Annual Report for Fiscal Year Ending 05-02, 2026 (Form 10-K)

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

OVERVIEW

The following Management's Discussion and Analysis of Operations is intended to provide information about the Company's operations and business environment and should be read in conjunction with our Consolidated Financial Statements and the accompanying Notes contained in Item 8 of this report.

National Beverage Corp. is incorporated in Delaware and began trading as a public company on the NASDAQ Stock Market in 1991. In this report, the terms "we," "us," "our," "Company" and "National Beverage" mean National Beverage Corp. and its subsidiaries unless indicated otherwise.

National Beverage Corp. innovatively refreshes America with a distinctive portfolio of sparkling waters, juices, energy drinks (Power+ Brands) and, to a lesser extent, carbonated soft drinks. We believe our creative product designs, innovative packaging and imaginative flavors, along with our corporate culture and philosophy, make National Beverage unique as a stand-alone entity in the beverage industry.

National Beverage Corp., in recent years, has transformed into an innovative, healthier refreshment company. From our corporate philosophy to product development and marketing, we are converting consumers to a 'Better for You' thirst quencher that cares compassionately for their nutritional health. We are committed to our quest to innovate for the joy, benefit and enjoyment of our consumers' healthier lifestyle.

The majority of our brands are geared to the active and health-conscious consumer including sparkling waters, energy drinks and juices. Our portfolio of Power+ Brands includes LaCroix® sparkling waters; Clear Fruit® non-carbonated water beverages enhanced with fruit flavor; Rip It® energy drinks and shots; and Everfresh®, Everfresh Premier Varietals™ and Mr. Pure® 100% juice and juice-based products. Additionally, we produce and distribute carbonated soft drinks including Shasta® and Faygo®, iconic brands whose consumer loyalty spans more than 135 years.

Our strategy seeks the profitable growth of our products by (i) developing healthier beverages in response to the global shift in consumer buying habits and tailoring our beverage portfolio to the preferences of a diverse mix of 'crossover consumers' - a growing group desiring a healthier alternative to artificially sweetened and high-caloric beverages; (ii) emphasizing unique flavor development and variety throughout our brands that appeal to multiple demographic groups; (iii) maintaining points of difference through innovative marketing, packaging and consumer engagement and (iv) responding faster and more creatively to changing consumer trends than larger competitors who are burdened by legacy production and distribution complexity and costs.

Presently, our primary market focus is the United States. Certain of our beverages are also distributed on a limited basis in other countries and options to expand distribution to other regions are being pursued. To service a diverse customer base that includes numerous national retailers, as well as thousands of smaller "up-and-down-the-street" accounts, we utilize a hybrid distribution system consisting of warehouse and direct-store delivery. The warehouse delivery system allows our retail partners to further maximize their assets by utilizing their ability to pick up beverages at our warehouses, further lowering their/our product costs.

Our operating results are affected by numerous factors, including fluctuations in the costs of raw materials, supply chain disruptions, holiday and seasonal programming and weather conditions. Beverage sales are seasonal with higher sales volume realized during the summer months. See "Item 1A. Risk Factors" in Part I of this report for additional information about risks and uncertainties facing our Company.

RESULTS OF OPERATIONS

The following section generally discusses the fiscal years ended May 2, 2026 ("Fiscal 2026") and May 3, 2025 ("Fiscal 2025") results and year-to-year comparisons between Fiscal 2026 and Fiscal 2025. Discussions of fiscal year ended April 27, 2024 ("Fiscal 2024") results and year-to-year comparisons between Fiscal 2025 and Fiscal 2024 can be found in "Management's Discussion and Analysis of Financial Condition and Results of Operations" in Part II, Item 7 of our Annual Report on Form 10-K for the year ended May 3, 2025, which is available free of charge on our website at www.nationalbeverage.com. Fiscal 2026 and Fiscal 2024 both consisted of 52 weeks. Fiscal 2025 consisted of 53 weeks.

Net Sales

Net sales for Fiscal 2026 were $1,180.6 million compared to $1,201.4 million for Fiscal 2025. Sales were impacted primarily from one less selling week. Average selling price per case increased by 5.2%. A 6.7% decline in case volume impacted both Power+ Brand and carbonated soft drink brands. The unprecedented disruption, government shutdowns, funding changes, inflation and cautious consumer spending all impacted volume.

Gross Profit

Gross profit for Fiscal 2026 was $437.3 million compared to $443.9 million for Fiscal 2025. The change in gross profit was primarily due to an increase in packaging and ingredient costs and the change in case volume, partially offset by the increase in average selling price per case. Although the average cost of sales per case increased 5.0%, gross profit per case increased and gross margin remained constant at 37.0% for both Fiscal 2026 and Fiscal 2025.

Shipping and handling costs are included in selling, general and administrative expenses, the classification of which is consistent with many beverage companies. However, our gross margin may not be comparable to companies that include shipping and handling costs in cost of sales. See Note 1-Significant Accounting Policies, of Notes to the Consolidated Financial Statements.

Selling, General and Administrative Expenses

Selling, general and administrative expenses for Fiscal 2026 decreased $1.3 million to $207.2 million from $208.5 million for Fiscal 2025. The decrease was primarily due to a decrease in administrative and shipping and handling costs, partially offset by an increase in marketing and selling costs. As a percentage of net sales, selling, general and administrative expenses increased to 17.5% compared to 17.4% in Fiscal 2025.

Other Income, net

Other income, net is primarily comprised of interest income of $10.6 million for Fiscal 2026 and $9.3 million for Fiscal 2025. The increase in interest income is primarily due to increased average invested balances, partially offset by lower yields.

Income Taxes

For Fiscal 2026 and Fiscal 2025, our effective tax rates were 23.7% and 23.6%, respectively. The differences between the effective rate and the federal statutory rate of 21% were primarily due to the effects of state income taxes.

LIQUIDITY AND FINANCIAL CONDITION

Liquidity and Capital Resources

Our principal sources of liquidity are our existing cash and cash-equivalents, cash generated from operations and borrowing capacity available under our revolving credit facilities. At May 2, 2026, we had $349.5 million in cash and cash equivalents and maintained unsecured revolving credit facilities totaling $150 million, under which no borrowings were outstanding and $2.7 million was reserved for standby letters of credit. We believe that existing capital resources will be sufficient to meet our liquidity and capital requirements for the next twelve months. See Note 5 - Debt, of Notes to the Consolidated Financial Statements.

Pursuant to a management agreement, we incurred fees to Corporate Management Advisors, Inc. ("CMA") of $11.8 million and $12.0 million for Fiscal 2026 and Fiscal 2025, respectively. At May 2, 2026 and May 3, 2025, current liabilities included amounts due to CMA of $3.0 million and $2.1 million, respectively. See Note 6 - Capital Stock and Transactions with Related Parties, of Notes to the Consolidated Financial Statements.

Cash Flows

The Company's cash position increased $155.7 million in Fiscal 2026 compared to a decrease of $133.2 million in Fiscal 2025 primarily due to the payment of a special cash dividend of $304.1 million in the first quarter of Fiscal 2025. Net cash provided by operating activities for Fiscal 2026 was $181.3 million compared to $206.7 million for Fiscal 2025. For Fiscal 2026, cash flow provided by operating activities decreased primarily due to a net increase in working capital excluding cash.

Net cash used in investing activities for Fiscal 2026 reflects capital expenditures of $25.1 million, compared to capital expenditures of $36.3 million for Fiscal 2025. Expenditures for property, plant and equipment in Fiscal 2026 were primarily for capital projects to expand our capacity, enhance sustainability and packaging capabilities and improve efficiencies at our production facilities. We intend to continue to improve packaging capabilities and efficiencies at our production facilities in Fiscal 2027 and anticipate Fiscal 2027 capital expenditures to be comparable to Fiscal 2026 capital spending.

Net cash used in financing activities for Fiscal 2026 primarily reflects the repurchase of common shares for $0.7 million.

Financial Position

During Fiscal 2026, our working capital increased $191.4 million to $457.8 million. The increase in working capital was primarily due to an increase in cash and cash equivalents of $155.7 million, an increase in inventory of $10.4 million, an increase in the derivative asset of $8.6 million, an increase in income tax receivable of $5.1 million, a decrease in accounts payable and accrued liabilities of $5.2 million, and other net working capital increases of $6.4 million. Trade receivables increased $0.1 million to $104.3 million and days sales outstanding was 31.9 days at May 2, 2026 compared to 32.5 days at May 3, 2025. Inventories increased $10.4 million as a result of increased quantities of finished goods. Annual inventory turns decreased to 8.2 times from 8.7 times. At May 2, 2026, the current ratio was 4.4 to 1 compared to 2.9 to 1 at May 3, 2025.

CONTRACTUAL OBLIGATIONS

Contractual obligations at May 2, 2026 are payable as follows:

		(In thousands)
		Total				1 Year Or less				2 to 3 Years				4 to 5 Years				More Than 5 Years
Operating leases		$	66,868			$	16,755			$	22,758			$	17,030			$	10,325
Purchase commitments			13,251				13,251				-				-				-
Total		$	80,119			$	30,006			$	22,758			$	17,030			$	10,325

We contribute to certain pension plans under collective bargaining agreements and to a discretionary profit-sharing plan. Annual contributions were $4.2 million for both Fiscal 2026 and Fiscal 2025. See Note 11- Pension Plans, of Notes to Consolidated Financial Statements.

We maintain self-insured and deductible programs for certain liability, medical and workers' compensation exposures. Other long-term liabilities include known claims and estimated incurred but not reported claims not otherwise covered by insurance based on actuarial assumptions and historical claims experience. Since the timing and amount of claim payments vary significantly, we are not able to reasonably estimate future payments for specific periods and therefore such payments have not been included in the table above. Standby letters of credit aggregating $2.7 million have been issued in connection with our self-insurance programs. These standby letters of credit expire through June 2027 and are expected to be renewed.

OFF-BALANCE SHEET ARRANGEMENTS AND ESTIMATES

We do not have any off-balance sheet arrangements that have, or are reasonably likely to have, a current or future material effect on our financial condition.

CRITICAL ACCOUNTING ESTIMATES

The preparation of financial statements in conformity with United States 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. We believe that the critical accounting policies described in the following paragraphs comprise the most significant estimates and assumptions used in the preparation of our consolidated financial statements. For these policies, we caution that future events rarely develop exactly as estimated and the best estimates routinely require adjustment. See Note 1- Significant Accounting Policies, of Notes to the Consolidated Financial Statements for a complete description of our significant accounting policies.

Revenue Recognition

Revenue is recognized when the performance obligation is satisfied. Our written sales terms do not allow a right of return except in rare instances. We offer various sales incentive arrangements to our customers that require customer performance or achievement of certain sales volume targets. Sales incentives are accrued over the period of benefit or expected sales. When the incentive is paid in advance, the aggregate incentive is recorded as a prepaid asset and amortized over the period of benefit. The recognition of these incentives involves the use of judgment related to performance and sales volume estimates that are made based on historical experience and other factors. Sales incentives are accounted for as a reduction of sales and actual amounts ultimately realized may vary from accrued amounts. Such differences are recorded once determined and have historically not been significant.

We sell products to a variety of customers and extend credit based on an evaluation of each customer's financial condition, generally without requiring collateral. Exposure to credit losses varies by customer principally due to the financial condition of each customer. Our products are typically sold on credit; however smaller direct-store delivery accounts may be sold on a cash on delivery basis. Our credit terms normally require payment within 30 days of delivery and may allow discounts for early payment. We estimate and reserve for credit losses based on our experience with past due accounts, collectability and our analysis of customer data.

RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

See Note 1 - Significant Accounting Policies - Recently Issued Accounting Pronouncements, of Notes to the Consolidated Financial Statements, for a complete description of recent accounting pronouncements including the respective expected dates of adoption and expected effects on the Company's consolidated financial position, results of operations or liquidity.

FORWARD-LOOKING STATEMENTS

National Beverage Corp. and its representatives may make written or oral statements relating to future events or results relative to our financial, operational and business performance, achievements, objectives and strategies. These statements are "forward-looking" within the meaning of the Private Securities Litigation Reform Act of 1995 and include statements contained in this report and other filings with the Securities and Exchange Commission and in reports to our stockholders. Certain statements including, without limitation, statements containing the words "believes," "anticipates," "intends," "plans," "expects," "estimates", "may," "will," "should," "could," and similar expressions constitute "forward-looking statements" and involve known and unknown risk, uncertainties and other factors that may cause the actual results, performance or achievements of our Company to be materially different from any future results, performance or achievements expressed or implied by such forward looking statements. Such factors include, but are not limited to, the following: general economic and business conditions, pricing of competitive products, success of new product and flavor introductions, fluctuations in the costs and availability of raw materials and packaging supplies, including effects of tariffs and supply chain interruptions, ability to recover cost increases, labor strikes or work stoppages or other interruptions in the employment of labor, continued retailer support for our products, changes in brand image, consumer demand and preferences and our success in creating products geared toward consumers' tastes, success in implementing business strategies, changes in business strategy or development plans, technology failures or cyberattacks on our technology systems or our effective response to technology failures or cyberattacks on our customers', suppliers' or other third parties' technology systems, international conflicts, government regulations, taxes or fees imposed on the sale of our products, unfavorable weather conditions, changing weather patterns and natural disasters, climate change or legislative or regulatory responses to such change and other factors referenced in this report, filings with the Securities and Exchange Commission and other reports to our stockholders. We disclaim any obligation to update any such factors or to publicly announce the results of any revisions to any forward- looking statements contained herein to reflect future events or developments.