National Beverage (FIZZ) - 2023 Q4 - Annual Report

PART I This section provides an overview of the company's business, including its products, operations, competitive landscape, and regulatory environment ITEM 1. Business National Beverage Corp. develops, produces, markets, and sells a distinctive portfolio of healthier beverages, primarily in the United States and Canada - National Beverage Corp. innovatively refreshes America with a distinctive portfolio of sparkling waters, juices, energy drinks, and carbonated soft drinks[95][304] - The company focuses on developing and delighting consumers with healthier beverages in response to global shifts in consumer buying habits and lifestyles, targeting 'crossover consumers' desiring healthier alternatives[3][335] - Key differentiators include creative product designs, innovative packaging, imaginative flavors, and a corporate culture that emphasizes innovative marketing and consumer engagement over traditional high-cost national advertising[95][236][237] General Business Overview This section outlines the company's primary market focus and its corporate history - The company's primary market focus is the United States and Canada, with consideration for expanding distribution to other regions[238][336] - National Beverage Corp. was incorporated in Delaware and began trading as a public company on the NASDAQ Stock Market in 1991[32][274] Brands and Product Portfolio This section details the company's diverse brand portfolio, including sparkling waters, juices, energy drinks, and carbonated soft drinks - The brand portfolio includes 'Power+ Brands' such as LaCroix®, LaCroix Cúrate®, LaCroix NiCola® sparkling waters; Clear Fruit®; Rip It® energy drinks; and Everfresh®, Everfresh Premier Varietals™, and Mr. Pure® 100% juice products[275] - Carbonated Soft Drinks (CSDs) include iconic brands like Shasta® and Faygo®, with a consumer loyalty spanning over 130 years[275][280] - Recent LaCroix innovations include Cherry Blossom (winner of PEOPLE's Food Awards 2022), Beach Plum, Black Razzberry, Guava São Paulo, Hi-Biscus, LimonCello, and Pastèque[6][240][277] Production Strategy The company employs a vertically integrated production strategy to ensure quality control and market responsiveness - The company utilizes an innovative and controlled vertical integration of its production facilities, which is believed to provide an advantage over competitors relying on third-party bottlers[250] - Controlling all production, distribution, and marketing allows for effective quality control, consumer appeal management, and quick response to changing market conditions[250] Distribution System The company utilizes a hybrid distribution system to reach a diverse customer base across various channels - A hybrid distribution system is used to service a diverse customer base, including national retailers and smaller accounts, through three primary channels: take-home, convenience, and food-service[11][336] - Distribution methods include a warehouse distribution system (for retailers to pick up products) and a direct-store delivery fleet (for convenience and food-service channels)[12][252][283] - Vending machines and glass-door coolers are utilized as marketing and promotional tools to expand on-site visual trial, increase sales, and enhance brand awareness[13] Sales and Marketing Strategies Marketing efforts focus on direct consumer engagement through digital platforms, social media, and targeted promotional activities - Marketing emphasizes direct consumer engagement through innovative digital marketing, social media, sponsorships, and creative content to enhance the consumer experience[285] - The company also uses regional events, special event marketing, endorsements, consumer coupon distribution, product sampling, and in-store promotional activities tailored to local demographics[255] - 'MerchMx' representatives work with store managers to optimize shelf space, build displays, and expand distribution[255] Raw Materials and Procurement The company's products rely on commodity-based raw materials, leading to price and availability fluctuations - Products are made from various materials including aluminum cans, plastic bottles, water, carbon dioxide, juice and flavor concentrates, sweeteners, cartons, and closures[256] - A significant portion of raw material purchases are derived from commodities, leading to price and availability fluctuations based on worldwide market conditions[16] - The company uses derivative financial instruments to partially mitigate exposure to changes in certain raw material costs and enters into multi-year supply agreements[16] Competitive Landscape The beverage industry is highly competitive, with the company facing numerous national, regional, and private label brands - The beverage industry is highly competitive, with products competing against a broad range of liquid refreshments from national, regional, and private label brands[17][266] - Major competitors include Nestlé S.A., PepsiCo, and The Coca-Cola Company, which possess greater financial resources