NATIONAL BEVERAGE CORP - Annual Report: 2006 (Form 10-K)
Table of Contents
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
þ | Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 |
FOR THE FISCAL YEAR ENDED APRIL 29, 2006
OR
o | Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 |
For the transition period from to
Commission file number 1-14170
NATIONAL BEVERAGE CORP.
(Exact name of Registrant
as specified in its charter)
![(NATIONAL BEVERAGE CORP. LOGO)](https://www.sec.gov/Archives/edgar/data/0000069891/000095014406007084/g02587g0258700.gif)
Delaware | 59-2605822 | |
(State of incorporation) | (I.R.S. Employer Identification No.) | |
One North University Drive, Ft. Lauderdale, FL | 33324 | |
(Address of principal executive offices) | (Zip Code) |
Registrants telephone number, including area code: (954) 581-0922
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class | Name of Each Exchange on Which Registered | |
Common Stock, par value $.01 per share | American Stock Exchange |
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the Registrant is a well-known seasoned issuer, as defined in Rule 405 of
the Securities Act. Yes o No þ
Indicate by check mark if the Registrant is not required to file reports pursuant to Section 13 or
Section 15(d) of the Exchange Act.
Yes o No þ
Yes o No þ
Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for
such shorter period that the Registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes þ No o
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is
not contained herein, and will not be contained, to the best of Registrants knowledge, in
definitive proxy or information statements incorporated by reference in Part III of this Form 10-K
or any amendment to this Form 10-K. þ
Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer,
or a non-accelerated filer.
Large accelerated filer o | Accelerated filer o | Non-accelerated filer þ |
Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the
Exchange Act). Yes o No þ
The aggregate market value of the voting stock held by non-affiliates of Registrant computed by
reference to the closing sale price on October 28, 2005 was approximately $61.2 million.
The number of shares of Registrants common stock outstanding as of July 17, 2006 was 37,575,209.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrants Proxy Statement for the Annual Meeting of Shareholders to be filed on
or before August 28, 2006 are incorporated by reference in Part III of this report.
TABLE OF CONTENTS
Table of Contents
PART I
ITEM 1. BUSINESS
GENERAL
National Beverage Corp. develops, manufactures, markets and distributes a complete portfolio of
quality beverage products throughout the United States. Incorporated in Delaware in 1985, National
Beverage Corp. is a holding company for various operating subsidiaries. In this report, the terms
we, us, our, Company and National Beverage mean National Beverage Corp. and its
subsidiaries.
Our lines of multi-flavored soft drinks, including those of our flagship brands, Shasta® and
Faygo®, emphasize distinctive flavor variety. In addition, we offer an assortment of premium
beverages geared to the health-conscious consumer, including Everfresh®, Home Juice®, and Mr. Pure®
100% juice and juice-based products; and LaCroix®, Mt. Shasta, Crystal Bay® and ClearFruit®
flavored and spring water products. We also produce energy drinks and powdered beverage products,
including Rip It®, an energy drink in liquid and powdered form geared toward young consumers and
PowerBlast Energy Fuel, a powdered nutritional beverage
product for on-the-go consumers. Other products include Ohana® fruit-flavored drinks and St. Nicks® holiday soft
drinks. Substantially all of our brands are produced in thirteen manufacturing facilities that are
strategically located in major metropolitan markets throughout the continental United States. To a
lesser extent, we develop and produce soft drinks for retail grocery chains, warehouse clubs,
mass-merchandisers and wholesalers as well as soft drinks for other beverage companies.
We utilize various means to maintain our position as a cost-effective producer of beverage
products. These include centralized purchasing of raw materials, vertical integration of the
manufacturing process, close proximity to customer distribution centers, regionally targeted media
promotions and the use of multiple distribution systems. The strength of our brands and location
of our manufacturing facilities distinguish us as a national supplier of beverages to national and
regional retailers, mass merchandisers, wholesalers and discount stores.
Our strategy emphasizes the growth of our products by offering a branded beverage portfolio of
proprietary flavors; by supporting the franchise value of regional brands and expanding those
brands with modern packaging and broader demographic emphasis; by developing and acquiring
innovative products tailored toward healthy lifestyles; and by appealing to the quality-price
expectations of the family consumer. We believe that the regional share dynamics of our brands
perpetuate consumer loyalty within local regional markets, resulting in more retailer sponsored
promotional activities.
PRODUCTS
Shasta and Faygo, our traditional soft drink brands that emphasize flavor variety and innovation,
have been manufactured and marketed throughout the United States for a combined period of over 200
years. Established over 110 years ago and distributed nationally, Shasta is the largest of
National Beverages brands and includes multiple flavors as well as bottled spring and drinking
waters. Established almost 100 years ago, Faygo products are primarily distributed east of the
Mississippi River and include a multi-flavored product line. We also produce and market other
brands of soft drinks, juice and water products, including Ritz®, Everfresh, Crystal Bay and Ohana.
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We also offer Rip It energy drinks in a variety of flavors, and Rip It and PowerBlast powdered
energy products for the on-the-go consumer.
The volume of the flavor segment of the soft drink market continues to grow, as opposed to
declining cola volume, and alternative beverage products are being consumed with greater frequency.
We believe that we will continue to benefit from these trends, which are consistent with our
fantasy of flavors strategy emphasizing our distinctive flavored soft drinks, energy drinks,
juices and other specialty beverages. Although cola drinks account for approximately 50% of the
soft drink industrys domestic grocery channel volume, colas account for less than 20% of our
Companys total volume. We continue to emphasize expanding our beverage portfolio beyond
traditional carbonated soft drinks through new product development inspired by lifestyle
enhancement trends, innovative package enhancements, and the dichotomization and expansion of
our brands in order to increase demand for non-carbonated and alternative beverages.
MANUFACTURING
Our Companys thirteen plants are strategically located in major metropolitan markets across the
continental United States, enabling us to efficiently manufacture and distribute beverages to
substantially all geographic markets. Each plant is generally equipped to produce both canned and
bottled beverage products in a variety of package sizes in each market. We utilize numerous
package types and sizes, including cans ranging from eight to sixteen ounces and bottles ranging
from seven ounces to three liters.
We believe that ownership of our bottling facilities provides an advantage over certain of our
competitors that rely upon independent third party bottlers to manufacture and market their
products. Since our Company controls the national manufacture, distribution and marketing of our
brands, we can more effectively manage product quality and customer service and respond quickly to
changing market conditions.
We produce a substantial portion of the flavor concentrates used in our branded products. By
controlling our own formulas throughout our bottling network, we are able to assure manufacture of
our product in accordance with uniform quality standards while tailoring flavors to regional taste
preferences. We believe that the combination of a Company-owned bottling network servicing the
United States together with uniform standards for packaging, formulations, and customer service
provide us with a strategic advantage in servicing the growing presence of national retailers and
mass-merchandisers. Our Company also maintains research and development laboratories at multiple
locations. These laboratories continually test products for compliance with our strict quality
control standards as well as conduct research for new products and flavors.
DISTRIBUTION
We utilize a hybrid distribution system to deliver our products through four primary distribution
channels: take-home, convenience, food-service and vending.
The take-home distribution channel consists of national and regional grocery stores, warehouse
clubs, mass-merchandisers, wholesalers and dollar stores. We distribute our products to this
channel through the warehouse distribution system and the direct-store
delivery system. Under the warehouse distribution system, products are shipped from our
manufacturing
facilities to the retailers centralized distribution centers and then distributed by the retailer
to each
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of its outlet locations with other goods. Products sold through the direct-store delivery
system are distributed directly to the customers retail outlets by our direct-store delivery fleet
and by independent distributors.
We also distribute our products to the convenience channel through our own
direct-store delivery fleets and those of independent distributors. The convenience channel
consists of convenience stores, gas stations, and other smaller up-and-down-the-street accounts.
Because of the higher retail prices and margins that typically prevail, we have undertaken several
measures to expand convenience channel distribution in recent years. These include development of
products specifically targeted to this market, such as ClearFruit, Everfresh, Mr. Pure, Crystal
Bay, Rip It and PowerBlast. Additionally, we have created proprietary and specialized packaging
for these products with distinctive graphics.
Our food-service division is responsible for sales to hospitals, schools, military bases, airlines,
hotels and food-service wholesalers. Food-service products are distributed primarily through
independent, specialized distributors. Additionally, our Company-owned direct-store distribution
systems service certain schools and other institutions.
Each of our take-home, convenience and food-service operations use vending machines and glass-door
coolers as marketing and promotional tools for our brands. We provide vending machines and coolers
on a placement or purchase basis to our customers and vending operators. We believe that the
vending market provides not only increased beverage sales, but also the enhancement of brand
awareness and the development of brand loyalty.
SALES AND MARKETING
We sell and market our products through an internal sales force as well as selected broker
networks. Our sales force is organized to serve a specific market segment, focusing either on
geographic territories, distribution channels or product lines. We believe that this focus allows
each sales group to provide high level, responsive service and support to the customers and markets
served.
Our sales and marketing programs are directed toward maintaining and enhancing consumer brand
recognition and loyalty, and typically utilize a combination of regional advertising, special event
marketing, diversified packaging, endorsements and sponsorships, and consumer coupon distribution.
We retain advertising agencies to assist with media advertising programs for our brands.
Additionally, we offer numerous promotional programs to retail customers, including cooperative
advertising support, in-store advertising materials and other incentives. We believe these
elements allow us to tailor marketing and advertising programs to meet local and regional economic
conditions and demographics. We also seek to maintain points of difference between our brands and
those of our competitors by combining high product quality, flavor innovation and unique packaging
designs with a value pricing strategy. Additionally, National Beverage sponsors special holiday
promotions including St. Nicks, which features special holiday flavors and packaging.
Our regional share dynamics strategy emphasizes the acquisition and support of brands that have a
significant regional presence. We believe that these types of products enjoy a regional
identification that fosters long-term consumer loyalty and make them less vulnerable to consumer
switching. In addition, these types of home-town products often generate more aggressive
retailer
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sponsored promotional activities and receive media exposure through community activities and other
local events.
RAW MATERIALS
Our centralized procurement division maintains relationships with numerous suppliers of raw
materials and packaging goods. By consolidating the purchasing function for our manufacturing
facilities, we believe we are able to procure more competitive arrangements with our suppliers,
allowing us to compete as a low-cost producer of beverages.
The products we produce and sell are made from various materials, including sweeteners, juice
concentrates, carbon dioxide, water, glass and plastic bottles, aluminum cans and ends, paper,
cartons and closures. Most of our low-calorie soft drink products use aspartame or sucralose. We
manufacture a substantial portion of our flavor concentrates and purchase remaining raw materials
from multiple suppliers.
