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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED MAY 2, 1998
[ ] 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)
DELAWARE 59-2605822
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
ONE NORTH UNIVERSITY DRIVE, FT. LAUDERDALE, FL 33324
(Address of principal executive offices) (Zip Code)
(954) 581-0922
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act: Common Stock, par
value $.01 per share
(Title of class)
Securities registered pursuant to Section 12(g) of the Act: None
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 (x) No ( )
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 Registrant's 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. [x]
The aggregate market value of the voting stock held by non-affiliates of
Registrant computed by reference to the closing price on July 27, 1998 was
approximately $46,478,000.
The number of shares of Registrant's common stock outstanding as of July 27,
1998 was 18,498,088.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrant's Proxy Statement for the Annual Meeting of
Shareholders to be filed on or before August 31, 1998 are incorporated by
reference into Part III of this report.
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PART I
ITEM 1. BUSINESS
GENERAL
National Beverage Corp. (the "Company") is a holding company for various
subsidiaries that market, manufacture and distribute a full line of beverage
products: Shasta(R), Faygo(R) and Big Shot(R) multi-flavored and cola soft
drinks; Everfresh(R) juice and juice-enriched products; LaCROIX(R) and Mt.
Shasta(TM) spring and carbonated water products; ClearFruit (R), Spree(R) and
nuAnce(R) flavored carbonated and non-carbonated beverages; and specialty items,
Creepy Coolers(TM) and St. Nick's(TM). Substantially all of the Company's brands
are produced in its fourteen manufacturing facilities which are strategically
located throughout the continental United States. The Company also develops and
produces branded soft drinks for retail grocery chains, warehouse clubs,
mass-merchandisers and wholesalers ("allied brands") as well as soft drinks for
other beverage companies ("manufacturing services").
The Company's strategy emphasizes the growth of its branded products by offering
a beverage portfolio of proprietary flavors; by supporting the franchise value
of regional brands; by developing and acquiring innovative products tailored
toward healthy lifestyles; and by appealing to the "quality-price" sensitivity
factor of the family consumer. In addition, the Company seeks to utilize the
strength of its brands and location of its manufacturing facilities to be a
single source supplier of branded and allied branded beverages for national and
large regional retailers.
Various means are utilized by the Company to maintain its position as a
cost-effective producer of its beverage products. These include vertical
integration of the supply of raw materials for the manufacturing process, bulk
delivery to customer distribution centers, regionally targeted media promotions
and the use of multiple distribution systems. Management believes it is able to
offer retailers a higher profit margin on Company branded products and allied
brands than is typically available from the sale of nationally distributed
products.
PRODUCTS
The Company's principal branded soft drink products, Shasta and Faygo, have been
developed and marketed throughout the United States for over a combined 200
years. Established over 100 years ago and distributed nationally, Shasta is the
largest of the Company's brands and includes approximately 50 flavors as well as
bottled spring water. Established over 90 years ago, Faygo products are
primarily distributed east of the Mississippi River and include over 45 flavors.
In addition, the Company produces Big Shot, a regional multi-flavored soft drink
line established in 1935; Everfresh, a full line of juice products; LaCROIX, a
sparkling and still water product line; ClearFruit, an all natural,
non-carbonated water with fresh fruit flavors; Shasta Plus, a vitamin enriched,
non-carbonated beverage; nuAnce, a "new age" beverage product; Body Works, an
isotonic sports drink; Mt. Shasta, a domestic spring water; and Spree, an all
natural carbonated soft drink.
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Although cola drinks account for approximately 57% of the soft drink industry's
domestic grocery channel volume, the Company's "fantasy of flavors" strategy
emphasizes its non-cola products. As a result, colas account for less than 25%
of the Company's total volume. During the last ten years, the "flavor segment"
volume of the soft drink market has grown three times faster than cola volume.
Management believes the Company is well suited to compete in the flavor category
due to the long established brand awareness of Shasta and Faygo, which are
synonymous with flavor, along with its continued "flavor-enhancement"
philosophy. During the fiscal year ended May 2, 1998 ("fiscal 1998"), the
Company added, among other flavors, Everfresh Orange Dream, Everfresh Fuzzy
Navel, Ohana Lemon Tea and Ohana Lemonade. Additionally, the Company introduced
an exotic line of Shasta products which included new flavors such as Horchata,
Tamarindo, Manzana, Guava Passionfruit, Mango and Jamaica. Management believes
that the Company's structure and marketing strategies, unlike that of its
national competitors, permits efficient regional manufacturing and distribution
of flavors targeted toward specific demographics and consumer preferences.
The Company intends to expand its product line by introducing several
"neutraceutical / functional" beverage products. These non-carbonated beverages,
which will be enriched with natural herbs such as St. John's wort, ginseng,
ginkgo biloba and guarana, are designed to capitalize on the growing popularity
of energy and "feel good" drinks.
MANUFACTURING
The Company's fourteen bottling plants are strategically located across the
continental United States, enabling the Company to efficiently manufacture and
distribute beverages to most geographic markets. Each facility is generally
equipped to produce both canned and bottled beverage products in a variety of
package sizes in each regional market. The Company utilizes a variety of package
sizes, including 8 ounce cans; 6-pack, 12-pack, 18-pack and 24-pack "suitcases"
of 12-ounce cans; one, two and three liter "family size" bottles; and 16 ounce,
20 ounce and 24 ounce bottles targeted to single-serve markets.
Management believes that ownership of its bottling facilities provides an
advantage over certain of its competitors that rely upon independent third party
bottlers to manufacture and market their products. Since the Company controls
the national manufacture, distribution and marketing of its brands, it can more
effectively manage product quality and customer service and respond quickly to
changing market conditions. From time to time, the Company will shift
manufacturing equipment among its facilities to increase cost efficiencies or
maximize the utilization of equipment.
The Company produces a majority of its flavor concentrates at its own facilities
which are distributed for use in its manufacturing facilities. Utilizing the
same formulas throughout its bottling network, the Company is able to
manufacture its products in accordance with uniform standards and
specifications. The Company also maintains research and development laboratories
at multiple locations. These laboratories continually test products for
compliance with the Company's strict quality control standards as well as
conduct research for new products and flavors.
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DISTRIBUTION
The Company's products are sold primarily through the "take-home" channel and,
to a lesser extent, through the convenience, food service and vending
distribution channels.
The take-home distribution channel consists of grocery, warehouse club,
mass-merchandiser, wholesaler and discount stores. The Company distributes its
products to this channel through both the warehouse distribution system and the
direct-store delivery system. Under the warehouse distribution system, products
are shipped from the Company's manufacturing facilities to the retailer's
centralized distribution centers and then shipped by the retailer to each of its
outlet locations with other goods. Products shipped under the direct-store
delivery system are distributed directly to the customer's retail outlets
through the Company's bulk delivery and direct-store-delivery fleet and through
independent distributors. In recent years, the Company has increased utilization
of multiple distributions systems to expand the presence of various Company
brands within the take-home channel.
The Company distributes its products to the convenience store and retail gas
station market through its own direct-store-delivery fleet and that of
independent distributors. The Company increased distribution through this
higher-margin channel during fiscal 1998, and intends to continue emphasizing
growth within this channel during fiscal 1999.
The Company's food service division is responsible for sales to hospitals,
schools, military bases, airlines, hotels and food service wholesalers. The
Company's food service products are distributed primarily through independent,
specialized distributors.
Each of the Company's take-home, convenience and food service operations uses
vending machines and glass-door coolers as marketing and promotional tools for
the Company's brands. The Company provides vending machines and coolers on a
placement or purchase basis to its customers and vending operators. Management
believes 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
The Company sells and markets its products through an internal sales force, as
well as selected broker networks. The Company's sales force is organized to
serve a specific market segment, focusing either on geographic territories,
distribution channels or product line segments. This focus allows each sales
group to provide high level, responsive service and support to the customers and
markets that it serves. During the past two fiscal years, the Company has
increased its field sale force and currently employs over 200 sales
representatives.
The Company's 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 and consumer coupon distribution. The Company retains advertising
agencies to assist with media advertising programs for its brands. The Company
also offers numerous promotional programs to its retail customers, including
cooperative advertising support, in-store advertising materials and other
incentives.
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Management believes these elements allow it to tailor marketing and advertising
programs for demographic and economic lifestyles to meet local and regional
requirements. The Company seeks to maintain points of difference between its
brands and those of its competitors by combining high product quality, flavor
innovation and unique packaging designs with a value pricing strategy.
Additionally, the Company sponsors special holiday promotions including Creepy
Coolers for Halloween and St. Nick's, which features special holiday flavors and
colors for Christmas.
The Company's "regional share dynamics" strategy emphasizes the acquisition and
support of brands that have a significant regional presence. Management believes
that these types of products are less subject to attack by the larger national
brands because of the strong, regional consumer loyalty developed over time and
because of their relatively small national market share. Additionally, brands
that have regional consumer recognition do not require costly national media
advertising and are effectively promoted by the Company's regionally targeted
marketing programs and retailer-based sales incentives.
As part of its sales and marketing strategy, the Company enters into long-term
contractual relationships which join its sales, marketing and manufacturing
expertise with the sales and marketing expertise of national and regional
retailers. These "Strategic Alliances" provide for retailer promotional support
for the Company's brands through in-store and point-of-sale advertising, and
provide nationally integrated manufacturing and distribution services for the
retailer's own branded products. See Item 7.
RAW MATERIALS
The Company maintains relationships with numerous suppliers of raw materials and
packaging goods and utilizes a centralized procurement division to purchase raw
materials and packaging supplies. By consolidating the purchasing function for
its fourteen bottling facilities, management believes it is able to procure more
competitive arrangements with its suppliers, allowing it to compete as a
low-cost producer of beverages.