and aggressive promotional capabilities[17] Seasonality Operating results are influenced by seasonality, with higher sales typically occurring during summer months - Operating results are affected by seasonality, with higher sales typically realized during the summer months due to increased outdoor activities[307] Trademarks The company owns numerous significant trademarks for its brands and intends to maintain their registrations - The company owns numerous trademarks for its brands, which are significant to its business, and intends to maintain all registrations and use them in operations[18][289] Governmental Regulation The company's operations are subject to various federal, state, and local laws and regulations, including environmental statutes - Production, distribution, and sale of products are subject to various federal, state, and local laws and regulations, including the Federal Food, Drug and Cosmetic Act, OSHA, and environmental statutes[19][259] - The company believes it is in compliance, in all material respects, with existing legislation and environmental laws[19][260] Human Capital The company employs approximately 1,593 people, emphasizing health, safety, competitive compensation, and diversity - As of April 29, 2023, the company employed approximately 1,593 people, with 374 covered by collective bargaining agreements[21] - The company emphasizes employee health and safety, striving for an injury-free work environment through data analysis and preventative actions[22] - Compensation programs are designed to attract and retain talent, offering competitive benefits including comprehensive health, dental, life, disability, and profit-sharing[262] - The company supports a culture of diversity and inclusion, with approximately 62% of employees identifying as persons of color and 24% as female[291] Sustainability Initiatives The company implements sustainability initiatives through domestic production, efficient distribution, and recyclable packaging - All beverage products are produced in the U.S., contributing to thousands of local jobs and boasting a lower carbon footprint than imported brands[23] - The majority of products are delivered through a warehouse distribution system, which provides more efficient and lower greenhouse gas emissions than direct-store delivery[23] - All packaging is recyclable, and over 80% of products are in aluminum cans, which generally contain approximately 73% recycled material[293] Available Information Annual, quarterly, and current reports, along with proxy statements, are available free of charge on the company's website - Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, proxy statements, and amendments are available free of charge on the company's website[265] ITEM 1A. RISK FACTORS The company faces various risks including raw material cost volatility, brand image impacts, intense competition, customer consolidation, regulatory changes, and reliance on key personnel and IT systems - Production and distribution are dependent on raw materials (aluminum, resin, corn, water, fruit juice) and energy sources (natural gas, diesel fuel), which are subject to supply chain disruptions and price volatility[26] - Unfavorable publicity, quality issues, or failure to adapt to changing demographics and consumer trends could tarnish brand image and adversely affect financial position[48] - The beverage industry is extremely competitive, with larger competitors possessing greater financial, marketing, and distribution resources, which could adversely affect revenues and profits[266] - Customer base consolidation and rapid growth of e-commerce transactions and value stores could limit pricing ability and lead to loss of business[326] - Unfavorable weather conditions (cold, rainy, or prolonged drought) may reduce demand for products or restrict water use, adversely affecting profitability and production[27] - Compliance with or changes in federal, state, and local laws and regulations, including potential new taxes on beverages, could require material expenses and negatively affect financial position[267] - Dependence on key executive officers and employees, and the ability to retain and motivate them, is critical to performance, as their loss could adversely affect operations[297] - Sustained increases in employee wages and benefits, driven by labor market competition, could adversely impact financial results[327] - Disruptions to information technology systems or third-party service providers due to cyberattacks, system failures, or natural disasters could adversely affect sales and financial results[50] ITEM 1B. UNRESOLVED STAFF COMMENTS The company reported no unresolved staff comments - No unresolved staff comments were reported[328] ITEM 2. PROPERTIES The company operates twelve production facilities across ten states, with ten owned and two leased, all considered in good condition and sufficient for current needs - The company's principal properties include twelve production facilities located in ten states, aggregating approximately two million square feet[269] - Ten