Substantially all of the materials and ingredients we purchase are presently available from several
suppliers, although strikes, weather conditions, utility shortages, governmental control or
regulations, national emergencies, price or supply fluctuations or other events outside our control
could adversely affect the supply of specific materials. We use Splenda® sweetener in certain of
our sugar-free products, which is currently available from only one supplier and may be in short
supply during certain periods. Our key raw materials, including aluminum cans, plastic bottles and
high fructose corn syrup, are derived from commodities. Therefore, pricing and availability tend
to fluctuate based upon worldwide market conditions. Our ability to recover increased costs
through higher pricing may be limited by the competitive environment in which we operate. In
certain cases, we elect to enter into multi-year agreements for the supply of these materials with
one or more suppliers, the terms of which may include variable or fixed pricing, minimum purchase
quantities, and/or the requirement to purchase all supplies for specified locations. A significant
portion of our raw material purchases is comprised of aluminum cans.
SEASONALITY
Our sales are seasonal with the highest volume typically realized during the summer months. We
have sufficient production capacity to meet seasonal increases without maintaining significant
quantities of inventory in anticipation of periods of peak demand. The volume of sales may be
affected by weather conditions.
COMPETITION
The carbonated soft drink market and the non-carbonated beverage market are highly competitive and
our competitive position varies in each of our market areas. Our products compete with many
varieties of liquid refreshments, including coffee, milk, tea and water. We compete with bottlers
and distributors of national, regional, and private label products. Several competitors, including
the two that dominate the soft drink industry, PepsiCo, Inc. and The Coca-Cola Company, have
greater financial resources than us and aggressive promotion of their products can adversely affect
sales of our brands. Principal methods of competition in the beverage industry are price and
promotional activity, advertising and marketing programs, point-of-sale merchandising, retail space
management, customer service, product differentiation, packaging innovations and distribution
methods. We believe our Company differentiates itself through strong regional brand recognition,
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innovative flavor variety, attractive packaging, efficient distribution methods, specialized
advertising and, for some product lines, value pricing.
TRADEMARKS
We maintain registered trademarks for our brands in the United States and abroad, which are
significant to the business of our Company. Shasta, Faygo, Ritz, LaCroix, Everfresh, Big Shot, Mr.
Pure, Home Juice, ClearFruit, Mt. Shasta, Crystal Bay, Rip It, PowerBlast, Ohana, and St. Nicks
are among the trademarks of National Beverage. We intend to continue to maintain all registrations
of our significant trademarks and use the trademarks in the operation of our businesses.
GOVERNMENTAL REGULATION
The production, distribution and sale of our products in the United States are subject to the
Federal Food, Drug and Cosmetic Act; the Dietary Supplement Health and Education Act of 1994; the
Occupational Safety and Health Act; the Lanham Act; various environmental statutes; and various
other federal, state and local statutes regulating the production, transportation, sale, safety,
advertising, labeling and ingredients of such products. Our management believes that we are in
compliance in all material respects with such existing legislation.
Certain states and localities prohibit the sale of certain beverages unless a deposit or tax is
charged for containers. These requirements vary by each jurisdiction. Similar legislation has
been proposed in certain other states and localities, as well as by Congress. We are unable to
predict whether such legislation will be enacted or what impact its enactment would have on our
business, financial condition or results of operations.
All of our facilities in the United States are subject to federal, state and local environmental
laws and regulations. Compliance with these provisions has not had any material adverse effect on
our financial or competitive position. We believe that our current practices and procedures for
the control and disposition of toxic or hazardous substances comply in all material respects with
applicable law. However, compliance with or any violation of current and future laws or
regulations could require material expenditures or otherwise have a material adverse effect.
EMPLOYEES
As of April 29, 2006, we employed approximately 1,400 people, of which approximately 400 are
covered by collective bargaining agreements. We believe that relations with employees are good.
AVAILABLE INFORMATION
Our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K,
proxy statements and amendments to those reports, are available free of charge on our internet
website at www.nationalbeverage.com as soon as reasonably practicable after such reports are
electronically filed with the Securities and Exchange Commission. The information on the Companys
website is not incorporated by reference in this Annual Report on Form 10-K.
Any person may obtain a copy of the Companys Code of Ethics by making a written request to the
Corporate Secretary and mailing it to National Beverage Corp., One North University Drive, Fort
Lauderdale, Florida 33324.
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ITEM 1A. RISK FACTORS
In addition to other information in this Form 10-K, the following risk factors should be considered
carefully in evaluating the Companys business. Our business, financial condition and results of
operations could be materially and adversely affected by any of these risks. Additional risks and
uncertainties, including risks and certainties not presently known to the Company, or that the
Company currently deems immaterial, may also impair its business and results of operations.
Changes in consumer preferences and taste. There has been an increasing focus on health and
wellness in the beverage industry. This has led to a decline in the consumption of caloric
carbonated soft drinks and an increase in the consumption of products perceived to deliver health,
wellness and/or functionality. If we do not adequately anticipate and react to changing
demographics, consumer trends, health concerns and product preferences, our results of operations
and financial condition could be adversely affected.
Competition. The beverage industry is extremely competitive. Our products compete with a broad
range of beverage products, most of which are manufactured and distributed by companies with
substantially greater financial, marketing and distribution resources. In order to generate future
revenues and profits, we must continue to sell products that appeal to our customers and consumers.
Discounting and other competitive action may make it more difficult to sustain revenues and
profits.
Customer consolidation. Our retail customer base has been consolidating over the last several
years resulting in fewer customers with increased purchasing power. This increased purchasing
power can limit our ability to increase pricing for our products with certain of our customers.
Our inability to meet the demands of our larger customers could lead to a loss of business and
adversely affect our results of operations and financial position.
Supply of raw materials. The production of our products is dependent on certain raw materials,
including aluminum, resin, fuel, linerboard and corn. These commodities are subject to price
volatility caused by numerous factors. Commodity price increases ultimately result in a
corresponding increase in the cost of raw materials and energy costs. We may be limited in our
ability to pass these increases on to our customers or may incur a loss in sales volume to the
extent price increases are taken. In addition, strikes, weather conditions, governmental controls,
national emergencies, natural disasters, supply shortages or other events could affect our
continued supply of raw materials. If the price of raw materials increases or the availability of
raw materials is limited, our results of operations and financial condition could be adversely
affected.
Governmental regulation. Our business and properties are subject to various federal, state and
local laws and regulations, including those governing the production, packaging, quality, labeling
and distribution of beverage products. New laws or regulations or changes in existing laws or
regulations could negatively impact our financial results through higher operating costs to achieve
compliance.
Section 404 of the Sarbanes-Oxley Act. Pursuant to Section 404 of the Sarbanes-Oxley Act of 2002
and related Securities and Exchange Commission rules currently in effect, we will have to furnish a
report of managements assessment of the effectiveness of our internal controls at April 28, 2007.
If it is determined that our internal controls over financial reporting are not effective,
investors could lose confidence in our reported financial information. Also, preparing for and
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complying with Section 404 of the Sarbanes-Oxley Act of 2002 will increase our cost of being a
public company in fiscal 2007 and beyond.
ITEM 1B. UNRESOLVED STAFF COMMENTS
None
ITEM 2. PROPERTIES
Our principal properties include thirteen production facilities located in eleven states, which, in
the aggregate, comprise approximately two million square feet. We own eleven production facilities
in the following states: Arizona, California (2), Georgia, Kansas, Michigan (2), Ohio, Texas, Utah
and Washington. Two production facilities, located in Maryland and Florida, are leased subject to
agreements that expire through 2007. We believe our facilities are generally in good condition and
sufficient to meet present needs. We periodically review the capabilities of our facilities and,
on the basis of such review, may from time to time acquire additional facilities and/or dispose of
existing facilities.
The production of beverages is capital intensive but is not characterized by rapid technological
change. The technological advances that have occurred have generally been of an incremental
cost-saving nature, such as the industrys conversion to lighter weight containers. We are not
aware of any anticipated industry-wide changes in technology that would adversely impact our
current physical production capacity or cost of production.
We own and lease delivery trucks, other trucks, vans and automobiles used in the sale and
distribution of our products. In addition, we lease office space, transportation equipment, office
equipment, data processing equipment and certain plant equipment.
ITEM 3. LEGAL PROCEEDINGS
From time to time, we are a party to various litigation matters arising in the ordinary course of
business. In our opinion, the ultimate disposition of such matters will not have a material
adverse effect on our consolidated financial position or results of operations.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were voted upon during the fourth quarter of fiscal 2006.
PART II
ITEM 5. MARKET FOR REGISTRANTS 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 American Stock Exchange (AMEX) under the symbol FIZ. The following table shows the
range of high and low sale prices per share of the Common Stock as reported by the AMEX for the
fiscal quarters indicated:
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Fiscal 2006 | Fiscal 2005 | |||||||||||||||
High | Low | High | Low | |||||||||||||
First Quarter |
$ | 8.66 | $ | 7.18 | $ | 10.29 | $ | 7.50 | ||||||||
Second Quarter |
$ | 8.76 | $ | 7.07 | $ | 9.30 | $ | 7.74 | ||||||||
Third Quarter |
$ | 10.00 | $ | 7.00 | $ | 9.89 | $ | 8.06 | ||||||||
Fourth Quarter |
$ | 16.00 | $ | 8.31 | $ | 9.20 | $ | 7.00 |
Excluding beneficial owners of our Common Stock whose securities are held in the names of various
dealers and/or clearing agencies, there were approximately 700 shareholders of record at July 17,
2006, according to records maintained by our transfer agent.
On January 27, 2006 and April 30, 2004, the Company paid a special cash dividend of $1.00 per
share. Currently, the Board of Directors has no plans to declare additional cash dividends. See
Note 5 of Notes to Consolidated Financial Statements for certain restrictions on the payment of
dividends.
