337
$ 53,401
National Beverage Corp. / 2011 Annual Report / Page Twenty-two
National Beverage Corp.
Management’s Discussion and Analysis of
Financial Condition and Results of Operations
Depreciation expense was $9,294,000 for
Fiscal 2011, $10,263,000 for Fiscal 2010 and
$9,456,000 for Fiscal 2009.
3 . AC C RU E D L I A B I L I T I E S
Accrued liabilities as of April 30, 2011 and May 1,
2010 consisted of the following:
(In thousands)
Accrued compensation
Accrued promotions
Accrued insurance
Other
Total
4 . DE B T
2011
2010
$ 9,862
7,130
2,078
7,144
$ 8,192
7,324
2,388
5,266
$ 26,214
$ 23,170
At April 30, 2011, a subsidiary of the Company
maintained a $50,000,000 unsecured revolving
credit facility with a bank (the “Credit Facility”). The
Credit Facility expires on April 30, 2013 and, cur-
rently, any borrowings would bear interest at .3%
above LIBOR or, at our election, .5% below the
bank’s reference rate. At April 30, 2011, $2,639,000
of the Credit Facility was used for standby letters
of credit and $47,361,000 was available for
borrowings.
The Credit Facility requires the subsidiary to
maintain certain financial ratios, principally debt to
net worth and debt to EBITDA (as defined in the
loan agreement), and contains other restrictions,
none of which are expected to have a material
effect on our operations or financial position. At
April 30, 2011, we were in compliance with all loan
covenants and approximately $1,320,000 of
retained earnings was restricted from distribution.
On July 8, 2011, the subsidiary entered into an
additional $25,000,000 unsecured revolving credit
facility with a bank which expires on July 8, 2013
and contains similar financial covenants.
5 . C A P I TA L S T O C K A N D T R A N S AC T IO N S
W I T H R E L AT E D PA R T I E S
The Company paid special cash dividends of
$106,314,000 ($2.30 per share) on February 14,
2011 and $62,295,000 ($1.35 per share) on
January 22, 2010.
In January 1998, the Board of Directors autho-
rized 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 during the three fiscal years
ended April 30, 2011.
The Company is a party to a management
agreement with Corporate Management Advisors,
Inc. (“CMA”), a corporation owned by our Chairman
and Chief Executive Officer. Under the terms of the
agreement, CMA provides, subject to the direction
and supervision of the Board of Directors of the
Company, (i) senior corporate functions (including
supervision of the Company’s financial, legal,
executive recruitment, internal audit and manage-
ment information systems departments) as well as
the services of a Chief Executive Officer and Chief
Financial Officer, and (ii) services in connection
with acquisitions, dispositions and financings by
the Company, including identifying and profiling
acquisition candidates, negotiating and structuring
potential transactions and arranging financing for
any such transaction. CMA, through its personnel,
also provides, to the extent possible, the stimulus
and creativity to develop an innovative and
dynamic persona for the Company, its products
and corporate image. In order to fulfill its obliga-
tions under the management agreement, CMA
employs numerous individuals, whom, acting as a
unit, provide management, administrative and cre-
ative functions for the Company. The management
agreement provides that the Company will pay
CMA an annual base fee equal to one percent of
the consolidated net sales of the Company, and
further provides that the Compensation and Stock
National Beverage Corp. / 2011 Annual Report / Page Twenty-three
National Beverage Corp.
National Beverage Corp.
Notes to Consolidated Financial Statements (continued)
Selected Financial Data
Option Committee and the Board of Directors may
from time to time award additional incentive com-
pensation to CMA. No incentive compensation
has been paid from the inception of the agreement
through Fiscal 2011. We incurred management
fees to CMA of $6,002,000 for Fiscal 2011,
$5,935,000 for Fiscal 2010 and $5,752,000 for
Fiscal 2009. Included in accounts payable at
April 30, 2011 and May 1, 2010 were amounts due
CMA of $1,519,000 and $2,823,000, respectively.
6 . DE R I VAT I V E F I N A N C I A L I N S T RU M E N T S
We have entered into various aluminum swap con-
tracts to partially mitigate our exposure to changes
in the cost of aluminum cans through April 2012.
The financial instruments were designated and
accounted for as a cash flow hedge. Accordingly,
gains or losses attributable to the effective portion
of the cash flow hedge are reported in Accumulated
Other Comprehensive Income (“AOCI”) and reclas-
sified into earnings through cost of sales in the
period in which the hedged transaction affects
earnings. The ineffective portion of the change in
fair value of our cash flow hedge was immaterial.