Products produced and sold by the Company are made from various materials,
including sweeteners, juice concentrates, carbon dioxide, water, glass, resin
used in plastic bottles, aluminum, paper, cartons and caps. Most of the
Company's low-calorie soft drink products use aspartame. The Company
manufactures a majority of its own flavor concentrates and purchases the
remainder of its raw materials from multiple suppliers. In the ordinary course
of its business, the Company enters into commitments for the supply of certain
raw materials, none of which are material to the Company's financial position.
All of the materials or ingredients used by the Company are presently available,
although strikes, weather conditions, governmental controls, national
emergencies or other events outside the Company's control could adversely affect
the supply of specific materials. Additionally, pricing and availability of
certain of the Company's raw materials are based on commodities, primarily
aluminum, resin, corn, linerboard and juice concentrates, which tend to
fluctuate based upon worldwide market conditions.
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SEASONALITY
The Company's sales are seasonal with the highest volume typically realized
during the summer months. The Company has 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 production and sale of non-alcoholic beverages is highly competitive and the
Company's competitive position varies in each of its market areas. The Company
is not considered dominant in any market. Products produced and marketed by the
Company compete with national soft drinks delivered directly to retail customers
by franchised bottlers, local and regional soft drink products and other
beverages, including water, juice and juice-based drinks, "new age" beverage
products, sports drinks, coffee and tea. Several competitors, including the two
that dominate the soft drink industry, PepsiCo, Inc. and The Coca-Cola Company,
have greater financial resources than the Company. Competition is based upon
taste, quality, price, availability, promotion, packaging, advertising and
service to the customer. Price competition by national brand soft drink
companies as well as other regional soft drink producers has been intense over
recent years and the Company expects that such competitive conditions will
continue.
TRADEMARKS
The Company maintains various registered trademarks for its proprietary brands
in the United States and abroad, which are significant to the business of the
Company. The Company intends to continue to maintain all registrations of its
significant trademarks and continue to use the trademarks in the operation of
its businesses.
GOVERNMENTAL REGULATION
The production, distribution and sale of the Company's products in the United
States are subject to the Federal Food, Drug and Cosmetic Act; 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. Certain states and localities prohibit, or may in the future enact
legislation to prohibit, the sale of certain beverages unless a deposit or tax
is charged for containers. Management believes that it is in compliance in all
material respects with such existing legislation.
All of the Company's facilities in the United States are subject to federal,
state and local environmental laws and regulations. Compliance with these
provisions has not had, and the Company does not expect such compliance to have,
any material adverse effect on the Company's financial or competitive position.
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EMPLOYEES
As of May 2, 1998, the Company employed approximately 1,200 people, of which 400
are in professional, technical, managerial, sales, administrative, and clerical
job classifications and 800 are production/hourly employees. Of the Company's
hourly employees, approximately 300 are covered by collective bargaining
agreements which expire through 2001. Management believes that the Company's
relations with its employees are good.
ITEM 2. PROPERTIES
The principal properties of the Company include fourteen production and
warehouse facilities located in twelve states which, in the aggregate, comprise
approximately two million square feet. Eleven facilities are owned by the
Company and are located in the following states: Ohio, Michigan (2), Georgia,
California (2), Texas, Kansas, Arizona, Utah and Washington. Three production
facilities, located in Louisiana, Maryland and Florida, are leased subject to
agreements that expire through 2000. Management believes the Company's
facilities are generally in good condition and sufficient to meet its present
needs.
The production of soft drinks 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 industry's
conversion to lower-weight cans and lids. The Company is not aware of any
anticipated industry-wide changes in technology that would adversely impact the
Company's current physical production capacity or cost of production.
At May 2, 1998, the Company operated approximately 200 vehicles that include
delivery trucks, other trucks, vans and automobiles used in the sale and
distribution of its products. In addition, the Company leases office space,
transportation equipment, office equipment, data processing equipment and some
plant equipment.
ITEM 3. LEGAL PROCEEDINGS
Albert H. Kahn v. Nick A. Caporella, et al., Civil Action No. 11890 was filed in
December 1990 by a shareholder of Burnup & Sims Inc. ("BSI"), now MasTec, Inc.,
in the Court of Chancery of the State of Delaware in and for New Castle County
against the Company, the members of the Board of Directors of BSI and against
BSI. In May 1993, plaintiff amended its class action and shareholder derivative
complaint (the "Amended Complaint"). The class action claims allege, among other
things, that the Board of Directors of BSI, and the Company, as its largest
shareholder, breached their respective fiduciary duties in approving (i) the
dividend by BSI of its shares of the Company common stock (the "Distribution")
and (ii) the exchange of certain shares of BSI's common stock held by the
Company for certain indebtedness of the Company held by BSI (the "Exchange"; the
Distribution and the Exchange are hereafter referred to as the "1991
Transaction"), in allegedly placing the interests of the Company ahead of the
interests of other shareholders of BSI. The derivative action claims allege,
among other things, that the Board of Directors of BSI breached their fiduciary
duties by approving executive officer compensation arrangements, by financing
the Company's operations on a current basis, and by permitting the interests of
BSI to be subordinated to those of the Company. In the lawsuit, plaintiff seeks
to
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rescind the 1991 Transaction and to recover unspecified damages. The defendants,
including the Company, have moved to dismiss the actions for failure to make a
demand and state a claim upon which relief can be granted. The motion is still
pending.
In November 1993, plaintiff filed a class action and derivative complaint, Civil
Action No. 13248 (the "1993 Complaint") against the Company, BSI, the members of
the Board of Directors of BSI, and certain other defendants (referred to as
"Other Defendants"). In December 1993, plaintiff amended the 1993 Complaint (the
"1993 Amended Complaint"). The 1993 Amended Complaint alleges, among other
things, that the Board of Directors of BSI, and the Company, as BSI's largest
stockholder, breached their respective fiduciary duties by approving an
agreement dated October 15, 1993, as amended, between BSI and the Other
Defendants (the "Acquisition Agreement") and the exchange of 3,153,847 shares of
BSI common stock owned by the Company for certain indebtedness owed to BSI by
the Company (the "Redemption") which, according to the allegations of the 1993
Complaint, benefits the President and Chief Executive Officer of the Company at
the expense of BSI's stockholders. On November 29, 1993, plaintiff filed a
motion for an order preliminarily and permanently enjoining the transactions
under the Acquisition Agreement and the Redemption. On March 7, 1994, the court
heard oral arguments with respect to plaintiff's motion to enjoin the
transactions, and on March 10, 1994, the court denied plaintiff's request for
injunctive relief finding that plaintiff had not established a likelihood of
success on the merits and that, in any event, the equities did not favor the
imposition of injunctive relief.
There has been no further discovery or other court proceedings since May 1995.
Management believes that the allegations in the complaint, the Amended
Complaint, the 1993 Complaint and the 1993 Amended Complaint are without merit,
and intends to vigorously defend these actions.
The Company is a defendant in various other lawsuits arising in the ordinary
course of business.
In the opinion of management, the ultimate disposition of the foregoing lawsuits
will not have a material adverse effect on the Company's consolidated financial
position or result of operations.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were voted upon during the fourth quarter of fiscal 1998.
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PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
MARKET INFORMATION
The common stock of the Company, par value $.01 per share, is listed on the
American Stock Exchange under the symbol "FIZ".
The table below sets forth, for the periods indicated, the high and low prices
of the common stock as reported by the American Stock Exchange:
Fiscal 1998 Fiscal 1997
High Low High Low
---- --- ---- ---
First Quarter $ 11-7/8 $ 9-13/16 $ 7-7/16 $ 4-3/4
Second Quarter 10-3/4 9-3/16 10-1/16 6-11/16
Third Quarter 10-1/8 8-7/8 9 7-1/2
Fourth Quarter 10-1/2 9-7/16 12-5/8 7-5/8
On October 25, 1996, the Company paid a 100% stock dividend to its shareholders
of record on September 9, 1996, effected as a 2 for 1 stock split. All share
quotations shown above have been restated to reflect this split.
HOLDERS
At July 27, 1998, there were 1,138 stockholders of record of the Company's
common stock. This number was determined from records maintained by the
Company's transfer agent and does not include beneficial owners of the Company's
securities whose securities are held in the names of various dealers and/or
clearing agencies.
DIVIDENDS
The Company has not paid any cash dividends with respect to its common stock
during the last three fiscal years and the Company's Board of Directors has no
present plans for declaring any such 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 and footnote amounts)
Fiscal Year Ended (1):
--------------------------------------------------------
May 2, May 3, April 27, April 29, April 30,
1998 1997 1996 1995 1994
-------- -------- -------- -------- --------
STATEMENT OF INCOME DATA:
Net sales $400,749 $385,427 $350,431 $348,732 $347,727
Cost of sales 275,083 275,453 261,859 261,720 258,207
-------- -------- -------- -------- --------
Gross profit 125,666 109,974 88,572 87,012 89,520
Selling, general and administrative
expenses 102,195 88,921 70,029 68,563 66,775
Other charges (2) -- -- -- -- 9,119
Interest expense 4,175 4,951 4,969 5,226 7,710
Other income - net 1,633 871 950 877 243
-------- -------- -------- -------- --------
Income from continuing operations
before income taxes 20,929 16,973 14,524 14,100 6,159
Provision for income taxes 7,827 6,280 5,520 5,499 2,666
-------- -------- -------- -------- --------
Income from continuing operations $ 13,102 $ 10,693 $ 9,004 $ 8,601 $ 3,493
======== ======== ======== ======== ========
Income from continuing operations
per share (3):
Basic $ 0.71 $ 0.58 $ 0.44 $ 0.41 $ 0.13
Diluted 0.68 0.56 0.43 0.40 0.13
BALANCE SHEET DATA:
Working capital $ 50,398 $ 47,624 $ 43,580 $ 33,260 $ 30,910
Property - net 55,945 55,436 56,226 52,075 54,250
Total assets 182,327 170,897 177,560 162,558 162,583
Long-term debt 41,600 55,026 62,568 43,185 51,699
Deferred income taxes 8,332 7,245 6,805 6,435 7,337
Shareholders' equity 69,980 56,703 47,052 43,871 36,236
(1) Fiscal 1997 consisted of 53 weeks.