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ITEM 6. SELECTED FINANCIAL DATA
NATIONAL BEVERAGE CORP. AND SUBSIDIARIES
(In thousands, except per share amounts)
(In thousands, except per share amounts)
Fiscal Year Ended | ||||||||||||||||||||
April 29, | April 30, | May 1, | May 3, | April 27, | ||||||||||||||||
2006 | 2005 | 2004 | 2003 (1) | 2002 | ||||||||||||||||
SUMMARY OF OPERATIONS: |
||||||||||||||||||||
Net sales |
$ | 516,802 | $ | 495,572 | $ | 512,061 | $ | 500,430 | $ | 502,778 | ||||||||||
Cost of sales |
349,131 | 340,206 | 343,316 | 335,457 | 339,041 | |||||||||||||||
Gross profit |
167,671 | 155,366 | 168,745 | 164,973 | 163,737 | |||||||||||||||
Selling, general and administrative
expenses |
135,090 | 130,037 | 139,058 | 136,902 | 136,925 | |||||||||||||||
Interest expense |
105 | 106 | 132 | 316 | 857 | |||||||||||||||
Other income
- net |
2,416 | 1,199 | 544 | 706 | 867 | |||||||||||||||
Income before income taxes |
34,892 | 26,422 | 30,099 | 28,461 | 26,822 | |||||||||||||||
Provision for income taxes |
12,666 | 9,536 | 11,408 | 10,872 | 10,270 | |||||||||||||||
Net income |
$ | 22,226 | $ | 16,886 | $ | 18,691 | $ | 17,589 | $ | 16,552 | ||||||||||
PER SHARE DATA: |
||||||||||||||||||||
Basic net income (2) |
$ | .59 | $ | .45 | $ | .51 | $ | .48 | $ | .45 | ||||||||||
Diluted net income (2) |
.58 | .44 | .49 | .46 | .44 | |||||||||||||||
Cash dividends paid (3) |
1.00 | | 1.00 | | | |||||||||||||||
Closing stock price |
15.36 | 7.10 | 9.08 | 7.10 | 7.20 | |||||||||||||||
BALANCE SHEET DATA: |
||||||||||||||||||||
Working capital |
$ | 75,025 | $ | 81,962 | $ | 64,967 | $ | 79,785 | $ | 70,164 | ||||||||||
Property - net |
56,027 | 62,879 | 59,535 | 60,432 | 60,658 | |||||||||||||||
Total assets |
218,339 | 224,587 | 205,378 | 218,195 | 205,685 | |||||||||||||||
Long-term debt |
| | | 300 | 10,981 | |||||||||||||||
Deferred
income taxes - net |
17,783 | 15,958 | 14,930 | 14,843 | 12,072 | |||||||||||||||
Shareholders equity (3) |
130,860 | 143,296 | 125,376 | 143,292 | 125,677 |
(1) | Fiscal 2003 consisted of 53 weeks. | |
(2) | Basic net income per share is computed by dividing earnings applicable to common shares by the weighted average number of shares outstanding. Diluted net income per share includes the dilutive effect of stock options. Share amounts have been adjusted for the 100% stock dividend distributed on March 22, 2004. | |
(3) | In January 2006 and April 2004, the Company paid a special cash dividend of $1.00 per share, aggregating $38.0 million and $38.4 million, respectively. |
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ITEM 7. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
National Beverage Corp. develops, manufactures, markets and distributes a complete portfolio of
quality beverage products throughout the United States. Incorporated in Delaware in 1985, National
Beverage Corp. is a holding company for various operating subsidiaries. In this report, the terms
we, us, our, Company and National Beverage mean National Beverage Corp. and its
subsidiaries.
Our lines of multi-flavored soft drinks, including those of our flagship brands, Shasta® and
Faygo®, emphasize distinctive flavor variety. In addition, we offer an assortment of premium
beverages geared to the health-conscious consumer, including Everfresh®, Home Juice®, and Mr. Pure®
100% juice and juice-based products; and LaCroix®, Mt. Shasta, Crystal Bay® and ClearFruit®
flavored and spring water products. We also produce energy drinks and powdered beverage products,
including Rip It®, an energy drink in liquid and powdered form geared toward young consumers and
PowerBlast Energy Fuel, a powdered nutritional beverage
product for on-the-go consumers. Other products include Ohana® fruit-flavored drinks and St. Nicks® holiday soft
drinks. Substantially all of our brands are produced in thirteen manufacturing facilities that are
strategically located in major metropolitan markets throughout the continental United States. To a
lesser extent, we develop and produce soft drinks for retail grocery chains, warehouse clubs,
mass-merchandisers and wholesalers (allied brands) as well as soft drinks for other beverage
companies.
Our strategy emphasizes the growth of our products by offering a branded beverage portfolio of
proprietary flavors; by supporting the franchise value of regional brands and expanding those
brands with modern packaging and broader demographic emphasis; by developing and acquiring
innovative products tailored toward healthy lifestyles; and by appealing to the quality-price
expectations of the family consumer. We believe that the regional share dynamics of our brands
perpetuate consumer loyalty within local regional markets, resulting in more retailer sponsored
promotional activities.
Over the last several years, we have focused on increasing penetration of our brands in the
convenience channel through Company-owned and independent distributors. The convenience channel is
composed of convenience stores, gas stations and other smaller up-and-down-the-street accounts.
Because of the higher retail prices and margins that typically prevail, we have undertaken specific
measures to expand distribution in this channel. These include development of products specifically
targeted to this market, such as ClearFruit, Everfresh, Mr. Pure, Crystal Bay, Rip It and
PowerBlast. Additionally, we have created proprietary and specialized packaging for these products
with distinctive graphics. We intend to continue our focus on enhancing growth in the convenience
channel through both specialized packaging and innovative product development.
Beverage industry sales are seasonal with the highest volume typically realized during the summer
months. Additionally, our operating results are subject to numerous factors, including
fluctuations in the costs of raw materials, changes in consumer preference for beverage products
and competitive pricing in the marketplace.
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RESULTS OF OPERATIONS
Net Sales
Net sales for fiscal 2006 increased 4.7% to $516.8 million compared to fiscal 2005, excluding $1.8
million received last year from a customer relative to a recovery of pricing and promotional
allowances for product shipped in a previous period. This increase included a 6% improvement in
pricing and a 1% increase in branded volume, partially offset by a 12% decline in allied case
volume. The increases in unit pricing and branded volume were led by increased sales of Rip It
energy drinks, Everfresh juices and LaCroix waters. Volume, however, was negatively impacted by the
effects of price increases instituted to recover raw material cost increases and by the effects of
major hurricanes in several of our market areas.
During fiscal 2005, we initiated a series of price increases to offset unprecedented raw material
cost increases, especially in the latter part of the year as sustained increases in fuel and resin
continued to rise to historical new highs. Price increases tend to have an adverse effect on case
volume and the industry generally experienced reduced case volume, especially for carbonated soft
drinks. As a result, our branded case volume was relatively flat for the year while net pricing was
up slightly, due to higher selling prices and a change in product mix. This product mix change
included increased sales of our alternative beverages as obesity and other health issues caused
consumers to consume less carbonated soft drinks. Also impacting sales was a 19% volume decline in
allied branded products related to a retailers change in philosophy, which affected their sales
and our earlier decision to eliminate certain lower margin business. Net sales included $1.8
million received from a customer relative to the recovery of pricing and promotional allowances for
product shipped in a previous year.
Gross Profit
Gross profit approximated 32.4% of net sales for fiscal 2006 and 31.4% of net sales for fiscal
2005. This improvement was due to net proceeds of $8.4 million received from a fructose settlement
partially offset by the effects of higher cost of goods sold, lower allied case volume, and the
$1.8 million noted above. Excluding the fructose settlement, cost of goods sold per unit increased
approximately 7%, primarily due to higher manufacturing and raw material costs. See Note 11 of
Notes to Consolidated Financial Statements.
Gross profit approximated 31.4% of net sales for fiscal 2005 and 33.0% for fiscal 2004. This
decline was due to the effect of the sales decrease and higher cost of goods sold. Cost of goods
sold per unit increased approximately 4%, primarily due to higher packaging and energy costs.
Shipping and handling costs are included in selling, general and administrative expenses, the
classification of which is consistent with many beverage companies. However, our gross margin may
not be comparable to companies that include shipping and handling costs in cost of sales. See Note
1 of Notes to Consolidated Financial Statements.
Selling, General and Administrative Expenses
Selling, general and administrative expenses were $135.1 million or 26.1% of net sales for fiscal
2006 compared to $130.0 million or 26.2% of net sales for last year. The $5.1 million increase is
due to higher marketing and administrative costs including increased costs related to product
development and new product introduction.
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Selling, general and administrative expenses for fiscal 2005 were $130.0 million or 26.2% of net
sales compared to $139.1 million or 27.2% of net sales for fiscal 2004. The decline in expenses
was due primarily to lower selling and marketing costs of $3.2 million and $5.6 million,
respectively, partially offset by higher energy costs.
Interest Expense and Other Income-Net
Interest expense of $105,000 in fiscal 2006 and $106,000 in fiscal 2005 is primarily related to
financing costs related to maintaining lines of credit. Other income includes interest income of
$1,450,000 for fiscal 2006, $581,000 for fiscal 2005, and $603,000 for fiscal 2004. The increase
in interest income for fiscal 2006 is primarily due to an increase in investment yields and average
invested balances, while the decline in fiscal 2005 is related to a decrease in average invested
balances. Fiscal 2006 other income includes gains and losses on the disposal of property of
approximately $2.1 million and $2.0 million, respectively. In addition, other income for fiscal
2006 and fiscal 2005 includes a gain of $1.1 million and $633,000, respectively, related to a
contract settlement with a customer.
Income Taxes
Our effective tax rate was approximately 36.3% for fiscal 2006, 36.1% for fiscal 2005, and 37.9%
for fiscal 2004. The difference between the effective rate and the federal statutory rate of 35%
was primarily due to the effects of state income taxes, nondeductible expenses, and nontaxable
interest income. See Note 8 of Notes to Consolidated Financial Statements.
LIQUIDITY AND FINANCIAL CONDITION
Capital Resources
Our current sources of capital are cash flow from operations and borrowings under existing credit
facilities. The Company maintains unsecured revolving credit facilities aggregating $45 million of
which $3 million is utilized for standby letters of credit at April 29, 2006. We believe
that existing capital resources are sufficient to meet our capital requirements and those of the
parent company for the foreseeable future.
Cash Flows
During
fiscal 2006, $28.6 million was provided from operating activities, which was offset by $5.1
million used for investing activities and $35.9 million used for financing activities. Cash
provided by operating activities decreased $4.3 million due to an increase in trade receivables,
inventories and other assets. Cash used in investing activities increased $1.2 million due to the
net change in marketable securities purchased and sold. Cash used in financing activities
increased $36.1 million due primarily to the $38 million cash dividend paid in January 2006.
During fiscal 2005, cash of $32.9 million was generated from operating activities, which was
partially offset by $3.9 million used for investing activities. Cash provided by operating
activities for fiscal 2005 increased $11.6 million due to an increase in non-cash charges and
favorable changes in working capital requirements. Cash used in investing activities increased
$3.8 million primarily due to increased capital expenditures to enhance packaging capabilities and
improve manufacturing efficiencies. Cash provided by financing activities of $146,000 was
comprised of proceeds from stock options exercised.
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Financial Position
During fiscal 2006, our working capital decreased $6.9 million to $75 million primarily due to the
$38 million cash dividend paid in January 2006. Trade
receivables increased $2.1 million due to
higher sales. Inventory increased $4.7 million due to the effects of new products and cost
increases. Prepaid and other assets increased $1.6 million due to an increase in income tax refund
receivables. At April 29, 2006, the current ratio was 2.2 to 1 compared to 2.4 to 1 at April 30,
2005.
During fiscal 2005, our working capital increased $17 million to $82 million from $65 million,
primarily due to an increase in cash balances generated from operating activities. Trade
receivables decreased $2.6 million due primarily to lower sales. Prepaid and other assets declined
$684,000 due to lower income tax refund receivables. At April 30, 2005, the current ratio was 2.4
to 1 compared to 2.1 to 1 for the prior year.
Liquidity
We continually evaluate capital projects designed to expand capacity, enhance packaging
capabilities and improve efficiencies at our manufacturing facilities. In the latter part of
fiscal 2004, we initiated several capital expenditure programs to upgrade our manufacturing
facilities, which resulted in increased capital expenditures in fiscal 2005 and, to a lesser
extent, in fiscal 2006. Such programs are expected to continue in fiscal 2007.
In January 1998, the Board of Directors authorized the purchase of up to 800,000 shares of National
Beverage common stock. In fiscal 2004, we purchased 18,000 shares and there were no shares
purchased in fiscal 2006 and fiscal 2005. Aggregate shares purchased since January 1998 were
502,060.
Pursuant to a management agreement, we incurred a fee to Corporate Management Advisors, Inc.
(CMA) of approximately $5.2 million for fiscal 2006, $5.0 million for fiscal 2005, and $5.1
million for fiscal 2004. At April 29, 2006, we owed $1.3 million to CMA for unpaid fees. See Note
6 of Notes to Consolidated Financial Statements.
CONTRACTUAL OBLIGATIONS
Long-term contractual obligations at April 29, 2006 are payable as follows:
(In thousands) | ||||||||||||||||||||
2008- | 2010- | |||||||||||||||||||
Total | 2007 | 2009 | 2011 | Thereafter | ||||||||||||||||
Operating leases |
$ | 17,577 | $ | 5,268 | $ | 6,860 | $ | 3,645 | $ | 1,804 | ||||||||||
Purchase commitments |
29,176 | 19,985 | 9,191 | | | |||||||||||||||
Total |
$ | 46,753 | $ | 25,253 | $ | 16,051 | $ | 3,645 | $ | 1,804 | ||||||||||
We have guaranteed the residual value of certain leased property in the amount of $11.3 million.
Management believes that the net realizable value of the equipment will be in excess of the
guaranteed amount when the lease terminates in July 2012.
We contribute to certain pension plans under collective bargaining agreements based on hours worked
and to a discretionary profit sharing plan, neither of which have any long-term contractual funding
requirements. Contributions were $2.2 million for fiscal 2006, $2.3 million for fiscal 2005, and
$2.2 million for fiscal 2004.
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We maintain self-insured and deductible programs for certain liability, medical and workers
compensation exposures. Other long-term liabilities include known claims and estimated incurred,
but not reported, claims not otherwise covered by insurance, based on actuarial assumptions and
historical claims experience. Since the timing and amount of claims settlement varies
significantly, we are not able to reasonably estimate future payments for the periods indicated.
We have standby letters of credit aggregating $3 million related to our self-insurance programs,
which expire in fiscal 2007. We expect to renew these standby letters of credit until they are no
longer required.
OFF-BALANCE SHEET ARRANGEMENTS
We do not have any off-balance sheet arrangements that have or are reasonably likely to have a
current or future material effect on our financial condition.
CRITICAL ACCOUNTING POLICIES
The preparation of financial statements in conformity with generally accepted accounting principles
requires management to make estimates and assumptions that affect the amounts reported in the
financial statements and accompanying notes. Although these estimates are based on managements
knowledge of current events and actions it may undertake in the future, they may ultimately differ
from actual results. We believe that the critical accounting policies described in the following
paragraphs affect the most significant estimates and assumptions used in the preparation of our
consolidated financial statements. For these policies, we caution that future events rarely develop
exactly as estimated, and the best estimates routinely require adjustment.
Credit Risk
We sell products to a variety of customers and extend credit based on an evaluation of each
customers financial condition, generally without requiring collateral. Exposure to losses on
receivables varies by customer principally due to the financial condition of each customer. We
monitor our exposure to credit losses and maintain allowances for anticipated losses based on
specific customer circumstances, credit conditions, and historical write-offs and collections.
Impairment of Long-Lived Assets
All long-lived assets, excluding goodwill and intangible assets not subject to amortization, are
evaluated for impairment on the basis of undiscounted cash flows whenever events or changes in
circumstances indicate that the carrying amount of an asset may not be recoverable. An impaired
asset is written down to its estimated fair market value based on the best information available.
Estimated fair market value is generally measured by discounting future cash flows. Goodwill and
intangible assets not subject to amortization are evaluated for impairment annually or sooner in
accordance with SFAS No. 142. An impairment loss is recognized if the carrying amount, or for
goodwill, the carrying amount of its reporting unit, is greater than its fair value.
Income Taxes
Our effective income tax rate and the tax bases of assets and liabilities are based on estimates of
taxes which will ultimately be payable. Deferred taxes are recorded to give recognition to
temporary differences between the tax bases of assets or liabilities and their reported amounts in
the financial statements. Valuation allowances are established when it is deemed, more likely than
not, that the benefit of deferred tax assets will not be realized.
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Insurance Programs
We maintain self-insured and deductible programs for certain liability, medical and workers
compensation exposures. Accordingly, we accrue for known claims and estimated incurred but not
reported claims not otherwise covered by insurance, based on actuarial assumptions and historical
claims experience.
Sales Incentives
We offer various sales incentive arrangements to our customers, which require customer performance
or achievement of certain sales volume targets. In those circumstances when the incentive is paid
in advance, we amortize the amount paid over the period of benefit or contractual sales volume.
When the incentive is paid in arrears, we accrue the expected amount to be paid over the period of
benefit or expected sales volume. The recognition of expense for these incentives involves the use
of judgment related to performance and sales volume estimates that are made based on historical
experience and other factors. Sales incentives are accounted for as a reduction of revenues and
actual amounts may vary from reported amounts.
FORWARD-LOOKING STATEMENTS
National Beverage and its representatives may from time to time make written or oral statements
relating to future events or results relative to our financial, operational and business
performance, achievements, objectives and strategies. These statements are forward-looking
within the meaning of the Private Securities Litigation Reform Act of 1995, and include statements
contained in this report and other filings with the Securities and Exchange Commission and in
reports to our stockholders. Certain statements including, without limitation, statements
containing the words believes, anticipates, intends, expects, and estimates constitute
forward-looking statements and involve known and unknown risk, uncertainties and other factors
that may cause the actual results, performance or achievements of our Company to be materially
different from any future results, performance or achievements expressed or implied by such
forward-looking statements. Such factors include, but are not limited to, the following: general
economic and business conditions; pricing of competitive products; success in acquiring other
beverage businesses; success of new product and flavor introductions; fluctuations in the costs of
raw materials and packaging supplies, and the ability to pass along any cost increases to our
customers; our ability to increase prices for our products; labor strikes or work stoppages or
other interruptions or difficulties in the employment of labor; continued retailer support for our
products; changes in consumer preferences and our success in creating products geared toward
consumers tastes; success of implementing business strategies; changes in business strategy or
development plans; government regulations; unseasonably cold or wet weather conditions; and other
factors referenced in this Form 10-K. 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.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Commodities
We purchase various raw materials, including aluminum cans, plastic bottles, high fructose corn
syrup, and various juice concentrates, the prices of which fluctuate based on commodity market
15
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conditions. Our ability to recover increased costs through higher pricing may be limited by the
competitive environment in which we operate.
Interest Rates
We had no outstanding debt or debt related interest rate exposure during fiscal 2006.
Our investment portfolio is comprised of highly liquid securities consisting primarily of
short-term money market instruments and auction rate securities, the yields of which fluctuate
based largely on short-term Treasury rates. If the yield of these instruments had changed by 100
basis points (1%), interest income for fiscal 2006 would have changed by approximately $500,000.
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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
NATIONAL BEVERAGE CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
AS OF APRIL 29, 2006 AND APRIL 30, 2005
(In thousands, except share amounts)
CONSOLIDATED BALANCE SHEETS
AS OF APRIL 29, 2006 AND APRIL 30, 2005
(In thousands, except share amounts)
2006 | 2005 | |||||||
Assets |
||||||||
Current assets: |
||||||||
Cash and equivalents |
$ | 42,119 | $ | 54,557 | ||||
Trade
receivables - net of allowances of $562 (2006) and $585 (2005) |
48,236 | 46,135 | ||||||
Inventories |
34,429 | 29,738 | ||||||
Deferred
income taxes - net |
1,940 | 1,759 | ||||||
Prepaid and other assets |
9,287 | 7,657 | ||||||
Total current assets |
136,011 | 139,846 | ||||||
Property - net |
56,027 | 62,879 | ||||||
Goodwill |
13,145 | 13,145 | ||||||
Intangible
assets - net |
1,653 | 1,939 | ||||||
Other assets |
11,503 | 6,778 | ||||||
$ | 218,339 | $ | 224,587 | |||||
Liabilities and Shareholders Equity |
||||||||
Current liabilities: |
||||||||
Accounts payable |
$ | 38,041 | $ | 38,012 | ||||
Accrued liabilities |
20,576 | 18,290 | ||||||
Income taxes payable |
2,369 | 1,582 | ||||||
Total current liabilities |
60,986 | 57,884 | ||||||
Deferred
income taxes - net |
17,783 | 15,958 | ||||||
Other liabilities |
8,710 | 7,449 | ||||||
Shareholders equity: |
||||||||
Preferred stock, 7% cumulative, $1 par value, aggregate liquidation
preference of $15,000 - 1,000,000 shares authorized; 150,000
shares issued; no shares outstanding |
150 | 150 | ||||||
Common
stock, $.01 par value - authorized 50,000,000 shares;
issued 41,511,193 shares (2006) and 41,018,960 shares (2005);
outstanding 37,478,409 shares (2006) and 36,986,176 shares (2005) |
415 | 410 | ||||||
Additional paid-in capital |
23,033 | 19,679 | ||||||
Retained earnings |
125,262 | 141,057 | ||||||
Treasury
stock - at cost: |
||||||||
Preferred stock - 150,000 shares |
(5,100 | ) | (5,100 | ) | ||||
Common stock - 4,032,784 shares |
(12,900 | ) | (12,900 | ) | ||||
Total shareholders equity |
130,860 | 143,296 | ||||||
$ | 218,339 | $ | 224,587 | |||||
See accompanying Notes to Consolidated Financial Statements.
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NATIONAL BEVERAGE CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
FOR THE FISCAL YEARS ENDED APRIL 29, 2006, APRIL 30, 2005 AND MAY 1, 2004
(In thousands, except per share amounts)
CONSOLIDATED STATEMENTS OF INCOME
FOR THE FISCAL YEARS ENDED APRIL 29, 2006, APRIL 30, 2005 AND MAY 1, 2004
(In thousands, except per share amounts)
2006 | 2005 | 2004 | ||||||||||
Net sales |
$ | 516,802 | $ | 495,572 | $ | 512,061 | ||||||
Cost of sales |
349,131 | 340,206 | 343,316 | |||||||||
Gross profit |
167,671 | 155,366 | 168,745 | |||||||||
Selling, general and administrative expenses |
135,090 | 130,037 | 139,058 | |||||||||
Interest expense |
105 | 106 | 132 | |||||||||
Other income
- net |
2,416 | 1,199 | 544 | |||||||||
Income before income taxes |
34,892 | 26,422 | 30,099 | |||||||||
Provision for income taxes |
12,666 | 9,536 | 11,408 | |||||||||
Net income |
$ | 22,226 | $ | 16,886 | $ | 18,691 | ||||||
Net income per share - |
||||||||||||
Basic |
$ | .59 | $ | .45 | $ | .51 | ||||||
Diluted |
$ | .58 | $ | .44 | $ | .49 | ||||||
Average common shares outstanding - |
||||||||||||
Basic |
37,806 | 37,579 | 36,937 | |||||||||
Diluted |
38,288 | 38,254 | 38,166 | |||||||||
See accompanying Notes to Consolidated Financial Statements.
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NATIONAL BEVERAGE CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS EQUITY
FOR THE FISCAL YEARS ENDED APRIL 29, 2006, APRIL 30, 2005 AND MAY 1, 2004
(In thousands, except share amounts)
CONSOLIDATED STATEMENTS OF SHAREHOLDERS EQUITY
FOR THE FISCAL YEARS ENDED APRIL 29, 2006, APRIL 30, 2005 AND MAY 1, 2004
(In thousands, except share amounts)
2006 | 2005 | 2004 | ||||||||||||||||||||||
Shares | Amount | Shares | Amount | Shares | Amount | |||||||||||||||||||
Preferred Stock |
||||||||||||||||||||||||
Beginning and end of year |
150,000 | $ | 150 | 150,000 | $ | 150 | 150,000 | $ | 150 | |||||||||||||||
Common Stock |
||||||||||||||||||||||||
Beginning of year |
41,018,960 | 410 | 40,894,440 | 409 | 22,250,202 | 223 | ||||||||||||||||||
Stock options exercised |
492,233 | 5 | 124,520 | 1 | 338,510 | 3 | ||||||||||||||||||
100% stock dividend |
| | | | 18,305,728 | 183 | ||||||||||||||||||
End of year |
41,511,193 | 415 | 41,018,960 | 410 | 40,894,440 | 409 | ||||||||||||||||||
Additional Paid-In
Capital |
||||||||||||||||||||||||
Beginning of year |
19,679 | 18,646 | 16,818 | |||||||||||||||||||||
Stock options exercised |
1,000 | 145 | 851 | |||||||||||||||||||||
Stock-based compensation |
1,254 | 78 | | |||||||||||||||||||||
Stock-based tax benefits |
1,100 | 810 | 1,160 | |||||||||||||||||||||
100% stock dividend |
| | (183 | ) | ||||||||||||||||||||
End of year |
23,033 | 19,679 | 18,646 | |||||||||||||||||||||
Retained Earnings |
||||||||||||||||||||||||
Beginning of year |
141,057 | 124,171 | 143,846 | |||||||||||||||||||||
Net income |
22,226 | 16,886 | 18,691 | |||||||||||||||||||||
Cash dividends paid |
(38,021 | ) | | (38,366 | ) | |||||||||||||||||||
End of year |
125,262 | 141,057 | 124,171 | |||||||||||||||||||||
Treasury Stock-Preferred |
||||||||||||||||||||||||
Beginning and end of year |
150,000 | (5,100 | ) | 150,000 | (5,100 | ) | 150,000 | (5,100 | ) | |||||||||||||||
Treasury Stock-Common |
||||||||||||||||||||||||
Beginning of year |
4,032,784 | (12,900 | ) | 4,032,784 | (12,900 | ) | 4,014,784 | (12,645 | ) | |||||||||||||||
Purchase of stock |
| | | | 18,000 | (255 | ) | |||||||||||||||||
End of year |
4,032,784 | (12,900 | ) | 4,032,784 | (12,900 | ) | 4,032,784 | (12,900 | ) | |||||||||||||||
Total Shareholders Equity |
$ | 130,860 | $ | 143,296 | $ | 125,376 | ||||||||||||||||||
See accompanying Notes to Consolidated Financial Statements.
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NATIONAL BEVERAGE CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE FISCAL YEARS ENDED APRIL 29, 2006, APRIL 30, 2005 AND MAY 1, 2004
(In thousands)
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE FISCAL YEARS ENDED APRIL 29, 2006, APRIL 30, 2005 AND MAY 1, 2004
(In thousands)
2006 | 2005 | 2004 | ||||||||||
Operating Activities: |
||||||||||||
Net income |
$ | 22,226 | $ | 16,886 | $ | 18,691 | ||||||
Adjustments to reconcile net income to net cash
provided by operating activities: |
||||||||||||
Depreciation and amortization |
13,587 | 12,464 | 11,394 | |||||||||
Deferred income tax provision |
1,644 | 891 | 143 | |||||||||
Loss (gain) on disposal of property, net |
(51 | ) | 15 | 59 | ||||||||
Changes in assets and liabilities: |
||||||||||||
Trade receivables |
(2,101 | ) | 2,641 | (7,745 | ) | |||||||
Inventories |
(4,691 | ) | 16 | (1,059 | ) | |||||||
Prepaid and other assets |
(4,675 | ) | (1,165 | ) | (7,784 | ) | ||||||
Accounts payable |
29 | 874 | 2,169 | |||||||||
Accrued and other liabilities, net |
2,584 | 275 | 5,453 | |||||||||
Net cash provided by operating activities |
28,552 | 32,897 | 21,321 | |||||||||
Investing Activities: |
||||||||||||
Marketable securities purchased |
(352,775 | ) | (233,900 | ) | (205,700 | ) | ||||||
Marketable securities sold |
352,775 | 242,900 | 213,700 | |||||||||
Property additions |
(7,964 | ) | (13,003 | ) | (8,696 | ) | ||||||
Proceeds from sale of assets |
2,890 | 152 | 623 | |||||||||
Net cash used in investing activities |
(5,074 | ) | (3,851 | ) | (73 | ) | ||||||
Financing Activities: |
||||||||||||
Debt repayments |
| | (1,450 | ) | ||||||||
Common stock cash dividend |
(38,021 | ) | | (38,366 | ) | |||||||
Purchase of common stock |
| | (255 | ) | ||||||||
Proceeds from stock options exercised |
1,005 | 146 | 854 | |||||||||
Stock-based tax benefits |
1,100 | | | |||||||||
Net cash provided by (used in) financing activities |
(35,916 | ) | 146 | (39,217 | ) | |||||||
Net Increase (Decrease) in Cash and Equivalents |
(12,438 | ) | 29,192 | (17,969 | ) | |||||||
Cash and
Equivalents - Beginning of Year |
54,557 | 25,365 | 43,334 | |||||||||
Cash and
Equivalents - End of Year |
$ | 42,119 | $ | 54,557 | $ | 25,365 | ||||||
Other Cash Flow Information: |
||||||||||||
Interest paid |
$ | 105 | $ | 106 | $ | 133 | ||||||
Income taxes paid |
10,754 | 6,910 | 11,049 |
See accompanying Notes to Consolidated Financial Statements.
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NATIONAL BEVERAGE CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
National Beverage Corp. develops, manufactures, markets and distributes a complete portfolio of
multi-flavored soft drinks, juice drinks, water and specialty beverages throughout the United
States. Incorporated in Delaware in 1985, National Beverage Corp. is a holding company for various
operating subsidiaries. When used in this report, the terms we, us, our, Company and
National Beverage mean National Beverage Corp. and its subsidiaries.
1. SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The consolidated financial statements include the accounts of National Beverage Corp. and all
subsidiaries. All significant intercompany balances have been eliminated. Our fiscal year ends the
Saturday closest to April 30th and, as a result, a 53rd week is added every
five or six years. Fiscal 2006, 2005 and 2004 consist of 52 weeks.
Cash and Equivalents
Cash and equivalents are comprised of cash and highly liquid securities (consisting primarily of
short-term money-market investments) with an original maturity or redemption option of three months
or less.
Changes in Accounting Standards
Management has reviewed the current changes in accounting standards and does not expect any of
these changes to have a material impact on the Company.
Credit Risk
We sell products to a variety of customers and extend credit based on an evaluation of each
customers financial condition, generally without requiring collateral. Exposure to losses on
receivables varies by customer principally due to the financial condition of each customer. We
monitor our exposure to credit losses and maintain allowances for anticipated losses based on
specific customer circumstances, credit conditions, and historical write-offs and collections. At
April 29, 2006 and April 30, 2005, we did not have any customer that comprised more than 10% of
trade receivables. No one customer accounted for more than 10% of net sales during any of the last
three fiscal years.
Fair Value of Financial Instruments
The fair values of financial instruments are estimated based on market rates. The carrying amounts
of financial instruments reflected in the balance sheets approximate their fair values.
Impairment of Long-Lived Assets
All long-lived assets, excluding goodwill and intangible assets not subject to amortization, are
evaluated for impairment on the basis of undiscounted cash flows whenever events or changes in
circumstances indicate that the carrying amount of an asset may not be recoverable. An impaired
asset is written down to its estimated fair market value based on the best information available.
Estimated fair market value is generally measured by discounting future cash flows. Goodwill and
intangible assets not subject to amortization are evaluated for impairment annually or sooner in
accordance with SFAS No. 142. An impairment loss is recognized if the carrying amount, or for
goodwill, the carrying amount of its reporting unit, is greater than its fair value.
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Income Taxes
Our effective income tax rate and the tax bases of assets and liabilities are based on estimates of
taxes which will ultimately be payable. Deferred taxes are recorded to give recognition to
temporary differences between the tax bases of assets or liabilities and their reported amounts in
the financial statements. Valuation allowances are established when it is deemed, more likely than
not, that the benefit of deferred tax assets will not be realized.
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.
Inventories
Inventories are stated at the lower of first-in, first-out cost or market. Inventories at April
29, 2006 are comprised of finished goods of $18,997,000 and raw materials of $15,432,000.
