National Beverage Corp.
Annual Report 2017

Plain-text annual report

National Beverage Corp. 2017 Annual Report GROSS PRICE / EARNINGS INDEX TRIFECTA PROFILE* Ambi tious – Delicious and Healthy . . . 55x 50x 35x 35x 45x 40x (SDA) Facts . . . National’s innovation sets the standards for healthy sparkling water Recognized leader of natural sparkling water category Carbonated soda sales facing accelerated declines due to health alerts and soda tax Major shareholder senior prominence Growth momentum bridled to agile and passionate organization *INDUSTRY LEADING REVENUES + OPERATING MARGIN GROWTH + SHAREHOLDER VALUE lovely overfly this H appy, squawking seagulls lagoon, high-fiving wingtips over such a beautiful New England cove . . . (winking in) another glorious crisp morning! Aromas are scenting, seaweed is smiling and ducks are hooting . . . what’s all the fuss about? FIZZ – that’s what!! Yes, grateful, thankful, ever so blessed Team National and yours truly have so much to smile about – and smile, we are graciously going to do until those happy, squawking seagulls roost! WOW . . . what a year! Best Revenues, Best Earnings, Best Industry Growth, Stock Hits $100, Company pays $3.00 in dividends, Team National is healthy and smiles abound . . . I hope those seagulls never land! I mean it . . . I believe for good fortune to prevail, a combination of things must occur! First, one should have that special ‘sidekick’ relationship with their spiritual guardian and, next, be genetically equipped to be the master of their destiny! Then, they should choose to engage in making lif e be tter fo r m or e th an they a r e c a pa bl e of a nd , finally . . . they should love what they do! I fully believe that good fortune beckons for these characters – yes! If the daring truth be told, National Beverage Corp. at the outset, and still relevant today, is an enterprise of caring purpose. Initially, to save the innocent from the clutches of a terrible corporate raider and, today, to bring ‘innocent’ healthy beverages to an ailing America! FY2017 was a pivotal year for National Beverage Corp. on several fronts. First, moving FIZZ into the growth stock segment; second, capturing top place in market performance in 40 of 42 key markets in the United States; third, leading the natural sparkling water category with such force as to influence the total sparkling water category in the U.S. and, finally, moving the Company’s revenues into the billion dollar range this FY2018. Creativity and innovation, plus new geographic distribution advances, continue to fuel our dynamic momentum. Catching the tide of ‘change’ (healthier consumables) has been quite advantageous. I certainly agree . . . and the building momentum of that incoming tide widens by the hour as is the case with an actual rising tide! As more people consume our healthy beverages, they expect to find them readily available and retailers continue to provide more and more space! Retailers across North America are discovering that healthy is in demand and will also produce healthy profits! The performance of the first quarter FY2018, both financial and FIZZ market activities, collaborating with new dynamic distribution results in Canada, will certainly make this period – a La La summer for LaCroix. FY2018 will continue to be a great year for FIZZ due to our ever-increasing momentum and also an accelerating movement in a large part of the planet to challenge any and all presently- stated claims made by beverage manufacturers. All consumer beverages will be affected and regulatory agencies will insist that labels represent the truth to consumers. This will promote brands like LaCroix and Shasta Sparkling Water SDA (Soft Drink Alternative) because of the standards with which these waters are developed, labeled and manufactured. Today, ratings agencies that monitor water products, especially sparkling water, are very unfair in their analysis by combining various products together regardless of their ingredients. Our Company will clearly benefit as more and more consumers become educated with the truth. Presently, misleading the consumer is quite prevalent – anyone can label something as all natural, organic or pure to induce a consumer purposely for their advantage. 2018 will see the pendulum return to more normal and more honest again . . . protecting those of us who diligently strive to do the right thing. Additionally, FY2018 will witness wonderful, new innovations with packaging, new theme additions, shelf demographic concepts and a new LaCroix Key Lime flavor introduced with this Annual Report. Much love and caring goes into all that we do, but when it comes to naturally essenced, sparkling water taste, we go the limit and several sips beyond! So . . . those shareholders who requested that their Annual Report and Proxy Statement be mailed to them will also get to try our new Key Lime flavor. Please let us know how you feel . . . Please! If you open this Annual Report to the inside back cover, we have defined our place in the sparkling water category. Please revisit this powerful page and understand National Beverage’s real purpose in making you aware of our leadership role in this sparkling water industry – and that is to make our healthy, authentically-genuine, great beverages the choice for all consumers searching for excellence. The right selection makes excellence a habit! National Beverage Corp. is benefitting from choices made years ago and this feeling is wonderful. Standing here at the precipice of a solar eclipse that heartens another eclipse happening simultaneously, where a jubilant team of aggressive humans are moving ‘innocent’ brands of fantastic sparkling water, LaCroix and Shasta SDA across North America, leaving in its wake healthy, joyful, refreshed and contented consumers. Wishing you continued good fortune, Nick A. Caporella Chairman and Chief Executive Officer Mindfulness FINANCIAL REVIEW SELECTED FINANCIAL DATA MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Fiscal Year Ended OVERVIEW and Shasta Sparkling Water® products; Rip It® energy drinks and shots; and Everfresh®, Everfresh Premier (In thousands, except per share and footnote amounts) SUMMARY OF OPERATIONS Net sales Cost of sales Gross profit April 29, 2017 April 30, 2016 May 2, 2015 May 3, 2014(3) April 27, 2013 $826,918 $704,785 $645,825 $641,135 $662,007 500,841 463,348 426,685 423,480 444,757 326,077 241,437 219,140 217,655 217,250 Selling, general and administrative expenses 163,600 148,384 145,157 153,220 146,223 Interest expense Other (income) expense - net Income before income taxes Provision for income taxes Net income PER SHARE DATA 189 (537) 203 145 371 (1,101) 660 666 403 173 162,825 92,705 74,713 63,109 70,451 55,780 31,507 25,402 19,474 23,531 $107,045 $ 61,198 $ 49,311 $ 43,635 $ 46,920 Basic earnings per common share(1) $ 2.30 $1.31 $ 1.06 $ .93 $ 1.01 National Beverage Corp. proudly refreshes America Varietals™ and Mr. Pure® 100% juice and juice-based with a distinctive portfolio of Sparkling Waters, Juices, products. Our Carbonated Soft Drinks portfolio Energy Drinks and Carbonated Soft Drinks. We includes Shasta® and Faygo®, iconic brands whose believe that our ingenious product designs, innovative flavor development spans more than 125 years. packaging and imaginative flavors, along with our To service a diverse customer base that includes corporate culture and philosophy, makes National numerous national retailers, as well as thousands of Beverage unique in the beverage industry. The smaller “up-and-down-the-street” accounts, we utilize Company’s primary market focus is North America, a hybrid distribution system to deliver our products but our products are also distributed in various other primarily through the take-home, convenience and countries. National Beverage Corp. was incorporated food-service channels. in Delaware in 1985 and began trading as a public Our strategy emphasizes the growth of our company on the NASDAQ Stock Market in 1991. In products by (i) developing healthier beverages in this report, the terms “we,” “us,” “our,” “Company” response to the global shift in consumer buying habits and “National Beverage” mean National Beverage and tailoring the variety and types of beverages in our Corp. and its subsidiaries unless indicated otherwise. portfolio to satisfy the preferences of a diverse mix of Diluted earnings per common share(1) 2.29 1.31 1.05 .92 1.01 National Beverage is evolving to meet the ‘crossover consumers’ – a growing group desiring a Closing stock price 88.59 46.74 22.42 19.21 14.57 Dividends paid on common stock(2) 1.50 — — — 2.55 BALANCE SHEET DATA Cash and equivalents(2) Working capital(2) $136,372 $105,577 $ 52,456 $ 29,932 $ 18,267 185,021 148,057 101,478 78,618 67,504 healthy hydration demands of consumers. Health change to better-for-you beverages; (ii) emphasizing and wellness awareness has increased significantly, unique flavor development and variety throughout our resulting in growing demand for beverages with little product lines and brands; (iii) leveraging our efficient or no calories and wholesome natural ingredients. production and distribution systems, cost-effective Our brands emphasize distinctly-flavored beverages social media platforms and regionally focused in attractive packaging that appeal to multiple marketing programs to profitably deliver high-quality Property, plant and equipment - net 65,150 61,932 60,182 59,494 57,307 demographic groups. The attentive, health-conscious products at optimal consumer price-points; and (iv) Total assets(2) Long-term debt Deferred income tax liability Shareholders' equity(2) 357,889 305,498 247,750 222,841 208,642 — — 10,000 30,000 50,000 15,993 14,474 15,245 13,873 14,327 245,618 206,152 147,782 106,201 70,316 Dividends paid on common stock(2) 69,850 — — — 118,139 (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) The Company paid special cash dividends on Common Stock of $69.9 million ($1.50 per share) on January 27, 2017 and $118.1 million ($2.55 per share) on December 27, 2012. (3) Fiscal 2014 consisted of 53 weeks. and discriminating consumer is ever more alert to responding faster and more creatively to consumer wellness choices and better-for-you ingredients that trends than competitors who are burdened by align to this transition and strategic focus. production and distribution complexity as well as Our brands consist of (i) beverages geared to legacy costs. the active and health-conscious consumer (“Power+ Our operating results are affected by numerous Brands”) including sparkling waters, energy drinks, factors, including fluctuations in the costs of raw and juices, and (ii) Carbonated Soft Drinks in a variety materials, changes in consumer preference for of flavors including regular, sugar-free and reduced beverage products, competitive pricing in the calorie options. Our portfolio of Power+ Brands marketplace and weather conditions. Beverage sales includes LaCroix®, LaCroix Cúrate™, LaCroix NiCola™ are seasonal with the highest volume typically realized 6 7 NATIONAL BEVERAGE CORP.NATIONAL BEVERAGE CORP.MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) during the summer and warmer months. As a result, The increase in gross profi t is primarily due to credit. Due to prior year repayments on borrowings, equipment amounted to $14.0 million for Fiscal our operating results from one fi scal quarter to the higher sales and a decline in cost of sales per case interest expense decreased to $189,000 in Fiscal 2017. The Company expects to increase capital next may not be comparable. RESULTS OF OPERATIONS Net Sales Net sales for fi scal year ended April 29, 2017 (“Fiscal 2017”) increased 17.3% to $826.9 million compared to $704.8 million for fi scal year ended April 30, 2016 (“Fiscal 2016”). The increase in sales resulted primarily from a 16.6% increase in case volume and, to a lesser extent, a higher average selling price. Power+ Brands volume increased 42.6%; branded carbonated soft drinks volume was fl at. Net sales for Fiscal 2016 increased 9.1% to $704.8 million compared to $645.8 million for the fi scal year ended May 2, 2015 (“Fiscal 2015”). The higher sales resulted from a 9.0% increase in case volume and a slight increase in average selling price. The volume increase includes 31.4% growth of our Power+ Brands, partially offset by a decline in carbonated soft drinks. of .4%. The decrease in cost of sales per case was 2017 from $203,000 in Fiscal 2016 and $371,000 in expenditures in Fiscal 2018 to support volume growth. due to favorable product mix changes and lower raw Fiscal 2015. Other expense is net of interest income On January 25, 2013, the Company sold 400,000 material costs. As a result, gross margin improved to of $641,000 for Fiscal 2017, $107,000 for Fiscal shares of Special Series D Preferred Stock, par value 34.3%. 2016 and $30,000 for Fiscal 2015. The change in $1 per share (“Series D Preferred”) for an aggregate Shipping and handling costs are included in interest income is due to changes in average invested purchase price of $20 million. Series D Preferred selling, general and administrative expenses, the balances and increased return on investments. Other had a liquidation preference of $50 per share and classifi cation of which is consistent with many income for Fiscal 2015 includes a $1.3 million gain on dividends were accrued on this amount at an annual beverage companies. However, our gross margin sale of property. rate of 3% through April 30, 2014 and, pursuant to subsequent amendments, 2.5% thereafter. may not be comparable to companies that include shipping and handling costs in cost of sales. See Note 1 of Notes to Consolidated Financial Statements. Income Taxes Our effective tax rate was 34.3% for Dividends were cumulative and payable quarterly. Fiscal 2017, 34% for Fiscal 2016 and 34% for Fiscal The net proceeds of $19.7 million were used to repay 2015. The difference between the effective rate and borrowings under the Credit Facilities. On May 2, Selling, General and Administrative Expenses the federal statutory rate of 35% was primarily due to 2014, the Company redeemed 160,000 shares of Selling, general and administrative expenses were the effects of state income taxes and the domestic Series D Preferred for an aggregate price of $8 million $163.6 million or 19.8% of net sales for Fiscal 2017, manufacturing deduction. See Note 7 of Notes to plus accrued dividends. On August 1, 2014, the increasing $15.2 million or 10.3% from Fiscal 2016. Consolidated Financial Statements. Company redeemed an additional 120,000 shares of The increase was primarily due to shipping and other volume related expenses and marketing spending increases. As a percent of Net sales, Selling, general LIQUIDITY AND FINANCIAL CONDITION plus accrued dividends. The fi nal redemption of the Series D Preferred for an aggregate price of $6 million remaining 120,000 shares of Series D Preferred was and administrative expenses decreased primarily due Liquidity and Capital Resources Our principal source made on April 29, 2016 for an aggregate price of $6 to the leveraging effects of higher volume on fi xed of funds is cash generated from operations. At April million plus accrued dividends. See Note 5 of Notes costs and growth of products distributed by customer 29, 2017, we maintained $100 million unsecured to Consolidated Financial Statements. Gross Profi t Gross profi t for Fiscal 2017 increased 35.1% to $326.1 million compared to $241.4 million for Fiscal 2016. The increase in gross profi t is due to increased volume, growth in higher margin Power+ pick-up. revolving credit facilities, under which no borrowings The Company paid a special cash dividend on Selling, general and administrative expenses were outstanding and $2.2 million was reserved for common stock of $69.9 million ($1.50 per share) on were $148.4 million or 21.1% of net sales for Fiscal 2016 compared to $145.2 million or 22.5% of net sales for Fiscal 2015. Fiscal 2016 expenses refl ect standby letters of credit. We believe that existing January 27, 2017. On May 5, 2017, the Company capital resources will be suffi cient to meet our liquidity declared a special cash dividend of $1.50 per share and capital requirements for the next twelve months. to shareholders of record on June 5, 2017. The cash Brands and a decline in cost of sales per case of higher distribution, selling and other volume related See Note 4 of Notes to Consolidated Financial dividend of $69.9 million will be paid from available 5.7%. The decline in cost of sales per case was costs, partially offset by lower marketing costs. Statements. cash on or before August 4, 2017. The Company due to favorable product mix changes and lower raw We continually evaluate capital projects to has announced that it plans to develop a program to material costs. Gross margin expanded to 39.4%. Interest Expense and Other Expense (Income) - Net expand our production capacity, enhance packaging increase distribution to shareholders based on the Gross profi t for Fiscal 2016 increased 10.2% to Interest expense is comprised of interest on capabilities or improve effi ciencies at our production length of time they have owned their shares. $241.4 million compared to $219.1 million for Fiscal 2015. borrowings and fees related to maintaining lines of facilities. Expenditures for property, plant and 8 NATIONAL BEVERAGE CORP. NATIONAL BEVERAGE CORP. 9 MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) Pursuant to a management agreement, we Financial Position During Fiscal 2017, our working CONTRACTUAL OBLIGATIONS incurred a fee to Corporate Management Advisors, capital increased to $185.0 million from $148.1 million Inc. (“CMA”) of $8.3 million for Fiscal 2017, $7.0 at April 30, 2016. The increase in working capital million for Fiscal 2016 and $6.5 million for Fiscal resulted from higher cash, trade receivables and 2015. At April 29, 2017, management fees payable inventory, partially offset by higher accounts payable to CMA were $2.1 million. See Note 5 of Notes to and accrued liabilities. Trade receivables increased Consolidated Financial Statements. $10.3 million or 17% due to increased sales while days Contractual obligations at April 29, 2017 are payable as follows: (In thousands) Operating leases Total Less Than 1 Year 1 to 3 Years 3 to 5 Years More Than 5 Years $30,276 $ 8,216 $13,714 $ 5,424 $ 2,922 Purchase commitments 15,239 9,472 4,718 1,049 — sales outstanding improved to 30.6 days from 31.0 Total $45,515 $17,688 $18,432 $ 6,473 $ 2,922 Cash Flows During Fiscal 2017, $113.8 million was days. Inventories increased $5.4 million or 11% as a provided by operating activities, $14.0 million was result of the Company maintaining increased fi nished As of April 29, 2017, we guaranteed the residual credit aggregating $2.2 million have been issued in used in investing activities and $69.0 million was used goods to support sales increases. Annual inventory value of certain leased equipment in the amount of connection with our self-insurance programs. These in fi nancing activities. Cash provided by operating turns remained unchanged at 9.5 times. As of April $2.5 million. If the proceeds from the sale of such standby letters of credit expire through March 2018 activities increased $34.8 million primarily due to 29, 2017, the current ratio was 3.1 to 1 compared to equipment are less than the balance required by the and are expected to be renewed. increased earnings offset in part by increased working 3.0 to 1 at April 30, 2016. lease when the lease terminates on August 1, 2017, capital. Cash used in investing activities increased During Fiscal 2016, our working capital increased the Company shall be required to pay the difference OFF-BALANCE SHEET ARRANGEMENTS $2.0 million refl ecting increased capital expenditures to $148.1 million from $101.5 million at May 2, 2015. up to such guaranteed amount. The Company does to support volume growth. Cash used in fi nancing The increase in working capital resulted from higher not expect to incur a loss on such guarantee. We do not have any off-balance sheet arrangements activities includes the $69.9 million ($1.50 per share) cash, trade receivables and inventory, partially offset We contribute to certain pension plans under that have, or are reasonably likely to have, a current or special common stock dividend paid on January 27, by higher accounts payable and accrued liabilities. collective bargaining agreements and to a discretionary future material effect on our fi nancial condition. 2017. Trade receivables increased $1.1 million due to higher profi t sharing plan. Annual contributions were $3.1 During Fiscal 2016, $79.0 million was provided sales activity while days sales outstanding improved to million for Fiscal 2017, $2.9 million for Fiscal 2016 and CRITICAL ACCOUNTING POLICIES by operating activities, $12.0 million was used in 31.0 days from 33.1 days. Inventories increased $5.0 $2.7 million for Fiscal 2015. See Note 9 of Notes to investing activities and $13.8 million was used in million as a result of the Company maintaining higher Consolidated Financial Statements. The preparation of fi nancial statements in conformity fi nancing activities. Cash provided by operating fi nished goods levels to support increases in sales We maintain self-insured and deductible with generally accepted accounting principles requires activities increased $20.9 million primarily due to and new product introductions. Annual inventory programs for certain liability, medical and workers’ management to make estimates and assumptions that increased earnings and favorable changes in working turns decreased to 9.5 from 10.2 times. At April 30, compensation exposures. Other long-term liabilities affect the amounts reported in the fi nancial statements capital. Cash used in investing activities increased 2016, the current ratio was 3.0 to 1 compared to 2.5 include known claims and estimated incurred but not and accompanying notes. Although these estimates $2.3 million refl ecting higher capital expenditures and to 1 at May 2, 2015. lower proceeds from the sale of property. Cash used in fi nancing activities was $13.8 million which included a $6 million redemption of preferred stock and $10 million in principal repayments under credit facilities. reported claims not otherwise covered by insurance, are based on management’s knowledge of current based on actuarial assumptions and historical events and actions it may undertake in the future, they claims experience. Since the timing and amount of may ultimately differ from actual results. We believe claim payments vary signifi cantly, we are not able that the critical accounting policies described in the to reasonably estimate future payments for specifi c following paragraphs comprise the most signifi cant periods and therefore such payments have not estimates and assumptions used in the preparation of been included in the table above. Standby letters of our consolidated fi nancial statements. 10 NATIONAL BEVERAGE CORP. NATIONAL BEVERAGE CORP. 11 MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) For these policies, we caution that future events rarely or liabilities and their reported amounts in the fi nancial and business performance, achievements, objectives develop exactly as estimated and the best estimates statements. Valuation allowances are established to routinely require adjustment. reduce the carrying amounts of deferred tax assets when it is deemed, more likely than not, that the Credit Risk We sell products to a variety of customers benefi t of deferred tax assets will not be realized. and extend credit based on an evaluation of each customer’s fi nancial condition, generally without requiring collateral. Exposure to credit losses varies by customer principally due to the fi nancial condition of each customer. We monitor our exposure to credit losses and maintain allowances for anticipated losses based on specifi c customer circumstances, credit conditions and historical write-offs. Insurance Programs We maintain self-insured and deductible programs for certain liability, medical and workers’ compensation exposures. Accordingly, we accrue for known claims and estimated incurred but not reported claims not otherwise covered by insurance based on actuarial assumptions and historical claims experience. Impairment of Long-Lived Assets All long-lived assets, excluding goodwill and intangible assets not subject to amortization, are evaluated for impairment Sales Incentives We offer various sales incentive arrangements to our customers that require customer performance or achievement of certain sales volume targets. Sales incentives are accrued over the period on the basis of undiscounted cash fl ows whenever of benefi t or expected sales volume. When the events or changes in circumstances indicate that the incentive is paid in advance, the aggregate incentive is carrying amount of an asset may not be recoverable. recorded as a prepaid and amortized over the period An impaired asset is written down to its estimated fair of benefi t or contractual sales volume. The recognition market value based on the best information available. Estimated fair market value is generally measured by discounting future cash fl ows. Goodwill and intangible assets not subject to amortization are evaluated for impairment annually or sooner if we believe such assets may be impaired. An impairment loss is recognized if the carrying amount or, for goodwill, the carrying amount of its reporting unit, is greater than its fair value. Income Taxes Our effective income tax rate is based on estimates of taxes which will ultimately be payable. Deferred taxes are recorded to give recognition to temporary differences between the tax bases of assets of these incentives involves the use of judgment related to performance and sales volume estimates that are made based on historical experience and other factors. Sales incentives are accounted for as a reduction of sales and actual amounts ultimately realized may vary from accrued amounts. FORWARD-LOOKING STATEMENTS National Beverage and its representatives may make written or oral statements relating to future events or results relative to our fi nancial, operational and strategies. These statements are “forward- looking” within the meaning of the Private Securities Litigation Reform Act of 1995 and include statements contained in this report, fi lings with the Securities and Exchange Commission and in reports to our stockholders. Certain statements including, without limitation, statements containing the words “believes,” “anticipates,” “intends,” “plans,” “expects,” and “estimates” constitute “forward-looking statements” and involve known and unknown risk, uncertainties and other factors that may cause the actual results, 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 fl uctuate 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 performance or achievements of our Company the use of supplier pricing agreements that enable us to be materially different from any future results, to establish all, or a portion of, the purchase prices for performance or achievements expressed or implied certain raw materials. Additionally, we use derivative by such forward-looking statements. Such factors fi nancial instruments to partially mitigate our exposure include, but are not limited to, the following: general 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 29, 2017, the Company had no borrowings outstanding. We had no debt-related interest rate exposure during Fiscal 2017. economic and business conditions, pricing of competitive products, success of new product and fl avor introductions, fl uctuations 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 brand image, consumer preferences and our success in creating products geared toward consumers’ tastes, success in implementing business strategies, changes in business strategy or development plans, government regulations, taxes or fees imposed on the sale of our products, unfavorable weather conditions and other factors referenced in this report, fi lings 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 refl ect future events or developments. 12 NATIONAL BEVERAGE CORP. NATIONAL BEVERAGE CORP. 13 CONSOLIDATED BALANCE SHEETS CONSOLIDATED STATEMENTS OF INCOME (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 Deferred income taxes - net Other liabilities Shareholders' equity: April 29, 2017 April 30, 2016 $136,372 $105,577 71,319 53,355 3,906 7,275 61,046 47,922 4,454 4,672 272,227 223,671 65,150 13,145 1,615 5,752 61,932 13,145 1,615 5,135 $357,889 $305,498 $ 58,100 $ 49,391 29,017 26,195 89 87,206 15,993 9,072 28 75,614 14,474 9,258 (In thousands, except per share amounts) Net sales Cost of sales Gross profit Selling, general and administrative expenses Interest expense Other (income) expense - net Income before income taxes Provision for income taxes Net income Less preferred dividends and accretion Earnings available to common shareholders Earnings per common share: Basic Diluted Weighted average common shares outstanding: Basic Diluted See accompanying Notes to Consolidated Financial Statements. Fiscal Year Ended April 29, 2017 April 30, 2016 May 2, 2015 $826,918 $704,785 $645,825 500,841 463,348 426,685 326,077 163,600 189 (537) 162,825 55,780 107,045 — 241,437 219,140 148,384 145,157 203 145 92,705 31,507 61,198 (238) 371 (1,101) 74,713 25,402 49,311 (275) $107,045 $ 60,960 $ 49,036 $ 2.30 $ 2.29 $ 1.31 $ 1.31 $ 1.06 $ 1.05 46,564 46,770 46,452 46,671 46,353 46,559 Preferred stock, $1 par value - 1,000,000 shares authorized Series C - 150,000 shares issued 150 150 Common stock, $.01 par value - 75,000,000 shares authorized; 50,616,134 shares (2017) and 50,588,734 shares (2016) 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. 14 506 506 35,638 34,570 227,928 190,733 (604) (1,807) (5,100) (12,900) (5,100) (12,900) 245,618 206,152 $357,889 $305,498 15 NATIONAL BEVERAGE CORP.NATIONAL BEVERAGE CORP. CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY (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 29, 2017 April 30, 2016 May 2, 2015 $107,045 $ 61,198 $ 49,311 1,110 93 1,203 783 (66) 717 (2,350) 31 (2,319) $108,248 $ 61,915 $ 46,992 (In thousands) Shares Amount Shares Amount Shares Amount Fiscal Year Ended April 29, 2017 April 30, 2016 May 2, 2015 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 End of year RETAINED EARNINGS Beginning of year Net income Common stock cash dividend Preferred stock dividends & accretion End of year ACCUMULATED OTHER COMPREHENSIVE LOSS Beginning of year Cash flow hedges Other End of year 150 $ 150 150 $ 150 150 $ 150 — — — — 120 (120) 120 (120) — — — — 240 (120) 120 50,589 506 50,418 504 50,368 27 — 171 2 50 50,616 506 50,589 506 50,418 34,570 — 365 208 495 35,638 190,733 107,045 (69,850) — 227,928 (1,807) 1,110 93 (604) 37,759 (5,791) 846 228 1,528 34,570 129,773 61,198 — (238) 190,733 (2,524) 783 (66) (1,807) 240 (120) 120 504 — 504 42,775 (5,791) 228 307 240 37,759 80,737 49,311 — (275) 129,773 (205) (2,350) 31 (2,524) TREASURY STOCK - SERIES C PREFERRED Beginning and end of year 150 (5,100) 150 (5,100) 150 (5,100) TREASURY STOCK - COMMON Beginning and end of year 4,033 (12,900) 4,033 (12,900) 4,033 (12,900) TOTAL SHAREHOLDERS’ EQUITY $245,618 $206,152 $147,782 See accompanying Notes to Consolidated Financial Statements. 16 17 NATIONAL BEVERAGE CORP.NATIONAL BEVERAGE CORP.CONSOLIDATED STATEMENTS OF CASH FLOWS NATIONAL BEVERAGE CORP. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Fiscal Year Ended April 29, 2017 April 30, 2016 May 2, 2015 National Beverage Corp. develops, produces, markets use derivative financial instruments for trading or and sells a diverse portfolio of flavored beverage speculative purposes. Credit risk related to derivative products primarily in North America. Incorporated financial instruments is managed by requiring high in Delaware in 1985, National Beverage Corp. is a credit standards for counterparties and frequent cash $107,045 $ 61,198 $ 49,311 holding company for various operating subsidiaries. settlements. See Note 6. (In thousands) OPERATING ACTIVITIES Net income Adjustments to reconcile net income to net cash provided by (used in) operating activities: Depreciation and amortization Deferred income tax provision (benefit) 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 12,834 1,358 72 208 (10,273) (5,433) (2,205) 8,709 1,457 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) Net cash provided by operating activities 113,772 78,955 58,020 INVESTING ACTIVITIES Additions to property, plant and equipment (14,015) (12,140) (11,630) Proceeds from sale of property, plant and equipment Net cash used in investing activities FINANCING ACTIVITIES Dividends paid on common stock Dividends paid on preferred stock Repayments under credit facilities, net Redemption of preferred stock Proceeds from stock options exercised Stock-based tax benefits Net cash used in financing activities NET INCREASE IN CASH AND EQUIVALENTS CASH AND EQUIVALENTS - BEGINNING OF YEAR 28 116 (13,987) (12,024) 1,905 (9,725) — (239) — (186) (10,000) (20,000) (6,000) (6,000) 848 1,528 228 240 (13,810) (25,771) 53,121 52,456 22,524 29,932 (69,850) — — — 365 495 (68,990) 30,795 105,577 CASH AND EQUIVALENTS - END OF YEAR $136,372 $105,577 $ 52,456 OTHER CASH FLOW INFORMATION Interest paid Income taxes paid See accompanying Notes to Consolidated Financial Statements. 18 $ 202 $ 116 $ 380 $ 55,901 $ 29,473 $ 24,745 When used in this report, the terms “we,” “us,” “our,” “Company” and “National Beverage” mean National Earnings Per Common Share Basic earnings per Beverage Corp. and its subsidiaries. common share is computed by dividing earnings 1. SIGNIFICANT ACCOUNTING POLICIES average number of common shares outstanding available to common shareholders by the weighted Basis of Presentation The consolidated financial share is calculated in a similar manner, but includes the statements have been prepared in accordance with dilutive effect of stock options amounting to 206,000 United States generally accepted accounting principles shares in Fiscal 2017, 219,000 shares in Fiscal 2016 (“GAAP”) and rules and regulations of the Securities and 206,000 shares in Fiscal 2015. during the period. Diluted earnings per common and Exchange Commission. The consolidated financial statements include the accounts of National Fair Value The fair value of long-term debt Beverage Corp. and all subsidiaries. All significant approximates its carrying value due to its variable intercompany transactions and accounts have been interest rate and lack of prepayment penalty. The eliminated. Our fiscal year ends the Saturday closest estimated fair values of derivative financial instruments to April 30 and, as a result, an additional week is are calculated based on market rates to settle the added every five or six years. Fiscal 2017, Fiscal instruments. These values represent the estimated 2016 and Fiscal 2015 consisted of 52 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 market value based on the best information available. our Consolidated Balance Sheets. We do not Estimated fair value is generally measured by 19 NATIONAL BEVERAGE CORP.NATIONAL BEVERAGE CORP. NATIONAL BEVERAGE CORP. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) discounting future cash fl ows. Goodwill and intangible Inventories Inventories are stated at the lower of 2016-02”). ASU 2016-02 requires the lease rights maintenance and repairs that do not extend the useful assets not subject to amortization are evaluated for fi rst-in, fi rst-out cost or market. Inventories at April and obligations arising from lease contracts, including life of an asset are expensed as incurred. Depreciation impairment annually or sooner if we believe such 29, 2017 were comprised of fi nished goods of $35.0 existing and new arrangements, to be recognized is recorded using the straight-line method over assets may be impaired. An impairment loss is recognized if the carrying amount or, for goodwill, the carrying amount of its reporting unit, is greater than its fair value. Income Taxes Our effective income tax rate is based on estimates of taxes which will ultimately be payable. Deferred taxes are recorded to give recognition to temporary differences between the tax bases of assets or liabilities and their reported amounts in the fi nancial statements. Valuation allowances are established to million and raw materials of $18.4 million. Inventories as assets and liabilities on the balance sheet. ASU estimated useful lives of 7 to 30 years for buildings and at April 30, 2016 were comprised of fi nished goods of 2016-02 is effective for our fi scal year beginning April improvements and 3 to 15 years for machinery and $29.1 million and raw materials of $18.8 million. 28, 2019. We are currently evaluating the potential equipment. Leasehold improvements are amortized impact of adopting this guidance on our consolidated using the straight-line method over the shorter of the Marketing Costs We are involved in a variety fi nancial statements. remaining lease term or the estimated useful life of the of marketing programs, including cooperative In November 2015, the FASB issued Accounting improvement. When assets are retired or otherwise advertising programs with customers, to advertise Standards Update No. 2015-17, “Balance Sheet disposed, the cost and accumulated depreciation and promote our products to consumers. Marketing Classifi cation of Deferred Taxes” (“ASU 2015-17”). are removed from the respective accounts and any costs are expensed when incurred, except for ASU 2015-17 requires companies to classify all related gain or loss is recognized. prepaid advertising and production costs which deferred tax liabilities and assets as noncurrent on the are expensed when the advertising takes place. balance sheet. ASU 2015-17 is effective for our fi scal Revenue Recognition Revenue from product sales Marketing costs, which are included in selling, general year beginning April 30, 2017. When implemented, is recognized when title and risk of loss pass to the reduce the carrying amounts of deferred tax assets and administrative expenses, totaled $44.9 million in current deferred tax asset will be reclassifi ed to customer, which generally occurs upon delivery. Our when it is deemed, more likely than not, that the Fiscal 2017, $38.8 million in Fiscal 2016 and $42.4 noncurrent in the consolidated balance sheet. policy is not to allow the return of products once they benefi t of deferred tax assets will not be realized. million in Fiscal 2015. In May 2014, the FASB issued Accounting have been accepted by the customer. However, on Standards Update No. 2014-09, “Revenue from occasion, we have accepted returns or issued credit Insurance Programs We maintain self-insured and New Accounting Pronouncements In March 2016, Contracts with Customers” (“ASU 2014-09”). ASU to customers, primarily for damaged goods. The deductible programs for certain liability, medical and workers’ compensation exposures. Accordingly, we accrue for known claims and estimated incurred but not reported claims not otherwise covered by insurance based on actuarial assumptions and historical claims experience. At April 29, 2017 and April 30, 2016, other liabilities included accruals of $6.9 million and $5.8 million, respectively, for estimated non-current risk retention exposures, of which $5.4 million and $4.8 million were covered by insurance. the Financial Accounting Standards Board (“FASB”) 2014-09 requires an entity to recognize revenue in an amounts have been immaterial and, accordingly, we issued Accounting Standards Update 2016-09, amount that refl ects the consideration it expects to do not provide a specifi c valuation allowance for sales “Compensation-Stock Compensation: Improvements receive in exchange for goods or services. On August returns. to Employee Share-Based Payment Accounting” 12, 2015, the FASB issued ASU 2015-14 which (“ASU 2016-09”). This amendment addresses several deferred the effective date of ASU 2014-09 by one Sales Incentives We offer various sales incentive aspects of the accounting for share-based payment year and is effective for our fi scal year beginning April arrangements to our customers that require customer transactions, including the income tax consequences, 29, 2018. We are currently evaluating the potential performance or achievement of certain sales volume classifi cation of awards as either equity or liabilities impact of adopting this guidance on our consolidated targets. When the incentive is paid in advance, we and classifi cation on the statement of cash fl ows. fi nancial statements; however, adoption is not amortize the amount paid over the period of benefi t ASU 2016-09 is effective for our fi scal year beginning expected to have a material impact on our fi nancial or contractual sales volume; otherwise, we accrue April 30, 2017. Adoption is not expected to have a position, results of operations or cash fl ows. the expected amount to be paid over the period of material impact on our fi nancial position, results of benefi t or expected sales volume. The recognition Intangible Assets Intangible assets as of April 29, operations or cash fl ows. Property, Plant and Equipment Property, plant of these incentives involves the use of judgment 2017 and April 30, 2016 consisted of non-amortizable In February 2016, the FASB issued Accounting and equipment are recorded at cost. Additions, related to performance and sales volume estimates trademarks. Standards Update No. 2016-02, “Leases” (“ASU replacements and betterments are capitalized, while that are made based on historical experience and 20 NATIONAL BEVERAGE CORP. NATIONAL BEVERAGE CORP. 21 NATIONAL BEVERAGE CORP. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) other factors. Sales incentives are accounted for as generally without requiring collateral. Exposure to 2. PROPERTY, PLANT AND EQUIPMENT April 30, 2021 and any borrowings would currently a reduction of sales and actual amounts ultimately credit losses varies by customer principally due to the bear interest at .9% above one-month LIBOR. There realized may vary from accrued amounts. fi nancial condition of each customer. We monitor our Property, plant and equipment as of April 29, 2017 were no borrowings outstanding under the Credit exposure to credit losses and maintain allowances and April 30, 2016 consisted of the following: Facilities at April 29, 2017 or April 30, 2016. At April Segment Reporting We operate as a single operating for anticipated losses based on specifi c customer segment for purposes of presenting fi nancial circumstances, credit conditions and historical write- information and evaluating performance. As such, offs. Activity in the allowance for doubtful accounts the accompanying consolidated fi nancial statements was as follows: present fi nancial information in a format that is consistent with the internal fi nancial information used (In thousands) Fiscal 2017 Fiscal 2016 Fiscal 2015 by management. We do not accumulate revenues by product classifi cation and, therefore, it is impractical to present such information. Balance at beginning of year $484 $330 $399 Net charge to expense 74 232 Net charge-off (90) (78) 117 (186) Balance at end of year $468 $484 $330 (In thousands) Land 29, 2017, $2.2 million of the Credit Facilities was 2017 2016 reserved for standby letters of credit and $97.8 million $ 9,500 $ 9,500 was available for borrowings. Buildings and improvements 51,157 50,856 Machinery and equipment 172,257 162,195 Total 232,914 222,551 Less accumulated depreciation (167,764) (160,619) Property, plant and equipment – net $65,150 $61,932 The Credit Facilities require the subsidiary to maintain certain fi nancial ratios, including debt to net worth and debt to EBITDA (as defi ned in the Credit Facilities), and contain other restrictions, none of which are expected to have a material effect on our Depreciation expense was $10.7 million for Fiscal operations or fi nancial position. At April 29, 2017, we 2017, $10.1 million for Fiscal 2016 and $10.2 million were in compliance with all loan covenants. Shipping and Handling Shipping and handling costs As of April 29, 2017 and April 30, 2016, we did not for Fiscal 2015. are reported in selling, general and administrative have any customer that comprised more than 10% expenses in the accompanying consolidated of trade receivables. No one customer accounted 3. ACCRUED LIABILITIES statements of income. Such costs aggregated $50.0 for more than 10% of net sales during any of the last 5. CAPITAL STOCK AND TRANSACTIONS WITH RELATED PARTIES million in Fiscal 2017, $44.6 million in Fiscal 2016 and three fi scal years. $44.4 million in Fiscal 2015. Although our classifi cation is consistent with many beverage companies, our Use of Estimates The preparation of fi nancial gross margin may not be comparable to companies statements in conformity with United States generally that include shipping and handling costs in cost of accepted accounting principles requires management sales. to make estimates and assumptions that affect the amounts reported in the fi nancial statements and Stock-Based Compensation Compensation expense accompanying notes. Although these estimates are for stock-based compensation awards is recognized based on management’s knowledge of current events over the vesting period based on the grant-date fair and anticipated future actions, actual results may vary value estimated using the Black-Scholes model. See from reported amounts. Note 8. Trade Receivables We record trade receivables at net realizable value, which includes an estimated allowance for doubtful accounts. We extend credit based on an evaluation of each customer’s fi nancial condition, Accrued liabilities as of April 29, 2017 and April 30, The Company paid a special cash dividend on 2016 consisted of the following: common stock of $69.9 million ($1.50 per share) on January 27, 2017. On May 5, 2017, the Company declared a special (In thousands) 2017 2016 cash dividend of $1.50 per share to shareholders of Accrued compensation $ 9,967 $ 9,217 record on June 5, 2017. The cash dividend of $69.9 Accrued promotions Accrued insurance Other Total 4. DEBT 8,403 2,938 7,709 5,888 2,786 8,304 $29,017 $26,195 million will be paid on or before August 4, 2017. 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 At April 29, 2017, a subsidiary of the Company of 3% through April 30, 2014 and, thereafter, at an maintained unsecured revolving credit facilities with annual rate equal to 370 basis points above the banks aggregating $100 million (the “Credit Facilities”). 3- Month LIBOR rate. Dividends were cumulative and The Credit Facilities expire from October 10, 2017 to payable quarterly. There were no accrued dividends 22 NATIONAL BEVERAGE CORP. NATIONAL BEVERAGE CORP. 23 NATIONAL BEVERAGE CORP. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) at April 29, 2017 and at April 30, 2016. The Series D impact of the rate change, the Company determined and profi ling acquisition candidates, negotiating losses attributable to the effective portion of the Preferred was nonvoting and redeemable at the option that the related fair value change was immaterial and and structuring potential transactions and arranging cash fl ow hedge are reported in Accumulated of the Company beginning May 1, 2014 at $50 per that no adjustment was required. fi nancing for any such transaction. CMA, through Other Comprehensive Income (Loss) (“AOCI”) and share. In addition, the Company has 150,000 shares On April 29, 2016, the Company redeemed the its personnel, also provides, to the extent possible, reclassifi ed into cost of sales in the period in which the of Series C Preferred Stock, par value $1 per share, fi nal remaining 120,000 shares of Series D Preferred the stimulus and creativity to develop an innovative hedged transaction affects earnings. The ineffective which are held as treasury stock and, therefore, such for an aggregate price of $6 million plus accrued and dynamic persona for the Company, its products portion of the change in fair value of our cash fl ow shares have no liquidation value. dividends. In connection therewith, the Company and corporate image. In order to fulfi ll its obligations hedge was immaterial. The following summarizes On May 2, 2014, the Company redeemed accreted and charged to retained earnings $89,000 under the management agreement, CMA employs the gains (losses) recognized in the Consolidated 160,000 shares of Series D Preferred, representing of original issuance costs, which was deducted numerous individuals, whom, acting as a unit, provide Statements of Income and AOCI relative to the cash 40% of the amount outstanding, for an aggregate price from income available to common shareholders for management, administrative and creative functions fl ow hedge for Fiscal 2017, Fiscal 2016 and Fiscal of $8 million plus accrued dividends. In connection earnings per share calculation. for the Company. The management agreement 2015: therewith, the Company accreted and charged to The Company is authorized under its stock provides that the Company will pay CMA an annual retained earnings $118,000 of original issuance buyback program to repurchase 1.6 million shares of base fee equal to one percent of the consolidated costs, which was deducted from income available Common Stock. As of April 29, 2017, 502,060 shares net sales of the Company, and further provides that (In thousands) Recognized in AOCI- Fiscal 2017 Fiscal 2016 Fiscal 2015 to common shareholders for earnings per share were purchased under the program and 1,097,940 the Compensation and Stock Option Committee Loss before income taxes $ (984) $(5,743) $(3,488) calculation. In conjunction with the partial redemption, shares were available for purchase. No shares of and the Board of Directors may from time to time Less income tax benefi t (365) (2,131) (1,294) the annual dividend rate on the outstanding Series D Common Stock have been repurchased during the award additional incentive compensation to CMA. Preferred was reduced to 2.5% for the twelve month last three fi scal years. The Board of Directors on numerous occasions period beginning May 1, 2014. In evaluating the The Company is a party to a management contemplated incentive compensation and, while impact of the rate change, the Company determined agreement with Corporate Management Advisors, shareholder value has increased over $4.5 billion (or that the related fair value change was immaterial and Inc. (“CMA”), a corporation owned by our Chairman 10,000%) since the inception of this agreement, no Net Reclassifi ed from AOCI to cost of sales- (Loss) gain before income taxes Less income tax (619) (3,612) (2,194) (2,749) (6,987) 248 (benefi t) provision (1,020) (2,592) 92 that no adjustment was required. and Chief Executive Offi cer. This agreement was On August 1, 2014, the Company redeemed originated in 1991 for the effi cient use of management incentive compensation has been paid. We incurred Net (1,729) (4,395) 156 management fees to CMA of $8.3 million for Fiscal Net change to AOCI $ 1,110 $ 783 $(2,350) 120,000 shares of Series D Preferred, representing of two public companies at the time. In 1994, one 2017, $7.0 million for Fiscal 2016 and $6.5 million 50% of the amount outstanding, for an aggregate of those public entities, through a merger, no longer for Fiscal 2015. Included in accounts payable were As of April 29, 2017, the notional amount of our price of $6 million plus accrued dividends. In was managed in this manner. Under the terms of the amounts due CMA of $2.1 million at April 29, 2017 outstanding aluminum swap contracts was $56.7 connection therewith, the Company accreted and agreement, CMA provides, subject to the direction and and $1.8 million at April 30, 2016. charged to retained earnings $89,000 of original supervision of the Board of Directors of the Company, million and, assuming no change in the commodity prices, $246,000 of unrealized loss before tax will be issuance costs, which was deducted from income (i) senior corporate functions (including supervision of 6. DERIVATIVE FINANCIAL INSTRUMENTS reclassifi ed from AOCI and recognized in earnings available to common shareholders for earnings per the Company’s fi nancial, legal, executive recruitment, over the next 12 months. See Note 1. share calculation. internal audit and management information systems From time to time, we enter into aluminum swap As of April 29, 2017, the fair value of the derivative On May 1, 2015, the Company and the holders departments) as well as the services of a Chief contracts to partially mitigate our exposure to asset, derivative liability and derivative long-term of the Series D Preferred agreed to extend the 2.5% Executive Offi cer and Chief Financial Offi cer, and (ii) changes in the cost of aluminum cans. Such liability was $602,000, $848,000 and $476,000, which annual dividend rate on the outstanding Series D services in connection with acquisitions, dispositions fi nancial instruments are designated and accounted was included in prepaid and other assets, accrued Preferred through April 30, 2016. In evaluating the and fi nancings by the Company, including identifying for as a cash fl ow hedge. Accordingly, gains or liabilities and other liabilities, respectively. As of April 24 NATIONAL BEVERAGE CORP. NATIONAL BEVERAGE CORP. 25 NATIONAL BEVERAGE CORP. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 30, 2016, the fair value of the derivative liability was $2.5 million, which was included in accrued liabilities. Such valuation does not entail a signifi cant amount of judgment and the inputs that are signifi cant to the fair value measurement are Level 2 as defi ned by the fair (In thousands) Deferred tax assets: 2017 2016 Accrued expenses and other $ 4,740 $ 5,655 Inventory and amortizable assets 538 538 Total deferred tax assets 5,278 6,193 value hierarchy as they are observable market based Deferred tax liabilities: inputs or unobservable inputs that are corroborated Property by market data. Intangibles and other 15,157 14,049 2,208 2,164 7. INCOME TAXES The provision (benefi t) for income taxes consisted of the following: (In thousands) Current Deferred Fiscal 2017 Fiscal 2016 Fiscal 2015 $54,422 $32,806 $24,326 1,358 (1,299) 1,076 (In thousands) Total $55,780 $31,507 $25,402 Deferred taxes are recorded to give recognition to temporary differences between the tax bases of assets or liabilities and their reported amounts in the fi nancial statements. Valuation allowances are established to reduce the carrying amounts of deferred tax assets when it is deemed more likely than not that the benefi t of deferred tax assets will not be realized. Deferred tax assets and liabilities as of April 29, 2017 and April 30, 2016 consisted of the following: Total deferred tax liabilities 17,365 16,213 Net deferred tax liabilities $12,087 $10,020 Current deferred tax assets–net $ 3,906 $ 4,454 Noncurrent deferred tax liabilities–net $15,993 $14,474 The reconciliation of the statutory federal income tax rate to our effective tax rate is as follows: Fiscal 2017 Fiscal 2016 Fiscal 2015 35.0% 35.0% 35.0% 2.2 2.2 2.3 Statutory federal income tax rate State income taxes, net of federal benefi t Domestic manufacturing deduction benefi t Other differences .1 (.2) (3.0) (3.0) (3.0) (.3) Effective income tax rate 34.3% 34.0% 34.0% As of April 29, 2017, the gross amount of unrecognized tax benefi ts was $1.7 million and $66,000 was recognized as a tax benefi t in Fiscal 2017. If we were to prevail on all uncertain tax positions, the net effect would be to reduce our tax expense by approximately $1.2 million. A reconciliation of the changes in the gross amount of unrecognized tax benefi ts, which amounts are included in other liabilities (In thousands) Fiscal 2017 Fiscal 2016 Fiscal 2015 8. STOCK-BASED COMPENSATION Beginning balance $1,678 $1,801 $2,123 Our stock-based compensation program is a broad- Increases due to current period tax positions Decreases due to lapse of statute of limitations and audit resolutions 150 145 122 based program designed to attract and retain employees while also aligning employees’ interests (85) (268) (444) The 1991 Omnibus Incentive Plan (the “Omnibus with the interests of the shareholders. Ending balance $1,743 $1,678 $1,801 Plan”) provides for compensatory awards consisting of (i) stock options or stock awards for up to 4,800,000 We recognize accrued interest and penalties shares of common stock, (ii) stock appreciation rights, related to unrecognized tax benefi ts in income tax dividend equivalents, other stock-based awards expense. As of April 29, 2017, unrecognized tax benefi ts included accrued interest of $239,000, of which approximately $12,000 was recognized as a tax benefi t in Fiscal 2017. We fi le annual income tax returns in the United States and in various state and local jurisdictions. 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 offi cers 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 A number of years may elapse before an uncertain National Beverage. tax position, for which we have unrecognized tax The number of shares or options which may be benefi ts, is resolved. While it is often diffi cult to predict issued under stock-based awards to an individual is the fi nal outcome or the timing of resolution of any limited to 1,680,000 during any year. Awards may particular uncertain tax position, we believe that our be granted for no cash consideration or such minimal unrecognized tax benefi ts refl ect the most probable cash consideration as may be required by law. outcome. We adjust these unrecognized tax benefi ts, as well as the related interest, in light of changing facts and circumstances. The resolution of any particular uncertain tax position could require the use of cash and an adjustment to our provision for income taxes in the period of resolution. Federal income tax returns for fi scal years subsequent to 2013 are subject to Options generally have an exercise price equal to the fair market value of our common stock on the date of grant, vest over a fi ve-year period and expire after ten years. The Special Stock Option Plan provides for the issuance of stock options to purchase up to an aggregate of 1,800,000 shares of common stock. Options may be granted for such consideration as examination. Generally, the income tax returns for the determined by the Board of Directors. The vesting in the accompanying consolidated balance sheets, is various state jurisdictions are subject to examination schedule and exercise price of these options are tied as follows: for fi scal years ending after fi scal 2010. to the recipient’s ownership level of common stock 26 NATIONAL BEVERAGE CORP. NATIONAL BEVERAGE CORP. 27 NATIONAL BEVERAGE CORP. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) and the terms generally allow for the reduction in life of stock options was estimated based on historical value for stock options granted was $20.09 for Fiscal 9. PENSION PLANS exercise price upon each vesting period. Also, the experience. The expected volatility was estimated 2016 and $8.30 for Fiscal 2015. Board of Directors authorized the issuance of options based on historical stock prices for a period consistent As of April 29, 2017, unrecognized compensation The Company contributes to certain pension plans to purchase up to 50,000 shares of common stock to with the expected life of stock options. The risk free expense related to the unvested portion of our stock under collective bargaining agreements and to a be issued at the direction of the Chairman. interest rate was based on the U.S. Treasury constant options was $425,000, which is expected to be discretionary profi t sharing plan. Annual contributions The Key Employee Equity Partnership Program maturity interest rate whose term is consistent with recognized over a weighted average period of 3.9 (“KEEP Program”) provides for the granting of stock the expected life of stock options. Forfeitures were years. The weighted average remaining contractual options to purchase up to 240,000 shares of common estimated based on historical experience and ranged term and the aggregate intrinsic value for options stock to key employees, consultants, directors and in values up to 16% for Fiscal 2017 and Fiscal 2016. outstanding as of April 29, 2017 was 5.5 years and offi cers. Participants who purchase shares of stock $29.6 million, respectively. The weighted average in the open market receive grants of stock options The following is a summary of stock option activity remaining contractual term and the aggregate intrinsic (including contributions to multi-employer plans refl ected below) were $3.1 million for Fiscal 2017, $2.9 million for Fiscal 2016 and $2.7 million for Fiscal 2015. The Company participates in three multi-employer defi ned benefi t pension plans with respect to certain collective bargaining agreements. If the Company chooses to stop participating in the multi-employer plan or if other employers choose to withdraw to the extent that a mass withdrawal occurs, the Company could be required to pay the plan a withdrawal liability based on the underfunded status of the plan. During value for options exercisable as of April 29, 2017 was 4.7 years and $17 million, respectively. We have a stock purchase plan which provides for the purchase of up to 1,536,000 shares of common stock by employees who (i) have been employed for at least two years, (ii) are not part-time employees Fiscal 2017, a subsidiary of the Company reached a and (iii) are not owners of fi ve percent or more of our settlement with respect to a notifi cation of withdrawal common stock. As of April 29, 2017, no shares have liability by one of the multi-employer pension plans not been issued under the plan. considered signifi cant. The settlement did not have a material effect on its fi nancial position or results of operations. equal to 50% of the number of shares purchased, up for Fiscal 2017: to a maximum of 6,000 shares in any two-year period. Options under the KEEP Program are forfeited in the event of the sale of shares used to acquire such options. Options are granted at an initial exercise price of 60% of the purchase price paid for the shares acquired and the exercise price reduces to the stock par value at the end of the six-year vesting period. We account for stock options under the fair value method of accounting using a Black-Scholes valuation Number of Shares Price(a) Options outstanding, beginning of year 418,895 $12.44 Granted Exercised — — (27,400) 13.31 Canceled (7,900) 16.01 Options outstanding, end of year 383,595 $11.47 Options exercisable, end of year 215,803 $ 9.64 (a) Weighted average exercise price. model to estimate the stock option fair value at date Stock-based compensation expense was of grant. The fair value of stock options is amortized $208,000 for Fiscal 2017, $228,000 for Fiscal to expense over the vesting period. No stock options 2016 and $307,000 for Fiscal 2015. The total fair were granted in Fiscal 2017, 3,500 shares were value of shares vested was $362,000 for Fiscal granted in Fiscal 2016 and 276,800 shares in Fiscal 2017, $652,000 for Fiscal 2016 and $371,000 2015. The weighted average Black-Scholes fair value for Fiscal 2015. The total intrinsic value for stock assumptions for stock options granted are as follows: options exercised was $1,506,000 for Fiscal 2017, weighted average expected life of 8.0 years for $5,161,000 for Fiscal 2016 and $917,000 for Fiscal Fiscal 2016 and 7.4 years for Fiscal 2015; weighted 2015. Net cash proceeds from the exercise of stock average expected volatility of 29.0% for Fiscal 2016 options were $365,000 for Fiscal 2017, $848,000 and 32.8% for Fiscal 2015; weighted average risk free for Fiscal 2016 and $228,000 for Fiscal 2015. Stock interest rates of 2.1% for Fiscal 2016 and 2.2% for based income tax benefi ts aggregated $495,000 Fiscal 2015; and expected dividend yield of 3.3% for for Fiscal 2017, $1,528,000 for Fiscal 2016 and Fiscal 2016 and 4.6% for Fiscal 2015. The expected $240,000 for Fiscal 2015. The weighted average fair 28 NATIONAL BEVERAGE CORP. 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 signifi cant multi-employer As of April 29, 2017, we guaranteed the residual purchase quantities. As of April 29, 2017, we had pension plans including the fi nancial improvement plan or rehabilitation plan status (“FIP/RP Status”) and the value of certain leased equipment in the amount of purchase commitments for raw materials of $12.7 zone status under the Pension Protection Act (“PPA”). The most recent PPA zone status available in Fiscal $2.5 million. If the proceeds from the sale of such million through 2021. 2017 and Fiscal 2016 is for the plans’ years ending December 31, 2015 and 2014, respectively. equipment are less than the balance required by the As of April 29, 2017, we had purchase Pension Fund Central States, Southeast and Southwest Areas Pension Plan (EIN no. 36-6044243) (the “CSSS Fund”) PPA Zone Status Fiscal 2017 Fiscal 2016 FIP/RP Status Surcharge Imposed lease when the lease terminates on August 1, 2017, commitments for plant and equipment of $2.6 million the Company shall be required to pay the difference for Fiscal 2018. up to such guaranteed amount. From time to time, we are a party to various The Company does not expect to incur a loss on litigation matters and claims arising in the ordinary Red Red Implemented Yes such guarantee. course of business. We do not expect the ultimate Western Conference of Teamsters Pension Trust Fund (EIN no. 91-6145047) (the “WCT Fund”) Green Green Not Applicable No For the plan years ended December 31, 2015 10. COMMITMENTS AND CONTINGENCIES and December 31, 2014, the Company was not listed in the Form 5500 Annual Returns as providing more We lease buildings, machinery and equipment under than 5% of the total contributions for the above plans. various non-cancelable operating lease agreements The collective bargaining agreements for employees expiring at various dates through 2026. Certain of in the CSSS Fund and the WCT Fund expire on these leases contain scheduled rent increases and/or October 18, 2021 and May 14, 2021, respectively. renewal options. Contractual rent increases are taken The Company’s contributions for all multi- payment and recognized on a straight-line basis over employer pension plans for the last three fi scal years the lease term. Rent expense under operating lease into account when calculating the minimum lease are as follow: (In thousands) Pension Fund CSSS Fund WCT Fund Other multi-employer pension funds Total Fiscal 2017 Fiscal 2016 Fiscal 2015 $1,262 $1,172 $1,103 477 485 637 201 448 306 $1,940 $2,105 $2,046 agreements totaled $12.0 million for Fiscal 2017, $9.2 million for Fiscal 2016 and $8.2 million for Fiscal 2015. Our minimum lease payments under non- cancelable operating leases as of April 29, 2017 were as follows: (In thousands) Fiscal 2018 Fiscal 2019 Fiscal 2020 Fiscal 2021 Fiscal 2022 Thereafter Total minimum lease payments $ 8,216 7,546 6,168 3,520 1,904 2,922 $30,276 We enter into various agreements with suppliers disposition of such matters to have a material adverse for the purchase of raw materials, the terms of which effect on our consolidated fi nancial position or results may include variable or fi xed pricing and minimum of operations. 11. QUARTERLY FINANCIAL DATA (UNAUDITED) (In thousands, except per share amounts) First Quarter Second Quarter Third Quarter Fourth Quarter $217,108 $203,180 $194,564 $212,066 85,494 78,717 75,920 85,946 28,995 24,604 24,285 29,161 $ .62 $ .53 $ .52 $ .63 $ .62 $ .53 $ .52 $ .62 $185,386 $178,678 $161,687 $179,034 62,899 60,621 52,552 65,365 17,113 15,312 11,236 17,537 $ .37 $ .33 $ .24 $ .37 $ .37 $ .33 $ .24 $ .37 FISCAL 2017 Net sales Gross profi t Net income Earnings per common share – basic Earnings per common share – diluted FISCAL 2016 Net sales Gross profi t Net income Earnings per common share – basic Earnings per common share – diluted 12. SUBSEQUENT EVENT On May 5, 2017, the Company declared a special cash dividend of $1.50 per share to shareholders of record on June 5, 2017. The cash dividend of $69.9 million will be paid on or before August 4, 2017. 30 NATIONAL BEVERAGE CORP. 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 29, 2017 and April 30, 2016 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 29, 2017. We also have audited National Beverage Corp.’s internal control over financial reporting as of April 29, 2017, 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 internal control over financial whether effective 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 29, 2017 and April 30, 2016 and the results of their operations and their cash flows for each of the years in the three-year period ended April 29, 2017, 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 29, 2017, 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 Ft. Lauderdale, Florida July 13, 2017 MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES The common stock of National Beverage Corp., par On January 25, 2013, the Company sold 400,000 value $.01 per share, (“Common Stock”) is listed on shares of Special Series D Preferred Stock, par value The NASDAQ Global Select Market under the symbol $1 per share (“Series D Preferred”) for an aggregate “FIZZ”. The following table shows the range of high purchase price of $20 million. Series D Preferred had a and low prices per share of the Common Stock for liquidation preference of $50 per share and dividends the fiscal quarters indicated: were accrued on this amount at an annual rate of 3% Fiscal Year Ended April 29, 2017 April 30, 2016 High Low High Low through April 30, 2014 and, pursuant to subsequent amendments, 2.5% thereafter. Dividends were cumulative and payable quarterly. The net proceeds of $19.7 million were used to repay borrowings under First Quarter $64.73 $46.50 $24.94 $19.98 the Credit Facilities. Second Quarter 58.30 39.14 38.91 23.05 On May 2, 2014, the Company redeemed Third Quarter 54.65 44.21 48.01 35.50 160,000 shares of Series D Preferred for an aggregate Fourth Quarter 92.85 48.81 47.00 32.35 price of $8 million plus accrued dividends. On August 1, 2014, the Company redeemed an additional At June 26, 2017 there were approximately 120,000 shares of Series D Preferred for an aggregate 19,000 holders of our Common Stock, the majority price of $6 million plus accrued dividends. The final of which hold their shares in the names of various redemption of the remaining 120,000 shares of dealers and/or clearing agencies. Series D Preferred was made on April 29, 2016 for an The Company paid special cash dividends on aggregate price of $6 million plus accrued dividends. Common Stock of $69.9 million ($1.50 per share) on January 27, 2017. On May 5, 2017, the Company declared a special cash dividend of $1.50 per share to holders of record as of June 5, 2017 to be paid on or before August 4, 2017. The Company is authorized under its stock buyback program to repurchase 1.6 million shares of Common Stock. As of April 29, 2017, 502,060 shares were purchased under the program and 1,097,940 shares were available for purchase. No shares of Common Stock have been repurchased during the last three fiscal years. 32 33 NATIONAL BEVERAGE CORP.NATIONAL BEVERAGE CORP.PERFORMANCE GRAPH The following graph shows a comparison of the fi ve-year cumulative returns of an investment of $100 cash on April 28, 2012, 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 28, 2012 provided a compounded annual return of approximately 49% as of April 29, 2017. COMPARISON OF 5-YEAR CUMULATIVE TOTAL RETURN among National Beverage Corp., the NASDAQ Composite Index, and a Peer Group $$880000 $$775500 $$770000 $$665500 $$660000 $$555500 $$550000 $$445500 $$440000 $$335500 $$330000 $$225500 $$220000 $$115500 $$110000 $$5500 $$00 4/28/2012 4/27/2013 5/3/2014 5/2/2015 4/30/2016 4/29/2017 National Beverage Corp. NASDAQ Composite-Total Returns Peer Group 4/28/2012 4/27/2013 5/3/2014 5/2/2015 4/30/2016 4/29/2017 National Beverage Corp. $100.00 $116.25 $153.27 $178.88 $372.92 $727.64 NASDAQ Composite 100.00 108.32 137.99 169.47 163.64 209.76 Peer Group 100.00 134.80 131.60 163.15 239.99 280.27 34 NATIONAL BEVERAGE CORP. Fulfillment . . . 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 Co. National Retail Brands, Inc. NewBevCo, Inc. NutraFizz Products Corp. PACO, Inc. Shasta Beverages, Inc. Shasta Beverages Intl., Inc. Shasta Sales, Inc. Shasta Sweetener Corp. Shasta West, Inc. Sundance Beverage Company CORPORATE OFFICES 8100 Southwest Tenth Street Fort Lauderdale, FL 33324 954-581-0922 ANNUAL MEETING The Annual Meeting of Shareholders will be held on Friday, October 6, 2017 at 2:00 p.m. local time at the Hyatt Regency Orlando International Airport Hotel, 9300 Jeff Fuqua Boulevard, Orlando, FL 32827. FINANCIAL AND OTHER INFORMATION A copy of National Beverage Corp.’s Annual Report, Annual Report on Form 10-K, and other financial information can be found on the company’s website (www.nationalbeverage.com) or may be obtained without charge by writing or calling: National Beverage Corp. Shareholder Relations 8100 Southwest Tenth Street Fort Lauderdale, FL 33324 Telephone: 877-NBC-FIZZ (877-622-3499) STOCK EXCHANGE LISTING Common Stock is listed on The NASDAQ Global Select Market – symbol FIZZ. TRANSFER AGENT AND REGISTRAR Computershare 462 South 4th Street Suite 1600 Louisville, KY 40202 888-313-1476 www.computershare.com/investor INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM RSM US LLP Fort Lauderdale, FL CORPORATE DATA DIRECTORS Nick A. Caporella Chairman of the Board & Chief Executive Officer National Beverage Corp. Joseph G. Caporella President National Beverage Corp. Cecil D. Conlee* Founding Partner CGR Advisors 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. Samuel C. Hathorn, Jr.* Retired Chief Executive Officer Trendmaker Development Co. 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 Tammera K. Atkins Vice President Rip It Energy Fuel John F. Hlebica Vice President Shasta Beverages Intl. Worth B. Shuman III Vice President Military Sales 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 LACROIX BRAND POWER CATEGORY GROWTH RATE VS. LACROIX GROWTH RATE TOTAL SPARKLING WATER CATEGORY GROWTH RATE: +16.2% 2015 - 2016 +16.2% CATEGORY TOTAL GROWTH RATE +72.7% LACROIX GROWTH RATE NATURAL SPARKLING WATER LACROIX GROWTH RATE 4.5X FASTER* $13 — $15 BILLION CATEGORY BY 2021 PROJECTED CATEGORY GROWTH RATE** *Source: Nielsen Spectra June 2017 **Source: ©2016 Beverage Marketing Corp. Hell o . . . dandelion! The common and humble Dandelion has a surprising amount of different meanings. Healing from emotional pain and physical injury alike. Intelligence, especially in an emotional and spiritual sense. The warmth and power of the rising sun. Surviving through all challenges and diffi culties. Long-lasting happiness and youthful joy. Getting your wish fulfi lled! 8100 Southwest Tenth Street, Fort Lauderdale, Florida 33324 954.581.0922 www.nationalbeverage.com 

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