National Beverage (FIZZ) - 2025 Q4 - Annual Report

Part I: Business and Risks This section provides an overview of the company's business operations, strategic focus, and the various risks it faces, including competitive pressures, regulatory changes, and cybersecurity threats Business Overview National Beverage Corp. innovates and markets a portfolio of sparkling waters, juices, and energy drinks, emphasizing a 'Healthy Transformation' strategy for health-conscious consumers with brands like LaCroix - The company's strategy centers on developing healthier beverages for 'crossover consumers' who are moving away from artificially sweetened or high-calorie drinks[14] - LaCroix Sparkling Water is the company's most significant brand and leads the premium domestic sparkling water category. Recent flavor innovations include Sunshine, Strawberry Peach, and Mojito[23][24][25] - The company operates 12 strategically located production facilities, enabling efficient distribution across the U.S. This vertically integrated model is considered a competitive advantage over competitors reliant on third-party bottlers[38][39] - As of May 3, 2025, the company employed approximately 1,681 people, with 384 covered by collective bargaining agreements[63] Risk Factors The company faces key risks including brand image damage, intense competition, customer consolidation, volatile raw material and energy costs, government regulations, rising labor costs, and potential cybersecurity incidents - The beverage industry is extremely competitive, with rivals like Coca-Cola, PepsiCo, and Nestlé possessing substantially greater financial and marketing resources[56][73] - The cost and availability of key raw materials (aluminum, resin, juice) and energy are subject to price volatility and supply chain disruptions, which could adversely affect financial results[75] - Potential changes in government regulations, such as new taxes on sweetened beverages or restrictions on certain ingredients, could increase costs or reduce demand for some products[76] - The business depends on information technology, and a cybersecurity incident could lead to system shutdowns, data breaches, and a material adverse effect on operations and financial condition[82] Cybersecurity The company manages cybersecurity risks through a multi-tiered strategy overseen by the Audit Committee, involving internal and external resources, employee training, and an incident response plan, with no material incidents in Fiscal 2025 - The Board's Audit Committee has oversight responsibility for cybersecurity and other information technology risks[87] - The company's management team, led by the Director of Information Technology, is responsible for managing material cybersecurity risks[87] - No cybersecurity incidents in Fiscal 2025 were reasonably likely to have a material effect on the company's business strategy, operations, or financial condition[86] Properties National Beverage Corp. operates twelve production facilities, ten owned and two leased, totaling approximately two million square feet across ten states, which are deemed sufficient for current needs - The company owns ten production facilities and leases two, located in Maryland and Florida, with leases expiring through 2035[88] Part II: Financial Information and Performance This section details the company's financial performance, including market information for its common stock, management's discussion and analysis of operations and liquidity, market risk disclosures, and audited financial statements Market for Common Equity and Stockholder Matters The company's common stock trades on NASDAQ under 'FIZZ'; in Fiscal 2025, a special cash dividend of $3.25 per share totaling $304.1 million was paid, with no share repurchases despite an authorized program - A special cash dividend of $3.25 per share, aggregating $304.1 million, was paid on July 24, 2024[95] - No shares of common stock were repurchased during the fiscal year ended May 3, 2025. Approximately 1.9 million shares remain available for repurchase under the current authorization[95] Management's Discussion and Analysis (MD&A) In Fiscal 2025, net sales slightly increased to $1.2 billion due to higher prices, gross margin improved to 37.0%, and net income rose to $186.8 million, maintaining strong liquidity with $193.8 million cash and no debt despite a large dividend payment Results of Operations Fiscal 2025 saw a slight increase in net sales driven by higher average selling prices, improved gross profit and margin due to lower packaging costs, and a rise in net income despite reduced SG&A expenses Fiscal 2025 vs. Fiscal 2024 Performance | Metric | Fiscal 2025 | Fiscal 2024 | Change | Reason for Change | | :--- | :--- | :--- | :--- | :--- | | Net Sales | $1,201.4M | $1,191.7M | +0.8% | 1.7% increase in avg. selling price, offset by 0.9% volume decrease | | Gross Profit | $443.9M | $428.5M | +3.6% | Decline in packaging costs and higher selling prices | | Gross Margin | 37.0% | 36.0% | +1.0 ppt | Favorable cost of sales and pricing | | SG&A Expenses | $208.5M | $209.9M | -0.7% | Reduced marketing spending and lower shipping costs | | Net Income | $186.8M | $176.7M | +5.7% | Higher gross profit and lower SG&A | | Diluted EPS | $1.99 | $1.89 | +5.3% | Increased net income | Liquidity and Financial Condition The company's cash decreased to $193.8 million due to a $304.1 million special dividend, yet operating cash flow remained strong at $206.7 million, with increased capital expenditures and $150 million in unused credit facilities - The company's cash position decreased by $133.2 million to $193.8 million, primarily due to the payment of a $304.1 million special cash dividend[118][120] - Net cash provided by operating activities was strong at $206.7 million for Fiscal 2025, compared to $197.9 million in Fiscal 2024[118] - Capital expenditures increased to $36.3 million in Fiscal 2025 from $30.2 million in Fiscal 2024, primarily for capacity expansion and efficiency projects[119] - The company maintained unsecured revolving credit facilities totaling $150 million with no