production facilities are owned (California (2), Georgia, Kansas, Michigan (2), Ohio, Texas, Utah, Washington), and two are leased (Maryland, Florida) with agreements expiring through 2025[269] - The facilities are believed to be in good condition and sufficient to meet present needs[269] ITEM 3. LEGAL PROCEEDINGS The company is involved in certain legal proceedings, including class action allegations, which it is vigorously defending and believes will not have a material adverse effect - The company has been named in certain legal proceedings, including those containing class action allegations[52][130] - The company is vigorously defending all legal proceedings and believes litigation will not have a material adverse effect on its financial position, cash flows, or results of operations[52][130] ITEM 4. MINE SAFETY DISCLOSURES The company reported that this item is not applicable - This item is not applicable to the company[270] PART II This section covers market information, financial performance, liquidity, and critical accounting policies ITEM 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities The company's common stock trades on NASDAQ under 'FIZZ', with 93.35 million shares outstanding as of June 26, 2023, and an active share repurchase program - The common stock of National Beverage Corp. is listed on The NASDAQ Global Select Market under the symbol 'FIZZ'[300] - As of June 26, 2023, the number of shares of common stock outstanding was 93,353,546[91] - The Board of Directors has authorized a program to repurchase 3.2 million shares of common stock, of which approximately 1.9 million shares remain available[301] Special Cash Dividends on Common Stock | Date | Amount (millions) | Per Share | | :--- | :---------------- | :-------- | | | | | ITEM 6. Reserved This item is reserved and contains no information ITEM 7. Management's Discussion and Analysis of Financial Condition and Results of Operations This section analyzes the company's financial performance, liquidity, capital resources, cash flows, and critical accounting policies for Fiscal 2023 versus Fiscal 2022 - National Beverage Corp. has transformed into an innovative, healthier refreshment company, focusing on 'Better for You' thirst quenchers[304] - The company's strategy emphasizes developing healthier beverages, unique flavor variety, innovative marketing, and rapid response to changing consumer trends[335] - The principal source of funds is cash generated from operations, with $158.1 million in cash and equivalents and $150 million in unsecured revolving credit facilities at April 29, 2023[312] Overview This overview highlights key factors influencing the company's operating results, including raw material costs and seasonality - The company's operating results are influenced by raw material costs, holiday and seasonal programming, and weather conditions, with higher sales typically in summer[307] Results of Operations This section details the company's net sales, gross profit, expenses, and income taxes for Fiscal 2023 compared to Fiscal 2022 Net Sales Performance (Fiscal 2023 vs. Fiscal 2022) | Metric | Fiscal 2023 | Fiscal 2022 | Change (%) | | :----- | :---------- | :---------- | :--------- | | Net Sales | $1,173 million | $1,138 million | +3.1% | | Average Selling Price | | | +8.4% | | Case Volume | | | -4.9% | Gross Profit Performance (Fiscal 2023 vs. Fiscal 2022) | Metric | Fiscal 2023 | Fiscal 2022 | Change | | :----- | :---------- | :---------- | :----- | | Gross Profit | $396.8 million | $417.8 million | -$21.0 million | | Gross Margin | 33.8% | 36.7% | -2.9 percentage points | | Average Cost per Case | | | +13.4% | Selling, General and Administrative Expenses (Fiscal 2023 vs. Fiscal 2022) | Metric | Fiscal 2023 | Fiscal 2022 | Change | | :----- | :---------- | :---------- | :----- | | SG&A Expenses | ~$210 million | ~$210 million | Flat | | SG&A as % of Net Sales | 17.9% | 18.4% | -0.5 percentage points | Effective Tax Rate (Fiscal 2023 vs. Fiscal 2022) | Metric | Fiscal 2023 | Fiscal 2022 | | :----- | :---------- | :---------- | | Effective Tax Rate | 23.7% | 23.6% | - Other (expense) income, net, included interest income of $2.3 million for Fiscal 2023, up from $0.1 million in Fiscal 2022, due to increased average invested balances and higher returns[340] Liquidity and Financial Condition The company's liquidity is strong with $158.1 million in cash and equivalents and $150 million in unsecured revolving credit facilities - At April 29, 2023, the company had $158.1 million in cash and cash equivalents and maintained $150 million in unsecured revolving credit facilities with no outstanding borrowings[312] - Working capital increased by $92.9 million to $222.1 million in Fiscal 2023, driven by increased cash and equivalents and trade receivables, partially offset by lower inventories[343] - The current ratio improved to 2.5 to 1 at April 29, 2023, from 1.9 to 1 at April 30, 2022[343] - Management fees to Corporate Management Advisors, Inc. (CMA) were $11.9 million for Fiscal 2023, up from $11.4 million for Fiscal 