National Beverage Corp.
Annual Report 2018

Plain-text annual report

National Beverage Corp. 2018 Annual Report Chairman’s Communique Over the past five years... U.S. sparkling water sales grew by $1.4B Source: The Wall Street Journal - August 12, 2018 The War on Sugar’s Biggest Casualty: Global Prices While U.S. soda sales declined by $1.2B June 20, 2018 revenue reached $1 Billion Last Three Fiscal Years Ended April 2018: Shareholder Value (Stock Price + Dividend) Quadrupled Year-Over-Year Operating Profit grew by Double Digits in each quarter EPS increased 202% $349 Million Net Cash provided by Operating Activities BevNet Magazine Chooses LaCroix Brand of the Year – Combination of flavor, cool designs, consumer outreach + accessibility Good Morning America devotes primetime to LaCroix’s Popularity + Essence Beverage Marketing Corporation selects National Beverage as Company of the Year Jimmy Fallon – The Tonight Show NBC . . . Cultural Phenomenon – LaCroix and its Essence LaCroix has the greatest growth potential household penetration: # of family members consuming different flavors = ++ conversion opportunity Approximately 500 million cups of coffee consumed in America daily – LaCroix first to combine Sparkling Water + Coffee Essence LaCroix Themes (Cúrate, NiCola) have more consumer appeal due to Innovative Colors, Unique Essences and Sensorial Experiences Financial Facts Brand Facts Industry Facts “Wonder is the Beginning of . . . Wisdom!” Socrates So clear, crisp and simple he said to me . . . “Nick, our revenues hit One Billion Dollars yesterday!” June 20, 2018 As I reflect back, my thoughts swiftly flashed over many tough times, but on June 20th they all became quite unimportant. During those arduous early years, I had set a goal that became a huge silent stimulator – the vision to grow our Company to $1 Billion organically without buying any revenues. On June 20, 2018, we nearly made it, all except approximately $180 million relating to the purchase of Shasta and Faygo. Our fiscal year ended April 2018 marks the fourth year of double-digit growth and we have chronicled the significant events of FY2018 on the FIZZ Innovator. While there is much to write about National Beverage Corp., I am going to focus on what each and every investor wants to know. What is going to sustain the growth of LaCroix? How is Shasta Sparkling Water SDA (Soft Drink Alternative) doing? Why is the future of FIZZ more exciting than its past? So, here we go . . . LaCroix is the ultimate game changer in the world of sparkling water. The Millennials have set the pace and GenZ is following their lead choosing LaCroix as their favorite craving. Viral marketing – by the consumers, for the consumers – is the most genuine form of advertising and distinguishes LaCroix from its impersonators. I just saw a recent YouTube video showing two kids stocking a refrigerator with LaCroix, with the older one telling the younger one how it’s done! Good stuff – viral marketing. The Ultimate, Absolute, Complete, Soft Drink Alternative – Shasta Sparkling Water was conceptualized, created and designed as a healthy alternative – harmless, without any sweetener, sodium or calories – and still provides the fizzy fun of a ball game, a picnic and a family outing. Leveraging the brand equity in core Brand Shasta, which stands for family, fun and now fitness, the new Shasta Sparkling Water will thrive on the same brand attributes. Nostalgic, classic, traditional flavorings that consumers grew up on, but have had to reduce for health reasons, are now available as Shasta SDA without the health risk. Our exclusive in-store brand introduction technique, BrandED, has confirmed consumer demand from all ages of this soft drink alternative providing flavor profiles like our original Shasta Cola, Draft Root Beer, Big Black Cherry, California Orange and Lemon Lime Splash. We have witnessed a mother’s joy of having her children enjoy Shasta Sparkling Water while bringing some home to her diabetic mother who introduced her to the original Shasta soft drinks. Joy again . . . Shasta SDA is also a soft drink alternative for the hospital, health and congregate care community which appears on the trays in a special 8oz. serving size. What makes our future brighter than the past? Once in a lifetime or once in a career, an event of a magnitude so significant occurs that it has the potential of changing an industry – maybe the world. That’s LaCroix . . . Awesome! LaCroix – look at it again. La La, do you feel it, sense it? It lures you into being refreshed by just thinking of the name . . . LaCroix. That name has inspired a cult and has created an awareness that leaves each and every consumer with that special feeling of . . . the Joy of LaCroix. It became the symbol of authenticity, healthy hydration and the smart way to live. Divine destiny defined our efforts. Intrigued by the name and vision of what could be, and helped through the use of masterful techniques that included the use of colors and reflections of sensorial caring, we created the stimulant that the cult embraced. Today, it is the symbol of the way to be, the way to live and what we want for those who we genuinely care for. It is our LaCroix now. LaCroix and its various themes are a visionary’s daydream. Included with this Annual Report is a box of the latest LaCroix NiCola offerings. As I stare at these cans before me, nothing so exciting and imaginable has ever been produced thus far, so I hope you will be as delighted as we certainly are for you to try them. Our wish . . . to have all new themes captivate more and more LaCroix enthusiasts. Our mission . . . to entrepreneur this wonder of a brand and have it become the ultimate obsession that truly defines a generation that guided America’s conscience – the LaCroix way! No one can predict or adequately quantify the upside potential of LaCroix. The concept and use of exotic themes are only limited by the wonderment of our dreams. America . . . its life is undergoing many changes – as is our industry. Principled, seasoned business leaders know that the pendulum of balance is always at work. Brands LaCroix and Shasta SDA are infants. Our LaCroix brand status allows it to ‘stand’ while Shasta SDA is still ‘crawling’. The world needs and awaits both, but the present matrix of market measurement affirms that LaCroix is a brand. In the past, the FTC used 40 million 192oz. cases as a qualifier for brand status – certainly many did not qualify under this measurement. LaCroix will soon surpass Diet Coke and Diet Pepsi at the grocery channel, and this does not include Mexico and Canada. Brand LaCroix is #1 in 42 of 52 total markets in the U.S., measured/accepted by Nielsen, and is climbing hourly in the remaining ten markets. The life of LaCroix has just begun and its potential is – the world – not yet calculable. These circumstances position LaCroix in a special place. The ownership of National Beverage and its shareholders add to the uniqueness of valuation of this company. I have not given up on the plan that was previously discussed – longevity reward for shareholders that register their stock in their name and get rewarded for their loyalty through more company distributions. The opportunities, advantages and financial prospects should be strengthened by a more harmonious, less volatile stock that is not under pressure to react abnormally. The current status may not allow our loyal investors to be protected from the ‘whims’ of self-serving opportunists. There are ways to have this happen – either the ‘long’ way or by a swifter transformation. The heart of our control shareholder has proven that his partner shareholders (long-term) are near and dear to his heart. We are working to remedy this current status. FIZZ is a very valuable enterprise and we want to treat our consumers and shareholders alike – super healthy, naturally! All shareholders want to see their company more than exceed their growth expectations. National Beverage continues its healthy growth momentum with ‘0’ calories, ‘0’ sodium and ‘0’ sweetener – the Innocent way. This heightened thrust will propel FIZZ to accelerate its dominant leadership . . . in the movement to make America healthier! Yes, we will . . . Nick A. Caporella Chairman and Chief Executive Officer FINANCIAL REVIEW SELECTED FINANCIAL DATA (In thousands, except per share and footnote amounts) SUMMARY OF OPERATIONS Net sales Cost of sales Fiscal Year Ended April 28, 2018 April 29, 2017 April 30, 2016 April 30, 2015 May 3, 2014(4) $ 975,734 $ 826,918 $ 704,785 $ 645,825 $ 641,135 584,599 500,841 463,348 426,685 423,480 Gross profit Selling, general and administrative expenses 391,135 326,077 241,437 219,140 217,655 186,947 163,600 148,384 145,157 153,220 Interest expense Other (income) expense - net Income before income taxes Provision for income taxes Net income PER SHARE DATA 201 (1,502) 189 (537) 203 145 205,489 162,825 55,715 55,780 92,705 31,507 371 (1,101) 74,713 25,402 660 666 63,109 19,474 $ 149,774 $ 107,045 $ 61,198 $ 49,311 $ 43,635 Basic earnings per common share(1) $ 3.21 $ 2.30 $ 1.31 $ 1.06 $ .93 Diluted earnings per common share(1) Closing stock price Dividends paid on common stock(2) 3.19 89.78 1.50 2.29 88.59 1.50 1.31 46.74 — 1.05 22.42 — .92 19.21 — BALANCE SHEET DATA Cash and equivalents(2) Working capital(2)(3) $ 189,864 $ 136,372 $ 105,577 $ 52,456 $ 29,932 248,297 181,115 143,603 97,130 60,182 75,933 59,494 Property, plant and equipment - net 85,807 65,150 61,932 Total assets(2)(3) Long-term debt Deferred income tax liability (3) Shareholders' equity(2) Dividends paid on common stock(2) 458,832 353,983 301,044 243,402 220,156 — — — 14,502 12,087 10,020 10,000 10,897 30,000 11,188 331,440 245,618 206,152 147,782 106,201 69,878 69,850 — — — (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 August 4, 2017 and January 27, 2017. (3) Deferred taxes have been reclassified from current assets to non-current liabilities in accordance with ASU 2015-17. See Note 1 of Notes to Consolidated Financial Statements. (4) Fiscal 2014 consisted of 53 weeks. 