The following summarizes the gains (losses) rec-
ognized in the Consolidated Statements of Income
and AOCI relative to the cash flow hedge for Fiscal
2011 and Fiscal 2010:
(In thousands)
Recognized in AOCI—
Gain before income taxes
Less income tax provision
Net
Reclassified from AOCI to
cost of sales—
Fiscal
2011
Fiscal
2010
$3,650
1,299
$603
214
2,351
389
(Loss) gain before income taxes
(617)
599
Less income tax (benefit)
provision
Net
(220)
(397)
213
386
Net change to AOCI
$2,748
$ 3
As of April 30, 2011, the notional amount of
our outstanding aluminum swap contracts was
$15,302,000 and, assuming no change in the
commodity prices, $4,069,000 of unrealized net
gain (before tax) will be reclassified from AOCI and
recognized in earnings over the next twelve months.
See Note 1.
As of April 30, 2011 and May 1, 2010, the fair
value of derivative assets was $4,271,000 and
$4,000, respectively, which was included in Prepaid
and other assets. Such valuation does not entail a
significant amount of judgment and the inputs that
are significant to the fair value measurement are
Level 2 in the fair value hierarchy as they are
observable market based inputs or unobservable
inputs that are corroborated by market data.
7. O T H E R ( E X P E N S E ) I N C O M E
Other (expense) income consisted of the following:
Fiscal
2011
$140
—
Fiscal
2010
$ 229
—
Fiscal
2009
$ 865
728
(82)
(78)
(291)
(289)
(363)
(263)
$ (20)
$ (351) $ 967
(In thousands)
Interest income
Gain on legal settlement
Loss on disposal of
property, net
Other (expense), net
Total
8 . I N C O M E TA X E S
The provision for income taxes consisted of the
following:
(In thousands)
Current
Deferred
Total
Fiscal
2011
Fiscal
2010
Fiscal
2009
$22,590
(694)
$19,558
(1,026)
$14,529
(474)
$21,896
$18,532
$14,055
Deferred taxes are recorded to give recogni-
tion to temporary differences between the tax
bases of assets or liabilities and their reported
National Beverage Corp. / 2011 Annual Report / Page Twenty-four
National Beverage Corp.
Management’s Discussion and Analysis of
Financial Condition and Results of Operations
amounts in the financial statements. Valuation
allowances are established to reduce the carrying
amounts of deferred tax assets when it is deemed,
more likely than not, that the benefit of deferred
tax assets will not be realized. Deferred tax assets
and liabilities as of April 30, 2011 and May 1, 2010
consisted of the following:
all uncertain tax positions, the net effect would be
to reduce our tax expense by approximately
$3,700,000. A reconciliation of the changes in the
gross amount of unrecognized tax benefits, which
amounts are included in “Other liabilities” in the
accompanying consolidated balance sheets, is
as follows:
(In thousands)
2011
2010
Deferred tax assets:
Accrued expenses and other
Inventory and amortizable
assets
$ 4,893
$ 4,995
497
490
Total deferred tax assets
5,390
5,485
Deferred tax liabilities:
Property
Intangibles and other
16,889
1,556
17,704
11
Total deferred tax liabilities
18,445
17,715
Net deferred tax liabilities
$ 13,055
$ 12,230
Current deferred tax
assets—net
Noncurrent deferred tax
$ 1,493
$ 3,367
liabilities—net
$ 14,548
$ 15,597
The reconciliation of the statutory federal income
tax rate to our effective tax rate is as follows:
Statutory federal
income tax rate
State income taxes,
net of federal benefit
Manufacturing
deduction benefit
Other differences
Fiscal
2011
Fiscal
2010
Fiscal
2009
35.0% 35.0% 35.0%
2.4
2.8
2.4
(3.0)
.5
(2.0)
.3
(2.0)
.8
Effective income tax rate
34.9% 36.1% 36.2%
As of April 30, 2011, the gross amount of
unrecog nized tax benefits was $4,687,000, of
which approximately $448,000 was recognized as
tax expense in Fiscal 2011. If we were to prevail on
(In thousands)
Beginning balance
Increases due to current
period tax positions
Decreases due to lapse
of statute of limitations
Fiscal
2011
Fiscal
2010
Fiscal
2009
$3,997
$3,662
$3,166
857
391
533
(167)
(56)
(37)
Ending balance
$4,687
$3,997
$3,662
We recognize accrued interest and penalties
related to unrecognized tax benefits in income tax
expense. As of April 30, 2011, unrecognized tax
benefits included accrued interest of $560,000, of
which approximately $59,000 was recognized as
tax expense in Fiscal 2011.