2022[342] Cash Flows This section summarizes cash flows from operating, investing, and financing activities for Fiscal 2023 Cash Flow Summary (Fiscal 2023) | Activity | Fiscal 2023 | | :------- | :---------- | | Cash provided by operating activities | $161.7 million | | Cash used in investing activities | $22.0 million | | Cash used in financing activities | $29.7 million | - Cash provided by operating activities increased by $28.5 million due to reduced net working capital (excluding cash) and changes in deferred taxes, partially offset by lower net income[313] - Cash used in investing activities decreased by $7.1 million due to lower capital expenditures[313] Contractual Obligations This section outlines the company's contractual obligations, including operating leases and purchase commitments Contractual Obligations at April 29, 2023 (in thousands) | Obligation Type | Total | 1 Year or less | 2 to 3 Years | 4 to 5 Years | More Than 5 Years | | :-------------- | :---- | :------------- | :----------- | :----------- | :---------------- | | Operating leases | $44,674 | $12,798 | $17,903 | $10,304 | $3,669 | | Purchase commitments | $19,535 | $19,535 | - | - | - | | Total | $64,209 | $32,333 | $17,903 | $10,304 | $3,669 | Off-Balance Sheet Arrangements and Estimates The company has no off-balance sheet arrangements likely to materially affect its financial condition - The company does not have any off-balance sheet arrangements that are reasonably likely to have a current or future material effect on its financial condition[41] Credit Risk The company extends credit to customers without collateral, monitoring exposure and maintaining allowances for anticipated losses - The company extends credit to customers based on financial condition evaluation, generally without requiring collateral, and monitors exposure to credit losses[42][345] - Allowances for anticipated losses are maintained based on experience with past due accounts, collectability, and customer data analysis[42] Critical Accounting Policies and Estimates Financial statement preparation involves management estimates and assumptions, particularly for revenue recognition, sales incentives, and long-lived asset impairment - The preparation of financial statements requires management to make estimates and assumptions that affect reported amounts, which may ultimately differ from actual results[63] - Revenue is recognized upon delivery to customers based on written sales terms that generally do not allow a right of return[319] - Sales incentives are accrued over the period of benefit or expected sales and accounted for as a reduction of sales, involving judgment related to performance and sales volume estimates[376] - Long-lived assets (excluding goodwill and non-amortizable intangibles) are evaluated for impairment based on undiscounted cash flows when circumstances indicate the carrying amount may not be recoverable[346] - The effective income tax rate is based on estimates, with deferred taxes recorded for temporary differences and valuation allowances established when benefits are unlikely to be realized[375] - The company maintains self-insured and deductible programs for certain liability, medical, and workers' compensation exposures, accruing for known and estimated incurred but not reported claims[347] Forward-Looking Statements Statements about future events involve known and unknown risks and uncertainties that may cause actual results to differ materially - Statements relating to future events or results are 'forward-looking' and involve known and unknown risks, uncertainties, and other factors that may cause actual results to differ materially[320] - Factors include general economic conditions, competitive pricing, new product success, raw material costs, labor issues, retailer support, consumer demand, regulatory changes, and weather conditions[320] Quantitative and Qualitative Disclosures About Market Risk The company manages market risks related to raw material price fluctuations and interest rates through derivatives and investment guidelines - The company purchases various raw materials (e.g., aluminum cans, plastic bottles, high fructose corn syrup) whose prices fluctuate based on commodity market conditions[349] - Derivative financial instruments are used to partially mitigate exposure to changes in certain raw material costs, and supplier pricing agreements are utilized[349] - The company is subject to interest rate risk related to highly liquid short-duration investment securities, managed with investment-grade guidelines and limits on credit exposure[321] ITEM 7A. Quantitative and Qualitative Disclosure About Market Risk This section is covered within ITEM 7, specifically under 'Quantitative and Qualitative Disclosures About Market Risk' ITEM 8. Financial Statements and Supplementary Data This section presents the company's consolidated financial statements, including balance sheets, income statements, cash flows, and notes, along with the independent auditor's report Consolidated Balance Sheets Summary (in thousands) | Asset/Liability/Equity | April 29, 2023 | April 30, 2022 | | :--------------------- | :------------- | :------------- | | Total Current Assets | $366,405 | $274,520 | | Property, Plant & Equipment - net | $148,423 | $144,258 | | Total Assets | $574,342 | $467,804 | | Total Current Liabilities | $144,321 | $145,319 | | Long-term Debt | $0 | $30,000 | | Total Liabilities | $201,855 | $228,366 | | Total Shareholders' Equity | $372,487 | $239,438 | Consolidated Statements of Income Summary (in thousands, except per share amounts) | Metric | Fiscal 2023 | Fiscal 2022 | Fiscal 2021 | | :----- | :---------- | :---------- | :---------- | | Net Sales | $1,172,932 | $1,138,013 | $1,072,210 | | Gross Profit | $396,789 | $417,805 | $421,616 | | Operating Income | $186,684 | $207,856 | $227,825 | | Net Income | $142,164 | $158,512 | $174,146 | | Basic EPS | $1.52 | $1.70 | $1.87 | | Diluted EPS | $1.52 | $1.69 | $1.86 | Consolidated Statements of Cash Flows Summary (in thousands) | Activity | Fiscal 2023 | Fiscal 2022 | Fiscal 2021 | | :------- | :---------- | :---------- | :---------- | | Net cash provided by operating activities | $161,665 | $133,133 | $193,770 | | Net cash used in investing activities | $(21,952) | $(29,004) | $(25,314) | | Net cash used in financing activities | $(29,689) | $(249,668) | $(279,385) | | Net Increase (Decrease) in Cash and Equivalents | $110,024 | $(145,539) | $(110,929) | | Cash and Equivalents - End of Year | $158,074 | $48,050 | $193,589 | Consolidated Balance Sheets This section presents the company's consolidated financial position, detailing assets, liabilities, and shareholders' equity Consolidated Balance Sheets (in thousands) | Assets | April 29, 2023 | April 30, 2022 | | :----------------------------------------------------------------------------------------------------------------------- | :------------- | :------------- | | Cash and equivalents | $158,074 | $48,050 | | Trade receivables - net | 104,918 | 93,592 | | Inventory | 93,578 | 103,318 | | Prepaid and other assets | 9,835 | 29,560 | | Total current assets | 366,405 | 274,520 | | Property, plant and equipment - net | 148,423 | 144,258 | | Right of use assets- net | 39,506 | 29,251 | | Goodwill | 13,145 | 13,145 | | Intangible assets | 1,615 | 1,615 | | Other assets | 5,248 | 5,015 | | Total assets | $574,342 | $467,804 | | Liabilities and Shareholders' Equity | | | | Accounts payable | $85,106 | $95,299 | | Accrued liabilities | 47,318 | 39,090 | | Operating lease liabilities | 11,745 | 10,543 | | Income taxes payable | 152 | 387 | | Total current liabilities | 144,321 | 145,319 | | Long-term debt | - | 30,000 | | Deferred income taxes - net | 19,814 | 23,823 | | Operating lease liability - non current | 29,782 | 20,703 | | Other liabilities | 7,938 | 8,521 | | Total liabilities | 201,855 | 228,366 | | Shareholders' equity: | | | | Preferred stock | 150 | 150 | | Common stock | 1,017 | 1,017 | | Additional paid-in capital | 40,393 | 39,405 | | Retained earnings | 358,345 | 216,181 | | Accumulated other comprehensive (loss) income | (3,185) | 6,918 | | Treasury stock | (24,233) | (24,233) | | Total shareholders' equity | 372,487 | 239,438 | | Total liabilities and shareholders' equity | $574,342 | $467,804 | Consolidated Statements of Income This section presents the company's consolidated financial performance, including net sales, gross profit, operating income, and net income Consolidated Statements of Income (in thousands, except per share amounts) | Metric | April 29, 2023 | April 30, 2022 | May 1, 2021 | | :------------------------------------- | :------------- | :------------- | :---------- | | Net sales | $1,172,932 | $1,138,013 | $1,072,210 | | Cost of sales | 776,143 | 720,208 | 650,594 | | Gross profit | 396,789 | 417,805 | 421,616 | | Selling, general and administrative expenses | 210,105 | 209,949 | 193,791 | | Operating income | 186,684 | 207,856 | 227,825 | | Other (expense) income - net | (242) | (260) | 312 | | Income before income taxes | 186,442 | 207,596 | 228,137 | | Provision for income taxes | 44,278 | 49,084 | 53,991 | | Net income | $142,164 | $158,512 | $174,146 | | Earnings per common share: | | | | | Basic | $1.52 | $1.70 | $1.87 | | Diluted | $1.52 | $1.69 | $1.86 | | Weighted average common shares outstanding: | | | | | Basic | 93,347 | 93,323 | 93,280 | | Diluted | 93,608 | 93,599 | 93,620 | Consolidated Statements of Comprehensive Income This section presents the company's comprehensive income, including net income and other comprehensive income items Consolidated Statements of Comprehensive Income (in thousands) | Metric | April 29, 2023 | April 30, 2022 | May 1, 2021 | | :-------------------------------- | :------------- | :------------- | :---------- | | Net income | $142,164 | $158,512 | $174,146 | | Other comprehensive income, net of tax: | | | | | Cash flow hedges | (10,130) | 3,882 | 7,930 | | Other | 27 | 19 | 507 | | Total | (10,103) | 3,901 | 8,437 | | Comprehensive income | $132,061 | $162,413 | $182,583 | Consolidated Statements of Shareholders' Equity This section details changes in the