2 NATIONAL BEVERAGE CORP.MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OVERVIEW As the cornerstone relative to the lead-in paragraph emphasizing National Beverage’s uniqueness: National Beverage Corp. innovatively refreshes America Many believe that if you put good in – with a distinctive portfolio of sparkling waters, juices Great comes out . . . and, to a lesser degree, energy drinks. Over the past We believe that if we put excellent in – few years, our carbonated soft drink brands continue You get magical out! to be modified as we endeavor to make them more Presently, National Beverage Corp. is uniquely adaptable to our consumers. We believe our ingenious positioned in three distinctive ways: product designs, innovative packaging and imaginative (1) The retail grocery industry is in revolution. flavors, along with our corporate culture and philosophy, Yesteryear, each retailer induced their consumer with make National Beverage unique as a stand-alone entity a proprietary brand (especially soft drinks), but today in the beverage industry. January 1986 found our infant company in possession of a month-old, typical soda pop manufacturer whose understands that the well-informed, smart consumer is demanding that retailers provide recognizable brands that have earned their respective consumer standing acquisition cost had not yet been determined. One, at on their merits. the time, could have described it as a ‘Hail Mary’ attempt (2) The retail grocer today is in the most competitive- to thwart another corporate 1980’s raider takeover. indexed service industry, without exception. Innovation, January 2018 ushered in a corporate marvel of plus the urgent time demands on the consumer, is focus that we believe not only defies the beverage requiring quick, expedient shopping and home delivery giants’ power and might, but finds that its creativity and is even more of a current shoppers’ choice. Retailers innovation transformed the entire soft drink industry! cannot carry slower-moving items that home delivery We primarily employ the warehouse delivery system, will not support. which due to the bricks and mortar costs to all retailers, (3) The new Millennial consumer is the most allows our retail partners to further maximize assets by competent/knowledgeable product analyzer ever, and utilizing their ability to pick up product at our warehouses, personal mental/physical lifestyles demand that healthier thus further lowering their/our product costs. is their preferred choice. Calories must qualify as worthy; Within the final quarter of FY2018, with the exception sugar being enemy #1 in the life of the Millennial. of the warehouse delivery system, National Beverage Our strategy seeks the profitable growth of our Corp. has completed its transformation from that typical products by (i) developing healthier beverages in soda pop manufacturer of January 1986 to the master response to the global shift in consumer buying habits innovator of this healthier refreshment company! From and tailoring our beverage portfolio to the preferences our corporate philosophy, development of products, of a diverse mix of ‘crossover consumers’ – a growing marketing to manufacturing, we are converting group desiring a healthier alternative to artificially consumers to a ‘Better for You’ thirst quencher that sweetened and high-caloric beverages; (ii) emphasizing compassionately cares for their nutritional health. We are in our infancy and have only begun in our quest unique flavor development and variety throughout our brands that appeal to multiple demographic groups; to innovate for the joy, benefit and enjoyment of our (iii) maintaining points of difference through innovative consumers’ healthier lifestyle! marketing, packaging and consumer engagement and 3 NATIONAL BEVERAGE CORP. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) (iv) responding faster and more creatively to changing RESULTS OF OPERATIONS consumer trends that larger competitors who are burdened by legacy production, distribution complexity and costs cannot quickly comply with. Net Sales Net sales for fiscal year ended April 28, 2018 (“Fiscal 2018”) increased 18.0% to $975.7 million Presently, our primary market focus is the United compared to $826.9 million for fiscal year ended April States and Canada. Certain of our products are also 29, 2017 (“Fiscal 2017”). The increase in sales resulted distributed on a limited basis in other countries and primarily from a 19.8% increase in branded case volume options to expand distribution to other regions are and, to a lesser extent, a higher average selling price. being considered. To service a diverse customer Power+ Brands volume increased 38.9%; branded base that includes numerous national retailers, as well carbonated soft drinks volume declined by 6.2%. The as thousands of smaller “up-and-down-the-street” Company discontinued its lower-margin, private-label accounts, we utilize a hybrid distribution system to carbonated soft drink business in the third quarter of deliver our products primarily through the warehouse Fiscal 2018, allowing future performance to be more delivery system and distributors. focused on brand equity appreciation. National Beverage Corp. is incorporated in Delaware Net sales for Fiscal 2017 increased 17.3% to $826.9 and began trading as a public company on the NASDAQ million compared to $704.8 million for the fiscal year Stock Market in 1991. In this report, the terms “we,” ended April 30, 2016 (“Fiscal 2016”). The increase in “us,” “our,” “Company” and “National Beverage” mean sales resulted primarily from a 16.6% increase in case National Beverage Corp. and its subsidiaries unless volume and, to a lesser extent, a higher average selling indicated otherwise. price. Power+ Brands volume increased 42.6%; branded Our operating results are affected by numerous carbonated soft drinks volume was flat. factors, including fluctuations in the costs of raw materials, holiday and seasonal programming and weather conditions. While yesteryear witnessed more Gross Profit Gross profit for Fiscal 2018 increased 20.0% to $391.1 million compared to $326.1 million seasonality, higher sales are realized during the summer for Fiscal 2017. The increase in gross profit is due to when outdoor activities are more prevalent. increased volume and growth in higher margin Power+ Our highly innovative business, where new beverages Brands, offset in part by increased cost of sales per are developed and produced for selective holidays case. Cost of sales per case increased 1.0% primarily and ceremonial dates, should not be analyzed on the due to higher aluminum costs. Gross margin expanded common three-month (quarterly) periods, traditionally to 40.1%. found acceptable. Today, costly development projects Gross profit for Fiscal 2017 increased 35.1% to and seasonal weather periods plus promotional $326.1 million compared to $241.4 million for Fiscal packaging, make quarter-to-quarter comparisons 2016. The increase in gross profit was due to increased unworthy statistics and forces companies to decision volume, growth in higher margin Power+ Brands and a making for that purpose, not truly beneficial for investors and shareholders alike. decline in cost of sales per case of 5.7%. The decrease in cost of sales per case was due to favorable product Traditional and typical are not a part of an innovator’s mix changes and lower raw material costs. Gross margin vocabulary. 4 expanded to 39.4%. NATIONAL BEVERAGE CORP.Shipping and handling costs are included in selling, general and administrative expenses, the classification Income Taxes Our effective tax rate was 27.1% for Fiscal 2018, 34.3% for Fiscal 2017 and 34% for Fiscal of which is consistent with many beverage companies. 2016. The reduction in the effective tax rate was due to However, our gross margin may not be comparable to the statutory rate decreases set forth in the Tax Cuts and companies that include shipping and handling costs Jobs Act (the “Tax Act”) enacted into law on December in cost of sales. See Note 1 of Notes to Consolidated 22, 2017. Under the Tax Act, the applicable federal Financial Statements. statutory rate was 30.4% for Fiscal 2018. Included in the effective tax rate for Fiscal 2018 is a one-time Selling, General and Administrative Expenses Selling, general and administrative expenses were adjustment reducing income tax expense to remeasure previous deferred tax liabilities of $4.3 million. In all years, $186.9 million or 19.2% of net sales for Fiscal 2018, the difference between the effective rate and the federal increasing $23.3 million from Fiscal 2017. The increase statutory rate was due to the effects of state income was primarily due to shipping and other volume-related taxes, the domestic manufacturing deduction and expenses and marketing spending increases. As a share-based payment awards. The applicable federal percent of net sales, selling, general and administrative statutory rate under the Tax Act will be reduced to 21% expenses decreased primarily due to the leveraging for fiscal 2019. See Note 7 of Notes to Consolidated effects of higher volume on fixed costs. Financial Statements. Selling, general and administrative expenses were $163.6 million or 19.8% of net sales for Fiscal 2017 LIQUIDITY AND FINANCIAL CONDITION compared to $148.4 million or 21.1% of net sales for Fiscal 2016. The increase was primarily due to shipping and other volume-related expenses and marketing Liquidity and Capital Resources Our principal source of funds is cash generated from operations. At April spending increases. As a percent of net sales, selling, 28, 2018, we maintained $100 million unsecured general and administrative expenses decreased primarily revolving credit facilities, under which no borrowings due to the leveraging effects of higher volume on fixed were outstanding and $2.1 million was reserved for costs and growth of products distributed by customer standby letters of credit. We believe that existing capital pick-up. Interest Expense and Other Expense (Income) - Net Interest expense is comprised of fees related to resources will be sufficient to meet our liquidity and capital requirements for the next twelve months. See Note 4 of Notes to Consolidated Financial Statements. maintaining lines of credit and, for part of Fiscal 2016, We continually evaluate capital projects to expand interest on borrowings. Interest expense was essentially our production capacity, enhance packaging capabilities flat for all years presented. Other expense is net of or improve efficiencies at our production facilities. interest income of $1.6 million for Fiscal 2018, $.6 Expenditures for property, plant and equipment million for Fiscal 2017 and $.1 million for Fiscal 2016. The change in interest income is due to changes in amounted to $32.0 million for Fiscal 2018 primarily to expand production capacity. The Company expects average invested balances and increased return on capital expenditures to increase in Fiscal 2019 to support investments. volume growth. 5 NATIONAL BEVERAGE CORP.MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) The Company paid special cash dividends on Common Stock of $69.9 million ($1.50 per share) Financial Position During Fiscal 2018, our working capital increased to $248.3 million from $181.1 million on both August 4, 2017 and January 27, 2017. The at April 29, 2017. The increase in working capital Company has announced it plans to develop a program resulted from higher cash, trade receivables and to increase distribution to shareholders based on the inventory, partially offset by higher accounts payable length of time they have owned their shares. and accrued liabilities. Trade receivables increased Pursuant to a management agreement, we incurred $13.0 million or 18.3% due to increased sales, and days a fee to Corporate Management Advisors, Inc. (“CMA”) sales outstanding increased to 31.4 days from 30.6 of $9.8 million for Fiscal 2018, $8.3 million for Fiscal days. Inventories increased $7.6 million or 14.2% as 2017 and $7.0 million for Fiscal 2016. At April 28, a result of increased finished goods and raw materials 2018, management fees payable to CMA were $2.4 to support sales increases. Annual inventory turns million. See Note 5 of Notes to Consolidated Financial remained unchanged at 9.5 times. As of April 28, 2018, Statements. the current ratio was 3.4 to 1 compared to 3.1 to 1 at April 29, 2017. Cash Flows During Fiscal 2018, $154.7 million was provided by operating activities, $31.9 million was used During Fiscal 2017, our working capital increased to $181.1 million from $143.6 million at April 30, 2016. in investing activities and $69.3 million was used in The increase in working capital resulted from higher financing activities. Cash provided by operating activities cash, trade receivables and inventory, partially offset by increased $40.5 million primarily due to increased higher accounts payable and accrued liabilities. Trade earnings offset in part by increased working capital. receivables increased $10.3 million or 17% due to Cash used in investing activities increased due to increased sales while days sales outstanding improved increased capital expenditures. Spending on property, to 30.6 days from 31.0 days. Inventories increased plant and equipment exceeded depreciation expense, $5.4 million as a result of higher finished goods levels our typical investment level, in order to support volume to support sales increases. Annual inventory turns growth. Cash used in financing activities includes the remained unchanged at 9.5 times. At April 29, 2017, $69.9 million ($1.50 per share) special cash dividend the current ratio was 3.1 to 1 compared to 2.9 to 1 at paid on August 4, 2017. April 30, 2016. During Fiscal 2017, $114.3 million was provided by operating activities, $14.0 million was used in investing activities and $69.5 million was used in financing activities. Cash provided by operating activities increased $33.8 million primarily due to increased earnings and favorable changes in working capital. Cash used in investing activities increased $2.0 million reflecting higher capital expenditures and lower proceeds from the sale of property. Cash used in financing activities includes the $69.9 million ($1.50 per share) special cash dividend paid on January 27, 2017. 6 NATIONAL BEVERAGE CORP.CONTRACTUAL OBLIGATIONS Contractual obligations at April 28, 2018 are payable as follows: (In thousands) Operating leases Purchase commitments Total Total Less Than 1 Year 1 to 3 Years 3 to 5 Years More Than 5 Years $ $ 28,448 $ 9,182 $ 12,856 $ 4,879 $ 1,531 15,875 11,287 3,540 1,048 — 44,323 $ 20,469 $ 16,396 $ 5,927 $ 1,531 We contribute to certain pension plans under collective CRITICAL ACCOUNTING POLICIES bargaining agreements and to a discretionary profit sharing plan. The preparation of financial statements in conformity Annual contributions were $3.4 million for Fiscal with generally accepted accounting principles requires 2018, $3.1 million for Fiscal 2017 and $2.9 million management to make estimates and assumptions that for Fiscal 2016. See Note 9 of Notes to Consolidated affect the amounts reported in the financial statements Financial Statements. and accompanying notes. Although these estimates We maintain self-insured and deductible programs are based on management’s knowledge of current for certain liability, medical and workers’ compensation events and actions it may undertake in the future, they exposures. Other long-term liabilities include known may ultimately differ from actual results. We believe claims and estimated incurred but not reported claims that the critical accounting policies described in the not otherwise covered by insurance, based on actuarial following paragraphs comprise the most significant assumptions and historical claims experience. Since the estimates and assumptions used in the preparation timing and amount of claim payments vary significantly, of our consolidated financial statements. For these we are not able to reasonably estimate future payments policies, we caution that future events rarely develop for specific periods and therefore such payments have exactly as estimated and the best estimates routinely not been included in the table above. Standby letters require adjustment. of credit aggregating $2.1 million have been issued in connection with our self-insurance programs. These standby letters of credit expire through March 2019 Credit Risk We sell products to a variety of customers and extend credit based on an evaluation of each and are expected to be renewed. customer’s financial condition, generally without OFF-BALANCE SHEET ARRANGEMENTS by customer principally due to the financial condition requiring collateral. Exposure to credit losses varies We do not have any off-balance sheet arrangements that have, or are reasonably likely to have, a current or losses and maintain allowances for anticipated losses based on specific customer circumstances, credit future material effect on our financial condition. conditions and historical write-offs. of each customer. We monitor our exposure to credit 7 NATIONAL BEVERAGE CORP.MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) Impairment of Long-Lived Assets All long-lived assets, excluding goodwill and intangible assets not however smaller direct-store delivery accounts may be sold on a cash basis. Our credit terms typically require subject to amortization, are evaluated for impairment payment within 30 days of delivery and may allow on the basis of undiscounted cash flows whenever discounts for early payment. We estimate and reserve events or changes in circumstances indicate that the for bad debt exposure based on our experience with carrying amount of an asset may not be recoverable. past due accounts, collectability and our analysis of An impaired asset is written down to its estimated fair customer data. value based on the best information available. Estimated We offer various sales incentive arrangements to fair value is generally measured by discounting future our customers that require customer performance or cash flows. Goodwill and intangible assets not subject achievement of certain sales volume targets. Sales to amortization are evaluated for impairment annually incentives are accrued over the period of benefit or or sooner if we believe such assets may be impaired. expected sales. When the incentive is paid in advance, An impairment loss is recognized if the carrying amount the aggregate incentive is recorded as a prepaid and or, for goodwill, the carrying amount of its reporting unit, amortized over the period of benefit. The recognition of is greater than its fair value. Income Taxes Our effective income tax rate is based on estimates of taxes which will ultimately be payable. 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 Deferred taxes are recorded to give recognition to and actual amounts ultimately realized may vary from temporary differences between the tax bases of assets accrued amounts. Such differences are recorded once or liabilities and their reported amounts in the financial determined and have historically not been significant. statements. Valuation allowances are established to We will adopt ASU 2014-09, Revenue from Contracts reduce the carrying amounts of deferred tax assets with Customers, and its amendments on April 29, 2018. when it is deemed, more likely than not, that the benefit See Note 1 to our consolidated financial statements of deferred tax assets will not be realized. for additional information on revenue recognition and the transition to the new revenue recognition guidance. Insurance Programs We maintain self-insured and deductible programs for certain liability, medical and workers’ compensation exposures. Accordingly, we FORWARD-LOOKING STATEMENTS accrue for known claims and estimated incurred but National Beverage and its representatives may make not reported claims not otherwise covered by insurance written or oral statements relating to future events or based on actuarial assumptions and historical claims results relative to our financial, operational and business experience. performance, achievements, objectives and strategies. These statements are “forward-looking” within the Revenue Recognition We recognize revenue upon delivery to our customers, based on written sales meaning of the Private Securities Litigation Reform Act of 1995 and include statements contained in this report, terms that do not allow a right of return except in rare filings with the Securities and Exchange Commission instances. Our products are typically sold on credit, and in reports to our stockholders. Certain statements 8 NATIONAL BEVERAGE CORP.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 QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Commodities We purchase various raw materials, including aluminum cans, plastic bottles, high actual results, performance or achievements of our fructose corn syrup, corrugated packaging and juice Company to be materially different from any future concentrates, the prices of which fluctuate based on results, performance or achievements expressed or commodity market conditions. Our ability to recover implied by such forward-looking statements. Such increased costs through higher pricing may be limited factors include, but are not limited to, the following: by the competitive environment in which we operate. general economic and business conditions, pricing of At times, we manage our exposure to this risk through competitive products, success of new product and the use of supplier pricing agreements that enable us flavor introductions, fluctuations in the costs of raw to establish all, or a portion of, the purchase prices for materials and packaging supplies, ability to pass along certain raw materials. Additionally, we use derivative cost increases to our customers, labor strikes or work financial instruments to partially mitigate our exposure stoppages or other interruptions in the employment to changes in certain raw material costs. of labor, continued retailer support for our products, changes in brand image, consumer preferences and our success in creating products geared toward consumers’ Interest Rates At April 28, 2018, the Company had no borrowings outstanding. We had no debt-related tastes, success in implementing business strategies, interest rate exposure during Fiscal 2018. 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, 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. 9 NATIONAL BEVERAGE CORP.CONSOLIDATED BALANCE SHEETS (In thousands, except share data) ASSETS Current assets: Cash and equivalents Trade receivables - net Inventories 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: Preferred stock, $1 par value - 1,000,000 shares authorized Series C - 150,000 shares issued Common stock, $.01 par value - 75,000,000 shares authorized; 50,650,784 shares (2018) and 50,616,134 shares (2017) issued Additional paid-in capital Retained earnings Accumulated other comprehensive income (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. 10 April 28, 2018 April 29, 2017 $ 189,864 $ 136,372 84,360 60,920 17,823 71,319 53,355 7,275 352,967 268,321 85,807 13,145 1,615 5,298 65,150 13,145 1,615 5,752 $ 458,832 $ 353,983 $ 74,853 $ 58,100 29,718 29,017 99 104,670 14,502 8,220 150 507 36,358 307,824 4,601 89 87,206 12,087 9,072 150 506 35,638 227,928 (604) (5,100) (12,900) (5,100) (12,900) 331,440 245,618 $ 458,832 $ 353,983 NATIONAL BEVERAGE CORP. 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 (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 28, 2018 April 29, 2017 April 30, 2016 $ 975,734 $ 826,918 $ 704,785 584,599 391,135 186,947 201 (1,502) 205,489 55,715 149,774 - 149,774 500,841 326,077 163,600 189 (537) 162,825 55,780 463,348 241,437 148,384 203 145 92,705 31,507 $ $ 107,045 $ 61,198 - (238) 107,045 $ 60,960 3.21 $ 3.19 $ 2.30 $ 2.29 $ 1.31 1.31 46,598 46,921 46,564 46,770 46,452 46,671 $ $ $ $ 11 NATIONAL BEVERAGE CORP. 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 28, 2018 April 29, 2017 April 30, 2016 $ 149,774 $ 107,045 $ 61,198 5,227 (22) 5,205 1,110 93 1,203 783 (66) 717 $ 154,979 $ 108,248 $ 61,915 12 NATIONAL BEVERAGE CORP.CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY Fiscal Year Ended April 28, 2018 April 29, 2017 April 30, 2016 (In thousands) Shares Amount Shares Amount Shares Amount SERIES C PREFERRED STOCK Beginning and end of year 150 $ 150 150 $ 150 150 $ 150 SERIES D PREFERRED STOCK Beginning of year Series D preferred redeemed End of year COMMON STOCK Beginning of year — — — — — — — — — — — — 120 (120) - 50,616 506 50,589 506 50,418 Stock options exercised 35 1 27 - 171 End of year 50,651 507 50,616 506 50,589 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 INCOME (LOSS) Beginning of year Cash flow hedges Other End of year 35,638 34,570 — 559 161 — — 365 208 495 36,358 35,638 227,928 149,774 (69,878) — 307,824 (604) 5,227 (22) 4,601 190,733 107,045 (69,850) — 227,928 (1,807) 1,110 93 (604) 120 (120) - 504 2 506 37,759 (5,791) 846 228 1,528 34,570 129,773 61,198 — (238) 190,733 (2,524) 783 (66) (1,807) 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 $ 331,440 $ 245,618 $ 206,152 See accompanying Notes to Consolidated Financial Statements. 13 NATIONAL BEVERAGE CORP. CONSOLIDATED STATEMENTS OF CASH FLOW (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 on disposal of property, net Stock-based compensation Stock-based tax benefits Changes in assets and liabilities: Trade receivables Inventories Prepaid and other assets Accounts payable Accrued and other liabilities Fiscal Year Ended April 28, 2018 April 29, 2017 April 30, 2016 $ 149,774 $ 107,045 $ 61,198 13,226 676 149 161 — 12,834 1,358 72 208 495 (13,041) (10,273) (7,565) (5,437) 16,753 25 (5,433) (2,205) 8,709 1,457 12,056 (1,299) 129 228 1,528 (1,095) (4,998) (485) 4,495 8,726 Net cash provided by operating activities 154,721 114,267 80,483 INVESTING ACTIVITIES Additions to property, plant and equipment (31,974) (14,015) (12,140) Proceeds from sale of property, plant and equipment 63 28 116 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 Net cash used in financing activities NET INCREASE IN CASH AND EQUIVALENTS CASH AND EQUIVALENTS - BEGINNING OF YEAR CASH AND EQUIVALENTS - END OF YEAR OTHER CASH FLOW INFORMATION Interest paid Income taxes paid See accompanying Notes to Consolidated Financial Statements. 14 (31,911) (13,987) (12,024) (69,878) (69,850) — — — 560 (69,318) 53,492 136,372 — — — 365 (69,485) 30,795 105,577 — (186) (10,000) (6,000) 848 (15,338) 53,121 52,456 $ $ $ 189,864 $ 136,372 $ 105,577 101 $ 202 $ 116 56,737 $ 55,901 $ 29,473 NATIONAL BEVERAGE CORP. NATIONAL BEVERAGE CORP. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS National Beverage Corp. innovatively develops, produces, markets and sells a distinctive portfolio of Earnings Per Common Share Basic earnings per common share is computed by dividing earnings sparkling waters, juices, energy drinks and carbonated available to common shareholders by the weighted soft drinks primarily in the United States and Canada. average number of common shares outstanding during Incorporated in Delaware in 1985, National Beverage the period. Diluted earnings per common share is Corp. is a holding company for various operating calculated in a similar manner, but includes the dilutive subsidiaries. When used in this report, the terms “we,” effect of stock options amounting to 323,000 shares in “us,” “our,” “Company” and “National Beverage” mean Fiscal 2018, 206,000 shares in Fiscal 2017 and 219,000 National Beverage Corp. and its subsidiaries. shares in Fiscal 2016. 1. SIGNIFICANT ACCOUNTING POLICIES Fair Value The estimated fair values of derivative financial instruments are calculated based on market Basis of Presentation The consolidated financial statements have been prepared in accordance with rates to settle the instruments. These values represent the estimated amounts we would receive upon sale, United States generally accepted accounting principles taking into consideration current market prices and (“GAAP”) and rules and regulations of the Securities credit worthiness. See Note 6. and Exchange Commission. The consolidated financial statements include the accounts of National Beverage Corp. and all subsidiaries. All significant intercompany Impairment of Long-Lived Assets All long-lived assets, excluding goodwill and intangible assets not transactions and accounts have been eliminated. Our subject to amortization, are evaluated for impairment on fiscal year ends the Saturday closest to April 30 and, the basis of undiscounted cash flows whenever events as a result, an additional week is added every five or six or changes in circumstances indicate that the carrying years. All fiscal years presented consisted of 52 weeks. amount of an asset may not be recoverable. An impaired Cash and Equivalents Cash and equivalents are comprised of cash and highly liquid securities (consisting asset is written down to its estimated fair market value based on the best information available. Estimated fair value is generally measured by discounting future cash primarily of short-term money-market investments) with flows. Goodwill and intangible assets not subject to an original maturity of three months or less. amortization are evaluated for impairment annually or Derivative Financial Instruments We use derivative financial instruments to partially mitigate our exposure 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, to changes in raw material costs. All derivative financial is greater than its fair value. instruments are recorded at fair value in our Consolidated Balance Sheets. We do not use derivative financial instruments for trading or speculative purposes. Credit risk related to derivative financial instruments is managed 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 by requiring high credit standards for counterparties temporary differences between the tax bases of assets and frequent cash settlements. See Note 6. or liabilities and their reported amounts in the financial 15 NATIONAL BEVERAGE CORP. NATIONAL BEVERAGE CORP. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) statements. Valuation allowances are established to reduce the carrying amounts of deferred tax assets New Accounting Pronouncements - adopted In March 2016, the Financial Accounting Standards when it is deemed, more likely than not, that the benefit Board (“FASB”) issued Accounting Standards Update of deferred tax assets will not be realized. No. 2016-09, “Compensation-Stock Compensation: Insurance Programs We maintain self-insured and deductible programs for certain liability, medical and Improvements to Employee Share-Based Payment Accounting” (“ASU 2016-09”). The updated guidance simplifies and changes how companies account for workers’ compensation exposures. Accordingly, we certain aspects of share-based payment awards to accrue for known claims and estimated incurred but employees, including accounting for income taxes and not reported claims not otherwise covered by insurance forfeitures, as well as classification of certain items in the based on actuarial assumptions and historical claims statement of cash flows. The Company adopted ASU experience. At April 28, 2018 and April 29, 2017, other 2016-09 effective April 30, 2017 and elected to apply liabilities included accruals of $6.5 million and $6.9 the cash flow guidance retrospectively; therefore, cash million, respectively, for estimated non-current risk flow from operating activities increased and cash flow retention exposures, of which $5.0 million and $5.4 from financing activities decreased by $495 thousand million were covered by insurance. and $1.5 million for the twelve months ended April 29, Intangible Assets Intangible assets as of April 28, 2018 and April 29, 2017 consisted of non-amortizable trademarks. Inventories Inventories are stated at the lower of first-in, first-out cost or market. Inventories at April 28, 2017 and April 30, 2016, respectively. The Company also elected to continue to estimate the number of awards that are expected to vest using the forfeiture option. The adoption of ASU 2016-09 reduced the Company’s income tax expense by $886 thousand for the twelve months ended April 28, 2018. In November 2015, the FASB issued Accounting 2018 were comprised of finished goods of $37.6 million Standards Update No. 2015-17, “Balance Sheet and raw materials of $23.3 million. Inventories at April Classification of Deferred Taxes” (“ASU 2015-17”). 29, 2017 were comprised of finished goods of $35.0 ASU 2015-17 requires companies to classify all deferred million and raw materials of $18.4 million. tax liabilities and assets as noncurrent on the balance sheet. We adopted ASU 2015-17 effective for our Marketing Costs We are involved in a variety of marketing programs, including cooperative advertising fiscal year beginning April 30, 2017, electing to apply it retrospectively to all periods presented. As a result, programs with customers, to advertise and promote $3.9 million of deferred taxes was reclassified from our products to consumers. Marketing costs are current to non-current on the consolidated balance expensed when incurred, except for prepaid advertising sheet as of April 29, 2017. and production costs which are expensed when the In February 2018, the FASB issued Accounting advertising takes place. Marketing costs, which are included in selling, general and administrative expenses, Standards Update 2018-02, “Reclassification of Certain Tax Effects from Accumulated Other Comprehensive totaled $49.7 million in Fiscal 2018, $44.9 million in Income” (“ASU 2018-02”). This update permits the Fiscal 2017 and $38.8 million in Fiscal 2016. impact of lower corporate income tax rates related to 16 NATIONAL BEVERAGE CORP.items classified in accumulated other comprehensive financial statements. ASU 2017-12 is effective for our income to be reclassified directly to retained earnings. fiscal year beginning April 28, 2019. We are currently We adopted ASU 2018-02 effective for our third quarter evaluating the potential impact of adopting this guidance ended January 27, 2018. We elected not to reclassify on our consolidated financial statements. the income tax effects of the Tax Cuts and Jobs Act from accumulated other comprehensive income to retained earnings. Property, Plant and Equipment Property, plant and equipment are recorded at cost. Additions, replacements and betterments are capitalized, while maintenance and New Accounting Pronouncements - not yet adopted In May 2014, the FASB issued Accounting Standards repairs that do not extend the useful life of an asset are expensed as incurred. Depreciation is recorded using Update No. 2014-09, “Revenue from Contracts with the straight-line method over estimated useful lives of Customers” (“ASU 2014-09”). ASU 2014-09 requires 5 to 30 years for buildings and improvements and 3 an entity to recognize revenue in an amount that reflects to 15 years for machinery and equipment. Leasehold the consideration it expects to receive in exchange for improvements are amortized using the straight-line goods or services. On August 12, 2015, the FASB issued method over the shorter of the remaining lease term ASU 2015-14 which deferred the effective date of ASU or the estimated useful life of the improvement. When 2014-09 by one year and is effective for our fiscal year assets are retired or otherwise disposed, the cost beginning April 29, 2018. Management has completed and accumulated depreciation are removed from the its evaluation and adoption is not expected to have respective accounts and any related gain or loss is a material impact on our financial position, results of recognized. operations or cash flows. Disclosure requirements under the new guidance have been significantly expanded. In February 2016, the FASB issued Accounting Revenue Recognition We recognize revenue upon delivery to our customers, based on written sales Standards Update No. 2016-02, “Leases” (“ASU terms that do not allow a right of return except in rare 2016-02”). ASU 2016-02 requires the lease rights instances. Our products are typically sold on credit, and obligations arising from lease contracts, including however smaller accounts are sold on a cash basis. Our existing and new arrangements, to be recognized as credit terms typically require payment within 30 days of assets and liabilities on the balance sheet. ASU 2016- delivery and may allow discounts for early payment. We 02 is effective for our fiscal year beginning April 28, estimate and reserve for bad debt exposure based on 2019. We are currently evaluating the potential impact our experience with past due accounts, collectability of adopting this guidance on our consolidated financial and our analysis of customer data. statements. We offer various sales incentive arrangements to In August 2017, the FASB issued Accounting our customers that require customer performance or Standards Update 2017-12, “Targeted Improvements achievement of certain sales volume targets. Sales to Accounting for Hedge Activities” (“ASU 2017-12”). This amendment simplifies the application of hedge incentives are accrued over the period of benefit or expected sales volume. When the incentive is paid accounting and enables companies to better portray in advance, the aggregate incentive is recorded as the economics of risk management activities in their a prepaid and amortized over the period of benefit. 17 NATIONAL BEVERAGE CORP.NATIONAL BEVERAGE CORP. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) The recognition of these incentives involves the use of judgment related to performance and sales volume Trade Receivables We record trade receivables at net realizable value, which includes an estimated allowance estimates that are made based on historical experience for doubtful accounts. We extend credit based on and other factors. Sales incentives are accounted for as a an evaluation of each customer’s financial condition, reduction of sales and actual amounts ultimately realized generally without requiring collateral. Exposure to credit may vary from accrued amounts. Such differences are losses varies by customer principally due to the financial recorded once determined and have historically not condition of each customer. We monitor our exposure been significant. We will adopt ASU 2014-09, Revenue to credit losses and maintain allowances for anticipated from Contracts with Customers, and its amendments losses based on our experience with past due accounts, on April 29, 2018 using the modified retrospective collectability and our analysis of customer data. Activity approach, with no anticipated material impact to the in the allowance for doubtful accounts was as follows: consolidated financial statements. Segment Reporting We operate as a single operating segment for purposes of presenting financial information and evaluating performance. As such, the accompanying consolidated financial statements present financial information in a format that is consistent with the internal financial information used by management. We do not (In thousands) Fiscal 2018 Fiscal 2017 Fiscal 2016 Balance at beginning of year $ 468 $ 484 $ 330 Net charge to expense Net charge-off 34 (50) 74 (90) 232 (78) Balance at end of year $ 452 $ 468 $ 484 accumulate revenues by product classification and, As of April 28, 2018 and April 29, 2017, we did not therefore, it is impractical to present such information. have any customer that comprised more than 10% Shipping and Handling Costs Shipping and handling costs are reported in selling, general and administrative expenses in the accompanying consolidated statements of income. Such costs aggregated $63.3 million in Fiscal 2018, $50.0 million in Fiscal 2017 and $44.6 million in of trade receivables. No one customer accounted for more than 10% of net sales during any of the last three fiscal years. Use of Estimates The preparation of financial statements in conformity with United States generally Fiscal 2016. Although our classification is consistent accepted accounting principles requires management with many beverage companies, our gross margin may to make estimates and assumptions that affect the not be comparable to companies that include shipping amounts reported in the financial statements and and handling costs in cost of sales. accompanying notes. Although these estimates are Stock-Based Compensation Compensation expense for stock-based compensation awards is recognized over the vesting period based on the grant-date fair value estimated using the Black-Scholes model. See Note 8. based on management’s knowledge of current events and anticipated future actions, actual results may vary from reported amounts. 18 NATIONAL BEVERAGE CORP.2. PROPERTY, PLANT AND EQUIPMENT at April 28, 2018 or April 29, 2017. At April 28, 2018, $2.1 million of the Credit Facilities was reserved for Property, plant and equipment as of April 28, 2018 and standby letters of credit and $97.9 million was available April 29, 2017 consisted of the following: for borrowings. (In thousands) Land 2018 2017 $ 9,500 $ 9,500 Buildings and improvements 56,947 51,157 Machinery and equipment 194,241 172,257 Total 260,688 232,914 Less accumulated depreciation (174,881) (167,764) Property, plant and equipment – net $ 85,807 $ 65,150 Depreciation expense was $11.1 million for Fiscal 2018, $10.7 million for Fiscal 2017 and $10.1 million for Fiscal 2016. 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 28, 2018, we were in compliance with all loan covenants. 5. CAPITAL STOCK AND TRANSACTIONS WITH RELATED PARTIES The Company paid a special cash dividend on Common Stock of $69.9 million ($1.50 per share) on August 4, 3. ACCRUED LIABILITIES 2017 and January 27, 2017. On January 25, 2013, the Company sold 400,000 Accrued liabilities as of April 28, 2018 and April 29, shares of Special Series D Preferred Stock, par value 2017 consisted of the following: $1 per share (“Series D Preferred”) for an aggregate (In thousands) 2018 2017 Company redeemed the final remaining 120,000 shares Accrued compensation $ 9,790 $ 9,967 of Series D Preferred for an aggregate price of $6 million purchase price of $20 million. On April 29, 2016, the Accrued promotions Accrued freight Other Total 4. DEBT 7,011 5,984 6,933 8,403 2,279 8,368 plus accrued dividends. In addition, the Company has 150,000 shares of Series C Preferred Stock, par value $1 per share, which are held as treasury stock. $ 29,718 $ 29,017 The Company is authorized under its stock buyback program to repurchase 1.6 million shares of Common Stock. As of April 28, 2018, 502,060 shares were purchased under the program and 1,097,940 shares At April 28, 2018, a subsidiary of the Company were available for purchase. No shares of Common maintained unsecured revolving credit facilities with Stock have been repurchased during the last three banks aggregating $100 million (the “Credit Facilities”). fiscal years. The Credit Facilities expire from October 3, 2020 to June 18, 2021 and any borrowings would currently bear The Company is a party to a management agreement with Corporate Management Advisors, Inc. (“CMA”), a interest at .9% above one-month LIBOR. There were corporation owned by our Chairman and Chief Executive no borrowings outstanding under the Credit Facilities Officer. This agreement was originated in 1991 for the 19 NATIONAL BEVERAGE CORP.NATIONAL BEVERAGE CORP. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) efficient use of management of two public companies at 6. DERIVATIVE FINANCIAL INSTRUMENTS the time. In 1994, one of those public entities, through a merger, no longer was managed in this manner. From time to time, we enter into aluminum swap Under the terms of the agreement, CMA provides, contracts to partially mitigate our exposure to changes subject to the direction and supervision of the Board of in the cost of aluminum cans. Such financial instruments Directors of the Company, (i) senior corporate functions are designated and accounted for as a cash flow (including supervision of the Company’s financial, legal, hedge. Accordingly, gains or losses attributable to the executive recruitment, internal audit and information effective portion of the cash flow hedge are reported systems departments) as well as the services of a Chief in Accumulated Other Comprehensive Income (Loss) Executive Officer and Chief Financial Officer, and (ii) (“AOCI”) and reclassified into cost of sales in the period services in connection with acquisitions, dispositions in which the hedged transaction affects earnings. The and financings by the Company, including identifying ineffective portion of the change in fair value of our cash and profiling acquisition candidates, negotiating and flow hedge was immaterial. The following summarizes structuring potential transactions and arranging financing the gains (losses) recognized in the Consolidated for any such transaction. CMA, through its personnel, Statements of Income and AOCI relative to the cash also provides, to the extent possible, the stimulus and flow hedge for Fiscal 2018, Fiscal 2017 and Fiscal 2016: creativity to develop an innovative and dynamic persona for the Company, its products and corporate image. In order to fulfill its obligations under the management agreement, CMA employs numerous individuals, whom, acting as a unit, provide management, administrative and creative functions for the Company. The management agreement provides that the Company will pay CMA an annual base fee equal to one percent of the consolidated net sales of the Company, and further provides that the Compensation and Stock Option Committee and the Board of Directors may from time to time award additional incentive compensation to CMA or its personnel. The Board of Directors on numerous occasions contemplated incentive compensation and, while shareholder value has increased over $4.8 billion (In thousands) Recognized in AOCI- Gain (loss) before income taxes Less income tax provision (benefit) Net Reclassified from AOCI to cost of sales- Gain (loss) before income taxes Less income tax provision (benefit) Net Net change to AOCI Fiscal 2018 Fiscal 2017 Fiscal 2016 $ 9,498 $ (984) $ (5,743) 3,085 6,413 (365) (2,131) (619) (3,612) 2,569 (2,749) (6,987) 1,383 (1,020) (2,592) 1,186 (1,729) (4,395) $ 5,227 $ 1,110 $ 783 (or 11,000%) since the inception of this agreement, no As of April 28, 2018, the notional amount of our incentive compensation has been paid. We incurred outstanding aluminum swap contracts was $37.5 management fees to CMA of $9.8 million for Fiscal 2018, million and, assuming no change in the commodity $8.3 million for Fiscal 2017 and $7.0 million for Fiscal 2016. Included in accounts payable were amounts due prices, $6.2 million of unrealized gain before tax will be reclassified from AOCI and recognized in earnings CMA of $2.4 million at April 28, 2018 and $2.1 million over the next 12 months. See Note 1. at April 29, 2017. 20 NATIONAL BEVERAGE CORP.As of April 28, 2018, the fair value of the derivative (In thousands) asset was $6.2 million, which was included in prepaid Deferred tax assets: 2018 2017 and other assets. As of April 29, 2017, the fair value Accrued expenses and other $ 2,900 $ 4,740 of the derivative asset, derivative liability and derivative Inventory and amortizable assets 331 538 long-term liability was $602 thousand, $848 thousand Total deferred tax assets 3,231 5,278 and $476 thousand, which was included in prepaid Deferred tax liabilities: and other assets, accrued liabilities and other liabilities, Property respectively. Such valuation does not entail a significant Intangibles and other amount of judgment and the inputs that are significant Total deferred tax liabilities 14,858 15,157 2,875 2,208 17,733 17,365 to the fair value measurement are Level 2 as defined Net deferred tax liabilities $ 14,502 $ 12,087 by the fair value hierarchy as they are observable market based inputs or unobservable inputs that are The reconciliation of the statutory federal income tax corroborated by market data. rate to our effective tax rate is as follows: 7. INCOME TAXES The provision (benefit) for income taxes consisted of the following: (In thousands) Current Deferred Total Fiscal 2018 Fiscal 2017 Fiscal 2016 $ 55,039 $ 54,422 $ 32,806 Statutory federal income tax rate State income taxes, net of federal benefit Domestic manufacturing deduction benefit Remeasurement of deferred taxes Fiscal 2018 Fiscal 2017 Fiscal 2016 30.4% 35.0% 35.0% 2.4 2.2 2.2 (2.4) (3.0) (3.0) (2.9) (.4) - .1 - (.2) 676 1,358 (1,299) Other differences $ 55,715 $ 55,780 $ 31,507 Effective income tax rate 27.1% 34.3% 34.0% Deferred taxes are recorded to give recognition to As of April 28, 2018, the gross amount of unrecognized temporary differences between the tax bases of assets tax benefits was $1.7 million and $191 thousand was or liabilities and their reported amounts in the financial recognized as a tax expense in Fiscal 2018. If we were statements. Valuation allowances are established to to prevail on all uncertain tax positions, the net effect reduce the carrying amounts of deferred tax assets would be to reduce our tax expense by approximately when it is deemed more likely than not that the benefit $1.4 million. A reconciliation of the changes in the gross of deferred tax assets will not be realized. Deferred tax amount of unrecognized tax benefits, which amounts assets and liabilities as of April 28, 2018 and April 29, are included in other liabilities in the accompanying 2017 consisted of the following: consolidated balance sheets, is as follows: 21 NATIONAL BEVERAGE CORP. NATIONAL BEVERAGE CORP. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (In thousands) Fiscal 2018 Fiscal 2017 Fiscal 2016 Beginning balance $ 1,743 $ 1,678 $ 1,801 Federal income tax returns for fiscal years subsequent to 2015 are subject to examination. Generally, the income tax returns for the various state jurisdictions are subject Increases due to current period tax positions Decreases due to lapse of statute of limitations and audit resolutions 204 150 145 to examination for fiscal years ending after fiscal 2011. (214) (85) (268) 8. STOCK-BASED COMPENSATION Ending balance $ 1,733 $ 1,743 $ 1,678 Our stock-based compensation program is a broad- based program designed to attract and retain personnel We recognize accrued interest and penalties related while also aligning participants’ interests with the to unrecognized tax benefits in income tax expense. As interests of the shareholders. of April 28, 2018, unrecognized tax benefits included The 1991 Omnibus Incentive Plan (the “Omnibus accrued interest of $238 thousand. Plan”) provides for compensatory awards consisting of On December 22, 2017, the Tax Cuts and Jobs (i) stock options or stock awards for up to 4,800,000 Act (the “Tax Act”) was enacted into law. The Tax Act shares of common stock, (ii) stock appreciation rights, makes changes to the U.S. tax code, including reducing dividend equivalents, other stock-based awards in the U.S. federal tax rate from 35% to 21% effective amounts up to 4,800,000 shares of common stock and January 1, 2018. The phasing in of the lower corporate (iii) performance awards consisting of any combination of income tax rate results in a blended federal statutory the above. The Omnibus Plan is designed to provide an rate of 30.4% for our fiscal 2018, compared with the incentive to officers and certain other key employees and previous 35% rate. The federal statutory tax rate will be consultants by making available to them an opportunity reduced to 21% in subsequent fiscal years. Included to acquire a proprietary interest or to increase such in the effective tax rate for Fiscal 2018 is a one-time interest in National Beverage. The number of shares or adjustment reducing income tax expense to remeasure options which may be issued under stock-based awards previous deferred tax liabilities of $4.3 million. to an individual is limited to 1,680,000 during any year. We file annual income tax returns in the United States Awards may be granted for no cash consideration or and in various state and local jurisdictions. A number of such minimal cash consideration as may be required years may elapse before an uncertain tax position, for by law. Options generally have an exercise price equal which we have unrecognized tax benefits, is resolved. to the fair market value of our common stock on the While it is often difficult to predict the final outcome date of grant, vest over a five-year period and expire or the timing of resolution of any particular uncertain after ten years. tax position, we believe that our unrecognized tax The Special Stock Option Plan provides for the benefits reflect the most probable outcome. We adjust issuance of stock options to purchase up to an these unrecognized tax benefits, as well as the related aggregate of 1,800,000 shares of common stock. interest, in light of changing facts and circumstances. The resolution of any particular uncertain tax position Options may be granted for such consideration as determined by the Board of Directors. The vesting could require the use of cash and an adjustment to our schedule and exercise price of these options are tied to provision for income taxes in the period of resolution. the recipient’s ownership level of common stock and the 22 NATIONAL BEVERAGE CORP.terms generally allow for the reduction in exercise price risk free interest rate was based on the U.S. Treasury upon each vesting period. Also, the Board of Directors constant maturity interest rate whose term is consistent authorized the issuance of options to purchase up to with the expected life of stock options. There were no 50,000 shares of common stock to be issued at the forfeitures estimated in Fiscal 2018 and Fiscal 2016. direction of the Chairman. The Key Employee Equity Partnership Program The following is a summary of stock option activity for (“KEEP Program”) provides for the granting of stock Fiscal 2018: options to purchase up to 240,000 shares of common stock to key employees, consultants, directors and officers. Participants who purchase shares of stock in the open market receive grants of stock options Options outstanding, beginning of year equal to 50% of the number of shares purchased, up to a maximum of 6,000 shares in any two-year period. Options under the KEEP Program are forfeited in the Granted Exercised Canceled Number of Shares Price(a) $ 383,595 $ 11.47 500 (34,650) (4,500) 29.61 16.15 17.59 10.84 8.49 event of the sale of shares used to acquire such options. Options outstanding, end of year 344,945 Options are granted at an initial exercise price of 60% Options exercisable, end of year 209,579 of the purchase price paid for the shares acquired and the exercise price reduces to the stock par value at the (a) Weighted average exercise price. end of the six-year vesting period. Stock-based compensation expense was $161 We account for stock options under the fair value thousand for Fiscal 2018, $208 thousand for Fiscal 2017 method of accounting using a Black-Scholes valuation and $228 thousand for Fiscal 2016. The total fair value model to estimate the stock option fair value at date of of shares vested was $140 thousand for Fiscal 2018, grant. The fair value of stock options is amortized to $362 thousand for Fiscal 2017 and $652 thousand for expense over the vesting period. Stock options granted Fiscal 2016. The total intrinsic value for stock options were 500 shares in Fiscal 2018, no shares in Fiscal 2017 exercised was $3.0 million for Fiscal 2018, $1.5 million and 3,500 shares in Fiscal 2016. The weighted average for Fiscal 2017 and $5.2 million for Fiscal 2016. Net Black-Scholes fair value assumptions for stock options cash proceeds from the exercise of stock options were granted are as follows: weighted average expected life $560 thousand for Fiscal 2018, $365 thousand for Fiscal of 8.0 years for Fiscal 2018 and 8.0 years for Fiscal 2017 and $848 thousand for Fiscal 2016. Stock based 2016; weighted average expected volatility of 23.8% income tax benefits aggregated $886 thousand for for Fiscal 2018 and 29.0% for Fiscal 2016; weighted Fiscal 2018, $495 thousand for Fiscal 2017 and $1.5 average risk free interest rates of 2.4% for Fiscal 2018 million for Fiscal 2016. The weighted average fair value and 2.1% for Fiscal 2016; and expected dividend yield for stock options granted was $44.50 for Fiscal 2018. of 1.6% for Fiscal 2018 and 3.3% for Fiscal 2016. The As of April 28, 2018, unrecognized compensation expected life of stock options was estimated based on historical experience. The expected volatility was expense related to the unvested portion of our stock options was $268 thousand, which is expected to be estimated based on historical stock prices for a period recognized over a weighted average period of 3.3 years. consistent with the expected life of stock options. The The weighted average remaining contractual term and 23 NATIONAL BEVERAGE CORP.NATIONAL BEVERAGE CORP. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) the aggregate intrinsic value for options outstanding as of April 28, 2018 was 4.4 years and $27.3 million, respectively. The weighted average remaining contractual term and the aggregate intrinsic value for options exercisable as of April 28, 2018 was 3.5 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 and (iii) are not owners of five percent or more of our common stock. As of April 28, 2018, no shares have been issued under the plan. 9. PENSION PLANS The Company contributes to certain pension plans under collective bargaining agreements and to a discretionary profit sharing plan. Annual contributions (including contributions to multi-employer plans reflected below) were $3.4 million for Fiscal 2018, $3.1 million for Fiscal 2017 and $2.9 million for Fiscal 2016. The Company participates in three multi-employer defined benefit 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 Fiscal 2017, a subsidiary of the Company reached a settlement with respect to a notification of withdrawal liability by one of the multi-employer pension plans not considered significant. The settlement did not have a material effect on its financial position or results of operations. 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 2018 and Fiscal 2017 is for the plans’ years ending December 31, 2016 and 2015, respectively. Pension Fund Central States, Southeast and Southwest Areas Pension Plan (EIN no. 36-044243) (the “CSSS Fund”) PPA Zone Status Fiscal 2018 Fiscal 2017 FIP/RP Status Surcharge Imposed Red Red Implemented Yes Western Conference of Teamsters Pension Trust Fund (EIN no. 91-6145047) (the “WCT Fund”) Green Green Not Applicable No 24 NATIONAL BEVERAGE CORP.For the plan years ended December 31, 2016 and Our minimum lease payments under non-cancelable December 31, 2015, the Company was not listed in operating leases as of April 28, 2018 were as follows: the Form 5500 Annual Returns as providing more than 5% of the total contributions for the above plans. The collective bargaining agreements for employees in the CSSS Fund and the WCT Fund expire on October 18, 2021 and May 14, 2021, respectively. The Company’s contributions for all multi-employer pension plans for the last three fiscal years are as follow: (In thousands) Fiscal 2019 Fiscal 2020 Fiscal 2021 Fiscal 2022 Fiscal 2023 Thereafter $ 9,182 7,615 5,241 3,223 1,656 1,531 Total minimum lease payments $ 28,448 (In thousands) Pension Fund CSSS Fund WCT Fund Other multi-employer pension funds Total Fiscal 2018 Fiscal 2017 Fiscal 2016 We enter into various agreements with suppliers $ 1,370 $ 1,262 $ 1,172 for the purchase of raw materials, the terms of which 619 477 485 may include variable or fixed pricing and minimum 228 201 448 $ 2,217 $ 1,940 $ 2,105 purchase quantities. As of April 28, 2018, we had purchase commitments for raw materials of $11.2 million through 2022. As of April 28, 2018, we had purchase commitments for plant and equipment of $4.7 million for Fiscal 2019. 10. COMMITMENTS AND CONTINGENCIES From time to time, we are a party to various litigation matters and claims arising in the ordinary course of We lease buildings, machinery and equipment under business. We do not expect the ultimate disposition of various non-cancelable operating lease agreements such matters to have a material adverse effect on our expiring at various dates through 2029. Certain of consolidated financial position or results of operations. these leases contain scheduled rent increases and/or renewal options. Contractual rent increases are taken into account when calculating the minimum lease payment and recognized on a straight-line basis over the lease term. Rent expense under operating lease agreements totaled $13.3 million for Fiscal 2018, $12.0 million for Fiscal 2017 and $9.2 million for Fiscal 2016. 25 NATIONAL BEVERAGE CORP.NATIONAL BEVERAGE CORP. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 11. QUARTERLY FINANCIAL DATA (UNAUDITED) (In thousands, except per share amounts) First Quarter Second Quarter Third Quarter Fourth Quarter FISCAL 2018 Net sales Gross profit Net income Earnings per common share – basic Earnings per common share – diluted FISCAL 2017 Net sales Gross profit Net income Earnings per common share – basic Earnings per common share – diluted $ 259,832 $ 244,119 $ 227,477 $ 244,306 104,503 38,272 96,080 33,980 91,193 41,080 99,359 36,442 $ .82 $ .73 $ .88 $ .78 $ .82 $ .72 $ .88 $ .78 $ 217,108 $ 203,180 $ 194,564 $ 212,066 85,494 28,995 78,717 24,604 75,920 24,285 85,946 29,161 $ .62 $ .53 $ .52 $ .63 $ .62 $ .53 $ .52 $ .62 26 NATIONAL BEVERAGE CORP.REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Board of Directors and Shareholders of National Beverage Corp. Opinions on the Financial Statements and Internal Control Over Financial Reporting We have audited the accompanying consolidated balance sheets of National Beverage Corp. (the Company) as of April 28, 2018 and April 29, 2017, and the related consolidated statements of income, comprehensive income, stockholders’ equity and cash flows for each of the three years in the period ended April 28, 2018, and the related notes (collectively, the financial statements). We also have audited the Company’s internal control over financial reporting as of April 28, 2018, based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission in 2013. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Company as of April 28, 2018 and April 29, 2017, and the results of their operations and their cash flows for each of the years in the three- year period ended April 28, 2018, in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of April 28, 2018, based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission in 2013. Basis for Opinions The Company’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 the Company’s financial statements and an opinion on the company’s internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects. Our audits of the financial statements included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. 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. Definition and Limitations of Internal Control Over Financial Reporting 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. /s/ RSM US LLP We have served as the Company’s auditor since 2006. Fort Lauderdale, Florida June 27, 2018 27 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., par value $.01 per share, (“Common Stock”) is listed on The NASDAQ Global Select Market under the symbol “FIZZ”. The following table shows the range of high and low prices per share of the Common Stock for the fiscal quarters indicated: First Quarter Second Quarter Third Quarter Fourth Quarter Fiscal Year Ended April 28, 2018 April 29, 2017 High Low High Low $ 110.64 $ 81.65 $ 64.73 $ 46.50 129.82 113.70 114.77 91.50 93.01 83.78 58.30 54.65 92.85 39.14 44.21 48.81 At June 6, 2018 there were approximately 28,000 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 $69.9 million ($1.50 per share) on both August 4, 2017 (Fiscal 2018) and January 27, 2017 (Fiscal 2017). The Company is authorized under its stock buyback program to repurchase 1.6 million shares of Common Stock. As of April 28, 2018, 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. 28 NATIONAL BEVERAGE CORP.PERFORMANCE GRAPH The following graph shows a comparison of the five-year cumulative returns of an investment of $100 cash on April 27, 2013, assuming reinvestment of dividends, in (i) Common Stock, (ii) the NASDAQ Composite Index, (iii) the S&P 500 Index, and (iv) 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 27, 2013 provided a compounded annual return of approximately 45% as of April 28, 2018. 4/27/2013 5/3/2014 5/2/2015 4/30/2016 4/29/2017 4/28/2018 National Beverage Corp $ 100.00 $ 131.85 $ 153.88 $ 320.80 $ 625.93 $ 644.46 NASDAQ Composite –Total Return 100.00 127.40 156.45 151.07 193.65 230.40 S&P 500 – Total Return 100.00 121.43 138.89 139.05 163.96 187.24 Peer Group 100.00 97.62 121.03 178.03 207.92 197.64 29 NATIONAL BEVERAGE CORP. SUBSIDIARIES BevCo Sales, Inc. Beverage Corporation Intl., Inc. Big Shot Beverages, Inc. Everfresh Beverages, Inc. Faygo Beverages, Inc. LaCroix Beverages, 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 5, 2018 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 SUBSIDIARY MANAGEMENT Alan A. Chittaro President Faygo Beverages Michael J. Bahr Executive Vice President Shasta West James C.T. Bolton Executive Vice President PACO Alan D. Domzalski Executive Vice President Sundance Beverages James H. Erwin III Executive Vice President LaCroix Beverages Stephen E. Flis Executive Vice President Shasta Sweetener Arthur D. Hanrehan Executive Vice President National BevPak James M. Jones Executive Vice President Foodservice Division Tammera K. Atkins Vice President Rip It Energy Fuel John F. Hlebica Vice President International Division Nick A. Caporella Chairman of the Board & Chief Executive Officer National Beverage Corp. Joseph G. Caporella President National Beverage Corp. Cecil D. Conlee* Founder & Chairman The Conlee Company 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 Timothy C. Barker Executive Director- Strategic IT Brent R. Bott Executive Director- Consumer Marketing Gregory J. Kwederis Executive Director- Beverage Analyst Dominic H. Angelina Director-Internal Audit Richard S. Berkes Director-Risk Management Glenn G. Bryan Director-Tax Michael M. King Special Corporate Counsel Remembering Gregory P. Cook June 7, 1957 – July 27, 2018 God saw you getting tired And a cure was not to be, So he put his arms around you, And whispered, “Come to Me.” With tearful eyes we watched you, And saw you pass away. Although we loved you dearly, We could not make you stay. A golden heart stopped beating, Hard working hands to rest, God broke our hearts to prove to us, He only takes the Best! Greg was truly a one-of-a-kind character. Not many have attained the pinnacle achieved by him. His devoted sense of loyalty made him “The Most Unforgettable Person to Come Our Way.” Team National “Only when the mind wills itself “Only when the mind wills itself beyond its human boundaries... beyond its human boundaries... does one’s vision create the does one’s vision create the ultimate reality!” ultimate reality!” NAC NAC 8100 Southwest Tenth Street, Fort Lauderdale, Florida 33324 954.581.0922 www.nationalbeverage.com 

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