(2) Other charges included a $1,200,000 provision for legal claims and related
expenses, $3,468,000 of expenses associated with category development and
$4,451,000 of costs related to compliance with the Nutrition Labeling and
Education Act.
(3) Income from continuing operations per share is computed based upon earnings
applicable to common shares. For periods prior to fiscal 1997, earnings
applicable to common shares is comprised of income from continuing
operations less preferred dividends, plus for 1994, the Company's equity in
the preferred stock dividends received by a former holder. Per share amounts
are adjusted for the 2 for 1 stock split distributed on October 25, 1996 and
4 for 1 stock split distributed on November 9, 1994. See Note 8 of Notes to
Consolidated Financial Statements.
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
GENERAL OVERVIEW
National Beverage's strategy emphasizes the growth of its branded products by
offering a beverage portfolio of proprietary flavors; by supporting the
franchise value of regional brands; by developing and acquiring innovative
products tailored toward healthy lifestyles; and by appealing to the
"quality-price" sensitivity factor of the family consumer.
Beginning in the latter part of fiscal 1996, the Company commenced a program to
strengthen its brand equity and awareness through greater retailer sponsorship
by entering into long-term alliances with national and regional retailers to
supply both Company branded and customer branded soft drinks ("Strategic
Alliances"). During the past several years, the consolidation of smaller, less
competitive retail outlets into larger and highly price-sensitive, "mega-retail"
businesses has occurred, increasing the retailers' need for a single-source,
high-quality, service-oriented manufacturer of beverage products. Through its
Strategic Alliances, the Company has joined with these retailers to manufacture,
market and sell its brands and brands developed specifically for each retailer
("allied brands"). These alliances provide additional opportunities for the
Company to increase sales during promotional activity periods and reduce costs
by bulk shipments directly to the retailers' store locations. Retailers also
attain greater cost efficiencies by shipping branded and allied branded products
together, thus decreasing costs through the elimination of partial shipments.
Retailers are able to enhance distribution center inventory management and
quality control by contracting with one national supplier that can provide
consistent packaging, flavor and quality throughout the continental United
States. In addition, innovation in product design and a greater variety of
package alternatives have increased retailers' reliance on manufacturers that
are sensitive to changing design and packaging needs. Accordingly, management
believes that the strength of its regional brands and the location of its
manufacturing facilities position it as one of the leading single-source
suppliers of high-quality, high-value soft drinks, such as Shasta and Faygo, as
well as allied branded soft drinks, in multiple flavors and packaging throughout
the continental United States. It is the Company's intention to seek additional
Strategic Alliances.
The Company intends to continue its "regional share dynamics" strategy by
acquiring brands and expanding its product line in response to changes in
lifestyles and demographics. The acquisition of the Everfresh product line in
fiscal 1996 and the LaCROIX product line in fiscal 1997 expanded the Company's
product line to juice and additional water products. The Company seeks to
increase its revenues and brand portfolio by acquiring other regional beverage
businesses that meet its strategic and financial objectives.
Industry soft drink sales are seasonal with the highest volume typically
realized during the summer months. Additionally, the Company's 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 1998 increased $15.3 million to $400.7 million. This growth
was primarily the result of a 3% increase in branded case volume due to
increased sales to Strategic Alliance partners and expanded distribution of the
Everfresh and LaCROIX brands, and an increase in manufacturing services. Average
net selling prices of the Company's brands also increased slightly due to
favorable changes in distribution channel and product mix, and the effects of
Strategic Alliances. These increases were partially offset by reduced sales of
lower-margin products.
Net sales for fiscal 1997 increased 10% to $385.4 million from $350.4 million
for fiscal 1996. This growth was primarily the result of a 9% increase in
branded case volume due to increased sales to Strategic Alliance partners and
the addition of the Everfresh and LaCroix brands to the Company's product line.
Additionally, net unit selling price improved, despite the continuing intense
pricing and promotional activity within the industry, as a result of favorable
changes in package and product mix. As part of the Company's Strategic Alliance
program, sales of products are supported by in-store advertising and other
promotions, which also had the effect of increasing both net sales and selling
expenses. These increases were partially offset by reduced sales of certain
lower-margin products.
Fiscal 1998 and fiscal 1996 consisted of 52 weeks, while fiscal 1997 consisted
of 53 weeks.
GROSS PROFIT:
Gross profit approximated 31%, 28% and 25% of net sales for fiscal 1998, 1997
and 1996, respectively. These increases were due principally to increased sales
of juice and other higher-margin products, the effects of higher selling prices
noted above and periodic declines in the cost of certain raw materials.
Management believes that inflationary trends do not have a significant impact on
operating results since fluctuations in raw material costs are typically
influenced more by commodity market conditions than inflation. Although there
can be no assurances as to future predictability, the Company does not expect
any significant changes in raw material costs in fiscal 1999.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES:
As a percentage of net sales, selling, general and administrative expenses
approximated 25%, 23% and 20% for fiscal 1998, 1997 and 1996, respectively.
Included in these increases are higher marketing and advertising costs,
including expanded in-store advertising and other merchandising programs related
to the Strategic Alliance initiative. Additionally, the Company began increasing
the number of direct sales representatives employed during fiscal 1997. Costs
associated with these additional personnel also contributed to the fiscal 1998
and 1997 increases.
INTEREST EXPENSE AND OTHER INCOME-NET:
Fiscal 1998 interest expense decreased $.8 million due to a reduction in average
outstanding debt. Fiscal 1997 interest expense of $5.0 million is unchanged from
the prior year. Other income includes interest income of $1.7 million for fiscal
1998 and $1.0 million for fiscal 1997 and 1996.
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INCOME TAXES:
The Company's effective tax rate was approximately 37% for fiscal 1998 and 1997,
and 38% for fiscal 1996. The difference between the effective rate and the
federal statutory rate of 35% was primarily due to the effects of state income
taxes and other nondeductible expenses. See Note 7 of Notes to Consolidated
Financial Statements.
EARNINGS APPLICABLE TO COMMON SHARES AND EARNINGS PER SHARE:
In February 1996, the Company purchased all of the National Beverage Corp.
preferred stock held by its single holder. The repurchase of the Company's
preferred stock eliminated annual dividend payments of approximately $1.1
million. While not affecting net income, this purchase increased earnings
applicable to common shares and earnings per common share. See Notes 6 and 8 of
Notes to Consolidated Financial Statements.
LIQUIDITY AND CAPITAL RESOURCES
Management views earnings before interest expense, taxes, depreciation and
amortization ("EBITDA") as a key indicator of the Company's operating
performance and enterprise value, although not as a substitute for cash flow
from operations or operating income. For fiscal 1998, the Company generated
EBITDA of $34.4 million, which represents an increase of 16% from the prior
year. Management believes that EBITDA is sufficient to support both additional
growth and additional debt capacity.
The Company's cash position increased approximately $3.2 million to $40.4
million during fiscal 1998. Cash provided by operations of $24.0 million was
comprised of net income of $13.1 million, non-cash charges of $10.0 million and
cash provided by a working capital decrease of $.9 million. Cash of $7.1 million
was used for net capital expenditures and cash of $13.7 million was used for
financing activities, principally for net debt repayments. The Company's ratio
of current assets to current liabilities approximated 1.9 to 1 and 2.0 to 1 at
May 2, 1998 and May 3, 1997, respectively, and working capital increased to
$50.4 million from $47.6 million for those same periods.
At May 2, 1998, the Company had available credit lines of approximately $33.4
million. Management believes that cash and equivalents, together with funds
generated from operations and borrowing capabilities will be sufficient to meet
its operating cash requirements in the foreseeable future. The Company is
evaluating various capital projects to expand capacity at certain manufacturing
facilities. Presently, however, the Company has no material commitments for
capital expenditures and expects that fiscal 1999 capital expenditures will be
comparable to fiscal 1998.
At May 2, 1998, the Company had long-term debt outstanding of $41.6 million.
Certain debt agreements contain restrictions which require a subsidiary to
maintain certain financial ratios and minimum net worth, and limit the
subsidiary with respect to incurring certain additional indebtedness, paying
cash dividends and making certain loans, advances or other investments. At May
2, 1998, net assets of the subsidiary totaling approximately $49 million were
restricted from distribution. Management believes that cash balances of the
parent company, when combined with funds available from its subsidiary, provide
sufficient liquidity to allow it to meet
13
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its current and expected cash obligations. The Company was in compliance with
all loan covenants and restrictions at May 2, 1998 and such restrictions are not
expected to have a material adverse impact on the operations of the Company. See
Note 5 of Notes to Consolidated Financial Statements.
On January 23, 1998, the Company announced that its Board of Directors
authorized the Company to repurchase up to 800,000 shares of its common stock.
The Company expects to make such purchases from existing cash balances from time
to time through open market purchases, block trades and/or privately negotiated
transactions.
Pursuant to a management agreement, the Company incurred a fee to Corporate
Management Advisers, Inc. of approximately $4.0 million for fiscal 1998, $3.9
million for fiscal 1997 and $3.5 million for fiscal 1996. Payments under the
management agreement did not materially impact the liquidity of the Company. See
Note 6 of Notes to Consolidated Financial Statements.
CHANGES IN ACCOUNTING STANDARDS
Effective the third quarter of fiscal 1998, the Company adopted Financial
Accounting Standards Board Statement of Financial Accounting Standards No. 128
"Earnings Per Share", which establishes standards for computing and presenting
earnings per share. See Note 8 of Notes to Consolidated Financial Statements.
In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 130 "Reporting Comprehensive Income" ("SFAS
130") and No. 131 "Disclosures About Segments of an Enterprise and Related
Information" ("SFAS 131"). SFAS 130 establishes standards for reporting and
display of comprehensive income and its components. SFAS 131 specifies revised
guidelines for determining an entity's operating segments and the type and level
of financial information to be disclosed. SFAS 130 and SFAS 131 are effective
for fiscal years beginning after December 15, 1997. Management believes that the
implementation of SFAS 130 and SFAS 131 will not materially impact its financial
reporting.
YEAR 2000 COMPLIANCE
Many computer systems were designed using two digit date fields for purposes of
determining the year. This raises the possibility that these systems will
recognize a date using "00" as 1900 rather than 2000, which could result in
improper processing of time sensitive data or system failure. The Company is in
the process of reviewing its computer systems and modifying those that are
subject to this problem. The Company is also in the process of surveying its
major vendors and customers to determine the status of their Year 2000
compliance programs. Based on information currently available, management
believes that the completed and planned modifications of software and equipment
will prevent a material disruption of business, and that the costs of the Year
2000 compliance program will not have a material impact on the Company's results
of operations or financial position.
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FORWARD LOOKING STATEMENTS
Certain statements in this Annual Report on Form 10-K (this "Form 10-K"),
including statements under "Item 1. Business" and "Item 7. Management's
Discussion and Analysis of Financial Condition and Results of Operations,"
constitute "forward-looking statements" within the meaning of the Private
Securities Litigation Reform Act of 1995. Such forward-looking statements
involve known and unknown risks, uncertainties and other factors which may cause
the actual results, performance or achievements of the Company to be materially
different from any future results, performance or achievements express or
implied by such forward-looking statements. Such factors include, but are not
limited to, the following: general economic and business conditions;
competition; success of the Company's Strategic Alliance objective; success of
the Company in acquiring other beverage businesses; success of new product and
flavor introductions; fluctuations in the costs of raw materials; continued
retailer support for the Company's brands; changes in consumer preferences;
changes in business strategy or development plans; government regulations;
regional weather conditions; and other factors referenced in this Form 10-K. The
Company will not undertake and specifically declines any obligation to publicly
release the result of any revisions which may be made to any forward-looking
statements to reflect events or circumstances after the date of such statements
or to reflect the occurrence of anticipated or unanticipated events.
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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
NATIONAL BEVERAGE CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
AS OF MAY 2, 1998 AND MAY 3, 1997
(In thousands, except share amounts)
1998 1997
--------- ---------
ASSETS
Current assets:
Cash and equivalents $ 40,447 $ 37,257
Trade receivables - net of allowances of $715 (1998) and $608 (1997) 35,781 27,344
Inventories 23,402 23,590
Deferred income taxes 2,154 1,759
Prepaid and other 5,557 6,214
--------- ---------
Total current assets 107,341 96,164
Property - net 55,945 55,436
Intangible assets - net 14,973 15,503
Other assets 4,068 3,794
--------- ---------
$ 182,327 $ 170,897
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 37,065 $ 28,544
Accrued liabilities 18,606 17,880
Income taxes payable 879 1,391
Current portion of long-term debt 393 725
--------- ---------
Total current liabilities 56,943 48,540
Long-term debt 41,600 55,026
Deferred income taxes 8,332 7,245
Other liabilities 5,472 3,383
Commitments and contingencies
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 22,025,212 shares (1998) and 21,990,492 shares (1997);
Outstanding 18,494,488 shares (1998) and 18,459,768 shares (1997) 220 220
Additional paid-in capital 15,118 14,943
Retained earnings 67,973 54,871
Treasury stock - at cost:
Preferred stock (150,000 shares) (5,100) (5,100)
Common stock (3,530,724 shares) (8,381) (8,381)
--------- ---------
Total shareholders' equity 69,980 56,703
--------- ---------
$ 182,327 $ 170,897
========= =========
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 MAY 2, 1998, MAY 3, 1997 AND APRIL 27, 1996
(In thousands, except per share and footnote amounts)
1998 1997 1996
--------- --------- ---------
Net sales $ 400,749 $ 385,427 $ 350,431
Cost of sales 275,083 275,453 261,859
--------- --------- ---------
Gross profit 125,666 109,974 88,572
Selling, general and administrative expenses 102,195 88,921 70,029
Interest expense 4,175 4,951 4,969
Other income - net 1,633 871 950
--------- --------- ---------
Income before income taxes 20,929 16,973 14,524
Provision for income taxes 7,827 6,280 5,520
--------- --------- ---------
Net income $ 13,102 $ 10,693 $ 9,004
========= ========= =========
Components of basic earnings per common share (a):
Income from continuing operations $ 0.71 $ 0.58 $ 0.44
Purchase of preferred shares -- -- 0.41
--------- --------- ---------
$ 0.71 $ 0.58 $ 0.85
========= ========= =========
Components of diluted earnings per common share (a):
Income from continuing operations $ 0.68 $ 0.56 $ 0.43
Purchase of preferred shares -- -- 0.40
--------- --------- ---------
$ 0.68 $ 0.56 $ 0.83
========= ========= =========
(a) Earnings per common share is computed from earnings applicable to common
shares which, for fiscal 1996, consists of net income less preferred
dividends and $7,600,000 which represents the difference of the carrying
value of the Company's preferred stock over its purchase price. See Note 8.
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 MAY 2, 1998, MAY 3, 1997, AND APRIL 27, 1996
(In thousands, except share amounts)
1998 1997 1996
------------------------ ------------------------ ------------------------
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 21,990,492 220 12,741,488 127 12,731,088 127
Stock options exercised 34,720 -- 23,800 1 10,400 --
2 for 1 stock split -- -- 9,225,204 92 -- --
---------- ---------- ---------- ---------- ---------- ----------
End of year 22,025,212 220 21,990,492 220 12,741,488 127
========== ---------- ========== ---------- ========== ----------
ADDITIONAL PAID-IN CAPITAL
Beginning of year 14,943 14,873 14,808
Stock options exercised 175 162 65
2 for 1 stock split -- (92) --
---------- ---------- ----------
End of year 15,118 14,943 14,873
---------- ---------- ----------
RETAINED EARNINGS
Beginning of year 54,871 44,178 35,962
Net income 13,102 10,693 9,004
Preferred stock dividends -- -- (788)
---------- ---------- ----------
End of year 67,973 54,871 44,178
---------- ---------- ----------
TREASURY STOCK-PREFERRED
Beginning of year 150,000 (5,100) 150,000 (5,100) -- --
Preferred shares purchased -- -- -- -- 150,000 (5,100)
---------- ---------- ---------- ---------- ---------- ----------
End of year 150,000 (5,100) 150,000 (5,100) 150,000 (5,100)
========== ---------- ========== ---------- ========== ----------
TREASURY STOCK-COMMON
Beginning of year 3,530,724 (8,381) 3,430,724 (7,176) 3,430,724 (7,176)
Purchase of common stock -- -- 100,000 (1,205) -- --
---------- ---------- ---------- ---------- ---------- ----------
End of year 3,530,724 (8,381) 3,530,724 (8,381) 3,430,724 (7,176)
========== ---------- ========== ---------- ========== ----------
TOTAL SHAREHOLDERS' EQUITY $ 69,980 $ 56,703 $ 47,052
========== ========== ==========
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 MAY 2, 1998, MAY 3, 1997, AND APRIL 27, 1996
(In thousands)
1998 1997 1996
-------- -------- --------
OPERATING ACTIVITIES:
Net income $ 13,102 $ 10,693 $ 9,004
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation and amortization 9,254 7,784 7,148
Deferred income tax provision 692 2,991 1,000
Loss on sale of property 69 120 27
Changes in:
Trade receivables (8,437) 7,144 (1,318)
Inventories 188 1,369 763
Prepaid and other assets (3,201) (1,531) (666)
Accounts payable 8,521 (9,633) 2,252
Other liabilities, net 3,795 (2,335) (3,641)
-------- -------- --------
Net cash provided by operating activities 23,983 16,602 14,569
-------- -------- --------
INVESTING ACTIVITIES:
Property additions (7,312) (6,285) (5,119)
Proceeds from sale of property 216 461 27
Acquisitions, net of cash acquired -- 145 (11,378)
-------- -------- --------
Net cash used in investing activities (7,096) (5,679) (16,470)
-------- -------- --------
FINANCING ACTIVITIES:
Debt borrowings 8,300 33,200 29,784
Debt repayments (22,058) (40,946) (19,217)
Preferred stock dividends paid -- -- (1,838)
Purchase of preferred stock -- -- (5,100)
Purchase of common stock -- (1,205) --
Proceeds from stock options exercised 61 54 16
-------- -------- --------
Net cash provided by (used in) financing activities (13,697) (8,897) 3,645
-------- -------- --------
NET INCREASE IN CASH AND EQUIVALENTS 3,190 2,026 1,744
CASH AND EQUIVALENTS - BEGINNING OF YEAR 37,257 35,231 33,487
-------- -------- --------
CASH AND EQUIVALENTS - END OF YEAR $ 40,447 $ 37,257 $ 35,231
======== ======== ========
OTHER CASH FLOW INFORMATION:
Interest paid $ 5,067 $ 5,069 $ 5,085
Income taxes paid 6,204 4,227 4,863
Non-cash investing activities are described in Note 2.
See accompanying Notes to Consolidated Financial Statements.
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NATIONAL BEVERAGE CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
National Beverage Corp. (the "Company") is a holding company for various
subsidiaries that market, manufacture and distribute a full line of beverage
products: Shasta(R), Faygo(R) and Big Shot(R) multi-flavored and cola soft
drinks; Everfresh(R) juice and juice-enriched products; LaCROIX(R) and Mt.
Shasta(TM) spring and carbonated water products; ClearFruit (R), Spree(R) and
nuAnce(R) flavored carbonated and non-carbonated beverages; and specialty items,
Creepy Coolers(TM) and St. Nick's(TM). Substantially all of the Company's brands
are produced in its fourteen manufacturing facilities, which are strategically
located throughout the continental United States. The Company also develops and
produces branded soft drinks for retail grocery chains, warehouse clubs,
mass-merchandisers and wholesalers ("allied brands") as well as soft drinks for
other beverage companies.
The consolidated financial statements include National Beverage Corp. and its
wholly-owned subsidiaries. All material intercompany balances have been
eliminated. The fiscal year of the Company ends the Saturday closest to April
30th. The year ended May 2, 1998 ("fiscal 1998") and the year ended April 27,
1996 ("fiscal 1996") consisted of 52 weeks, while the year ended May 3, 1997
("fiscal 1997") consisted of 53 weeks. The preparation of financial statements
in conformity with generally accepted accounting principles requires management
to make estimates and assumptions that affect the amounts reported in the
financial statements and accompanying notes. Although these estimates are based
on management's knowledge of current events and actions it may undertake in the
future, they may ultimately differ from actual results.
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.
The Company sells products to a variety of customers and extends credit based on
an evaluation of the customer's financial condition, generally without requiring
collateral. Exposure to losses on receivables varies by customer principally due
to the financial condition of each customer. The Company monitors exposure to
credit losses and maintains allowances for anticipated losses. At May 2, 1998,
one customer represented approximately 13% of trade receivables and another
customer represented approximately 12% of trade receivables. At May 3, 1997, one
customer represented approximately 14% of trade receivables and another customer
represented approximately 10% of trade receivables. No one customer accounted
for more than 10% of net sales for fiscal 1998 or 1997. For fiscal 1996, one
customer accounted for approximately 14% of the Company's net sales and another
customer accounted for approximately 12% of the Company's net sales.
The Company incurs certain costs related to long-term contractual relationships
with national and large regional retailers to manufacture and jointly market
Company and allied branded products. These costs are deferred and amortized
based on the contractual unit volume or the straight-line method over the lesser
of the period of benefit or the non-cancelable period of the
20
21
contract. It is the Company's policy to periodically review and evaluate the
future benefits associated with these costs to determine that deferral and
amortization is justified. Of these costs, amounts associated with periods of
one year or less are included in other current assets and all other amounts are
included in other assets. Advertising costs are expensed as incurred.
Inventories are stated at the lower of first-in, first-out cost or market.
Inventories at May 2, 1998 are comprised of finished goods of $11,868,000 and
raw materials of $11,534,000. Inventories at May 3, 1997 are comprised of
finished goods of $12,189,000 and raw materials of $11,401,000.
Property is recorded at cost. Depreciation is computed by the straight-line
method over estimated useful lives as follows: buildings and improvements, 7 to
25 years; machinery and equipment, 3 to 15 years. When assets are retired or
otherwise disposed of, the cost and accumulated depreciation are removed from
the respective accounts and any related gain or loss is recognized. Maintenance
and repair costs are charged to expense as incurred, and renewals and
improvements that extend the useful lives of assets are capitalized.
Intangible assets consist of goodwill, trademarks, formulas and customer lists
at costs assigned at the date of acquisition and are amortized on a
straight-line basis over estimated useful lives ranging from 10 to 40 years.
Intangible assets at May 2, 1998 and May 3, 1997 consisted of the following:
(In thousands)
1998 1997
-------- --------
Goodwill $ 15,309 $ 15,309
Other 4,880 4,880
-------- --------
Total 20,189 20,189
Less accumulated amortization (5,216) (4,686)
-------- --------
Net $ 14,973 $ 15,503
======== ========
The Company periodically evaluates its non-current assets on a non-discounted
cash flow basis to assess recoverability. If the estimated future cash flow
associated with an asset is projected to be less than the carrying amount of the
asset, a write-down to fair value measured by discounted estimated future cash
flows would be recorded.
Revenue from product sales is recognized by the Company when title and risk of
loss passes to the customer, which generally occurs upon shipment.
The Company maintains self-insured and deductible programs for certain casualty,
medical and workers' compensation exposures. The Company accrues for known
claims and estimated incurred but not reported claims not otherwise covered by
insurance.
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2. ACQUISITIONS
In March 1996, the Company acquired certain of the United States assets of
Everfresh Beverages, Inc., a manufacturer of juice products. The acquisition of
these assets, which include a beverage manufacturing facility, the Everfresh,
Sundance and Rich n' Ready trademarks, receivables and inventory, has been
accounted for using the purchase method of accounting and, accordingly, the
purchase price has been allocated to the assets purchased based upon fair values
at the date of acquisition. In October 1996, the Company concluded the
acquisition of substantially all of the assets of Winterbrook Corporation, which
had as its principal product the LaCROIX sparkling and still water product line.
The operating results of Everfresh and Winterbrook have been included in the
consolidated statements of income from the dates of acquisition.
Net cash expended for acquired assets and indebtedness in fiscal year 1996 was
$11.4 million, comprised of assets purchased of $14.4 million (including
goodwill and other intangibles of $3.7 million) less liabilities assumed of $3.0
million.
3. PROPERTY
Property at May 2, 1998 and May 3, 1997 consisted of the following:
(In thousands)
1998 1997
--------- ---------
Land $ 8,897 $ 8,897
Buildings and improvements 31,520 31,213
Machinery and equipment 77,888 71,972
--------- ---------
Total 118,305 112,082
Less accumulated depreciation (62,360) (56,646)
--------- ---------
Property - net $ 55,945 $ 55,436
========= =========
Depreciation expense was $6,518,000 for fiscal 1998, $6,266,000 for fiscal 1997
and $6,437,000 for fiscal 1996.
4. ACCRUED LIABILITIES
Accrued liabilities at May 2, 1998 and May 3, 1997 consisted of the following:
(In thousands)
1998 1997
------- -------
Accrued promotions $ 6,312 $ 3,981
Accrued compensation 4,232 3,648
Other accrued liabilities 8,062 10,251
------- -------
$18,606 $17,880
======= =======
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5. DEBT
Debt at May 2, 1998 and May 3, 1997 consisted of the following:
(In thousands)
1998 1997
-------- --------
Senior Notes (see below) $ 25,000 $ 33,333
Credit Facilities (see below) -- 13,000
Term Loan Facility (see below) 16,600 8,300
Other (including capital leases) 393 1,118
-------- --------
Total 41,993 55,751
Less current portion (393) (725)
-------- --------
Long-term portion $ 41,600 $ 55,026
======== ========
A subsidiary of National Beverage Corp. has outstanding 9.95% unsecured senior
notes in the original principal amount of $50 million (the "Senior Notes")
payable in annual principal installments of $8.3 million through November 1,
2000. Additionally, the subsidiary has two unsecured revolving credit facilities
aggregating $35 million (the "Credit Facilities") and a $16.6 million unsecured
term loan facility ("Term Loan Facility") with banks. The Credit Facilities
expire May 31, 1999 and August 31, 1999, and bear interest at 1/2% below the
bank's reference rate or 1% above LIBOR, at the subsidiary's election. The Term
Loan Facility is repayable in installments from May 1999 through November 1999,
and bears interest at the bank's reference rate or 1 1/4% above LIBOR, at the
subsidiary's election. The Company intends to utilize its existing long-term
credit facilities to fund the next principal payment due on its Senior Notes.
Certain of the Company's debt agreements contain restrictions which require the
subsidiary to maintain certain financial ratios and minimum net worth, and limit
the subsidiary with respect to incurring certain additional indebtedness, paying
cash dividends and making certain loans, advances or other investments. At May
2, 1998, net assets of the subsidiary totaling approximately $49 million were
restricted from distribution. The Company was in compliance with all loan
covenants and restrictions and such restrictions are not expected to have a
material adverse impact on the operations of the Company.
The long-term portion of debt at May 2, 1998, matures as follows:
(In thousands)
Fiscal 2000 $33,267
Fiscal 2001 8,333
-------
Total $41,600
=======
The fair value of debt has been estimated using discounted cash-flow models
incorporating discount rates based on current market interest rates for similar
types of instruments or quoted market prices, when applicable. At May 2, 1998
and May 3, 1997, the difference between the estimated fair value and the
carrying value of debt instruments was not material.
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6. CAPITAL STOCK AND TRANSACTIONS WITH RELATED PARTIES
On October 25, 1996, the Company paid a 100% stock dividend to its shareholders
of record on September 9, 1996, effected as a 2 for 1 stock split. As a result
of the stock split, approximately $92,000, representing the par value of the
shares issued, was reclassified from additional paid-in capital to common stock.
On November 9, 1994, the Company distributed three shares of common stock for
each share outstanding to shareholders of record on October 24, 1994 pursuant to
a 4 for 1 stock split effected as a stock dividend. 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 splits.
The Company accrued preferred stock dividends of $788,000 in fiscal 1996.
Preferred stock dividends paid in fiscal year 1996 include $1,050,000 of
dividends accrued in fiscal 1995. In February 1996, the Company purchased all of
its outstanding preferred stock for $5,100,000, which has been classified as
held in treasury. See Note 8.
In June 1996, the Company purchased 100,000 shares of common stock on the open
market. Such shares are classified as held in treasury.
The Company is a party to a management agreement with Corporate Management
Advisers, Inc. ("CMA"), a corporation owned by the Company's Chairman and Chief
Executive Officer. Under the agreement, the employees of CMA provide the Company
and its subsidiaries 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 the Company's Board of
Directors. The Company incurred a fee to CMA of $4,007,000, $3,854,000, and
$3,504,000 for fiscal 1998, 1997 and 1996, respectively. No incentive
compensation has been incurred or approved under the management agreement since
its inception. The management agreement, pursuant to its terms, currently
expires on December 31, 2000. Included in accounts payable in the accompanying
consolidated balance sheets at May 2, 1998 and May 3, 1997 were amounts due CMA
of $1,058,000 and $1,001,000, respectively.
7. INCOME TAXES
The provision for income taxes (principally federal) consisted of the following:
(In thousands)
1998 1997 1996
------ ------ ------
Current $7,135 $3,289 $4,520
Deferred 692 2,991 1,000
------ ------ ------
Total $7,827 $6,280 $5,520
====== ====== ======
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The statutory federal income tax rate is reconciled to the Company's effective
tax rates as follows:
1998 1997 1996
---- ---- ----
Statutory federal income tax rate 35.0% 35.0% 35.0%
State income taxes 1.7 1.7 2.2
Goodwill and other permanent differences .7 .9 .9
Other, net -- (.6) (.1)
---- ---- ----
Effective income tax rate 37.4% 37.0% 38.0%
==== ==== ====
The Company provides deferred income taxes based on the difference between the
financial statement and tax bases of assets and liabilities. A valuation
allowance is established when it is deemed, more likely than not, that the
benefit of deferred tax assets will not be realized. The Company's deferred tax
assets and liabilities as of May 2, 1998 and May 3, 1997 consisted of the
following:
(In thousands)
1998 1997
------- -------
Deferred tax assets:
Accrued expenses $ 2,812 $ 3,699
Property and intangibles 382 588
Capital loss carryforward 826 826
Valuation allowance (826) (826)
------- -------
Total deferred tax assets 3,194 4,287
Deferred tax liabilities:
Property and intangibles 9,372 9,773
------- -------
Net deferred tax liabilities $ 6,178 $ 5,486
======= =======
Capital loss carryforwards, including accrued expenses, total $2,359,000 for
both fiscal 1998 and 1997, and expire at various dates, the earliest of which is
April 1999. A valuation allowance has been recorded to offset the deferred tax
assets resulting from capital losses since management deems it is more likely
than not that the related deferred tax assets will not be realized.
8. EARNINGS PER COMMON SHARE
Earnings per common share is calculated pursuant to Statement of Financial
Accounting Standards No. 128 ("SFAS 128") which was adopted effective for the
fiscal period ended January 31, 1998. Earnings per common share for prior
periods have been restated to give effect to the application of SFAS 128, which
had no material effect.
For fiscal 1996, earnings applicable to common shares is comprised of net income
less preferred dividends and a non-recurring, non-cash component of $7.6 million
arising from the Company's purchase of all of its outstanding preferred stock.
This amount represents the difference of the carrying value of the preferred
stock over its purchase price. The accounting treatment of the realized discount
on the preferred stock purchase is based upon the SEC staff's interpretation of
generally accepted accounting principles relating to such transactions.
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The following table provides a breakdown of the components of earnings
applicable to common shares, weighted average shares and dilutive stock options
outstanding, and earnings per common share for each of the fiscal years ended
May 2, 1998, May 3, 1997 and April 27, 1996:
(In thousands, except per share amounts)
1998 1997 1996
-------- -------- --------
Income from continuing operations $ 13,102 $ 10,693 $ 9,004
Less preferred dividends -- -- (788)
-------- -------- --------
13,102 10,693 8,216
Difference of carrying value of preferred
shares over cost of shares purchased -- -- 7,600
-------- -------- --------
Earnings applicable to common shares $ 13,102 $ 10,693 $ 15,816
======== ======== ========
Weighted average shares outstanding 18,477 18,317 18,606
Dilutive stock options 846 792 410
-------- -------- --------
Weighted average shares outstanding and
dilutive potential stock 19,323 19,109 19,016
======== ======== ========
Components of basic earnings per share:
Income from continuing operations $ .71 $ .58 $ .44
Purchase of preferred shares -- -- .41
-------- -------- --------
$ .71 $ .58 $ .85
======== ======== ========
Components of diluted earnings per share:
Income from continuing operations $ .68 $ .56 $ .43
Purchase of preferred shares -- -- .40
-------- -------- --------
$ .68 $ .56 $ .83
======== ======== ========
9. LEASES
Future minimum rental commitments for non-cancelable operating leases at May 2,
1998 are as follows:
(In thousands)
Fiscal 1999 $ 3,464
Fiscal 2000 2,521
Fiscal 2001 2,137
Fiscal 2002 1,923
Fiscal 2003 1,849
-------
Total minimum lease payments $11,894
=======
Rental expense was $5,775,000 for fiscal 1998, $3,907,000 for fiscal 1997 and
$3,132,000 for fiscal 1996.
26
27
10. INCENTIVE AND RETIREMENT PLANS
Long-term incentive compensation for executives is administered through the
Company's 1991 Omnibus Incentive Plan (the "Omnibus Plan"), which provides for
compensatory awards consisting of (i) stock options or stock awards for up to
1,400,000 shares of common stock of the Company, (ii) stock appreciation rights,
dividend equivalents, other stock-based awards in amounts up to 1,400,000 shares
of common stock of the Company 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 the Company by making available to them an
opportunity to acquire a proprietary interest or to increase such interest in
the Company. The number of shares or options which may be issued under stock
based awards to an individual is limited to 700,000 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, the Company has authorized the issuance
of options to purchase up to an aggregate of 240,000 shares of common stock.
Options may be granted for such consideration as determined by the Board or a
Committee of the Board. The Company also authorized the issuance of options to
purchase up to 40,000 shares of common stock to be issued at the direction and
discretion of the Chairman of the Board.
In March 1997, the Company's Board of Directors adopted the Key Employee Equity
Partnership Program ("KEEP"), which provides for the granting of stock options
to purchase up to 50,000 shares of common stock to key employees, consultants,
and officers of the Company. Participants who purchase shares of the Company's
stock in the open market receive grants of stock options equal to 50% of the
number of shares purchased, up to a maximum of 6,000 shares in any two-year
period. Options under the KEEP program are automatically forfeited in the event
of the sale of shares originally acquired by the participant. The options are
granted at an initial exercise price of 60% of the purchase price paid for the
shares acquired and reduces to the par value of the Company's stock at the end
of the six-year vesting period. The difference between the exercise price and
the fair market value of the stock on date of grant is amortized over the
vesting period.
The Company's 1991 Stock Purchase Plan (the "Stock Purchase Plan") adopted on
January 20, 1991 provides for the purchase of up to 640,000 shares of common
stock by employees of the Company who (1) have been employed by the Company for
at least two years, (2) are not part-time employees of the Company and (3) are
not owners of five percent (5%) or more of the common stock of the Company. As
of May 2, 1998, no shares have been issued under the Stock Purchase Plan.
27
28
The following is a summary of stock option activity:
1998
-------------------------
Weighted
Average
Exercise 1997 1996
Shares Price Shares Shares
---------- ---------- ---------- ----------
Options outstanding, beginning of year 1,120,360 $2.38 965,900 883,200
Options granted 53,766 7.52 192,700 174,100
Options exercised (34,720) 1.75 (38,240) (20,800)
Options canceled (31,320) -- -- (70,600)
---------- ---------- ----------
Options outstanding, end of year 1,108,086 2.51 1,120,360 965,900
========== ========== ==========
Options exercisable, end of year 659,332 479,340 361,600
Options available for grant, end of year 522,154 449,600 642,300
The following is a summary of stock options outstanding at May 2, 1998:
Options Outstanding Options Exercisable
------------------------------------- -----------------------
Weighted
Average Weighted Weighted
Remaining Average Average
Range of Contractual Exercise Exercise
Exercise Price Life Shares Price Shares Price
- -------------- ---- ------ ----- ------ -----
$.13 4 years 88,000 $ .13 88,000 $ .13
$.38-$.63 4 years 85,600 .50 85,600 .50
$1.25 4 years 62,400 1.25 62,400 1.25
$1.97-$2.56 6 years 651,620 2.17 381,592 2.16
$4.75 8 years 10,000 4.75 2,000 4.75
$5.00 8 years 168,700 5.00 33,740 5.00
$5.85-$6.43 9 years 21,766 6.04 -- --
$10.00-$11.50 5 years 20,000 10.75 6,000 10.00
---------- ----------
1,108,086 2.51 659,332 1.81
========== ==========
The option price range for all options outstanding at the end of the fiscal year
was $.13 to $11.50 for 1998, $.13 to $5.00 for 1997 and $.13 to $2.56 for 1996.
The option price range for options exercised during the fiscal year was $.63 to
$5.00 for 1998, $.63 to $2.38 for 1997 and $.63 to $2.10 for 1996. The weighted
average fair value of options granted during the fiscal year was $5.70 for 1998,
$3.61 for 1997 and $1.71 for 1996.
Pursuant to Financial Accounting Standards Board Statement of Financial
Accounting Standards No. 123, "Accounting and Disclosure of Stock-Based
Compensation" ("SFAS 123"), the Company has elected to follow Accounting
Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees"
("APB 25"), and related interpretations, in accounting for stock-based awards to
employees. Under APB 25, the Company generally recognizes no
28
29
compensation expense with respect to such awards unless the exercise price of
options granted is less than the market price on the date of grant.
Pro forma information regarding net income and earnings per share is required by
SFAS 123 for awards granted after December 15, 1994, as if the Company had
accounted for its stock-based awards to employees under the fair value method of
SFAS 123. The fair value of the Company's stock option grants to employees was
estimated using a Black-Scholes option pricing model with the following
assumptions used for grants: expected life of 10 years; volatility factor of 50%
for 1998 and 53% for 1997 and 1996, risk free interest rates of approximately 6%
for 1998 and 1997 and 7% for 1996; and no dividend payments. Had compensation
cost for the Company's options plans been determined and recorded consistent
with the Black-Scholes option pricing model in accordance with SFAS 123, the
Company's net income and earnings per share for fiscal 1998, 1997 and 1996 would
have been reduced on a pro forma basis by approximately $100,000 and $.01 per
share for each year.
The above pro forma effect on net income and earnings per share is not
necessarily indicative of the pro forma effect in the future years because it
does not take into consideration pro forma compensation expense related to
grants made prior to fiscal 1996. In addition, the Company anticipates granting
additional options in future years.
The Company contributes to various defined contribution retirement plans (which
cover employees under various collective bargaining agreements) and
discretionary profit sharing plans (which cover all non-union employees).
Contributions were $1,349,000 for fiscal 1998, $1,273,000 for fiscal 1997, and
$1,173,000 for fiscal 1996.
11. COMMITMENTS AND CONTINGENCIES
Albert H. Kahn v. Nick A. Caporella, et al., Civil Action No. 11890 was filed in
December 1990 by a shareholder of Burnup & Sims Inc. ("BSI"), now MasTec, Inc.,
in the Court of Chancery of the State of Delaware in and for New Castle County
against the Company, the members of the Board of Directors of BSI and against
BSI. In May 1993, plaintiff amended its class action and shareholder derivative
complaint (the "Amended Complaint"). The class action claims allege, among other
things, that the Board of Directors of BSI, and the Company, as its largest
shareholder, breached their respective fiduciary duties in approving (i) the
dividend by BSI of its shares of the Company common stock (the "Distribution")
and (ii) the exchange of certain shares of BSI's common stock held by the
Company for certain indebtedness of the Company held by BSI (the "Exchange"; the
Distribution and the Exchange are hereafter referred to as the "1991
Transaction"), in allegedly placing the interests of the Company ahead of the
interests of other shareholders of BSI. The derivative action claims allege,
among other things, that the Board of Directors of BSI breached their fiduciary
duties by approving executive officer compensation arrangements, by financing
the Company's operations on a current basis, and by permitting the interests of
BSI to be subordinated to those of the Company. In the lawsuit, plaintiff seeks
to rescind the 1991 Transaction and to recover unspecified damages. The
defendants, including the Company, have moved to dismiss the actions for failure
to make a demand and state a claim upon which relief can be granted. The motion
is still pending.
29
30
In November 1993, plaintiff filed a class action and derivative complaint, Civil
Action No. 13248 (The "1993 Complaint") against the Company, BSI, the members of
the Board of Directors of BSI, and certain other defendants (referred to as
"Other Defendants"). In December 1993, plaintiff amended the 1993 Complaint (the
"1993 Amended Complaint"). The 1993 Amended Complaint alleges, among other
things, that the Board of Directors of BSI, and the Company, as BSI's largest
stockholder, breached their respective fiduciary duties by approving an
agreement dated October 15, 1993, as amended, between BSI and the Other
Defendants (the "Acquisition Agreement") and the exchange of 3,153,847 shares of
BSI common stock owned by the Company for certain indebtedness owed to BSI by
the Company (the "Redemption") which, according to the allegations of the 1993
Complaint, benefits the President and Chief Executive Officer of the Company at
the expense of BSI's stockholders. On November 29, 1993, plaintiff filed a
motion for an order preliminarily and permanently enjoining the transactions
under the Acquisition Agreement and the Redemption. On March 7, 1994, the court
heard oral arguments with respect to plaintiff's motion to enjoin the
transactions, and on March 10, 1994, the court denied plaintiff's request for
injunctive relief finding that plaintiff had not established a likelihood of
success on the merits and that, in any event, the equities did not favor the
imposition of injunctive relief.
There has been no further discovery or other court proceedings since May 1995.
Management believes that the allegations in the complaint, the Amended
Complaint, the 1993 Complaint and the 1993 Amended Complaint are without merit,
and intends to vigorously defend these actions.
The Company is a defendant in various other lawsuits arising in the ordinary
course of business. In the opinion of management, the ultimate disposition of
the foregoing lawsuits will not have a material adverse effect on the Company's
consolidated financial position or results of operations.
In the ordinary course of its business, the Company enters into commitments for
the supply of certain raw materials, none of which are material to the Company's
financial position.
30
31
12. QUARTERLY FINANCIAL DATA (UNAUDITED)
(In thousands, except per share amounts)
First Second Third Fourth
Quarter Quarter Quarter Quarter
-------- -------- -------- --------
1998
- ----
Net sales $116,202 $100,044 $ 78,673 $105,830
Gross profit 38,288 30,919 23,353 33,106
Net income 5,970 3,259 929 2,944
Earnings per common share:
Basic $ .32 $ .18 $ .05 $ .16
Diluted .31 .17 .05 .15
1997
- ----
Net sales $110,204 $ 94,968 $ 75,113 $105,142
Gross profit 32,293 27,404 21,881 28,396
Net income 5,050 2,627 628 2,388
Earnings per common share:
Basic $ .28 $ .14 $ .03 $ .13
Diluted .27 .14 .03 .12
31
32
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and
Shareholders of National Beverage Corp.
In our opinion, the consolidated financial statements listed in the index
appearing under Item 14(a)(1) and (2) on page 35 present fairly, in all material
respects, the financial position of National Beverage Corp. and its subsidiaries
at May 2, 1998 and May 3, 1997, and the results of their operations and their
cash flows for each of the three years in the period ended May 2, 1998, in
conformity with generally accepted accounting principles. These financial
statements are the responsibility of the Company's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these statements in accordance with
generally accepted auditing standards which 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 the opinion expressed
above.
PricewaterhouseCoopers LLP
Miami, Florida
July 24, 1998
32
33
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information concerning directors and the nominees for director of National
Beverage Corp. is included under the caption "Election of Directors" and
"Information as to Nominees and Other Directorships" in the Company's Proxy
Statement for the Annual Meeting of Shareholders to be filed on or before August
31, 1998 and is hereby incorporated by reference.
The following table sets forth certain information with respect to the officers
of the Registrant as of May 2, 1998.
Name Age Position with Company
---- --- ---------------------
Nick A. Caporella (1) 62 Chairman of the Board, Chief Executive
Officer, President and Chief Financial
Officer
Joseph G. Caporella (2) 38 Executive Vice President and Secretary
George R. Bracken (3) 53 Vice President and Treasurer
Dean A. McCoy (4) 41 Vice President - Controller
Robert C. Spindler (5) 48 Vice President-Chief Administrative Officer
(1) Mr. Nick A. Caporella has served as Chairman of the Board, Chief Executive
Officer, Chief Financial Officer, and Director since the Company's inception
in 1985. Mr. Caporella also serves as Chairman of the Nominating Committee.
Prior to March 11, 1994, Mr. Caporella served as President and Chief
Executive Officer (since 1976) and Chairman of the Board (since 1989) of
Burnup & Sims Inc. Since January 1, 1992, Mr. Caporella's services have been
provided to the Company by Corporate Management Advisers, Inc., a company
which he owns.
(2) Mr. Joseph G. Caporella has served as Executive Vice President and Secretary
since January 1991 and Director since January 1987. Joseph G. Caporella is
the son of Nick A. Caporella.
(3) Mr. George R. Bracken was named Vice President and Treasurer in October
1996. Prior to that date, Mr. Bracken served as Vice President & Treasurer
of Burnup & Sims Inc. Since March 1994, Mr. Bracken's services have been
provided to the Company by Corporate Management Advisers, Inc.
33
34
(4) Mr. Dean A. McCoy was named Vice President - Controller in July 1993 and,
prior to that date, served as Controller since joining the Company in
December 1991.
(5) Mr. Robert C. Spindler was named Vice President - Chief Administrative
Officer in July 1997. Prior to joining the Company, Mr. Spindler was Vice
President and Chief Financial Officer for Renaissance Cruises, Inc. from May
1994 to August 1995, and Executive Vice President and Chief Financial
Officer of Brothers Gourmet Coffees, Inc. from February 1993 to March 1994.
All officers serve until their successors are chosen and may be removed at any
time by the Board of Directors. Officers are normally elected each year at the
first meeting of the Board of Directors after the annual meeting of
shareholders.
34
35
ITEM 11. EXECUTIVE COMPENSATION
National Beverage Corp. 1998 Proxy Statement, which will be filed on or before
August 31, 1998, is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
National Beverage Corp. 1998 Proxy Statement, which will be filed on or before
August 31, 1998, is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
National Beverage Corp. 1998 Proxy Statement, which will be filed on or before
August 31, 1998, is incorporated herein by reference.
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(A) 1. FINANCIAL STATEMENTS
PAGE
The following consolidated financial statements of
National Beverage Corp. and subsidiaries are included herein:
Consolidated Balance Sheets 16
Consolidated Statements of Income 17
Consolidated Statements of Shareholders' Equity 18
Consolidated Statements of Cash Flows 19
Notes to Consolidated Financial Statements 20
Report of Independent Accountants 32
2. FINANCIAL STATEMENT SCHEDULES
The following are included herein:
Schedule I - Condensed Financial Information of Registrant 40
Schedule II - Valuation and Qualifying Accounts 44
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 Index to Exhibits which follows.
(B) REPORTS ON FORM 8-K
No reports on Form 8-K were filed for the quarter ended May 2, 1998.
35
36
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 Advisers, 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 Note Purchase Agreement, dated June 5, 1992, among NewBevCo,
Inc. and Purchasers (3)
10.6 Credit Agreement, dated as of September 23, 1993, between
NewBevCo, Inc. and the lender therein (4)
10.7 Agreement, dated March 11, 1994, between Burnup & Sims Inc.
and National Beverage Corp. (5)
10.8 First Amendment to Credit Agreement, dated November 10, 1994,
between NewBevCo and lender therein (6)
10.9 Second Amendment to Credit Agreement, dated November 21, 1995,
between NewBevCo and lender therein (7)
10.10 Third Amendment to Credit Agreement, dated February 29, 1996,
between NewBevCo and lender therein (8)
10.11 Fourth Amendment to Credit Agreement, dated April 24, 1996,
between NewBevCo and lender therein (8)
10.12 Fifth Amendment to Credit Agreement, dated November 14, 1996,
between NewBevCo and lender therein (9)
10.13 Term Loan Credit Agreement, dated February 29, 1996, between
NewBevCo and lender therein (8)
10.14 Letter Modification to Term Loan Credit Agreement dated April
24, 1996, between NewBevCo and lender therein (8)
36
37
10.15 Term Note, dated February 18, 1997, between NewBevCo and
lender therein (11)
10.16 First Amendment to Term Loan Credit Agreement, dated February
18, 1997, between NewBevCo and lender therein (11)
10.17 Asset Purchase Agreement of Everfresh Beverages, Inc. (8)
10.18 Amendment No. 1 to the National Beverage Corp. Omnibus
Incentive Plan (8)
10.19 Special Stock Option Plan (10)
10.20 Amendment No. 2 to the National Beverage Corp. Omnibus
Incentive Plan (11)
10.21 Key Employee Equity Partnership Program (11)
21.1 Subsidiaries of Registrant (12)
23.1 Consent of Independent Accountants (12)
27.0 Financial Data Schedule (for SEC use only) (12)
(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 Annual Report on Form 10-K for the fiscal year ended May 2, 1992 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 30,
1993 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 29,
1994 and is incorporated herein by reference.