borrowings outstanding at fiscal year-end[116] Contractual Obligations As of May 3, 2025, the company's total contractual obligations amounted to $97.474 million, primarily consisting of operating lease commitments and short-term purchase commitments Contractual Obligations as of May 3, 2025 (In thousands) | Obligation Type | Total | Less than 1 Year | 2 to 3 Years | 4 to 5 Years | More than 5 Years | | :--- | :--- | :--- | :--- | :--- | :--- | | Operating leases | $82,856 | $17,388 | $28,010 | $20,441 | $17,017 | | Purchase commitments | $14,618 | $14,618 | - | - | - | | Total | $97,474 | $32,006 | $28,010 | $20,441 | $17,017 | Market Risk Disclosures The company manages market risks from commodity price fluctuations and interest rate changes, utilizing derivative instruments for materials like aluminum and addressing interest rate exposure primarily through its short-duration investment securities - The company uses derivative financial instruments, such as aluminum swap contracts, to partially mitigate exposure to changes in raw material costs[131] - As of May 3, 2025, the company had no outstanding borrowings, so its primary interest rate risk is related to its cash equivalent investments[132] Financial Statements and Supplementary Data This section presents the company's audited consolidated financial statements for Fiscal 2025, including the balance sheet, income statement, cash flow statement, and statement of shareholders' equity, along with detailed notes and the independent auditor's report Consolidated Financial Statements The consolidated financial statements for Fiscal 2025 show total assets of $672.86 million, net sales of $1.201 billion, net income of $186.821 million, and net cash from operating activities of $206.696 million Key Financial Data Summary (Fiscal Year 2025) | Metric | Amount (in thousands) | | :--- | :--- | | Balance Sheet (as of May 3, 2025) | | | Total Current Assets | $406,928 | | Total Assets | $672,860 | | Total Current Liabilities | $140,502 | | Total Liabilities | $228,861 | | Total Shareholders' Equity | $443,999 | | Income Statement (for FY ended May 3, 2025) | | | Net Sales | $1,201,354 | | Gross Profit | $443,941 | | Operating Income | $235,459 | | Net Income | $186,821 | | Cash Flow Statement (for FY ended May 3, 2025) | | | Net Cash from Operating Activities | $206,696 | | Net Cash used in Investing Activities | ($36,275) | | Net Cash used in Financing Activities | ($303,633) | Notes to Consolidated Financial Statements The notes detail accounting policies, including the 53-week Fiscal 2025, classification of shipping costs, absence of debt, related-party transactions with CMA totaling $12.0 million, use of $57.7 million notional aluminum swap derivatives, and $2.9 million in multi-employer pension plan contributions - Fiscal 2025 consisted of 53 weeks, whereas Fiscal 2024 and 2023 were 52-week years[144] - The company incurred management fees of $12.0 million in Fiscal 2025 payable to Corporate Management Advisors, Inc. (CMA), a company owned by the Chairman and CEO[176] - The company uses aluminum swap contracts to hedge against commodity price volatility. As of May 3, 2025, the notional amount of these contracts was $57.7 million[177] - The company contributes to multi-employer pension plans, with total contributions amounting to $2.9 million in Fiscal 2025[197] Report of Independent Registered Public Accounting Firm Grant Thornton LLP issued an unqualified opinion on the company's Fiscal 2025 consolidated financial statements and the effectiveness of its internal control over financial reporting, reporting no critical audit matters - The audit firm Grant Thornton LLP issued an unqualified opinion, stating the financial statements are presented fairly in all material respects[207] - The auditors also issued an unqualified opinion on the effectiveness of the company's internal control over financial reporting as of May 3, 2025[208][215] Controls and Procedures As of May 3, 2025, the CEO and principal financial officer concluded that both disclosure controls and internal control over financial reporting were effective, with no material changes reported during the last fiscal quarter - Management concluded that the company's disclosure controls and procedures were effective as of the end of the fiscal year[230] - Management's evaluation concluded that the company's internal control over financial reporting was effective as of May 3, 2025[233] Part III: Corporate Governance and Executive Compensation This section identifies the company's executive officers and incorporates detailed information on directors, corporate governance, executive compensation, security ownership, and related party transactions by reference from the 2025 Proxy Statement Directors, Executive Officers and Corporate Governance The report lists key executive officers, including Nick A. Caporella (Chairman & CEO), Joseph G. Caporella (President), and George R. Bracken (EVP - Finance), with further details on directors and governance incorporated by reference Executive Officers as of May 3, 2025 | Name | Age | Position | | :--- | :--- | :--- | | Nick A. Caporella | 89 | Chairman of the Board and Chief Executive Officer | | Joseph G. Caporella | 64 | President | | George R. Bracken | 80 | Executive Vice President - Finance | Part IV: Exhibits and Financial Statement Schedules This final part lists the financial statements, schedules, and exhibits filed with the Form 10-K, including consents from independent auditors and certifications by the CEO and CFO Exhibits and Signatures This section indexes all exhibits filed with the 10-K, such as corporate documents, material contracts, and compensation plans, and includes required signatures from the company's officers and directors - The report includes certifications from the Chief Executive Officer and Principal Financial Officer as required by Sections 302 and 906 of the Sarbanes-Oxley Act[257] - The report was signed by key executives, including George R. Bracken (Principal Financial Officer), Nick A. Caporella (CEO), and Joseph G. Caporella (President)[260][261]