Inventories at April 30, 2005 are comprised of finished goods of $17,411,000 and raw materials of
$12,327,000.
Marketing Costs
We are involved in a variety of marketing programs, including cooperative advertising programs with
customers, which advertise and promote our products to consumers. Marketing costs are expensed when
incurred, except for prepaid advertising and production costs of future media advertising.
Marketing costs, which are included in selling, general and administrative expenses, were $37.9
million in fiscal 2006, $35.6 million in fiscal 2005, and $41.2 million in fiscal 2004.
Net Income Per Share
Basic net income per share is computed by dividing net income by the weighted average number of
common shares outstanding. Included in average common shares outstanding are shares of common
stock of which option holders have elected to defer physical delivery following the exercise of
stock options. Diluted net income per share also includes the dilutive effect of stock options,
which amounted to 482,000 shares (2006), 675,000 shares (2005), and 1,229,000 shares (2004).
Property
Property is recorded at cost. Property additions, replacements and betterments are capitalized,
while maintenance and repairs that do not extend the useful life of an asset are expensed as
incurred. Depreciation is recorded using the straight-line method over estimated useful lives of 7
to 30 years for buildings and improvements, and 3 to 15 years for machinery and equipment.
Leasehold improvements are amortized using the straight-line method over the shorter of the
remaining lease term or the estimated useful life of the improvement. When assets are retired or
otherwise disposed, the cost and accumulated depreciation are removed from the respective accounts
and any related gain or loss is recognized.
Reclassifications
Reclassifications have been made to prior year amounts to conform to the current year presentation.
Revenue Recognition
Revenue from product sales is recognized when title and risk of loss passes to the customer, which
generally occurs upon delivery.
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Sales Incentives
We offer various sales incentive arrangements to our customers, which require customer performance
or achievement of certain sales volume targets. In those circumstances when the incentive is paid
in advance, we amortize the amount paid over the period of benefit or contractual sales volume.
When the incentive is paid in arrears, we accrue the expected amount to be paid over the period of
benefit or expected sales volume. The recognition of expense for these incentives involves the use
of judgment related to performance and sales volume estimates that are made based on historical
experience and other factors. Sales incentives are accounted for as a reduction of revenues and
actual amounts may vary from reported amounts.
Segment Reporting
We operate as a single operating segment for purposes of presenting financial information and
evaluating performance. As such, the accompanying consolidated financial statements present
financial information in a format that is consistent with the internal financial information used
by management.
Shipping and Handling Costs
Shipping and handling costs are reported in selling, general and administrative expenses in the
accompanying statements of income. Such costs aggregated $44.1 million in fiscal 2006, $41.4
million in fiscal 2005, and $41.4 million in fiscal 2004.
Stock-Based Compensation
At the beginning of the fourth quarter of fiscal 2006, the Company adopted SFAS No. 123R
Stock-Based Compensation pursuant to the modified prospective application and, accordingly, prior
period amounts have not been restated. Stock-based compensation expense was recorded based on the
fair value method for all awards granted on or after the date of adoption and for the portion of
previously granted awards that remained unvested at the date of adoption.
Prior to the fourth quarter of fiscal 2006, the Company applied the provisions of APB No. 25,
Accounting for Stock Issued to Employees, as permitted under SFAS No. 148, Accounting for
Stock-Based Compensation Transition and Disclosure an amendment of FASB Statement No. 123.
Under APB 25, stock-based compensation expense was generally not recognized unless the exercise
price of options granted was less than the market price on the date of grant.
Had compensation cost for options granted to employees been recorded based on the fair value method
under SFAS No. 123, Accounting for Stock-Based Compensation prior to the adoption date, net
income and earnings per share for each of the last three fiscal years would have been impacted on a
pro forma basis by less than $200,000 and $.01 per share.
Use of Estimates
The preparation of financial statements in conformity with generally accepted accounting principles
requires management to make estimates and assumptions that affect the amounts reported in the
financial statements and accompanying notes. Although these estimates are based on managements
knowledge of current events and anticipated future actions, actual results may vary from reported
amounts.
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2. PROPERTY
Property as of April 29, 2006 and April 30, 2005 consisted of the following:
(In thousands) | ||||||||
2006 | 2005 | |||||||
Land |
$ | 8,915 | $ | 10,187 | ||||
Buildings and improvements |
38,101 | 38,743 | ||||||
Machinery and equipment |
115,379 | 119,850 | ||||||
Total |
162,395 | 168,780 | ||||||
Less accumulated depreciation |
(106,368 | ) | (105,901 | ) | ||||
Property net |
$ | 56,027 | $ | 62,879 | ||||
Depreciation expense was $10,147,000 for fiscal 2006, $9,492,000 for fiscal 2005, and $8,911,000
for fiscal 2004.
3. INTANGIBLE ASSETS
Intangible assets as of April 29, 2006 and April 30, 2005 consisted of the following:
(In thousands) | ||||||||
2006 | 2005 | |||||||
Nonamortizable trademarks |
$ | 1,653 | $ | 1,654 | ||||
Amortizable distribution rights |
855 | 855 | ||||||
Less accumulated amortization |
(855 | ) | (570 | ) | ||||
Net |
| 285 | ||||||
Total net |
$ | 1,653 | $ | 1,939 | ||||
Amortization expense related to intangible assets was $285,000 for fiscal 2006, $83,000 for fiscal
2005, and $63,000 for fiscal 2004.
4. ACCRUED LIABILITIES
Accrued liabilities as of April 29, 2006 and April 30, 2005 consisted of the following:
(In thousands) | ||||||||
2006 | 2005 | |||||||
Accrued promotions |
$ | 5,609 | $ | 4,971 | ||||
Accrued compensation |
4,444 | 5,383 | ||||||
Accrued insurance |
3,603 | 2,864 | ||||||
Other |
6,920 | 5,072 | ||||||
Total |
$ | 20,576 | $ | 18,290 | ||||
5. DEBT
A subsidiary of the Company maintains unsecured revolving credit facilities aggregating $45 million
(the Credit Facilities) with banks. The Credit Facilities expire through May 1, 2008 and bear
interest at 1/2% below the banks reference rate or .6% above LIBOR, at the subsidiarys
election. At April 29, 2006, there was no outstanding debt under the Credit Facilities and
approximately $42 million was available for future borrowings.
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The Credit Facilities require the subsidiary to maintain certain financial ratios and contain other
restrictions, none of which are expected to have a material impact on our operations or financial
position. Significant financial ratios and restrictions include: fixed charge coverage; net worth
ratio; and limitations on incurrence of debt. At April 29, 2006, we were in compliance with all
loan covenants and approximately $25 million of retained earnings were restricted from
distribution.
6. CAPITAL STOCK AND TRANSACTIONS WITH RELATED PARTIES
On January 27, 2006, the Company paid a special cash dividend of $1.00 per share to shareholders of
record on January 5, 2006, including holders of deferred shares.
On April 30, 2004, the Company paid a special cash dividend of $1.00 per share to shareholders of
record on March 26, 2004, including holders of deferred shares and vested stock options.
On March 22, 2004, the Company distributed a 100% stock dividend to shareholders of record on March
8, 2004. As a result of the stock dividend, approximately $183,000, representing the par value of
the shares issued, was reclassified from additional paid-in capital to common stock. Average
shares outstanding, stock option data and per share data presented in these financial statements
have been adjusted retroactively for the effects of the stock dividend.
In January 1998, the Board of Directors authorized the purchase of up to 800,000 shares of National
Beverage common stock. In fiscal 2004, we purchased 18,000 shares, which are classified as treasury
stock. There were no shares purchased in fiscal 2006 and fiscal 2005. Aggregate shares purchased
since January 1998 were 502,060.
The Company is a party to a management agreement with Corporate Management Advisors, Inc. (CMA),
a corporation owned by the Companys Chairman and Chief Executive Officer. Under the agreement,
the employees of CMA provide our Company with corporate finance, strategic planning, business
development and other management services for an annual base fee equal to one percent of
consolidated net sales plus incentive compensation based on certain factors to be determined by the
Compensation Committee of our Companys Board of Directors. In July 2005, in connection with
providing services under the management agreement, CMA became a twenty percent joint owner of an
aircraft used by the Company. We incurred fees to CMA of $5.2 million for fiscal 2006, $5.0
million for fiscal 2005, and $5.1 million for fiscal 2004. No incentive compensation has been
incurred or approved under the management agreement since its inception. Included in accounts
payable at April 29, 2006 and April 30, 2005 were amounts due CMA of $1.3 million and $1.2 million,
respectively.
7. OTHER INCOME
Other income consisted of the following:
(In thousands) | ||||||||||||
2006 | 2005 | 2004 | ||||||||||
Interest income |
$ | 1,450 | $ | 581 | $ | 603 | ||||||
Gain on contract settlement |
1,143 | 633 | | |||||||||
Gain (loss) on disposal of property, net |
51 | (15 | ) | (59 | ) | |||||||
Relinquishment of distribution rights |
(228 | ) | | | ||||||||
Total |
$ | 2,416 | $ | 1,199 | $ | 544 | ||||||
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Fiscal 2006 other income includes gains and losses on the disposal of property of
approximately $2.1 million and $2.0 million, respectively.
8. INCOME TAXES
The provision for income taxes consisted of the following:
(In thousands) | ||||||||||||
2006 | 2005 | 2004 | ||||||||||
Current |
$ | 11,022 | $ | 8,645 | $ | 11,265 | ||||||
Deferred |
1,644 | 891 | 143 | |||||||||
Total |
$ | 12,666 | $ | 9,536 | $ | 11,408 | ||||||
The reconciliation of the statutory federal income tax rate to our effective tax rate was as
follows:
2006 | 2005 | 2004 | ||||||||||
Statutory federal income tax rate |
35.0 | % | 35.0 | % | 35.0 | % | ||||||
State income taxes, net of federal benefit |
2.9 | 3.0 | 3.0 | |||||||||
Other differences |
(1.6 | ) | (1.9 | ) | (.1 | ) | ||||||
Effective income tax rate |
36.3 | % | 36.1 | % | 37.9 | % | ||||||
Deferred taxes are recorded to give recognition to temporary differences between the tax bases of
assets or liabilities and their reported amounts in the financial statements. Valuation allowances
are established when it is deemed, more likely than not, that the benefit of deferred tax assets
will not be realized. Our deferred tax assets and liabilities as of April 29, 2006 and April 30,
2005 consisted of the following:
(In thousands) | ||||||||
2006 | 2005 | |||||||
Deferred tax assets: |
||||||||
Accrued expenses and other |
$ | 2,161 | $ | 2,280 | ||||
Inventory and amortizable assets |
155 | 279 | ||||||
Total deferred tax assets |
2,316 | 2,559 | ||||||
Deferred tax liabilities: |
||||||||
Property |
18,048 | 16,492 | ||||||
Intangibles and other |
111 | 266 | ||||||
Total deferred tax liabilities |
18,159 | 16,758 | ||||||
Net deferred tax liabilities |
$ | 15,843 | $ | 14,199 | ||||
Current deferred tax assets net |
$ | 1,940 | $ | 1,759 | ||||
Noncurrent deferred tax liabilities net |
$ | 17,783 | $ | 15,958 | ||||
9. STOCK-BASED COMPENSATION
The 1991 Omnibus Incentive Plan (the Omnibus Plan) provides for compensatory awards consisting of
(i) stock options or stock awards for up to 4,000,000 shares of common stock, (ii) stock
appreciation rights, dividend equivalents, other stock-based awards in amounts up to 4,000,000
shares of common stock and (iii) performance awards consisting of any combination of
the above. The Omnibus Plan is designed to provide an incentive to the officers (including those
who are also directors) and certain other key employees and consultants of our Company by making
available to them an opportunity to acquire a proprietary interest or to increase such interest in
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National Beverage. The number of shares or options which may be issued under stock-based awards to
an individual is limited to 1,400,000 during any year. Awards may be granted for no cash
consideration or such minimal cash consideration as may be required by law. Options generally vest
over a five-year period and expire after ten years.
Pursuant to a Special Stock Option Plan, National Beverage has authorized the issuance of options
to purchase up to an aggregate of 1,500,000 shares of common stock. Options may be granted for such
consideration as determined by the Board of Directors. The Board of Directors also authorized the
issuance of options to purchase up to 100,000 shares of common stock to be issued at the direction
of the Chairman.
The Key Employee Equity Partnership Program (KEEP Program) provides for the granting of stock
options to purchase up to 200,000 shares of common stock to key employees, consultants, directors
and officers of the Company. Participants who purchase shares of stock in the open market receive
grants of stock options equal to 50% of the number of shares purchased, up to a maximum of 12,000
shares in any two-year period. Options under the KEEP Program are automatically forfeited in the
event of the sale of shares originally acquired by the participant. Options are granted at an
initial exercise price of 60% of the purchase price paid for the shares acquired and reduce to the
par value of the stock at the end of the six-year vesting period.
The fair value of option grants was estimated on the date of grant using a Black-Scholes
option-pricing model with the following assumptions: weighted average expected life of 7.7 years
for fiscal 2006, 10 years for 2005, and 10 years for 2004; weighted average expected volatility of
30.5% for fiscal 2006, 41% for 2005, and 41% for 2004; weighted average risk free interest rates of
4.5% for fiscal 2006, 5% for 2005, and 4% for 2004; and no expected dividend payments. Subsequent
to adopting SFAS No. 123R, forfeitures were estimated based on historical experience. Prior to
adoption, forfeitures were recorded as they occurred. In fiscal 2006, the expected life of stock
options was estimated based on historical experience. Prior to fiscal 2006, the expected life was
based on contractual term. The expected volatility was estimated based on historical stock prices
for a period consistent with the expected life of stock options. The risk free interest rate was
based on the U.S. Treasury constant maturity interest rate whose term is consistent with the
expected life of stock options.
The following is a summary of stock option activity for fiscal 2006:
Weighted | ||||||||
Average | ||||||||
Exercise | ||||||||
Shares | Price | |||||||
Options outstanding, beginning of year |
975,659 | $ | 2.81 | |||||
Granted |
287,550 | 8.31 | ||||||
Exercised |
(453,433 | ) | 2.22 | |||||
Cancelled |
(400 | ) | 1.19 | |||||
Options outstanding, end of year |
809,376 | 4.93 | ||||||
Options exercisable, end of year |
427,820 | 3.20 | ||||||
Stock-based compensation expense for fiscal 2006, fiscal 2005 and fiscal 2004 was $291,000,
$89,000, and $229,000, respectively. The total fair value of shares vested for fiscal 2006, fiscal
2005 and fiscal 2004 was $218,000, $136,000, and $447,000, respectively. The total intrinsic value
for stock options exercised during fiscal 2006, fiscal 2005 and fiscal 2004 was $2.7 million,
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$353,000, and $6.3 million, respectively. The weighted average fair value for the stock options
granted in fiscal 2006, fiscal 2005 and fiscal 2004 was $5.18, $6.01, and $5.37, respectively.
As of April 29, 2006, unrecognized compensation expense related to the unvested portion of the
Companys stock options was $1.7 million, which is expected to be recognized over a weighted
average period of 4.8 years. The weighted average remaining contractual term and the aggregate
intrinsic value for options outstanding as of April 29, 2006 was 5.8 years and $8.4 million,
respectively. The weighted average remaining contractual term and the aggregate intrinsic value for
options exercisable as of April 29, 2006 was 3.2 years and $5.2 million, respectively.
For fiscal 2006, net cash proceeds from the exercise of stock options were $1,005,000 and the
associated income tax benefit was $942,000.
The Company has a stock purchase plan which provides for the purchase of up to 1,280,000 shares of
common stock by employees who (i) have been employed by our Company for at least two years, (ii)
are not part-time employees and (iii) are not owners of five percent or more of National Beverage
common stock. As of April 29, 2006, no shares have been issued under the plan.
10. COMMITMENTS AND CONTINGENCIES
We lease buildings, machinery and equipment under various non-cancelable operating lease agreements
expiring at various dates through 2013. Certain of these leases contain scheduled rent increases
and/or renewal options. Contractual rent increases are taken into account when calculating the
minimum lease payment and recognized on a straight-line basis over the lease term. Rent expense
under operating lease agreements totaled approximately $8,507,000 for fiscal 2006, $9,298,000 for
fiscal 2005, and $8,828,000 for fiscal 2004.
Our minimum lease payments under non-cancelable operating leases as of April 29, 2006 are as
follows:
(In thousands) | ||||
Fiscal 2007 |
$ | 5,268 | ||
Fiscal 2008 |
3,741 | |||
Fiscal 2009 |
3,119 | |||
Fiscal 2010 |
1,981 | |||
Fiscal 2011 |
1,664 | |||
Thereafter |
1,804 | |||
Total minimum lease payments |
$ | 17,577 | ||
We have guaranteed the residual value of certain leased property in the amount of $11.3 million.
No liability has been recorded as management believes that the net realizable value of the
equipment will be in excess of the guaranteed amount when the lease terminates in July 2012 and
that the fair market value of the guarantee is immaterial.
The Company contributes to certain pension plans under collective bargaining agreements based on
hours worked and to a discretionary profit sharing plan, neither of which have any long-term
contractual funding requirements. Contributions were $2.2 million for fiscal 2006, $2.3 million
for fiscal 2005, and $2.2 million for fiscal 2004.
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From time to time, we are a party to various litigation matters arising in the ordinary course of
business. In our opinion, the ultimate disposition of such matters will not have a material
adverse effect on our consolidated financial position or results of operations.
11. FRUCTOSE SETTLEMENT
In June 2005, we received a partial payment of $7.7 million from the settlement of our claim in a
class action lawsuit known as In re: High Fructose Corn Syrup Antitrust Litigation Master File No.
95-1477 in the United States District Court for the Central District of Illinois. The lawsuit
related to purchases of high fructose corn syrup made by the Company and others. The settlement
amount was allocated to each class action recipient based on the proportion of its purchases to
total purchases by all class action recipients. The amount received, less offsets and expenses of
$.5 million, was recorded as a reduction in cost of sales in the first quarter of fiscal 2006. In
November 2005, the Company received $1.2 million, representing the final payment due under the
settlement. Such amount was recorded in the third quarter of fiscal 2006 as a reduction in cost of
sales.
12. QUARTERLY FINANCIAL DATA (UNAUDITED)
(In thousands, except per share amounts) | ||||||||||||||||
First | Second | Third | Fourth | |||||||||||||
Quarter | Quarter | Quarter | Quarter | |||||||||||||
Fiscal 2006 |
||||||||||||||||
Net sales |
$ | 142,363 | $ | 131,502 | $ | 109,587 | $ | 133,350 | ||||||||
Gross profit |
49,328 | 41,220 | 34,920 | 42,203 | ||||||||||||
Net income |
9,683 | 4,574 | 2,297 | 5,672 | ||||||||||||
Net income per share basic |
$ | .26 | $ | .12 | $ | .06 | $ | .15 | ||||||||
Net income per share diluted |
$ | .25 | $ | .12 | $ | .06 | $ | .15 | ||||||||
Fiscal 2005 |
||||||||||||||||
Net sales |
$ | 146,512 | $ | 124,858 | $ | 103,511 | $ | 120,691 | ||||||||
Gross profit |
48,337 | 39,482 | 32,542 | 35,005 | ||||||||||||
Net income |
8,856 | 4,120 | 586 | 3,324 | ||||||||||||
Net income per share basic |
$ | .24 | $ | .11 | $ | .02 | $ | .09 | ||||||||
Net income per share diluted |
$ | .23 | $ | .11 | $ | .02 | $ | .09 |
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REPORT OF INDEPENDENT REGISTERED CERTIFIED PUBLIC ACCOUNTING FIRM
To the Board of Directors and
Shareholders of National Beverage Corp.:
Shareholders of National Beverage Corp.:
In our opinion, the consolidated financial statements listed in the accompanying index appearing
under Item 15(a)(1) present fairly, in all material respects, the financial position of National
Beverage Corp. and its subsidiaries at April 29, 2006 and April 30, 2005, and the results of their
operations and their cash flows for each of the three years in the period ended April 29, 2006, in
conformity with accounting principles generally accepted in the United States of America. In
addition, in our opinion, the financial statement schedule listed in the accompanying index
appearing under Item 15(a)(2) presents fairly, in all material respects, the information set forth
therein when read in conjunction with the related consolidated financial statements. These
financial statements and financial statement schedule are the responsibility of the Companys
management; our responsibility is to express an opinion on these financial statements and financial
statement schedule based on our audits. We conducted our audits of these statements in accordance
with standards of the Public Company Accounting Oversight Board (United States). Those standards
require that we plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits provide a reasonable basis for our
opinion.
/s/ PricewaterhouseCoopers LLP
Fort Lauderdale, Florida
July 28, 2006
Fort Lauderdale, Florida
July 28, 2006
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ITEM 9. | CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE |
None
ITEM 9A. CONTROLS AND PROCEDURES
National Beverages Chief Executive Officer and Principal Financial Officer have concluded that our
disclosure controls and procedures are effective, based on their evaluation of these controls and
procedures as of April 29, 2006. There has been no change in our internal control over financial
reporting during the year ended April 29, 2006 that has materially affected, or is reasonably
likely to materially affect, our internal control over financial reporting.
ITEM 9B. OTHER INFORMATION
None
PART III
ITEM 10. | DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT |
Information concerning directors and the nominees for director of National Beverage Corp. will be
included under the caption Election of Directors, Information as to Nominees and Other
Directors, Information Regarding Meetings and Committees of the Board and Section 16(a)
Beneficial Ownership Reporting Compliance in the Companys 2006 Proxy Statement and is
incorporated herein by reference.
The following table sets forth certain information with respect to the officers of the Registrant
as of April 29, 2006.
Name | Age | Position with Company | ||||
Nick A. Caporella (1)
|
70 | Chairman of the Board and Chief Executive Officer | ||||
Joseph G. Caporella (2)
|
46 | President | ||||
George R. Bracken (3)
|
61 | Senior Vice President Finance | ||||
Dean A. McCoy (4)
|
49 | Senior Vice President and Chief Accounting Officer |
(1) | Mr. Nick A. Caporella has served as Chairman of the Board, Chief Executive Officer, and Director since the Companys inception in 1985. Also, he serves as Chairman of the Nominating Committee. Since January 1, 1992, Mr. Caporellas services have been provided to the Company by Corporate Management Advisors, Inc., a company which he owns. | |
(2) | Mr. Joseph G. Caporella has served as President since September 2002 and, prior to that, as Executive Vice President and Secretary since January 1991. Also, he has served as a Director since January 1987. Joseph G. Caporella is the son of Nick A. Caporella. |
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(3) | Mr. George R. Bracken was named Senior Vice President Finance in October 2000 and, prior to that date, served as Vice President and Treasurer since October 1996. | |
(4) | Mr. Dean A. McCoy was named Senior Vice President and Chief Accounting Officer in October 2003 and, prior to that date, served as Senior Vice President Controller since October 2000. Prior to October 2000, he served as Vice President Controller since July 1993. |
All officers serve until their successors are chosen and may be removed at any time by the Board of
Directors. Officers are normally appointed each year at the first meeting of the Board of
Directors after the annual meeting of shareholders.
ITEM 11. | EXECUTIVE COMPENSATION |
Information concerning executive compensation will be included under the captions Executive
Compensation and Other Information, Compensation Committee Interlocks and Insider Participation,
Compensation Committee Report and Performance Graph in the Companys 2006 Proxy Statement and
is incorporated herein by reference.
ITEM 12. | SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS |
Information concerning security ownership of certain beneficial owners and management and related
stockholder matters will be included under the captions Security Ownership and Equity
Compensation Plan Information in the Companys 2006 Proxy Statement and is incorporated herein by
reference.
ITEM 13. | CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS |
Information concerning certain relationships and related transactions will be included under the
caption Certain Relationships and Related Party Transactions in the Companys 2006 Proxy
Statement and is incorporated herein by reference.
ITEM 14. | PRINCIPAL ACCOUNTANT FEES AND SERVICES |
Information concerning principal accountant fees and services will be included under the caption
Independent Auditors Fees in the Companys 2006 Proxy Statement and is incorporated herein by
reference.
PART IV
ITEM 15. | EXHIBITS AND FINANCIAL STATEMENT SCHEDULES |
(a) The following documents are filed as part of this report:
Page | ||||
1. Financial Statements |
||||
Consolidated Balance Sheets |
17 | |||
Consolidated Statements of Income |
18 | |||
Consolidated Statements of Shareholders Equity |
19 | |||
Consolidated Statements of Cash Flows |
20 | |||
Notes to Consolidated Financial Statements |
21 | |||
Report of Independent Registered Certified Public Accounting Firm |
30 |
32
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Page | ||||
2. Financial Statement Schedules |
||||
Schedule II - Valuation and Qualifying Accounts |
36 | |||
Schedules other than those listed above have been omitted since they are either not
applicable, not required or the information is included elsewhere herein. |
||||
3. Exhibits |
||||
See Exhibit Index which follows. |
EXHIBIT INDEX
Exhibit No. | Description | |
3.1
|
Restated Certificate of Incorporation (1) | |
3.2
|
Amended and Restated By-Laws (1) | |
10.1
|
Management Agreement between the Company and Corporate Management Advisors, Inc.(2) | |
10.2
|
National Beverage Corp. Investment and Profit Sharing Plan (1) | |
10.3
|
National Beverage Corp. 1991 Omnibus Incentive Plan (2) | |
10.4
|
National Beverage Corp. 1991 Stock Purchase Plan (2) | |
10.5
|
Credit Agreement, dated as of September 23, 1993, between NewBevCo, Inc. and the lender therein (3) | |
10.6
|
First Amendment to Credit Agreement, dated November 10, 1994, between NewBevCo and lender therein (4) | |
10.7
|
Second Amendment to Credit Agreement, dated November 21, 1995, between NewBevCo and lender therein (5) | |
10.8
|
Third Amendment to Credit Agreement, dated February 29, 1996, between NewBevCo and lender therein (6) | |
10.9
|
Fourth Amendment to Credit Agreement, dated April 24, 1996, between NewBevCo and lender therein (6) | |
10.10
|
Fifth Amendment to Credit Agreement, dated November 14, 1996, between NewBevCo and lender therein (7) | |
10.11
|
Amendment No. 1 to the National Beverage Corp. Omnibus Incentive Plan (6) | |
10.12
|
Special Stock Option Plan (8) | |
10.13
|
Amendment No. 2 to the National Beverage Corp. Omnibus Incentive Plan (9) | |
10.14
|
Key Employee Equity Partnership Program (9) | |
10.15
|
Amended and Restated Credit Agreement, dated December 10, 1998, between NewBevCo and lender therein (10) | |
10.16
|
Tenth Amendment to Credit Agreement, dated April 26, 2002, between NewBevCo and lender therein (11) | |
10.17
|
Amendment No. 4 to Amended and Restated Credit Agreement, dated April 26, 2002, between NewBevCo and lender therein (11) | |
21.1
|
Subsidiaries of Registrant (12) | |
23.1
|
Consent of Independent Registered Certified Public Accounting Firm (12) | |
31.1
|
Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (12) | |
31.2
|
Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (12) | |
32.1
|
Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (12) | |
32.2
|
Certification of Principal Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (12) |
33
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(1) | Previously filed with the Securities and Exchange Commission as an exhibit to the Form S-1 Registration Statement (File No. 33-38986) on February 19, 1991 and is incorporated herein by reference. | |
(2) | Previously filed with the Securities and Exchange Commission as an exhibit to Amendment No. 1 to Form S-1 Registration Statement (File No. 33-38986) on July 26, 1991 and is incorporated herein by reference. | |
(3) | Previously filed with the Securities and Exchange Commission as an exhibit to Quarterly Report on Form 10-Q for the fiscal period ended October 30, 1993 and is incorporated herein by reference. | |
(4) | Previously filed with the Securities and Exchange Commission as an exhibit to Quarterly Report on Form 10-Q for the fiscal period ended October 29, 1994 and is incorporated herein by reference. | |
(5) | Previously filed with the Securities and Exchange Commission as an exhibit to Quarterly Report on Form 10-Q for the fiscal period ended January 27, 1996 and is incorporated herein by reference. | |
(6) | Previously filed with the Securities and Exchange Commission as an exhibit to Annual Report on Form 10-K for the fiscal year ended April 27, 1996 and is incorporated herein by reference. | |
(7) | Previously filed with the Securities and Exchange Commission as an exhibit to Quarterly Report on Form 10-Q for the fiscal period ended January 25, 1997 and is incorporated herein by reference. | |
(8) | Previously filed with the Securities and Exchange Commission as an exhibit to Registration Statement on Form S-8 (File No. 33-95308) on August 1, 1995 and is incorporated herein by reference. | |
(9) | Previously filed with the Securities and Exchange Commission as an exhibit to Annual Report on Form 10-K for the fiscal year ended May 3, 1997 and is incorporated herein by reference. | |
(10) | Previously filed with the Securities and Exchange Commission as an exhibit to Annual Report on Form 10-K for the fiscal year ended May 1, 1999 and is incorporated herein by reference. | |
(11) | Previously filed with the Securities and Exchange Commission as an exhibit to Annual Report on Form 10-K for the fiscal year ended April 27, 2002 and is incorporated herein by reference. | |
(12) | Filed herein. |
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Table of Contents
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.
National Beverage Corp.
(Registrant) |
||||
By:
|
/s/ Dean A. McCoy | |||
Dean A. McCoy | ||||
Senior Vice President and | ||||
Chief Accounting Officer | ||||
Date: July 28, 2006 |
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed
below by the following persons on behalf of the Registrant and in the capacities and on the dates
indicated.
/s/ Nick A. Caporella
|
/s/ Samuel C. Hathorn, Jr. | |||||
Nick A. Caporella
|
Samuel C. Hathorn, Jr. | |||||
Chairman of the Board and
|
Director | |||||
Chief Executive Officer
|
Date: July 28, 2006 | |||||
Date: July 28, 2006 |
||||||
/s/ Joseph G. Caporella
|
/s/ S. Lee Kling | |||||
Joseph G. Caporella
|
S. Lee Kling | |||||
President and Director
|
Director | |||||
Date: July 28, 2006
|
Date: July 28, 2006 | |||||
/s/ George R. Bracken
|
/s/ Joseph P. Klock, Jr. | |||||
George R. Bracken
|
Joseph P. Klock, Jr. | |||||
Senior Vice President Finance
|
Director | |||||
(Principal Financial Officer)
|
Date: July 28, 2006 | |||||
Date: July 28, 2006
|
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Table of Contents
Schedule II
NATIONAL BEVERAGE CORP. AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
FOR THE FISCAL YEARS ENDED APRIL 29, 2006, APRIL 30, 2005 AND MAY 1, 2004
(In thousands)
VALUATION AND QUALIFYING ACCOUNTS
FOR THE FISCAL YEARS ENDED APRIL 29, 2006, APRIL 30, 2005 AND MAY 1, 2004
(In thousands)
Balance at | Charged | Net | Balance | |||||||||||||
Beginning | (Credited) | (Charge-Offs) | at End | |||||||||||||
Description | of Year | to Expenses | Recoveries | of Year | ||||||||||||
Year Ended April 29,
2006: |
||||||||||||||||
Allowance for doubtful
trade receivables |
$ | 585 | $ | 227 | $ | (250 | ) | $ | 562 | |||||||
Year Ended April 30,
2005: |
||||||||||||||||
Allowance for doubtful
trade receivables |
$ | 608 | $ | 271 | $ | (294 | ) | $ | 585 | |||||||
Year Ended May 1, 2004: |
||||||||||||||||
Allowance for doubtful
trade receivables |
$ | 562 | $ | (660 | ) | $ | 706 | $ | 608 | |||||||
36