37
38
(6) 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.
(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 27,
1996 and is incorporated herein by reference.
(8) 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.
(9) 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.
(10) 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.
(11) 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.
(12) Filed herein.
38
39
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)
/s/ Dean A. McCoy Date: July 31, 1998
- ------------------------------
Dean A. McCoy
Vice President - Controller
(Principal Accounting Officer)
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 Date: July 31, 1998
- ------------------------------
Nick A. Caporella
President and Chief Executive Officer and
Chairman of the Board (Principal Executive and
Financial Officer)
/s/ Joseph G. Caporella Date: July 31, 1998
- ------------------------------
Joseph G. Caporella
Executive Vice President and Secretary
/s/ Samuel C. Hathorn, Jr. Date: July 31, 1998
- ------------------------------
Samuel C. Hathorn, Jr.
Director
/s/ S. Lee Kling Date: July 31, 1998
- ------------------------------
S. Lee Kling
Director
/s/ Joseph P. Klock, Jr. Date: July 31, 1998
- ------------------------------
Joseph P. Klock, Jr.
Director
39
40
SCHEDULE I
NATIONAL BEVERAGE CORP. (PARENT COMPANY)
CONDENSED BALANCE SHEETS
AS OF MAY 2, 1998 AND MAY 3, 1997
(In thousands, except share amounts)
1998 1997
-------- --------
ASSETS
Current assets:
Cash and equivalents $ 194 $ 219
Deferred income taxes 2,154 3,150
-------- --------
Total current assets 2,348 3,369
Investment in subsidiaries - net 78,323 64,197
-------- --------
$ 80,671 $ 67,566
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued liabilities $ 1,480 $ 2,227
Income taxes payable 879 1,391
-------- --------
Total current liabilities 2,359 3,618
Deferred income taxes 8,332 7,245
Commitments and contingencies
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: 22,025,212 shares (1998) and 21,990,492 shares (1997);
Outstanding: 18,494,488 shares (1998) and 18,459,768 shares (1997) 220 220
Additional paid-in capital 15,118 14,943
Retained earnings 67,973 54,871
Treasury stock-at cost:
Preferred stock (150,000 shares) (5,100) (5,100)
Common stock (3,530,724 shares) (8,381) (8,381)
-------- --------
Total shareholders' equity 69,980 56,703
-------- --------
$ 80,671 $ 67,566
======== ========
See accompanying Notes to Condensed Financial Statements.
40
41
SCHEDULE I (CONTINUED)
NATIONAL BEVERAGE CORP. (PARENT COMPANY)
CONDENSED STATEMENTS OF INCOME
FOR THE FISCAL YEARS ENDED MAY 2, 1998, MAY 3, 1997, AND APRIL 27, 1996
(In thousands, except per share and footnote amounts)
1998 1997 1996
------------ ------------ ----------
Equity in pre-tax earnings of consolidated subsidiaries $ 20,929 $ 16,973 $ 14,581
Interest expense, net -- -- 57
------------ ------------ ----------
Income before income taxes 20,929 16,973 14,524
Provision for income taxes 7,827 6,280 5,520
------------ ------------ ----------
Net income $ 13,102 $ 10,693 $ 9,004
============ ============ ==========
Components of basic earnings per common share (a):
Income from continuing operations $ 0.71 $ 0.58 $ 0.44
Purchase of preferred shares -- -- 0.41
============ ============ ==========
$ 0.71 $ 0.58 $ 0.85
============ ============ ==========
Components of diluted earnings per common share (a):
Income from continuing operations $ 0.68 $ 0.56 $ 0.43
Purchase of preferred shares -- -- 0.40
============ ============ ==========
$ 0.68 $ 0.56 $ 0.83
============ ============ ==========
(a) Earnings per common share is computed from earnings applicable to common
shares which, for fiscal 1996, consists of net income less preferred
dividends and $7,600,000 which represents the difference of the carrying
value of the Company's preferred stock over its purchase price. See Note 8
of Notes to Consolidated Financial Statements.
See accompanying Notes to Condensed Financial Statements.
41
42
SCHEDULE I (CONTINUED)
NATIONAL BEVERAGE CORP. (PARENT COMPANY)
CONDENSED STATEMENTS OF CASH FLOWS
FOR THE FISCAL YEARS ENDED MAY 2, 1998, MAY 3, 1997, AND APRIL 27, 1996
(In thousands)
1998 1997 1996
-------- -------- --------
OPERATING ACTIVITIES:
Net income $ 13,102 $ 10,693 $ 9,004
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Deferred income tax provision 692 2,991 1,000
Undistributed equity in net income of
consolidated subsidiaries (13,102) (10,693) (9,041)
Changes in accounts payable and accrued liabilities (747) 98 (300)
-------- -------- --------
Net cash provided by (used in) operating activities (55) 3,089 663
-------- -------- --------
FINANCING ACTIVITIES:
Advances from (to) subsidiaries (31) (2,339) 7,278
Debt repayments -- -- (703)
Purchase of common stock -- (1,205) --
Preferred stock dividends paid -- -- (1,838)
Purchase of preferred stock -- -- (5,100)
Proceeds from stock options exercised 61 54 16
-------- -------- --------
Net cash provided by (used in) financing activities 30 (3,490) (347)
-------- -------- --------
NET INCREASE (DECREASE) IN CASH AND EQUIVALENTS (25) (401) 316
CASH AND EQUIVALENTS - BEGINNING OF YEAR 219 620 304
-------- -------- --------
CASH AND EQUIVALENTS - END OF YEAR $ 194 $ 219 $ 620
======== ======== ========
See accompanying Notes to Condensed Financial Statements.
42
43
SCHEDULE I (CONTINUED)
NATIONAL BEVERAGE CORP. (PARENT COMPANY)
NOTES TO CONDENSED FINANCIAL STATEMENTS
The accompanying parent company financial statements of National Beverage Corp.
("NBC") should be read in conjunction with the consolidated financial statements
of NBC and its consolidated subsidiaries.
1. BASIS OF PRESENTATION
NBC is a holding company for various wholly-owned subsidiaries which are
engaged in the manufacture and distribution of soft drinks and other
beverages. NBC investments in its wholly-owned subsidiaries are reported
in these parent company financial statements using the equity method of
accounting.
2. LONG-TERM DEBT
No long-term debt was outstanding at May 2, 1998 or at May 3, 1997.
A subsidiary of NBC has unsecured senior notes and bank credit facilities
outstanding. See Note 5 of Notes to Consolidated Financial Statements.
Certain of these debt agreements contain restrictions which, among other
things, limit the subsidiary from paying cash dividends to the parent. As
of May 2, 1998, net assets of the subsidiary totaling approximately $49
million were restricted from distribution.
3. CAPITAL STOCK AND TRANSACTIONS WITH RELATED PARTIES
See Note 6 of Notes to Consolidated Financial Statements for information
related to capital stock and transactions with related parties.
4. COMMITMENTS AND CONTINGENCIES
See Note 11 of Notes to Consolidated Financial Statements for information
related to legal proceedings.
43
44
SCHEDULE II
NATIONAL BEVERAGE CORP. AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
FOR THE FISCAL YEARS ENDED MAY 2, 1998, MAY 3, 1997, AND APRIL 27, 1996
(In thousands)
Additions Deductions
Balance at Charged Net Balance
Beginning (Credited) (Charge-Offs) at End
Description of Period to Expenses Recoveries of Period
- -------------------------------------- -------------- -------------- ---------------- -------------
YEAR ENDED MAY 2, 1998:
Allowance for doubtful
accounts receivable $608 $179 $(72) $715
============== ============== ================ =============
YEAR ENDED MAY 3, 1997:
Allowance for doubtful
accounts receivable $694 $51 $(137) $608
============== ============== ================ =============
YEAR ENDED APRIL 27, 1996:
Allowance for doubtful
accounts receivable $708 $(31) $17 $694
============== ============== ================ =============
44
1
EXHIBIT 21.1
SUBSIDIARIES OF REGISTRANT
Percentage
Jurisdiction of Voting
Name of Subsidiary of Incorporation Stock Owned
- ------------------ ---------------- -----------
BevCo Sales, Inc. Delaware 100%
Everfresh Beverages, Inc. Delaware 100%
Faygo Beverages, Inc. Michigan 100%
Faygo Sales Company Texas 100%
Hayward Enterprises, Inc. North Carolina 100%
LaCROIX Beverages, Inc. Florida 100%
National Retail Brands, Inc. Delaware 100%
NewBevCo, Inc. Delaware 100%
PACO, Inc. Delaware 100%
PETCO, Inc. Delaware 100%
Shasta West, Inc. Delaware 100%
Shasta Beverages, Inc. Delaware 100%
Shasta Beverages International, Inc. Delaware 100%
Shasta Midwest, Inc. Delaware 100%
Shasta Northwest, Inc. Delaware 100%
Shasta Sales, Inc. Delaware 100%
Shasta Sweetener Corp. Delaware 100%
Winnsboro Beverage Packers, Inc. Delaware 100%
1
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Registration
Statement on Form S-8 (No. 0-19447) of National Beverage Corp. of our report
dated July 24, 1998 appearing on page 32 of the Annual Report on Form 10-K.
PricewaterhouseCoopers LLP
Miami, Florida
July 24, 1998
5
1,000
YEAR
MAY-02-1998
MAY-02-1998
40,447
0
36,496
715
23,402
107,341
118,305
62,360
182,327
56,943
41,600
0
150
220
69,610
182,327
400,749
400,749
275,083
275,083
0
0
4,175
20,929
7,827
13,102
0
0
0
13,102
.71
.68