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 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. Federal
income tax returns for fiscal years subsequent to
2006 are subject to examination. Generally, the
income tax returns for the various state jurisdic-
tions are subject to examination for fiscal years
ending after fiscal 2006.
National Beverage Corp. / 2011 Annual Report / Page Twenty-five
National Beverage Corp.
National Beverage Corp.
Notes to Consolidated Financial Statements (continued)
Selected Financial Data
9. S T O C K-B A S E D C O M P E N S AT IO N
Our stock-based compensation program is a
broad-based program designed to attract and
retain employees while also aligning employees’
interests with the interests of the stockholders.
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 equiv-
alents, other stock-based awards in amounts up
to 4,800,000 shares of common stock and (iii) per-
formance 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 consideration as may be
required by law. Options generally vest over a five-
year period and expire after ten years.
The Special Stock Option Plan provides for
the issuance of stock 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 vesting
schedule and exercise price of these options are
tied to the recipient’s ownership level of Common
Stock and the terms generally allow for the reduc-
tion in exercise price upon each vesting period.
The Board of Directors also authorized the issu-
ance of options to purchase up to 50,000 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 officers. 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 the exercise price
reduces to the stock par value at the end of the
six-year vesting period.
We account for our employee stock options
under the fair value method of accounting using a
Black-Scholes valuation model to measure stock
option expense at the date of grant. Generally,
stock option grants have an exercise price equal to
the fair market value of our common stock on the
date of grant and have a 10-year term. The fair
value of stock options is amortized to expense
over the vesting period.
Stock options granted in Fiscal 2011 and
Fiscal 2010 were 301,500 shares and 3,000
shares, respectively. There were no stock options
or other stock-based awards granted in Fiscal
2009. The weighted average Black-Scholes fair
value assumptions for stock options granted are
as follows: weighted average expected life of 7.5
years for Fiscal 2011 and 8.0 years for Fiscal 2010;
weighted average expected volatility of 48.6% for
Fiscal 2011 and 52.2% for Fiscal 2010; weighted
average risk free interest rates of 2.8% for Fiscal
2011 and 3.4% for Fiscal 2010; and expected divi-
dend yield of 4.3% for Fiscal 2011 and 4% for
Fiscal 2010. The expected life of stock options was
National Beverage Corp. / 2011 Annual Report / Page Twenty-six
National Beverage Corp.
Management’s Discussion and Analysis of
Financial Condition and Results of Operations
estimated based on historical experience. The
expected volatility was estimated based on histori-
cal 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. Forfeitures were
estimated based on historical experience.
The following is a summary of stock option
activity for Fiscal 2011:
Options outstanding,
beginning of year
Granted
Exercised
Cancelled
Options outstanding,
end of year
Options exercisable,
end of year
Number of
Shares
414,120
301,500
(73,320)
(40,680)
Price (a)
$ 3.96
11.34
2.86
7.30
601,620
7.51
230,517
3.88
(a) Weighted average exercise price.
Stock-based compensation expense was
$446,000 for Fiscal 2011, $349,000 for Fiscal 2010
and $340,000 for Fiscal 2009. The total fair value
of shares vested was $135,000 for Fiscal 2011,
$402,000 for Fiscal 2010 and $304,000 for Fiscal
2009. The total intrinsic value for stock options
exercised was $799,000 for Fiscal 2011, $1,498,000
for Fiscal 2010 and $217,000 for Fiscal 2009. Net
cash proceeds from the exercise of stock options
were $209,000 for Fiscal 2011, $266,000 for Fiscal
2010 and $245,000 for Fiscal 2009. Stock-based
income tax benefits aggregated $921,000 for
Fiscal 2011, $384,000 for Fiscal 2010 and $60,000
for Fiscal 2009. The weighted average fair value for
stock options granted was $6.35 for Fiscal 2011
and $7.43 for Fiscal 2010.
As of April 30, 2011, unrecognized compensa-
tion expense related to the unvested portion of our
stock options was $1,834,000, which is expected
to be recognized over a weighted average period
of 4.7 years. The weighted average remaining con-
tractual term and the aggregate intrinsic value for
options outstanding as of April 30, 2011 was 4.9
years and $3,854,000, respectively. The weighted
average remaining contractual term and the aggre-
gate intrinsic value for options exercisable as of
April 30, 2011 was 3.6 years and $2,314,000,
respectively.
We have a stock purchase plan which pro-
vides 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 April 30, 2011, no shares have been issued
under the plan.
10 . C O M M I T M E N T S A N D C O N T I N GE N C I E S
We lease buildings, machinery and equipment
under various non-cancelable operating lease
agreements expiring at various dates through
2020. Certain of these leases contain scheduled
rent increases and/or renewal options. Contractual
rent increases are taken into account when calcu-
lating the minimum lease payment and recognized
on a straight-line basis over the lease term. Rent
expense under operating lease agreements totaled
approximately $ 9,952,000 for Fiscal 2011,
$8,920,000 for Fiscal 2010 and $7,679,000 for
Fiscal 2009.
National Beverage Corp. / 2011 Annual Report / Page Twenty-seven
National Beverage Corp.
National Beverage Corp.
Notes to Consolidated Financial Statements (continued)
Selected Financial Data
We enter into various agreements with suppli-
ers for the purchase of raw materials, the terms of
which may include variable or fixed pricing and
minimum purchase quantities. As of April 30, 2011,
we had purchase commitments for raw materials
of $49,874,000 for Fiscal 2012 and $27,697,000 for
Fiscal 2013.
From time to time, we are a party to various
litigation matters arising in the ordinary course of
business. We do not expect the ultimate disposi-
tion of such matters to have a material adverse
effect on our consolidated financial position or
results of operations.
Our minimum lease payments under non-
cancelable operating leases as of April 30, 2011
were as follows:
(In thousands)
Fiscal 2012
Fiscal 2013
Fiscal 2014
Fiscal 2015
Fiscal 2016
Thereafter
Total minimum lease payments
$ 4,842
2,911
2,035
1,807
1,569
4,038
$ 17,202
We have guaranteed the residual value of cer-
tain leased equipment in the amount of $11,300,000.
If the proceeds from sale of such equipment are
less than the balance required by the lease when
the lease terminates in July 2012, the Company
shall be required to pay the difference up to such
guaranteed amount.
The Company contributes to certain pension
plans under collective bargaining agreements
based on hours worked and to a discretionary
profit sharing plan. Contributions were $2,534,000
for Fiscal 2011, $2,309,000 for Fiscal 2010 and
$2,304,000 for Fiscal 2009.
National Beverage Corp. / 2011 Annual Report / Page Twenty-eight
National Beverage Corp.
Management’s Discussion and Analysis of
Financial Condition and Results of Operations
11 . Q UA R T E R LY F I N A N C I A L DATA ( U N AU DI T E D)
(In thousands, except per share amounts)
F I S C A L 2 011
Net sales
Gross profit
Net income
Net income per share—basic
Net income per share—diluted
F I S C A L 2 010
Net sales
Gross profit
Net income
Net income per share—basic
Net income per share—diluted
First
Quarter
Second
Quarter
Third
Quarter
Fourth
Quarter
$ 165,030
58,488
12,053
.26
.26
$
$
$ 151,127
56,355
10,207
.22
.22
$
$
$ 131,926
49,530
7,407
.16
.16
$
$
$ 152,110
54,281
11,087
.24
.24
$
$
$ 162,831
50,523
9,793
.21
.21
$
$
$ 149,571
50,797
8,324
.18
.18
$
$
$ 131,462
42,740
5,525
.12
.12
$
$
$ 149,601
52,955
9,211
.20
.20
$
$
National Beverage Corp. / 2011 Annual Report / Page Twenty-nine
National Beverage Corp.
Report of Independent Registered Public Accounting Firm
Selected Financial Data
To the Board of Directors and Shareholders of
National Beverage Corp.
We have audited the accompanying consolidated bal-
ance sheets of National Beverage Corp. as of April 30,
2011 and May 1, 2010 and the related consolidated
statements of income, shareholders’ equity and cash
flows for each of the years in the three-year period
ended April 30, 2011. We also have audited National
Beverage Corp.’s internal control over financial reporting
as of April 30, 2011, based on criteria established in
Internal Control—Integrated Framework issued by the
Committee of Sponsoring Organizations of the Treadway
Com mis sion (COSO). National Beverage Corp.’s man-
age ment is responsible for these financial statements, for
maintaining effective internal control over financial report-
ing and for its assessment of the effectiveness of internal
control over financial reporting. Our responsibility is to
express an opinion on these financial statements and an
opinion on the Company’s internal control over financial
reporting based on our audits.
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 audits to obtain reasonable assur-
ance about whether the financial statements are free of
material misstatement and whether effective internal
control over financial reporting was maintained in all
material respects. Our audits of the financial statements
included examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant
estimates made by management and evaluating the
overall financial statement presentation. Our audit of
internal control over financial reporting included obtaining
an understanding of internal control over financial
reporting, assessing the risk that a material weakness
exists and testing and evaluating the design and oper-
ating effectiveness of internal control based on the
assessed risk. Our audits also included performing
such other procedures as we considered necessary in
the circumstances. We believe that our audits provide a
reasonable basis for our opinions.
A company’s internal control over financial reporting
is a process designed to provide reasonable assurance
regarding the reliability of financial reporting and the
preparation of financial statements for external purposes
in accordance with generally accepted accounting prin-
ciples. A company’s internal control over financial
reporting includes those policies and procedures that
(1) pertain to the maintenance of records that, in reason-
able detail, accurately and fairly reflect the transactions
and dispositions of the assets of the company; (2) pro-
vide reasonable assurance that transactions are recorded
as necessary to permit preparation of financial state-
ments in accordance with generally accepted account-
ing principles and that receipts and expenditures of the
company are being made only in accordance with
authorizations of management and directors of the
company; and (3) provide reasonable assurance regard-
ing prevention or timely detection of unauthorized acqui-
sition, use, or disposition of the company’s assets that
could have a material effect on the financial statements.
Because of its inherent limitations, internal control
over financial reporting may not prevent or detect mis-
statements. Also, projections of any evaluation of effec-
tiveness to future periods are subject to the risk that
controls may become inadequate because of changes
in conditions, or that the degree of compliance with the
policies or procedures may deteriorate.
In our opinion, the financial statements referred to
above present fairly, in all material respects, the financial
position of National Beverage Corp. as of April 30, 2011
and May 1, 2010 and the results of its operations and its
cash flows for each of the years in the three-year period
ended April 30, 2011, in conformity with accounting
principles generally accepted in the United States of
America. Also in our opinion, National Beverage Corp.
maintained, in all material respects, effective internal
control over financial reporting as of April 30, 2011, based
on criteria established in Internal Control—Integrated
Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission (COSO).
McGladrey & Pullen, LLP
Fort Lauderdale, Florida
July 14, 2011
National Beverage Corp. / 2011 Annual Report / Page Thirty
National Beverage Corp.
National Beverage Corp.
Management’s Discussion and Analysis of
Market for Registrant’s Common Equity, Related Stockholder Matters
and Issuer Purchases of Equity Securities
Financial Condition and Results of Operations
The Company paid special cash dividends of
$106,314,000 ($2.30 per share) on February 14, 2011
and $62,295,000 ($1.35 per share) on January 22,
2010. See Note 4 of Notes to Consolidated Financial
Statements for certain restrictions on the payment
of dividends.
In January 1998, the Board of Directors author-
ized 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 during the last three fiscal years.
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.” The following table shows the
range of high and low prices per share of the
Common Stock for the fiscal quarters indicated:
Fiscal Year Ended
April 30, 2011
Low
High
May 1, 2010
Low
High
First Quarter
Second Quarter
Third Quarter
Fourth Quarter
$14.41
$15.23
$15.45
$14.69
$10.77
$12.32
$12.44
$12.30
$11.64 $ 9.25
$12.00 $ 9.55
$14.50 $ 10.37
$11.82 $ 10.75
At July 5, 2011, there were approximately 4,300
holders of our Common Stock, the majority of
which hold their shares in the names of various
dealers and/or clearing agencies.
National Beverage Corp. / 2011 Annual Report / Page Thirty-one
National Beverage Corp.
National Beverage Corp.
Performance Graph
Selected Financial Data
The following graph shows a comparison of the five-year cumulative returns of an investment of $100
cash on April 29, 2006, assuming reinvestment of dividends, in (i) our Common Stock, (ii) the NASDAQ
Composite Index and (iii) a company-constructed peer group consisting of Coca-Cola Bottling Company
Consolidated and Cott Corporation. On October 2, 2010, the North American operations of Coca-Cola
Enterprises Inc. were acquired by The Coca-Cola Company; therefore, Coca-Cola Enterprises is no longer
included in the company-constructed peer group.
Comparison of 5 Year Cumulative Total Return
$160
$140
$120
$100
$80
$60
$40
$20
$0
4/29/06
4/28/07
5/3/08
5/2/09
5/1/10
4/30/11
National Beverage
NASDAQ
PEER GROUP
National Beverage Corp.
NASDAQ Composite
Peer Group
4/29/06
4/28/07
5/3/08
5/2/09
5/1/10
4/30/11
$100.00
100.00
100.00
$102.54
111.24
111.04
$ 67.53
107.01
42.48
$87.83
75.98
43.30
$107.64
109.83
71.01
$151.24
129.57
82.86
160
140
120
100
80
60
40
20
0
$160
140
120
100
80
60
40
20
0
National Beverage Corp. / 2011 Annual Report / Page Thirty-two
4/29/06
4/20/07
5/3/08
5/2/09
5/1/10
4/30/11
National Beverage Corp.
Corporate Data
Subsidiar y Management
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.
John R. Hagan
Senior Executive Vice President
Shasta Beverages, Inc.
Charles A. Maier
Executive Vice President
Foodservice
Shasta Sales, Inc.
Dennis L. Thompson
Executive Vice President
BevCo Sales, Inc.
John F. Hlebica
Vice President
Shasta Beverages Intl., Inc.
Worth B. Shuman III
Vice President
Military Sales
Martin J. Rose
General Manager
Shasta Vending
Subsidiaries
BevCo Sales, Inc.
Beverage Corporation Intl., Inc.
Big Shot Beverages, Inc.
Everfresh Beverages, Inc.
Faygo Beverages, Inc.
Home Juice Corp.
National Beverage Vending
Company
National Retail Brands, Inc.
NewBevCo, Inc.
NutraFizz Products Corp.
PACO, Inc.
Shasta Beverages, Inc.
Shasta Beverages Intl., Inc.
Shasta Sales, Inc.
Shasta Sweetener Corp.
Shasta West, Inc.
Sundance Beverage Company
Corporate Offices
8100 Southwest Tenth Street
Fort Lauderdale, FL 33324
954-581-0922
Annual Meeting
The Annual Meeting of
Share holders will be held
on Friday, September 30, 2011
at 2:00 p.m. local time at
the Hyatt Regency Orlando
International Airport,
9300 Airport Boulevard,
Orlando, FL 32827
Financial and Other
Information
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
Stock Exchange Listing
Common Stock is listed on The
NASDAQ Global Select Market–
symbol FIZZ.
Transfer Agent and
Registrar
BNY Mellon Shareowner
Services
P.O. Box 358015
Pittsburgh, PA 15252-8015
888-313-1476
www.bnymellon.com/
shareowner/equityaccess
Independent Registered
Public Accounting Firm
McGladrey & Pullen, LLP
Fort Lauderdale, FL
Directors
Nick A. Caporella
Chairman of the Board &
Chief Executive Officer
National Beverage Corp.
Joseph G. Caporella
President
National Beverage Corp.
Cecil D. Conlee*
Founding Partner
CGR Advisors
Samuel C. Hathorn, Jr.*
Retired Chief Executive Officer
Trendmaker Development Co.
Joseph P. Klock, Jr., Esq.*
Partner
Rasco, Klock, Reininger, Perez,
Esquenazi, Vigil & Nieto
Stanley M. Sheridan*
Retired President
Faygo Beverages, Inc.
*Member Audit Committee
Corporate Management
Nick A. Caporella
Chairman of the Board &
Chief Executive Officer
Joseph G. Caporella
President
George R. Bracken
Senior Vice President–Finance
Dean A. McCoy
Senior Vice President &
Chief Accounting Officer
Brent R. Bott
Senior Director–
Consumer Marketing
Gregory J. Kwederis
Senior Director–
Beverage Analyst
Timothy C. Barker
Director–Strategic IT
Richard S. Berkes
Director–Risk Management
Glenn G. Bryan
Director–Tax
Vanessa C. Walker
Director–
Strategic Brand Management
Gregory P. Cook
Controller
Annual Report Design by Curran & Connors, Inc. / www.curran-connors.com
8100 Southwest Tenth Street • Fort Lauderdale, Florida 33324
954.581.0922 • www.nationalbeverage.com