company's shareholders' equity, including common stock, retained earnings, and treasury stock Consolidated Statements of Shareholders' Equity (in thousands) | Item | April 29, 2023 | April 30, 2022 | May 1, 2021 | | :-------------------------------------------- | :------------- | :------------- | :---------- | | Series C Preferred Stock | $150 | $150 | $150 | | Common Stock | $1,017 | $1,017 | $1,016 | | Additional Paid-In Capital | $40,393 | $39,405 | $38,375 | | Retained Earnings | $358,345 | $216,181 | $337,672 | | Accumulated Other Comprehensive (Loss) Income | $(3,185) | $6,918 | $3,017 | | Treasury Stock - Series C Preferred | $(5,100) | $(5,100) | $(5,100) | | Treasury Stock - Common | $(19,133) | $(19,133) | $(19,133) | | Total Shareholders' Equity | $372,487 | $239,438 | $355,997 | Consolidated Statements of Cash Flows This section presents the company's cash inflows and outflows from operating, investing, and financing activities Consolidated Statements of Cash Flows (in thousands) | Activity | April 29, 2023 | April 30, 2022 | May 1, 2021 | | :------------------------------------------------------------------------------------------- | :------------- | :------------- | :---------- | | Net cash provided by operating activities | $161,665 | $133,133 | $193,770 | | Net cash used in investing activities | $(21,952) | $(29,004) | $(25,314) | | Net cash used in financing activities | $(29,689) | $(249,668) | $(279,385) | | Net Increase (Decrease) in Cash and Equivalents | $110,024 | $(145,539) | $(110,929) | | Cash and Equivalents - Beginning of Year | $48,050 | $193,589 | $304,518 | | Cash and Equivalents - End of Year | $158,074 | $48,050 | $193,589 | | Other Cash Flow Information: | | | | | Interest paid | $315 | $371 | $148 | | Income taxes paid | $37,831 | $51,958 | $63,357 | Notes to Consolidated Financial Statements This section provides detailed explanations and disclosures supporting the consolidated financial statements 1. Significant Accounting Policies This note outlines the key accounting principles and methods used in preparing the consolidated financial statements - The consolidated financial statements are prepared in accordance with United States generally accepted accounting principles (GAAP) and include the accounts of National Beverage Corp. and all subsidiaries[356] - Cash and equivalents consist primarily of bank deposits and short-term government money-market investments[385] - Derivative financial instruments are recorded at fair value and used to partially mitigate exposure to changes in raw material costs, not for trading or speculative purposes[357] - Basic earnings per common share is computed by dividing earnings available to common shareholders by the weighted average number of common shares outstanding, while diluted EPS includes the dilutive effect of stock options[386] - Long-lived assets are evaluated for impairment based on undiscounted cash flows when events indicate the carrying amount may not be recoverable[387] - The company's effective income tax rate is based on estimates, with deferred taxes recorded for temporary differences and valuation allowances established when benefits are unlikely to be realized[359] - The company maintains self-insured and deductible programs for certain liability, medical, and workers' compensation exposures, accruing for known and estimated incurred but not reported claims[388] - Intangible assets consist of non-amortizable acquired trademarks[360] - Inventories are stated at the lower of first-in, first-out cost or market, with adjustments for estimated excess, obsolete, or impaired balances[389] - Marketing costs are expensed when incurred, except for prepaid advertising and production costs, which are expensed when the advertising takes place[361] - Property, plant and equipment is recorded at cost, with depreciation using the straight-line method over estimated useful lives[390] - Revenue is recognized upon delivery to customers based on written sales terms that generally do not allow a right of return[391] - Sales incentive arrangements are accrued over the period of benefit or expected sales and accounted for as a reduction of sales[80] - The company operates as a single operating segment for financial reporting and performance evaluation purposes[363] - Shipping and handling costs are reported in selling, general and administrative expenses, totaling $86.8 million in Fiscal 2023, $87.7 million in Fiscal 2022, and $75.5 million in Fiscal 2021[81] - Trade receivables are recorded at net realizable value, with an allowance for doubtful accounts based on historical experience and customer data[365] - No single customer comprised more than 10% of trade receivables or net sales during the last three fiscal years[83] - The preparation of financial statements requires management to make estimates and assumptions that affect reported amounts[366] 2. Property, Plant and Equipment This note details the company's property, plant, and equipment, including land, buildings, machinery, and accumulated depreciation Property, Plant and Equipment – