2016 Annual Report
Shareholder Value
Indeterminable
$2176
$1040
$890
FY2014
FY2015
(in millions)
FY2016
Carting Stats
Metric
Cylinder
C
A
S
E
V
O
L
U
M
E
13.2
11.5
10.1
16%
$93
$100
$74
$64
$105
$100
$87
$75
10
2
50
0
FY2014
FY2015
FY2016
50
0
FY2014
FY2015
FY2016
FY2014
FY2015 FY2016
Operating Margin
(in total percentage)
Operating Profit
(in millions)
EBITDA*
(in millions)
*EBITDA chart utilizes a non-GAAP measure
SUCCESS HAS A FRAMEWORK
BEGINS WITH . . .
“With every package of Healthy Innocent LaCroix and Shasta Sparkling SDA
(soft drink alternative) that is sold, we are accelerating the evolution – the
transformation from once-upon-a-time acceptable – to today, technically
great and smarter!”
Someone will feature a story in the future that portrays a beautiful can
of sparkling water with the word Innocent printed on it, a Tesla electric
car and a Smartphone with a Health App . . . ‘The Beginning’ the story
will read! Inevitable . . . sure thing!!
These last few years have witnessed a broad, startlingly chaotic
transformation in our society, our planet, our lives and our Company.
Yesteryear, if someone was opposing an acceptable trend, they were
stuck-in-the-mud or a radical. Today, they are Gen Z or Millennials and
different is praised and applauded for the courage provoking the
change.
National Beverage deserves a tremendous amount of praise . . . not
because I think so, but because consumers, retailers and investors say
so! Why? . . . for the vision to accept the changing world and, far more
importantly, to embrace the challenges and do something about them!
Just recently, a major retailer selected brand LaCroix as its class partner
due to its outstanding performance; and that same week our common
stock reached a record high.
greater focus on our leadership role in the sparkling water category.
pop days. That’s what we anticipate . . .
Today, our Company is an enterprising innovator, leaving the traditional
superhighway behind. Our new course, our new pathway is called . . .
‘Inevitable’ and our vehicle’s name – ‘Exponential!’ At destiny’s resting
place, we will have clearly resolved the magic of our mission . . .
‘Indeterminable Value!’
FY2016 was indeed our ‘Breakout Year’ relative to innovation, creativity
and financial results.
Fundamentally, the financials speak for
themselves. More important than the numbers, were the ‘hard’
decisions relative to strengthening the resolve and tweaking the focus
on execution changes affecting the marketing and selling of sparkling
water. A very significant marketing strategy was employed with a
Harnessing the team to the ‘LaCroix Effect’ and introducing the first
clean label in the industry, Shasta Sparkling SDA (soft drink alternative),
while expanding the use of BrandED and its consumer data intelligence,
were all key in those ‘hard’ decisions.
We are blessed in many ways. We are also a highly determined, keenly
aggressive, smartly led team that will not allow anything to stand
between us and our charge. Our ultimate greatness is helping to make
our America kinder, healthier and respected for its greatness!
So, what are we anticipating . . .
. . . an evolution, a revolutionary perfect scenario where the
health/fitness population demands choices or they
As a major part of fiscal resolution, America will
demand of its citizens healthier lifestyles and this will
involve goals and incentives to save and lower health care
costs. This will work because debt-ridden America will
not. This will work because it has to! The alternative is
more than unhealthy. We, National Beverage, are perfectly
ready and more – our assets, our brands and our philosophy
are a fit with helping to make America healthier. Momentum
will increase as exponential growth magnifies, initiated by
the replacement of unhealthy choices with healthier options.
Retailers will devote space to healthier products and a
dynamic period will occur just like the beginning of the soda
At present, we are in August and our first quarter has
concluded – so we are anticipating spectacular results!
Additionally, we want the momentum on all fronts to
continue; innovation, creativity, sales and distribution to
intensify; team harmony and courage to stand up to the
challenges that an industry leader must confront; but,
most notably . . . never, never focus on what others in
our industry are doing. Instead, remain as vigilant on
the space – the difference between us and the
competition. If that space or difference gets bigger,
we are doing the right things. If that space
tightens, we must work to regain it – at whatever
will not continue to purchase!
the cost!
We are Team National and our passion,
agility and innovation will magnetize us to
this leadership place – and here we will stay!
So, side-by-side with you, our shareholder, our teammate and our
friend, let us continue to feel grateful for our good fortune. Our fiscal
first quarter will redefine the caliber of our determined focus!
Joy, peace and goodness is on our minds and in our hearts.
Drink Healthy, Think Healthy and Be Healthy and just maybe –
a great habit is born!
“With every package of Healthy Innocent LaCroix and Shasta Sparkling SDA
(soft drink alternative) that is sold, we are accelerating the evolution – the
transformation from once-upon-a-time acceptable – to today, technically
great and smarter!”
Someone will feature a story in the future that portrays a beautiful can
of sparkling water with the word Innocent printed on it, a Tesla electric
car and a Smartphone with a Health App . . . ‘The Beginning’ the story
will read! Inevitable . . . sure thing!!
These last few years have witnessed a broad, startlingly chaotic
transformation in our society, our planet, our lives and our Company.
Yesteryear, if someone was opposing an acceptable trend, they were
stuck-in-the-mud or a radical. Today, they are Gen Z or Millennials and
different is praised and applauded for the courage provoking the
change.
National Beverage deserves a tremendous amount of praise . . . not
because I think so, but because consumers, retailers and investors say
so! Why? . . . for the vision to accept the changing world and, far more
importantly, to embrace the challenges and do something about them!
Just recently, a major retailer selected brand LaCroix as its class partner
due to its outstanding performance; and that same week our common
stock reached a record high.
Today, our Company is an enterprising innovator, leaving the traditional
superhighway behind. Our new course, our new pathway is called . . .
‘Inevitable’ and our vehicle’s name – ‘Exponential!’ At destiny’s resting
place, we will have clearly resolved the magic of our mission . . .
‘Indeterminable Value!’
FY2016 was indeed our ‘Breakout Year’ relative to innovation, creativity
and financial results.
Fundamentally, the financials speak for
themselves. More important than the numbers, were the ‘hard’
decisions relative to strengthening the resolve and tweaking the focus
on execution changes affecting the marketing and selling of sparkling
water. A very significant marketing strategy was employed with a
greater focus on our leadership role in the sparkling water category.
pop days. That’s what we anticipate . . .
Harnessing the team to the ‘LaCroix Effect’ and introducing the first
clean label in the industry, Shasta Sparkling SDA (soft drink alternative),
while expanding the use of BrandED and its consumer data intelligence,
were all key in those ‘hard’ decisions.
We are blessed in many ways. We are also a highly determined, keenly
aggressive, smartly led team that will not allow anything to stand
between us and our charge. Our ultimate greatness is helping to make
our America kinder, healthier and respected for its greatness!
So, what are we anticipating . . .
. . . an evolution, a revolutionary perfect scenario where the
health/fitness population demands choices or they
will not continue to purchase!
the cost!
As a major part of fiscal resolution, America will
demand of its citizens healthier lifestyles and this will
involve goals and incentives to save and lower health care
costs. This will work because debt-ridden America will
not. This will work because it has to! The alternative is
more than unhealthy. We, National Beverage, are perfectly
ready and more – our assets, our brands and our philosophy
are a fit with helping to make America healthier. Momentum
will increase as exponential growth magnifies, initiated by
the replacement of unhealthy choices with healthier options.
Retailers will devote space to healthier products and a
dynamic period will occur just like the beginning of the soda
At present, we are in August and our first quarter has
concluded – so we are anticipating spectacular results!
Additionally, we want the momentum on all fronts to
continue; innovation, creativity, sales and distribution to
intensify; team harmony and courage to stand up to the
challenges that an industry leader must confront; but,
most notably . . . never, never focus on what others in
our industry are doing. Instead, remain as vigilant on
the space – the difference between us and the
competition. If that space or difference gets bigger,
we are doing the right things. If that space
tightens, we must work to regain it – at whatever
We are Team National and our passion,
agility and innovation will magnetize us to
this leadership place – and here we will stay!
So, side-by-side with you, our shareholder, our teammate and our
friend, let us continue to feel grateful for our good fortune. Our fiscal
first quarter will redefine the caliber of our determined focus!
Joy, peace and goodness is on our minds and in our hearts.
Drink Healthy, Think Healthy and Be Healthy and just maybe –
a great habit is born!
“With every package of Healthy Innocent LaCroix and Shasta Sparkling SDA
(soft drink alternative) that is sold, we are accelerating the evolution – the
transformation from once-upon-a-time acceptable – to today, technically
great and smarter!”
Someone will feature a story in the future that portrays a beautiful can
of sparkling water with the word Innocent printed on it, a Tesla electric
car and a Smartphone with a Health App . . . ‘The Beginning’ the story
will read! Inevitable . . . sure thing!!
These last few years have witnessed a broad, startlingly chaotic
transformation in our society, our planet, our lives and our Company.
Yesteryear, if someone was opposing an acceptable trend, they were
stuck-in-the-mud or a radical. Today, they are Gen Z or Millennials and
different is praised and applauded for the courage provoking the
change.
National Beverage deserves a tremendous amount of praise . . . not
because I think so, but because consumers, retailers and investors say
so! Why? . . . for the vision to accept the changing world and, far more
importantly, to embrace the challenges and do something about them!
Just recently, a major retailer selected brand LaCroix as its class partner
due to its outstanding performance; and that same week our common
stock reached a record high.
Today, our Company is an enterprising innovator, leaving the traditional
superhighway behind. Our new course, our new pathway is called . . .
‘Inevitable’ and our vehicle’s name – ‘Exponential!’ At destiny’s resting
place, we will have clearly resolved the magic of our mission . . .
‘Indeterminable Value!’
FY2016 was indeed our ‘Breakout Year’ relative to innovation, creativity
and financial results.
Fundamentally, the financials speak for
themselves. More important than the numbers, were the ‘hard’
decisions relative to strengthening the resolve and tweaking the focus
on execution changes affecting the marketing and selling of sparkling
water. A very significant marketing strategy was employed with a
Harnessing the team to the ‘LaCroix Effect’ and introducing the first
clean label in the industry, Shasta Sparkling SDA (soft drink alternative),
while expanding the use of BrandED and its consumer data intelligence,
were all key in those ‘hard’ decisions.
We are blessed in many ways. We are also a highly determined, keenly
aggressive, smartly led team that will not allow anything to stand
between us and our charge. Our ultimate greatness is helping to make
our America kinder, healthier and respected for its greatness!
So, what are we anticipating . . .
. . . an evolution, a revolutionary perfect scenario where the
health/fitness population demands choices or they
As a major part of fiscal resolution, America will
demand of its citizens healthier lifestyles and this will
involve goals and incentives to save and lower health care
costs. This will work because debt-ridden America will
not. This will work because it has to! The alternative is
more than unhealthy. We, National Beverage, are perfectly
ready and more – our assets, our brands and our philosophy
are a fit with helping to make America healthier. Momentum
will increase as exponential growth magnifies, initiated by
the replacement of unhealthy choices with healthier options.
Retailers will devote space to healthier products and a
dynamic period will occur just like the beginning of the soda
greater focus on our leadership role in the sparkling water category.
pop days. That’s what we anticipate . . .
At present, we are in August and our first quarter has
concluded – so we are anticipating spectacular results!
Additionally, we want the momentum on all fronts to
continue; innovation, creativity, sales and distribution to
intensify; team harmony and courage to stand up to the
challenges that an industry leader must confront; but,
most notably . . . never, never focus on what others in
our industry are doing. Instead, remain as vigilant on
the space – the difference between us and the
competition. If that space or difference gets bigger,
we are doing the right things. If that space
tightens, we must work to regain it – at whatever
will not continue to purchase!
the cost!
We are Team National and our passion,
agility and innovation will magnetize us to
this leadership place – and here we will stay!
So, side-by-side with you, our shareholder, our teammate and our
friend, let us continue to feel grateful for our good fortune. Our fiscal
first quarter will redefine the caliber of our determined focus!
Joy, peace and goodness is on our minds and in our hearts.
Drink Healthy, Think Healthy and Be Healthy and just maybe –
a great habit is born!
“With every package of Healthy Innocent LaCroix and Shasta Sparkling SDA
(soft drink alternative) that is sold, we are accelerating the evolution – the
transformation from once-upon-a-time acceptable – to today, technically
great and smarter!”
Someone will feature a story in the future that portrays a beautiful can
of sparkling water with the word Innocent printed on it, a Tesla electric
car and a Smartphone with a Health App . . . ‘The Beginning’ the story
will read! Inevitable . . . sure thing!!
These last few years have witnessed a broad, startlingly chaotic
transformation in our society, our planet, our lives and our Company.
Yesteryear, if someone was opposing an acceptable trend, they were
stuck-in-the-mud or a radical. Today, they are Gen Z or Millennials and
different is praised and applauded for the courage provoking the
change.
National Beverage deserves a tremendous amount of praise . . . not
because I think so, but because consumers, retailers and investors say
so! Why? . . . for the vision to accept the changing world and, far more
importantly, to embrace the challenges and do something about them!
Just recently, a major retailer selected brand LaCroix as its class partner
due to its outstanding performance; and that same week our common
stock reached a record high.
greater focus on our leadership role in the sparkling water category.
pop days. That’s what we anticipate . . .
Today, our Company is an enterprising innovator, leaving the traditional
superhighway behind. Our new course, our new pathway is called . . .
‘Inevitable’ and our vehicle’s name – ‘Exponential!’ At destiny’s resting
place, we will have clearly resolved the magic of our mission . . .
‘Indeterminable Value!’
FY2016 was indeed our ‘Breakout Year’ relative to innovation, creativity
and financial results.
Fundamentally, the financials speak for
themselves. More important than the numbers, were the ‘hard’
decisions relative to strengthening the resolve and tweaking the focus
on execution changes affecting the marketing and selling of sparkling
water. A very significant marketing strategy was employed with a
Harnessing the team to the ‘LaCroix Effect’ and introducing the first
clean label in the industry, Shasta Sparkling SDA (soft drink alternative),
while expanding the use of BrandED and its consumer data intelligence,
were all key in those ‘hard’ decisions.
We are blessed in many ways. We are also a highly determined, keenly
aggressive, smartly led team that will not allow anything to stand
between us and our charge. Our ultimate greatness is helping to make
our America kinder, healthier and respected for its greatness!
So, what are we anticipating . . .
. . . an evolution, a revolutionary perfect scenario where the
health/fitness population demands choices or they
As a major part of fiscal resolution, America will
demand of its citizens healthier lifestyles and this will
involve goals and incentives to save and lower health care
costs. This will work because debt-ridden America will
not. This will work because it has to! The alternative is
more than unhealthy. We, National Beverage, are perfectly
ready and more – our assets, our brands and our philosophy
are a fit with helping to make America healthier. Momentum
will increase as exponential growth magnifies, initiated by
the replacement of unhealthy choices with healthier options.
Retailers will devote space to healthier products and a
dynamic period will occur just like the beginning of the soda
At present, we are in August and our first quarter has
concluded – so we are anticipating spectacular results!
Additionally, we want the momentum on all fronts to
continue; innovation, creativity, sales and distribution to
intensify; team harmony and courage to stand up to the
challenges that an industry leader must confront; but,
most notably . . . never, never focus on what others in
our industry are doing. Instead, remain as vigilant on
the space – the difference between us and the
competition. If that space or difference gets bigger,
we are doing the right things. If that space
tightens, we must work to regain it – at whatever
will not continue to purchase!
the cost!
We are Team National and our passion,
agility and innovation will magnetize us to
this leadership place – and here we will stay!
So, side-by-side with you, our shareholder, our teammate and our
friend, let us continue to feel grateful for our good fortune. Our fiscal
first quarter will redefine the caliber of our determined focus!
Joy, peace and goodness is on our minds and in our hearts.
Drink Healthy, Think Healthy and Be Healthy and just maybe –
a great habit is born!
Nick A. Caporella
Chairman and Chief Executive Officer
P.S.
So, as one Salt Lake City ‘believer’ sighed:
“I feel so fancy drinking from this elegant can!
I feel like I should have my pinky up!”
“Words rarely are spoken as precious
as these,” my heart smiled!
Financial
Review
SELECTED FINANCIAL DATA
Fiscal Year Ended
(In thousands, except per share and footnote amounts)
April 30,
2016
May 2,
2015
May 3,
2014(3)
April 27,
2013
April 28,
2012
SUMMARY OF OPERATIONS:
Net sales
Cost of sales
Gross profit
Selling, general and administrative expenses
Interest expense
Other expense (income)—net
Income before income taxes
Provision for income taxes
$ 704,785
463,348
$ 645,825
426,685
$641,135
423,480
$ 662,007
444,757
$ 628,886
415,629
241,437
148,384
203
145
92,705
31,507
219,140
145,157
371
(1,101)
74,713
25,402
217,655
153,220
660
666
63,109
19,474
217,250
146,223
403
173
70,451
23,531
213,257
146,169
107
85
66,896
22,903
Net income
$ 61,198
$ 49,311
$ 43,635
$ 46,920
$ 43,993
PER SHARE DATA:
Basic earnings per common share(1)
Diluted earnings per common share(1)
Closing stock price
Dividends paid on common stock(2)
BALANCE SHEET DATA:
Cash and equivalents(2)
Working capital(2)
Property, plant and equipment—net
Total assets(2)
Long-term debt
Deferred income tax liability
Shareholders’ equity(2)
Dividends paid on common stock(2)
$
1.31
1.31
46.74
—
$
1.06
1.05
22.42
—
$
.93
.92
19.21
—
$
1.01
1.01
14.57
2.55
$
.95
.95
14.68
—
$ 105,577
148,057
61,932
305,498
—
14,474
206,152
—
$ 52,456
101,478
60,182
247,750
10,000
15,245
147,782
—
$ 29,932
78,618
59,494
222,841
30,000
13,873
106,201
$ 18,267
67,504
57,307
208,642
50,000
14,327
70,316
— 118,139
$ 35,626
69,818
56,729
222,988
—
14,214
121,636
—
(1) Basic earnings per common share is computed by dividing earnings available to common shareholders by the weighted average
number of common shares outstanding. Diluted earnings per common share includes the dilutive effect of stock options.
(2) In Fiscal 2013, the Company paid special cash dividends on Common Stock of $118.1 million ($2.55 per share).
(3) Fiscal 2014 consisted of 53 weeks.
6
NATIONAL BEVERAGE CORP.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
carbonated soft drinks for specific retailers (“Allied
National Beverage Corp. proudly refreshes
Brands”) that endorse a strategic alliance concept of
America with a distinctive portfolio of Sparkling
joint marketing to support growth of both brands.
Waters, Juices, Energy Drinks and Carbonated Soft
Our portfolio of Power+ Brands includes LaCroix®,
Drinks. We believe that our ingenious product
LaCroix Cúrate™, LaCroix NiCola™ and Shasta®
designs, innovative packaging and imaginative
sparkling water products; Rip It® energy drinks and
flavors, along with our corporate culture and
shots; and Everfresh®, Everfresh Premier Varietals™
philosophy, makes National Beverage unique in the
and Mr. Pure® 100% juice and juice-based products.
beverage industry. The Company’s primary market
Our Carbonated Soft Drinks portfolio includes
focus is the United States, but our products are also
Shasta® and Faygo®, iconic brands whose flavor
distributed in various other countries. National
development spans more than 125 years.
Beverage Corp. was incorporated in Delaware in
To service a diverse customer base that includes
1985 and began trading as a public company on the
numerous national retailers, as well as thousands of
NASDAQ Stock Market in 1991. In this report, the
smaller “up-and-down-the-street” accounts, we
terms “we,” “us,” “our,” “Company” and “National
utilize a hybrid distribution system to deliver our
Beverage” mean National Beverage Corp. and its
products primarily
through
the
take-home,
subsidiaries unless indicated otherwise.
convenience and food-service channels.
National Beverage is in an ongoing transition to
Our strategy emphasizes the growth of our
meet the healthy hydration demands of the American
products by (i) developing healthier beverages in
consumer. Health and wellness awareness has
response to the global shift in consumer buying
increased significantly, resulting in growing demand
habits and tailoring the variety and types of beverages
for beverages with little or no calories and wholesome
in our portfolio to satisfy the preferences of a diverse
natural ingredients. Our brands emphasize distinctly-
mix of ‘crossover consumers’ – a growing group
flavored beverages in attractive packaging that
desiring a change to better-for-you beverages; (ii)
appeal to multiple demographic groups. The
emphasizing
flavor development and variety
attentive, conscious and discriminating consumer is
throughout our product lines and brands; (iii)
ever more alert to healthy choices and better-for-you
producing and developing products of the highest
ingredients that align to this transition and strategic
quality that also appeal to the value expectations of
focus.
the consumer; (iv) leveraging our efficient production
Our brands consist of (i) beverages geared to the
and distribution systems, and our cost-effective
active and health-conscious consumer (“Power+
social media and regionally focused marketing
Brands”) including sparkling waters, energy drinks,
programs, to profitably deliver products at optimal
and juices, and (ii) Carbonated Soft Drinks in a variety
consumer price-points; and (v) responding faster and
of flavors including regular, sugar-free and reduced
more creatively to consumer trends than competitors
calorie options. To a lesser extent, we produce
who are burdened by production and distribution
NATIONAL BEVERAGE CORP.
7
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
complexity as well as legacy costs.
for Fiscal 2015. The increase in gross profit is primarily
The majority of our sales are seasonal with the
due to higher sales and a decline in cost of sales per
highest volume typically realized during the summer
case of .4%. The decrease in cost of sales per case
and warmer months. As a result, our operating
was due to favorable product mix changes and lower
results from one fiscal quarter to the next may not be
raw material costs. As a result, gross margin
comparable. Additionally, our operating results are
improved to 34.3%.
affected by numerous factors, including fluctuations
Gross profit was 33.9% of net sales for Fiscal
in the costs of raw materials, changes in consumer
2015 and Fiscal 2014. Cost of sales per unit declined
preference for beverage products, competitive pricing
.3% primarily due to product mix changes.
in the marketplace and weather conditions.
Shipping and handling costs are included in
selling, general and administrative expenses, the
RESULTS OF OPERATIONS
classification of which is consistent with many
beverage companies. However, our gross margin
Net Sales Net sales for the fiscal year ended April
may not be comparable to companies that include
30, 2016 (“Fiscal 2016”) increased 9.1% to $704.8
shipping and handling costs in cost of sales. See
million compared to $645.8 million for the fiscal year
Note 1 of Notes to Consolidated Financial Statements.
ended May 2, 2015 (“Fiscal 2015”). The higher sales
resulted from a 9.0% increase in case volume and a
Selling, General and Administrative Expenses
slight increase in average selling price. The volume
Selling, general and administrative expenses were
increase includes 31.4% growth of our Power+
$148.4 million or 21.1% of net sales for Fiscal 2016
Brands, partially offset by a decline in branded
compared to $145.2 million or 22.5% of net sales for
carbonated soft drinks and Allied Brands.
Fiscal 2015. Fiscal 2016 expenses reflect higher
Net sales for Fiscal 2015 increased .7% to $645.8
distribution, selling and other volume related costs,
million compared to $641.1 million for the fiscal year
partially offset by lower marketing costs.
ended May 3, 2014 (“Fiscal 2014”). The higher sales
Selling, general and administrative expenses
resulted from a 1.1% increase in case volume partially
were $145.2 million or 22.5% of net sales for Fiscal
offset by a .4% decline in average selling price. The
2015 compared to $153.2 million or 23.9% of net
increase in case volume reflects a 2.9% increase in
sales for Fiscal 2014. Fiscal 2015 expenses reflect
branded volume, including a 15.3% case volume
l o w e r
s e l l i n g
a n d m a r ke t i n g
c o s t s .
growth for our Power+ Brands, partially offset by a
decline in Allied Brands. The decline in average
Interest Expense and Other Expense (Income) -
selling price is related to changes in product mix.
Net Interest expense is comprised of interest on
borrowings and fees related to maintaining lines of
Gross Profit Gross profit for Fiscal 2016 increased
credit. Due to repayments on borrowings, interest
10.2% to $241.4 million compared to $219.1 million
expense decreased to $203,000 in Fiscal 2016 from
8
NATIONAL BEVERAGE CORP.
$371,000 in Fiscal 2015 and $660,000 in Fiscal 2014.
equipment amounted to $12.1 million for Fiscal 2016.
Other expense is net of interest income of $107,000
The Company expects
to
increase capital
for Fiscal 2016, $30,000 for Fiscal 2015 and $15,000
expenditures in Fiscal 2017 to support volume
for Fiscal 2014. The change in interest income is due
growth.
to changes in average invested balances. Other
On January 25, 2013, the Company sold 400,000
income for Fiscal 2015 includes a $1.3 million gain on
shares of Special Series D Preferred Stock (“Series D
sale of property.
Preferred”), par value $1 per share for an aggregate
purchase price of $20 million. On May 2, 2014, the
Income Taxes Our effective tax rate was 34% for
Company redeemed 160,000 shares of Series D
Fiscal 2016, 34% for Fiscal 2015 and 30.9% for Fiscal
Preferred, representing 40% of the amount
2014. The difference between the effective rate and
outstanding, for an aggregate price of $8 million. On
the federal statutory rate of 35% was primarily due to
August 1, 2014, The Company redeemed 120,000
the effects of state income taxes, the domestic
shares of Series D Preferred, representing 50% of the
manufacturing deduction and, for Fiscal 2014,
amount outstanding, for an aggregate price of $6
adjustment of unrecognized tax benefits related to
million. On April 29, 2016, the Company redeemed
the resolution of certain open tax years. See Note 7
120,000 shares of Series D Preferred, representing
of Notes to Consolidated Financial Statements.
the remaining shares outstanding, for an aggregate
price of $6 million. See Note 5 of Notes to
LIQUIDITY AND FINANCIAL CONDITION
Consolidated Financial Statements.
Pursuant to a management agreement, we
Liquidity and Capital Resources Our principal
incurred a fee to Corporate Management Advisors,
source of funds is cash generated from operations
Inc. (“CMA”) of $7.0 million for Fiscal 2016, $6.5
and borrowings available under our credit facilities.
million for Fiscal 2015 and $6.4 million for Fiscal 2014.
At April 30, 2016, we maintained $100 million
At April 30, 2016, management fees payable to CMA
unsecured revolving credit facilities, no borrowings
were $1.8 million. See Note 5 of Notes to
were outstanding and $2.2 million was reserved for
Consolidated Financial Statements.
standby letters of credit. We believe that existing
capital resources will be sufficient to meet our liquidity
Cash Flows During Fiscal 2016, $79.0 million was
and capital requirements for the next twelve months.
provided by operating activities, $12.0 million was
See Note 4 of Notes to Consolidated Financial
used in investing activities and $13.8 million was
Statements.
used in financing activities. Cash provided by
We continually evaluate capital projects to
operating activities increased $20.9 million primarily
expand our production capacity, enhance packaging
due to increased earnings and favorable changes in
capabilities or improve efficiencies at our production
working capital. Cash used in investing activities
facilities. Expenditures for property, plant and
increased $2.3 million reflecting higher capital
NATIONAL BEVERAGE CORP.
9
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
expenditures and lower proceeds from the sale of
resulted from higher cash, trade receivables and
property. Cash used in financing activities was $13.8
inventory, partially offset by higher accounts payable
million which included a $6 million redemption of
and accrued liabilities. Trade receivables increased
preferred stock and $10 million in principal
$1.1 million due to higher sales activity while days
repayments under credit facilities.
sales outstanding improved to 31.0 days from 33.1
During Fiscal 2015, $58.0 million was provided
days. Inventories increased $5.0 million as a result of
by operating activities, $9.7 million was used in
the Company maintaining higher finished goods
investing activities and $25.8 million was used in
levels to support increases in sales and new product
financing activities. Cash provided by operating
introductions. Annual inventory turns decreased to
activities increased $5.6 million primarily due to
9.5 from 10.2 times. At April 30, 2016, the current
increased earnings. Cash used in investing activities
ratio was 3.0 to 1 compared to 2.5 to 1 at May 2,
decreased $2.3 million reflecting lower capital
2015.
expenditures and proceeds of $1.9 from the sale of
During Fiscal 2015, our working capital increased
property. Cash used in financing activities was $25.8
$22.9 million to $101.5 million primarily due to cash
million which included a $6 million redemption of
generated from operating activities. Trade receivables
preferred stock and $20 million in principal
increased $1.7 million due to higher sales activity and
repayments under credit facilities.
days sales outstanding improved to 33.1 days from
34.7 days. Inventories decreased $1.0 million and
Financial Position During Fiscal 2016, our working
annual inventory turns improved to 10.2 from 9.4
capital increased to $148.1 million from $101.5 million
times. At May 2, 2015, the current ratio was 2.5 to 1
at May 2, 2015. The increase in working capital
compared to 2.2 to 1 at May 3, 2014.
CONTRACTUAL OBLIGATIONS
Contractual obligations at April 30, 2016 are payable as follows:
(In thousands)
Operating leases
Purchase commitments
Total
Total
$26,033
50,553
Less Than
1 Year
1 to 3
Years
3 to 5
Years
More Than
5 Years
$6,376
50,553
$10,034
—
$6,205
—
$3,418
—
$76,586
$56,929
$10,034
$ 6,205
$3,418
As of April 30, 2016, we guaranteed the residual
lease when the lease terminates on August 1, 2017,
value of certain leased equipment in the amount of
the Company shall be required to pay the difference
$4.4 million. If the proceeds from the sale of such
up to such guaranteed amount. The Company
equipment are less than the balance required by the
expects to have no loss on such guarantee.
10
NATIONAL BEVERAGE CORP.
We contribute to certain pension plans under
Although these estimates are based on management’s
collective bargaining agreements and
to a
knowledge of current events and actions it may
discretionary profit sharing plan. Total contributions
undertake in the future, they may ultimately differ
were $2.9 million for Fiscal 2016, $2.7 million for
from actual results. We believe that the critical
Fiscal 2015 and $2.7 million for Fiscal 2014. See
accounting policies described in the following
Note 9 of Notes to Consolidated Financial Statements.
paragraphs comprise the most significant estimates
We maintain self-insured and deductible
programs for certain liability, medical and workers’
compensation exposures. Other long-term liabilities
include known claims and estimated incurred but not
reported claims not otherwise covered by insurance,
based on actuarial assumptions and historical claims
experience. Since the timing and amount of claim
payments vary significantly, we are not able to
reasonably estimate future payments for specific
periods and therefore such payments have not been
included in the table above. Standby letters of credit
aggregating $2.2 million have been issued in
connection with our self-insurance programs. These
standby letters of credit expire through March 2017
and are expected to be renewed.
OFF-BALANCE SHEET ARRANGEMENTS
We do not have any off-balance sheet arrangements
that have, or are reasonably likely to have, a current
or future material effect on our financial condition.
CRITICAL ACCOUNTING POLICIES
and assumptions used in the preparation of our
consolidated financial statements. For these policies,
we caution that future events rarely develop exactly
as estimated and the best estimates routinely require
adjustment.
Credit Risk We sell products to a variety of customers
and extend credit based on an evaluation of each
customer’s financial condition, generally without
requiring collateral. Exposure to credit losses varies
by customer principally due to the financial condition
of each customer. We monitor our exposure to credit
losses and maintain allowances for anticipated losses
based on specific 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 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.
The preparation of financial statements in
Estimated fair market value is generally measured by
conformity with generally accepted accounting
discounting future cash flows. Goodwill and
principles requires management to make estimates
intangible assets not subject to amortization are
and assumptions that affect the amounts reported in
evaluated for impairment annually or sooner if we
the financial statements and accompanying notes.
believe such assets may be impaired. An impairment
NATIONAL BEVERAGE CORP.
11
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
loss is recognized if the carrying amount or, for
factors. Sales incentives are accounted for as a
goodwill, the carrying amount of its reporting unit, is
reduction of sales and actual amounts ultimately
greater than its fair value.
realized may vary from accrued amounts.
Income Taxes Our effective income tax rate is based
FORWARD-LOOKING STATEMENTS
on estimates of taxes which will ultimately be payable.
Deferred taxes are recorded to give recognition to
National Beverage and its representatives may make
temporary differences between the tax bases of
written or oral statements relating to future events or
assets or liabilities and their reported amounts in the
results relative to our financial, operational and
financial statements. Valuation allowances are
business performance, achievements, objectives and
established to reduce the carrying amounts of
strategies. These statements are “forward-looking”
deferred tax assets when it is deemed, more likely
within the meaning of the Private Securities Litigation
than not, that the benefit of deferred tax assets will
Reform Act of 1995 and include statements contained
not be realized.
in this report, filings with the Securities and Exchange
Commission and in reports to our stockholders.
Insurance Programs We maintain self-insured and
Certain statements including, without limitation,
deductible programs for certain liability, medical and
statements containing the words “believes,”
workers’ compensation exposures. Accordingly, we
“anticipates,” “intends,” “plans,” “expects,” and
accrue for known claims and estimated incurred but
“estimates” constitute “forward-looking statements”
not reported claims not otherwise covered by
and involve known and unknown risk, uncertainties
insurance based on actuarial assumptions and
and other factors that may cause the actual results,
historical claims experience.
performance or achievements of our Company to be
Sales Incentives We offer various sales incentive
arrangements to our customers that require customer
performance or achievement of certain sales volume
targets. When the incentive is paid in advance, we
amortize the amount paid over the period of benefit
or contractual sales volume; otherwise, 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
materially different
from any
future results,
performance or achievements expressed or implied
by such forward-looking statements. Such factors
include, but are not limited to, the following: general
economic and business conditions, pricing of
competitive products, success of new product and
flavor introductions, fluctuations in the costs of raw
materials and packaging supplies, ability to pass
along cost increases to our customers, labor strikes
or work stoppages or other interruptions in the
employment of labor, continued retailer support for
our products, changes in consumer preferences and
our success in creating products geared toward
12
NATIONAL BEVERAGE CORP.
consumers’ tastes, success in implementing
fluctuations. If the interest rate on our debt changed
business strategies, changes in business strategy or
by 100 basis points (1%), our interest expense for
development plans, government regulations, taxes or
Fiscal 2016 would have changed by approximately
fees imposed on the sale of our products, unfavorable
$50,000.
weather conditions and other factors referenced in
this report, filings with the Securities and Exchange
Commission and other reports to our stockholders.
We disclaim an obligation to update any such factors
or to publicly announce the results of any revisions to
any forward-looking statements contained herein to
reflect future events or developments.
QUANTITATIVE AND QUALITATIVE
DISCLOSURES ABOUT MARKET RISK
Commodities We purchase various raw materials,
including aluminum cans, plastic bottles, high
fructose corn syrup, corrugated packaging and juice
concentrates, the prices of which fluctuate based on
commodity market conditions. Our ability to recover
increased costs through higher pricing may be limited
by the competitive environment in which we operate.
At times, we manage our exposure to this risk
through the use of supplier pricing agreements that
enable us to establish all, or a portion of, the purchase
prices for certain raw materials. Additionally, we use
derivative financial instruments to partially mitigate
our exposure to changes in certain raw material
costs.
Interest Rates During Fiscal 2016, the Company
repaid $10 million in borrowings under its credit
facilities. At April 30, 2016, the Company had no
borrowings outstanding. Interest rate hedging
products are not used to mitigate risk from interest
NATIONAL BEVERAGE CORP.
13
CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
ASSETS
Current assets:
Cash and equivalents
Trade receivables—net
Inventories
Deferred income taxes—net
Prepaid and other assets
Total current assets
Property, plant and equipment—net
Goodwill
Intangible assets
Other assets
Total assets
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable
Accrued liabilities
Income taxes payable
Total current liabilities
Long-term debt
Deferred income taxes—net
Other liabilities
Shareholders’ equity:
Preferred stock, $1 par value—1,000,000 shares authorized
Series C—150,000 shares issued
Series D—120,000 shares issued (2015), aggregate liquidation
preference of $6,000 (2015)
Common stock, $.01 par value—75,000,000 shares authorized;
50,588,734 shares (2016) and 50,418,019 shares (2015) issued
Additional paid-in capital
Retained earnings
Accumulated other comprehensive loss
Treasury stock—at cost:
Series C preferred stock—150,000 shares
Common stock—4,032,784 shares
Total shareholders’ equity
Total liabilities and shareholders’ equity
See accompanying Notes to Consolidated Financial Statements.
14
NATIONAL BEVERAGE CORP.
April 30,
2016
May 2,
2015
$ 105,577
61,046
47,922
4,454
4,672
223,671
61,932
13,145
1,615
5,135
$ 52,456
59,951
42,924
4,348
8,050
167,729
60,182
13,145
1,615
5,079
$ 305,498
$ 247,750
$ 49,391
26,195
28
$ 44,896
21,257
98
75,614
—
14,474
9,258
66,251
10,000
15,245
8,472
150
—
150
120
506
34,570
190,733
(1,807)
504
37,759
129,773
(2,524)
(5,100)
(12,900)
(5,100)
(12,900)
206,152
147,782
$ 305,498
$ 247,750
CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share amounts)
Net sales
Cost of sales
Gross profit
Selling, general and administrative expenses
Interest expense
Other expense (income)—net
Income before income taxes
Provision for income taxes
Net income
Less preferred dividends and accretion
Fiscal Year Ended
April 30,
2016
May 2,
2015
May 3,
2014
$ 704,785
463,348
$ 645,825
426,685
$ 641,135
423,480
241,437
148,384
203
145
92,705
31,507
61,198
(238)
219,140
145,157
371
(1,101)
74,713
25,402
49,311
(275)
217,655
153,220
660
666
63,109
19,474
43,635
(726)
Earnings available to common shareholders
$ 60,960
$ 49,036
$ 42,909
Earnings per common share:
Basic
Diluted
Weighted average common shares outstanding:
Basic
Diluted
See accompanying Notes to Consolidated Financial Statements.
$
$
1.31
1.31
$
$
1.06
1.05
$
$
.93
.92
46,452
46,671
46,353
46,559
46,331
46,519
NATIONAL BEVERAGE CORP.
15
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In thousands)
Net income
Other comprehensive income (loss), net of tax:
Cash flow hedges
Other
Total
Comprehensive income
See accompanying Notes to Consolidated Financial Statements.
Fiscal Year Ended
April 30,
2016
May 2,
2015
May 3,
2014
$61,198
$49,311
$43,635
783
(66)
717
(2,350)
31
(2,319)
610
149
759
$61,915
$46,992
$44,394
16
NATIONAL BEVERAGE CORP.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
(In thousands)
Shares
Amount
Shares
Amount
Shares
Amount
Fiscal Year Ended
April 30, 2016
May 2, 2015
May 3, 2014
SERIES C PREFERRED STOCK
Beginning and end of year
SERIES D PREFERRED STOCK
Beginning of year
Series D preferred redeemed
End of year
COMMON STOCK
Beginning of year
Stock options exercised
End of year
ADDITIONAL PAID-IN CAPITAL
Beginning of year
Series D preferred redeemed
Stock options exercised
Stock-based compensation
Stock-based tax benefits
Other
End of year
RETAINED EARNINGS
Beginning of year
Net income
Preferred stock dividends & accretion
End of year
ACCUMULATED OTHER
COMPREHENSIVE LOSS
Beginning of year
Cash flow hedge
Other
End of year
TREASURY STOCK—SERIES C PREFERRED
Beginning and end of year
TREASURY STOCK—COMMON
Beginning and end of year
150
$
150
150
$
150
150
$
150
120
(120)
—
50,418
171
50,589
120
(120)
—
240
(120)
120
240
(120)
120
400
(160)
240
504
2
50,368
50
504
—
50,362
6
506
50,418
504
50,368
37,759
(5,791)
846
228
1,528
—
34,570
129,773
61,198
(238)
190,733
(2,524)
783
(66)
(1,807)
42,775
(5,791)
228
307
240
—
37,759
80,737
49,311
(275)
129,773
(205)
(2,350)
31
(2,524)
400
(160)
240
504
—
504
50,398
(7,722)
47
95
17
(60)
42,775
37,828
43,635
(726)
80,737
(964)
610
149
(205)
150
(5,100)
150
(5,100)
150
(5,100)
4,033
(12,900)
4,033
(12,900)
4,033
(12,900)
TOTAL SHAREHOLDERS’ EQUITY
$ 206,152
$ 147,782
$ 106,201
See accompanying Notes to Consolidated Financial Statements.
NATIONAL BEVERAGE CORP.
17
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
OPERATING ACTIVITIES:
Net income
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation and amortization
Deferred income tax (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
Fiscal Year Ended
April 30,
2016
May 2,
2015
May 3,
2014
$ 61,198
$ 49,311
$ 43,635
12,056
(1,299)
129
228
(1,095)
(4,998)
(485)
4,495
8,726
11,580
1,076
(1,188)
307
(1,746)
990
(605)
(710)
(995)
11,708
79
51
95
5,864
(4,680)
(2,548)
1,345
(3,167)
Net cash provided by operating activities
78,955
58,020
52,382
INVESTING ACTIVITIES:
Additions to property, plant and equipment
Proceeds from sale of property, plant and equipment
Net cash used in investing activities
FINANCING ACTIVITIES:
Dividends paid on preferred stock
Repayments under credit facilities, net
Redemption of preferred stock
Proceeds from stock options exercised
Stock-based tax benefits
Other
Net cash used in financing activities
NET INCREASE IN CASH AND EQUIVALENTS
CASH AND EQUIVALENTS—BEGINNING OF YEAR
(12,140)
116
(11,630)
1,905
(12,124)
62
(12,024)
(9,725)
(12,062)
(186)
(10,000)
(6,000)
848
1,528
—
(239)
(20,000)
(6,000)
228
240
—
(659)
(20,000)
(8,000)
47
17
(60)
(13,810)
(25,771)
(28,655)
53,121
52,456
22,524
29,932
11,665
18,267
CASH AND EQUIVALENTS—END OF YEAR
$ 105,577
$ 52,456
$ 29,932
OTHER CASH FLOW INFORMATION:
Interest paid
Income taxes paid
See accompanying Notes to Consolidated Financial Statements.
18
NATIONAL BEVERAGE CORP.
$
116
$
380
$
723
$ 29,473
$ 24,745
$ 23,079
NATIONAL BEVERAGE CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
National Beverage Corp. develops, produces,
Consolidated Balance Sheets. We do not use
markets and sells a diverse portfolio of flavored
derivative financial instruments for trading or
beverage products primarily in North America.
speculative purposes. Credit risk related to derivative
Incorporated in Delaware in 1985, National Beverage
financial instruments is managed by requiring high
Corp. is a holding company for various operating
credit standards for counterparties and frequent
subsidiaries. When used in this report, the terms
cash settlements. See Note 6.
“we,” “us,” “our,” “Company” and “National Beverage”
mean National Beverage Corp. and its subsidiaries.
Earnings Per Common Share Basic earnings per
common share is computed by dividing earnings
1. SIGNIFICANT ACCOUNTING POLICIES
available to common shareholders by the weighted
average number of common shares outstanding
Basis of Presentation The consolidated financial
during the period. Diluted earnings per common
statements have been prepared in accordance with
share is calculated in a similar manner, but includes
United States generally accepted accounting
the dilutive effect of stock options amounting to
principles (“GAAP”) and rules and regulations of the
219,000 shares in Fiscal 2016, 206,000 shares in
Securities and Exchange Commission. The
Fiscal 2015 and 188,000 shares in Fiscal 2014.
consolidated financial statements include the
accounts of National Beverage Corp. and all
Fair Value The fair value of long-term debt
subsidiaries. All significant intercompany transactions
approximates its carrying value due to its variable
and accounts have been eliminated. Our fiscal year
interest rate and lack of prepayment penalty. The
ends the Saturday closest to April 30 and, as a result,
estimated fair values of derivative financial instruments
an additional week is added every five or six years.
are calculated based on market rates to settle the
Fiscal 2016 and Fiscal 2015 consisted of 52 weeks
instruments. These values represent the estimated
while Fiscal 2014 consisted of 53 weeks.
amounts we would receive upon sale, taking into
consideration current market prices and credit
Cash and Equivalents Cash and equivalents are
worthiness. See Note 6.
comprised of cash and highly liquid securities
(consisting primarily of short-term money-market
Impairment of Long-Lived Assets All long-lived
investments) with an original maturity of three months
assets, excluding goodwill and intangible assets not
or less.
subject to amortization, are evaluated for impairment
on the basis of undiscounted cash flows whenever
Derivative Financial Instruments We use derivative
events or changes in circumstances indicate that the
financial instruments to partially mitigate our exposure
carrying amount of an asset may not be recoverable.
to changes in raw material costs. All derivative
An impaired asset is written down to its estimated fair
financial instruments are recorded at fair value in our
market value based on the best information available.
NATIONAL BEVERAGE CORP.
19
NATIONAL BEVERAGE CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Estimated fair value is generally measured by
Inventories Inventories are stated at the lower of
discounting future cash flows. Goodwill and
first-in, first-out cost or market. Inventories at April
intangible assets not subject to amortization are
30, 2016 were comprised of finished goods of $29.1
evaluated for impairment annually or sooner if we
million and raw materials of $18.8 million. Inventories
believe such assets may be impaired. An impairment
at May 2, 2015 were comprised of finished goods of
loss is recognized if the carrying amount or, for
$24.9 million and raw materials of $18.0 million.
goodwill, the carrying amount of its reporting unit, is
greater than its fair value.
Marketing Costs We are involved in a variety of
marketing programs,
including cooperative
Income Taxes Our effective income tax rate is based
advertising programs with customers, to advertise
on estimates of taxes which will ultimately be payable.
and promote our products to consumers. Marketing
Deferred taxes are recorded to give recognition to
costs are expensed when incurred, except for
temporary differences between the tax bases of
prepaid advertising and production costs which are
assets or liabilities and their reported amounts in the
expensed when the advertising takes place.
financial statements. Valuation allowances are
Marketing costs, which are included in selling,
established to reduce the carrying amounts of
general and administrative expenses, totaled $38.8
deferred tax assets when it is deemed, more likely
million in Fiscal 2016, $42.4 million in Fiscal 2015 and
than not, that the benefit of deferred tax assets will
$50.2 million in Fiscal 2014.
not be realized.
New Accounting Pronouncements In March 2016,
Insurance Programs We maintain self-insured and
the Financial Accounting Standards Board (“FASB”)
deductible programs for certain liability, medical and
issued Accounting Standards Update 2016-09,
workers’ compensation exposures. Accordingly, we
“Compensation-Stock Compensation: Improvements
accrue for known claims and estimated incurred but
to Employee Share-Based Payment Accounting”
not reported claims not otherwise covered by
(“ASU 2016-09”). This amendment addresses several
insurance based on actuarial assumptions and
aspects of the accounting for share-based payment
historical claims experience. At April 30, 2016 and
transactions, including the income tax consequences,
May 2, 2015, other liabilities included accruals of $5.8
classification of awards as either equity or liabilities
million and $5.9 million, respectively, for estimated
and classification on the statement of cash flows.
non-current risk retention exposures, of which $4.8
ASU 2016-09 is effective for our fiscal year beginning
million and $4.7 million were covered by insurance.
April 30, 2017. Early adoption is permitted. We are
Intangible Assets Intangible assets as of April 30,
this guidance on our consolidated financial
currently evaluating the potential impact of adopting
2016 and May 2, 2015 consisted of non-amortizable
statements.
trademarks.
20
NATIONAL BEVERAGE CORP.
In February 2016, the FASB issued Accounting
maintenance and repairs that do not extend the
Standards Update No. 2016-02, “Leases” (“ASU
useful life of an asset are expensed as incurred.
2016-02”). ASU 2016-02 requires the lease rights
Depreciation is recorded using the straight-line
and obligations arising from lease contracts, including
method over estimated useful lives of 7 to 30 years
existing and new arrangements, to be recognized as
for buildings and improvements and 3 to 15 years for
assets and liabilities on the balance sheet. ASU
machinery and equipment. Leasehold improvements
2016-02 is effective for our fiscal year beginning April
are amortized using the straight-line method over the
28, 2019. We are currently evaluating the potential
shorter of the remaining lease term or the estimated
impact of adopting this guidance on our consolidated
useful life of the improvement. When assets are
financial statements.
retired or otherwise disposed, the cost and
In November 2015, the FASB issued Accounting
accumulated depreciation are removed from the
Standards Update No. 2015-17, “Balance Sheet
respective accounts and any related gain or loss is
Classification of Deferred Taxes” (“ASU 2015-17”).
recognized.
ASU 2015-17 requires companies to classify all
deferred tax liabilities and assets as noncurrent on
Revenue Recognition Revenue from product sales is
the balance sheet. ASU 2015-17 is effective for our
recognized when title and risk of loss pass to the
fiscal year beginning April 30, 2017. We are currently
customer, which generally occurs upon delivery. Our
evaluating the potential impact of adopting this
policy is not to allow the return of products once they
guidance on our consolidated financial statements.
have been accepted by the customer. However, on
In May 2014, the FASB issued Accounting
occasion, we have accepted returns or issued credit
Standards Update No. 2014-09, “Revenue from
to customers, primarily for damaged goods. The
Contracts with Customers” (“ASU 2014-09”). ASU
amounts have been immaterial and, accordingly, we
2014-09 requires an entity to recognize revenue in an
do not provide a specific valuation allowance for
amount that reflects the consideration it expects to
sales returns.
receive in exchange for goods or services. On
August 12, 2015, the FASB issued ASU 2015-14
Sales Incentives We offer various sales incentive
which deferred the effective date of ASU 2014-09 by
arrangements to our customers that require customer
one year and is effective for our fiscal year beginning
performance or achievement of certain sales volume
April 29, 2018. We are currently evaluating the
targets. When the incentive is paid in advance, we
potential impact of adopting this guidance on our
amortize the amount paid over the period of benefit
consolidated financial statements.
or contractual sales volume; otherwise, we accrue
the expected amount to be paid over the period of
Property, Plant and Equipment Property, plant and
benefit or expected sales volume. The recognition of
equipment are recorded at cost. Additions,
these incentives involves the use of judgment related
replacements and betterments are capitalized, while
to performance and sales volume estimates that are
NATIONAL BEVERAGE CORP.
21
NATIONAL BEVERAGE CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
made based on historical experience and other
based on an evaluation of each customer’s financial
factors. Sales incentives are accounted for as a
condition, generally without requiring collateral.
reduction of sales and actual amounts ultimately
Exposure to credit losses varies by customer
realized may vary from accrued amounts.
principally due to the financial condition of each
customer. We monitor our exposure to credit losses
Segment Reporting We operate as a single operating
and maintain allowances for anticipated losses based
segment for purposes of presenting financial
on specific customer circumstances, credit
information and evaluating performance. As such,
conditions and historical write-offs. Activity in the
the accompanying consolidated financial statements
allowance for doubtful accounts was as follows:
present financial information in a format that is
consistent with the internal financial information used
(In thousands)
Fiscal
2016
Fiscal
2015
Fiscal
2014
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
Balance at beginning of year
Net charge to expense
Net charge-off
$ 330
232
(78)
$ 399 $ 454
95
(150)
117
(186)
Balance at end of year
$ 484
$ 330 $399
costs are reported
in selling, general and
As of April 30, 2016 and May 2, 2015, we did not
administrative expenses in the accompanying
have any customer that comprised more than 10% of
consolidated statements of income. Such costs
trade receivables. No one customer accounted for
aggregated $44.6 million in Fiscal 2016 and $44.4
more than 10% of net sales during any of the last
million in Fiscal 2015 and Fiscal 2014. Although our
three fiscal years.
classification is consistent with many beverage
companies, our gross margin may not be comparable
Use of Estimates The preparation of financial
to companies that include shipping and handling
statements in conformity with United States generally
costs in cost of sales.
accepted accounting principles requires management
to make estimates and assumptions that affect the
Stock-Based Compensation Compensation
amounts reported in the financial statements and
expense for stock-based compensation awards is
accompanying notes. Although these estimates are
recognized over the vesting period based on the
based on management’s knowledge of current
grant-date fair value estimated using the Black-
events and anticipated future actions, actual results
Scholes model. See Note 8.
may vary from reported amounts.
Trade Receivables We record trade receivables at
net realizable value, which includes an appropriate
allowance for doubtful accounts. We extend credit
22
NATIONAL BEVERAGE CORP.
2. PROPERTY, PLANT AND EQUIPMENT
The Credit Facilities expire from October 10, 2017 to
June 18, 2018 and, currently, any borrowings would
Property, plant and equipment as of April 30, 2016
bear interest at .9% above one-month LIBOR. There
and May 2, 2015 consisted of the following:
were no borrowings outstanding under the Credit
Facilities at April 30, 2016 and $10 million was
(In thousands)
2016
2015
outstanding at May 2, 2015. At April 30, 2016, $2.2
Land
Buildings and improvements
Machinery and equipment
$
9,500
50,856
162,195
$ 9,500
50,405
156,702
Total
Less accumulated depreciation
222,551
(160,619)
216,607
(156,425)
Property, plant and
equipment—net
$ 61,932
$ 60,182
Depreciation expense was $10.1 million for Fiscal
2016, $10.2 million for Fiscal 2015 and $9.8 million for
Fiscal 2014.
million of the Credit Facilities were reserved for
standby letters of credit and $97.8 million were
available for borrowings.
The Credit Facilities require the subsidiary to
maintain certain financial ratios, including debt to net
worth and debt to EBITDA (as defined in the Credit
Facilities), and contain other restrictions, none of
which are expected to have a material effect on our
operations or financial position. At April 30, 2016, we
were in compliance with all loan covenants.
3. ACCRUED LIABILITIES
5. CAPITAL STOCK AND TRANSACTIONS
WITH RELATED PARTIES
Accrued liabilities as of April 30, 2016 and May 2,
2015 consisted of the following:
(In thousands)
Accrued compensation
Accrued promotions
Accrued insurance
Other
Total
4. DEBT
2016
2015
$ 9,217
5,888
2,786
8,304
$ 7,473
3,801
1,651
8,332
$ 26,195
$ 21,257
At April 30, 2016, a subsidiary of the Company
maintained unsecured revolving credit facilities with
banks aggregating $100 million (the “Credit Facilities”).
On January 25, 2013, the Company sold 400,000
shares of Special Series D Preferred Stock, par value
$1 per share (“Series D Preferred”) for an aggregate
purchase price of $20 million. Series D Preferred had
a liquidation preference of $50 per share and accrued
dividends on this amount at an annual rate of 3%
through April 30, 2014 and, thereafter, at an annual
rate equal to 370 basis points above the 3-Month
LIBOR. Dividends were cumulative and payable
quarterly. There were no accrued dividends at April
30, 2016 and $37,000 was accrued at May 2, 2015.
The Series D Preferred was nonvoting and
redeemable at the option of the Company beginning
May 1, 2014 at $50 per share. In addition, the
Company has 150,000 shares of Series C Preferred
NATIONAL BEVERAGE CORP.
23
NATIONAL BEVERAGE CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Stock, par value $1 per share, which are held as
On April 29, 2016, the Company redeemed the
treasury stock and, therefore, such shares have no
final remaining 120,000 shares of Series D Preferred
liquidation value.
for an aggregate price of $6 million plus accrued
On May 2, 2014, the Company redeemed
dividends. In connection therewith, the Company
160,000 shares of Series D Preferred, representing
accreted and charged to retained earnings $89,000
40% of the amount outstanding, for an aggregate
of original issuance costs, which was deducted from
price of $8 million plus accrued dividends. In
income available to common shareholders for
connection therewith, the Company accreted and
earnings per share calculation.
charged to retained earnings $118,000 of original
In April 2012, the Board of Directors authorized
issuance costs, which was deducted from income
an increase in the Company’s Stock Buyback
available to common shareholders for earnings per
Program from 800,000 to 1.6 million shares of
share calculation. In conjunction with the partial
common stock. As of April 30, 2016, 502,060 shares
redemption, the annual dividend rate on the
were purchased under the program and 1,097,940
outstanding Series D Preferred was reduced to 2.5%
shares were available for purchase. There were no
for the twelve month period beginning May 1, 2014.
shares purchased during the last three fiscal years.
In evaluating the impact of the rate change, the
The Company is a party to a management
Company determined that the related fair value
agreement with Corporate Management Advisors,
change was immaterial and that no adjustment was
Inc. (“CMA”), a corporation owned by our Chairman
required.
and Chief Executive Officer. This agreement was
On August 1, 2014, the Company redeemed
originated in 1991 for the efficient use of management
120,000 shares of Series D Preferred, representing
of two public companies at the time. In 1994, one of
50% of the amount outstanding, for an aggregate
those public entities, through a merger, no longer
price of $6 million plus accrued dividends. In
was managed in this manner. Under the terms of the
connection therewith, the Company accreted and
agreement, CMA provides, subject to the direction
charged to retained earnings $89,000 of original
and supervision of the Board of Directors of the
issuance costs, which was deducted from income
Company, (i) senior corporate functions (including
available to common shareholders for earnings per
supervision of the Company’s financial, legal,
share calculation.
executive recruitment, internal audit and management
On May 1, 2015, the Company and the holders
information systems departments) as well as the
of the Series D Preferred agreed to extend the 2.5%
services of a Chief Executive Officer and Chief
annual dividend rate on the outstanding Series D
Financial Officer, and (ii) services in connection with
Preferred through April 30, 2016. In evaluating the
acquisitions, dispositions and financings by the
impact of the rate change, the Company determined
Company,
including
identifying and profiling
that the related fair value change was immaterial and
acquisition candidates, negotiating and structuring
that no adjustment was required.
potential transactions and arranging financing for any
24
NATIONAL BEVERAGE CORP.
such transaction. CMA, through its personnel, also
Comprehensive
Income
(Loss)
(“AOCI”) and
provides, to the extent possible, the stimulus and
reclassified into earnings through cost of sales in the
creativity to develop an innovative and dynamic
period in which the hedged transaction affects
persona for the Company, its products and corporate
earnings. The ineffective portion of the change in fair
image. In order to fulfill its obligations under the
value of our cash flow hedge was immaterial. The
management agreement, CMA employs numerous
following summarizes the gains (losses) recognized in
individuals, whom, acting as a unit, provide
the Consolidated Statements of Income and AOCI
management, administrative and creative functions
relative to the cash flow hedge for Fiscal 2016, Fiscal
for the Company. The management agreement
2015 and Fiscal 2014:
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
(In thousands)
Compensation and Stock Option Committee and the
Board of Directors may from time to time award
additional incentive compensation to CMA. The
Recognized in AOCI:
Loss before income taxes
Less income tax benefit
Fiscal
2016
Fiscal
2015
Fiscal
2014
$ (5,743) $ (3,488) $ (1,059)
(393)
(1,294)
(2,131)
Net
(3,612)
(2,194)
(666)
Board of Directors on numerous occasions
contemplated incentive compensation and, while
shareholder value has increased over $2.5 billion (or
6,000%) since the inception of this agreement, no
incentive compensation has been paid. We incurred
management fees to CMA of $7.0 million for Fiscal
Reclassified from AOCI to
cost of sales:
(Loss) gain before
income taxes
Less income tax
(benefit) provision
2016, $6.5 million for Fiscal 2015 and $6.4 million for
Net
(6,987)
248
(2,028)
(2,592)
(4,395)
92
(752)
156
(1,276)
Fiscal 2014. Included in accounts payable were
Net change to AOCI
$ 783
$ (2,350) $ 610
amounts due CMA of $1.8 million at April 30, 2016
and $1.6 million at May 2, 2015.
As of April 30, 2016, the notional amount of our
outstanding aluminum swap contracts was $14.4
6. DERIVATIVE FINANCIAL INSTRUMENTS
million and, assuming no change in the commodity
prices, $2.5 million of unrealized loss before tax will
From time to time, we enter into aluminum swap
be reclassified from AOCI and recognized in earnings
contracts to partially mitigate our exposure to
over the next 12 months. See Note 1.
changes in the cost of aluminum cans. Such financial
As of April 30, 2016, the fair value of the derivative
instruments are designated and accounted for as a
liability was $2.5 million, which was included in
cash flow hedge. Accordingly, gains or losses
accrued liabilities. As of May 2, 2015, the fair value of
attributable to the effective portion of the cash flow
the derivative liability and derivative long-term liability
hedge are reported
in Accumulated Other
was $3.0 million and $751,000, which was included
NATIONAL BEVERAGE CORP.
25
NATIONAL BEVERAGE CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(In thousands)
2016
2015
in accrued liabilities and other liabilities, respectively.
Such valuation does not entail a significant amount of
judgment and the inputs that are significant to the fair
Deferred tax assets:
Accrued expenses and other
value measurement are Level 2 as defined by the fair
Inventory and amortizable assets
value hierarchy as they are observable market based
Total deferred tax assets
6,193
5,698
inputs or unobservable inputs that are corroborated
by market data.
7. INCOME TAXES
Deferred tax liabilities:
Property
Intangibles and other
14,049
2,164
14,364
2,231
Total deferred tax liabilities
16,213
16,595
Net deferred tax liabilities
$ 10,020
$ 10,897
The provision (benefit) for income taxes consisted of
Current deferred tax assets—net
$ 4,454
$ 4,348
$ 5,655
538
$ 5,281
417
the following:
(In thousands)
Current
Deferred
Total
Fiscal
2016
Fiscal
2015
Fiscal
2014
$32,806
(1,299)
$24,326
1,076
$19,395
79
$31,507
$25,402
$19,474
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
Noncurrent deferred tax liabilities—net
$ 14,474
$ 15,245
The reconciliation of the statutory federal income tax
rate to our effective tax rate is as follows:
Fiscal
2016
Fiscal
2015
Fiscal
2014
Statutory federal income
tax rate
35.0% 35.0% 35.0%
State income taxes,
net of federal benefit
Domestic manufacturing
deduction benefit
Adjustment of unrecognized
2.2
2.3
2.3
(3.0)
(3.0)
(3.0)
(.1)
(.1)
(.2)
(.1)
(3.3)
(.1)
than not that the benefit of deferred tax assets will
not be realized. Deferred tax assets and liabilities as
tax benefit
Other differences
of April 30, 2016 and May 2, 2015 consisted of the
Effective income tax rate
34.0% 34.0% 30.9%
following:
During April 2014, the Company reached an
agreement with the Internal Revenue Service with
respect to its review of the Company’s federal income
tax returns for the three years ended April 2013. No
material adjustments were proposed and,
accordingly, the Company adjusted the related
unrecognized tax benefits during the fourth quarter
of Fiscal 2014.
26
NATIONAL BEVERAGE CORP.
As of April 30, 2016, the gross amount of
any particular uncertain tax position, we believe that
unrecognized tax benefits was $1.7 million and
our unrecognized tax benefits reflect the most
$59,000 was recognized as a tax benefit in Fiscal
probable outcome. We adjust these unrecognized
2016. If we were to prevail on all uncertain tax
tax benefits, as well as the related interest, in light of
positions, the net effect would be to reduce our tax
changing facts and circumstances. The resolution of
expense by approximately $1.2 million.
A
any particular uncertain tax position could require the
reconciliation of the changes in the gross amount of
use of cash and an adjustment to our provision for
unrecognized tax benefits, which amounts are
income taxes in the period of resolution. Federal
included in other liabilities in the accompanying
income tax returns for fiscal years subsequent to
consolidated balance sheets, is as follows:
2013 are subject to examination. Generally, the
(In thousands)
Beginning balance
Increases due to current
period tax positions
Decreases due to lapse of
statute of limitations and
audit resolutions
Fiscal
2016
Fiscal
2015
Fiscal
2014
$ 1,801
$ 2,123 $ 4,349
145
122
268
income tax returns for the various state jurisdictions
are subject to examination for fiscal years ending
after fiscal 2010.
8. STOCK-BASED COMPENSATION
(268)
(444)
(2,494)*
based program designed to attract and retain
Our stock-based compensation program is a broad-
Ending balance
$ 1,678
$ 1,801 $ 2,123
employees while also aligning employees’ interests
* Includes $1,907 related to the Internal Revenue Service review of the
Company’s federal income tax returns for the three years ended April 2013
noted above.
We recognize accrued interest and penalties
related to unrecognized tax benefits in income tax
expense. As of April 30, 2016, unrecognized tax
benefits included accrued interest of $227,000, of
which approximately $42,000 was recognized as a
tax benefit in Fiscal 2016.
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 resolved. While it is often difficult to
predict the final outcome or the timing of resolution of
with the interests of the shareholders.
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
officers 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
NATIONAL BEVERAGE CORP.
27
NATIONAL BEVERAGE CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
to 1,680,000 during any year. Awards may be
We account for stock options under the fair value
granted for no cash consideration or such minimal
method of accounting using a Black-Scholes
cash consideration as may be required by law.
valuation model to estimate the stock option fair value
Options generally have an exercise price equal to the
at date of grant. The fair value of stock options is
fair market value of our common stock on the date of
amortized to expense over the vesting period. Stock
grant, vest over a five-year period and expire after ten
options granted were 3,500 shares in Fiscal 2016,
years.
276,800 shares in Fiscal 2015 and 5,245 shares in
The Special Stock Option Plan provides for the
Fiscal 2014. The weighted average Black-Scholes
issuance of stock options to purchase up to an
fair value assumptions for stock options granted are
aggregate of 1,800,000 shares of common stock.
as follows: weighted average expected life of 8.0
Options may be granted for such consideration as
years for Fiscal 2016, 7.4 years for Fiscal 2015 and 8
determined by the Board of Directors. The vesting
years for Fiscal 2014; weighted average expected
schedule and exercise price of these options are tied
volatility of 29.0% for Fiscal 2016, 32.8% for Fiscal
to the recipient’s ownership level of common stock
2015 and 35.8% for Fiscal 2014; weighted average
and the terms generally allow for the reduction in
risk free interest rates of 2.1% for Fiscal 2016, 2.2%
exercise price upon each vesting period. Also, the
for Fiscal 2015 and 1.9% for Fiscal 2014; and
Board of Directors authorized the issuance of options
expected dividend yield of 3.3% for Fiscal 2016, 4.6%
to purchase up to 50,000 shares of common stock
for Fiscal 2015 and 4.6% for Fiscal 2014. The
to be issued at the direction of the Chairman.
expected life of stock options was estimated based
The Key Employee Equity Partnership Program
on historical experience. The expected volatility was
(“KEEP Program”) provides for the granting of stock
estimated based on historical stock prices for a
options to purchase up to 240,000 shares of common
period consistent with the expected life of stock
stock to key employees, consultants, directors and
options. The risk free interest rate was based on the
officers. Participants who purchase shares of stock
U.S. Treasury constant maturity interest rate whose
in the open market receive grants of stock options
term is consistent with the expected life of stock
equal to 50% of the number of shares purchased, up
options. Forfeitures were estimated based on
to a maximum of 6,000 shares in any two-year
historical experience and ranged from 0% to 16% for
period. Options under the KEEP Program are
Fiscal 2016, Fiscal 2015 and Fiscal 2014.
forfeited in the event of the sale of shares used to
The following is a summary of stock option activity
acquire such options. Options are granted at an
for Fiscal 2016:
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.
28
NATIONAL BEVERAGE CORP.
Number
of Shares Price(a)
Options outstanding, beginning of year
Granted
Exercised
Cancelled
613,135
3,500
(170,715)
(27,025)
$ 11.23
9.53
4.97
$15.62
Options outstanding, end of year
418,895
$12.44
outstanding as of April 30, 2016 was 6.2 years and
$14.4 million, respectively. The weighted average
remaining contractual term and the aggregate
intrinsic value for options exercisable as of April 30,
2016 was 5.0 years and $6.3 million, respectively.
We have a stock purchase plan which provides
for the purchase of up to 1,536,000 shares of
Options exercisable, end of year
170,056
$ 9.64
common stock by employees who (i) have been
(a) Weighted average exercise price.
Stock-based compensation expense was
$228,000 for Fiscal 2016, $307,000 for Fiscal 2015
and $95,000 for Fiscal 2014. The total fair value of
employed for at least two years, (ii) are not part-time
employees and (iii) are not owners of five percent or
more of our common stock. As of April 30, 2016, no
shares have been issued under the plan.
shares vested was $652,000 for Fiscal 2016,
9. PENSION PLANS
$371,000 for Fiscal 2015 and $90,000 for Fiscal
2014. The total intrinsic value for stock options
The Company contributes to certain pension plans
exercised was $5,161,000 for Fiscal 2016, $917,000
under collective bargaining agreements and to a
for Fiscal 2015 and $76,000 for Fiscal 2014. Net
discretionary profit sharing plan. Total contributions
cash proceeds from the exercise of stock options
(including contributions to multi-employer plans
were $848,000 for Fiscal 2016, $228,000 for Fiscal
reflected below) were $2.9 million for Fiscal 2016,
2015 and $47,000 for Fiscal 2014. Stock based
$2.7 million for Fiscal 2015 and $2.7 million for Fiscal
income tax benefits aggregated $1,528,000 for Fiscal
2014.
2016, $240,000 for Fiscal 2015 and $17,000 for Fiscal
The Company participates in various multi-
2014. The weighted average fair value for stock
employer defined benefit pension plans covering
options granted was $20.09 for Fiscal 2016, $8.30
certain employees whose employment is covered
for Fiscal 2015 and $12.50 for Fiscal 2014.
under collective bargaining agreements. If the
As of April 30, 2016, unrecognized compensation
Company chooses to stop participating in the multi-
expense related to the unvested portion of our stock
employer plan or if other employers choose to
options was $642,000, which is expected to be
withdraw to the extent that a mass withdrawal
recognized over a weighted average period of 4.8
occurs, the Company could be required to pay the
years. The weighted average remaining contractual
plan a withdrawal liability based on the underfunded
term and the aggregate intrinsic value for options
status of the plan.
NATIONAL BEVERAGE CORP.
29
NATIONAL BEVERAGE CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Summarized below is certain information regarding the Company’s participation in significant multi-
employer pension plans including the financial improvement plan or rehabilitation plan status (“FIP/RP Status”)
and the zone status under the Pension Protection Act (“PPA”). The most recent PPA zone status available in
Fiscal 2016 and Fiscal 2015 is for the plans’ years ending December 31, 2014 and 2013, respectively.
Pension Fund
PPA Zone Status
Fiscal
2016
Fiscal
2015
FIP/RP Status
Surcharge
Imposed
Central States, Southeast and Southwest Areas Pension Plan
(EIN no. 36-6044243) (the “CSSS Fund”)
Red
Red
Implemented
Western Conference of Teamsters Pension Trust Fund
(EIN no. 91-6145047) (the “WCT Fund”)
Green
Green
Not applicable
No
No
For the plan years ended December 31, 2014 and
the subsidiary with a notice of withdrawal liability.
December 31, 2013, the Company was not listed in
The Company disputes various aspects of the
the Form 5500 Annual Returns as providing more
withdrawal liability calculations and is challenging
than 5% of the total contributions for the above plans.
them under applicable Federal laws. The Company
The collective bargaining agreements for employees
anticipates that the amount of its liability will not have
in the CSSS Fund and the WCT Fund expire on
a material effect on its financial position or results of
October 18, 2016 and May 14, 2016, respectively.
operations.
The Company is presently negotiating the renewal of
the WCT Fund collective bargaining agreement.
10. COMMITMENTS AND
CONTINGENCIES
The Company’s contributions for all multi-
employer pension plans for the last three fiscal years
We lease buildings, machinery and equipment under
are as follow:
(In thousands)
Pension Fund
CSSS Fund
WCT Fund
Other multi-employer
pension funds
Fiscal
2016
$1,172
485
Fiscal
2015
Fiscal
2014
$1,103
637
$1,079
476
various non-cancelable operating lease agreements
expiring at various dates through 2026. 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
448
306
295
basis over the lease term. Rent expense under
Total
$2,105
$2,046
$1,850
operating lease agreements totaled $9.2 million for
Fiscal 2016, $8.2 million for Fiscal 2015 and $7.9
The trustees of one of the multi-employer pension
million for Fiscal 2014.
plans that is not considered individually significant
have notified a subsidiary of the Company that a
mass withdrawal has occurred and have provided
30
NATIONAL BEVERAGE CORP.
Our minimum lease payments under non-cancelable
up to such guaranteed amount. The Company
operating leases as of April 30, 2016 were as follows:
expects to have no loss on such guarantee.
(In thousands)
Fiscal 2017
Fiscal 2018
Fiscal 2019
Fiscal 2020
Fiscal 2021
Thereafter
$ 6,376
5,350
4,684
3,968
2,237
3,418
Total minimum lease payments
$ 26,033
As of April 30, 2016, we guaranteed the residual
value of certain leased equipment in the amount of
$4.4 million. If the proceeds from the sale of such
equipment are less than the balance required by the
lease when the lease terminates on August 1, 2017,
the Company shall be required to pay the difference
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 April 30, 2016, we had
purchase commitments for raw materials of $45.5
million for Fiscal 2017.
As of April 30, 2016, we had purchase
commitments for plant and equipment of $5.0 million
for Fiscal 2017.
From time to time, we are a party to various
litigation matters and claims arising in the ordinary
course of business. We do not expect the ultimate
disposition of such matters to have a material adverse
effect on our consolidated financial position or results
of operations.
11. QUARTERLY FINANCIAL DATA (UNAUDITED)
(In thousands, except per share amounts)
FISCAL 2016
Net sales
Gross profit
Net income
Earnings per common share—basic
Earnings per common share—diluted
FISCAL 2015
Net sales
Gross profit
Net income
Earnings per common share—basic
Earnings per common share—diluted
First
Quarter
Second
Quarter
Third
Quarter
Fourth
Quarter
$ 185,386
62,899
17,113
.37
.37
$
$
$ 178,678
60,621
15,312
.33
.33
$
$
$ 161,687
52,552
11,236
.24
.24
$
$
$ 179,034
65,365
17,537
.37
.37
$
$
$ 174,637
59,842
15,363
.33
.33
$
$
$ 163,575
57,732
12,958
.28
.28
$
$
$ 143,021
46,090
8,808
.19
.19
$
$
$ 164,592
55,476
12,182
.26
.26
$
$
NATIONAL BEVERAGE CORP.
31
REPORT OF INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM
To the Board of Directors and Shareholders of National Beverage Corp.
We have audited the accompanying consolidated
balance sheets of National Beverage Corp. as of April
30, 2016 and May 2, 2015 and the related
consolidated statements of income, comprehensive
income, shareholders’ equity and cash flows for each
of the years in the three-year period ended April 30,
2016. We also have audited National Beverage
Corp.’s internal control over financial reporting as of
April 30, 2016, based on criteria established in
Internal Control — Integrated Framework issued by
the Committee of Sponsoring Organizations of the
Treadway Commission (COSO) in 2013. National
Beverage Corp.’s management is responsible for
these financial statements, for maintaining effective
internal control over financial reporting and for its
assessment of the effectiveness of internal control
over financial reporting included in the accompanying
Management’s Report on 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 assurance 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 operating 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 principles. A company’s
internal control over financial reporting includes those
policies and procedures that (1) pertain to the
maintenance of records that, in reasonable detail,
accurately and fairly reflect the transactions and
dispositions of the assets of the company; (2) provide
reasonable assurance that transactions are recorded
as necessary to permit preparation of financial
statements in accordance with generally accepted
accounting 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 regarding prevention or timely detection of
unauthorized acquisition, 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
misstatements. Also, projections of any evaluation of
effectiveness 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 consolidated financial
statements referred to above present fairly, in all
material respects, the financial position of National
Beverage Corp. as of April 30, 2016 and May 2, 2015
and the results of their operations and their cash
flows for each of the years in the three-year period
ended April 30, 2016, 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,
2016, based on criteria established in Internal
Control—Integrated Framework issued by the
Committee of Sponsoring Organizations of the
Treadway Commission (COSO) in 2013.
/s/ RSM US LLP
West Palm Beach, Florida
July 14, 2016
32
NATIONAL BEVERAGE CORP.
MARKET FOR REGISTRANT’S COMMON EQUITY,
RELATED STOCKHOLDER MATTERS AND ISSUER
PURCHASES OF EQUITY SECURITIES
The common stock of National Beverage Corp.,
dividends were accrued on this amount at an annual
par value $.01 per share, (“Common Stock”) is listed
rate of 3% through April 30, 2014 and, thereafter, at
on The NASDAQ Global Select Market under the
an annual rate equal to 370 basis points above the
symbol “FIZZ”. The following table shows the range
3-Month LIBOR. Dividends were cumulative and
of high and low prices per share of the Common
payable quarterly. The net proceeds of $19.7 million
Stock
for
the
fiscal quar ters
indicated:
were used to repay borrowings under the Credit
Fiscal Year Ended
Company pursuant to the exemption from registration
Facilities. The Series D Preferred was issued by the
April 30, 2016
Low
High
May 2, 2015
Low
High
provided by Section 4(2) of the Securities Act of
1933.
On May 2, 2014, the Company redeemed
160,000 shares of Series D Preferred for an aggregate
price of $8 million plus accrued dividends. In
conjunction with the partial redemption, the annual
dividend rate on the outstanding Series D Preferred
was reduced to 2.5% for the twelve-month period
beginning May 1, 2014. On May 1, 2015, the Company
and the holders of the Series D Preferred agreed to
extend the 2.5% annual dividend rate on the
outstanding Series D Preferred through April 30,
2016.
On August 1, 2014, the Company redeemed an
additional 120,000 shares of Series D Preferred for
an aggregate price of $6 million plus accrued
dividends. The final redemption of the remaining
120,000 shares of Series D Preferred was made on
April 29, 2016 for an aggregate price of $6 million
plus accrued dividends.
First Quarter
Second Quarter
Third Quarter
Fourth Quarter
$24.94
$38.91
$48.01
$47.00
$19.98
$23.05
$35.50
$32.35
$19.97
$25.50
$27.32
$25.00
$15.42
$17.58
$21.00
$21.00
At July 7, 2016 there were approximately 14,000
holders of our Common Stock, the majority of which
hold their shares in the names of various dealers
and/or clearing agencies.
The Company paid special cash dividends on
Common Stock of $118.1 million ($2.55 per share) on
December 27, 2012.
In April 2012, the Board of Directors authorized
an increase in the Company’s Stock Buyback
Program from 800,000 to 1.6 million shares of
Common Stock. As of April 30, 2016, 502,060
shares were purchased under the program and
1,097,940 shares were available for purchase. There
were no shares of Common Stock purchased during
the last three fiscal years.
On January 25, 2013, the Company sold 400,000
shares of Special Series D Preferred Stock, par value
$1 per share (“Series D Preferred”) for an aggregate
purchase price of $20 million. Series D Preferred had
a liquidation preference of $50 per share and
NATIONAL BEVERAGE CORP.
33
PERFORMANCE GRAPH
The following graph shows a comparison of the five-year cumulative returns of an investment of $100
cash on April 30, 2011, assuming reinvestment of dividends, in (i) Common Stock, (ii) the NASDAQ Composite
Index and (iii) a Company-constructed peer group consisting of Coca-Cola Bottling Company Consolidated
and Cott Corporation. Based on the cumulative total return below, an investment in our Common Stock on
April 30, 2011 provided a compounded annual return of approximately 31.5% as of April 30, 2016.
Comparison of 5-Year Cumula(cid:14)ve Total Return
among Na(cid:14)onal Beverage Corp., the NASDAQ Composite Index, and a Peer Group
$420
$400
$380
$360
$340
$320
$300
$280
$260
$240
$220
$200
$180
$160
$140
$120
$100
$80
$60
$40
$20
$0
4/30/2011
4/28/2012
4/27/2013
5/3/2014
5/2/2015
4/30/16
Na(cid:29)onal Beverage Corp.
NASDAQ Composite-Total Returns
Peer Group
National Beverage Corp.
NASDAQ Composite
Peer Group
4/30/11
4/28/12
4/27/13
5/3/14
5/2/15
4/30/16
$100.00
100.00
100.00
$105.46
107.92
81.90
$122.59
116.89
110.40
$161.64
148.92
107.78
$188.65
182.88
133.63
$393.28
176.59
196.56
34
NATIONAL BEVERAGE CORP.
Financial
Review
SUBSIDIARIES
BevCo Sales, Inc.
Beverage Corporation Intl., Inc.
Big Shot Beverages, Inc.
Everfresh Beverages, Inc.
Faygo Beverages, Inc.
LaCroix Sparkling Water, Inc.
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
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 by
contacting 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.
CORPORATE OFFICES
8100 Southwest Tenth Street
Fort Lauderdale, FL 33324
954-581-0922
STOCK EXCHANGE LISTING
Common Stock is listed on
The NASDAQ Global Select
Market–symbol FIZZ.
ANNUAL MEETING
The Annual Meeting of
Shareholders will be held on
Friday, September 30, 2016
at 2:00 p.m. local time at the
Hyatt Regency Orlando
International Airport, 9300
Jeff Fuqua Boulevard,
Orlando, FL 32827.
TRANSFER AGENT AND
REGISTRAR
Computershare
250 Royall Street
Canton, MA 02021
888-313-1476
www.computershare.com/
investor
INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM
RSM US LLP
West Palm Beach, FL
CORPORATE DATA
DIRECTORS
SUBSIDIARY MANAGEMENT
Alan A. Chittaro
President
Faygo Beverages, Inc.
Michael J. Bahr
Executive Vice President
Shasta West
James C.T. Bolton
Executive Vice President
PACO, Inc.
Alan D. Domzalski
Executive Vice President
Sundance Beverage
Company
James H. Erwin III
Executive Vice
President–Sales
Shasta Beverages, Inc.
Stephen E. Flis
Executive Vice President
Shasta Sweetener, Inc.
Arthur D. Hanrehan
Executive Vice President
National BevPak
James M. Jones
Executive Vice President
Shasta Foodservice
John F. Hlebica
Vice President
Shasta Beverages
International
Worth B. Shuman III
Vice President
Military Sales
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.
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
Executive Vice
President–Finance
Gregory P. Cook
Vice President–Controller &
Chief Accounting Officer
Timothy C. Barker
Executive Director–Strategic IT
Brent R. Bott
Executive Director–
Consumer Marketing
Gregory J. Kwederis
Executive Director–
Beverage Analyst
Kenneth A. Finneran
Senior Director–
Human Resources
Dominic H. Angelina
Director–Internal Audit
Richard S. Berkes
Director–Risk Management
Glenn G. Bryan
Director–Tax
Michael M. King
Special Corporate Counsel
Ballooning Momentum . . .
The Healthy Way!
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W A TER
Health and fitness are driving CSDs
down and sparkling water up across the U.S.
35% of households in the U.S.
35% of households in the U.S.
are currently purchasing sparkling water,
are currently purchasing sparkling water,
78% bottled water and 94% CSDs
78% bottled water and 94% CSDs
Since 1998, the per capita consumption
Since 1998, the per capita consumption
of CSDs has declined 25%
of CSDs has declined 25%
(650 oz. drinks vs. 864 oz.)
(650 oz. drinks vs. 864 oz.)
C
S
D
The average spending on health care
The average spending on health care
per capita in the U.S. is the highest in
per capita in the U.S. is the highest in
the world among developing countries
the world among developing countries
Obesity rates
Obesity rates
have doubled
have doubled
among adults
among adults
in America
in America
America is experiencing an evolution
America is experiencing an evolution
away from sugary beverages
away from sugary beverages
toward healthier options
toward healthier options
Bottled water sales will surpass
Bottled water sales will surpass
CSDs for the very first time in 2016
CSDs for the very first time in 2016
U.S. health care costs are projected
U.S. health care costs are projected
to exceed $4.4 trillion by 2020
to exceed $4.4 trillion by 2020
up from $1.4 trillion in 2000
up from $1.4 trillion in 2000
High blood-sugar levels are now considered an ‘American epidemic’
High blood-sugar levels are now considered an ‘American epidemic’
CSDs - Carbonated Soft Drinks
Information from various sources: OECD, CMS, BevNET, Beverage Digest and HHS
EXPONENTIAL Opportunity
outlined in a script to be followed.
does not lie in wait
Chance is not an option available at wit’s end.
Advantage is often just Courage.
Excellence is embedded in the character of Sound Principles.
Greatness comes only after being Captured.
Grand results – without pre-setting one's lens – never come into view.
!
Sound character settles: Never
Only the truly Blessed – Count Them . . .
nac
National Beverage Corp.
8100 Southwest Tenth Street, Fort Lauderdale, Florida 33324
954.581.0922
www.nationalbeverage.com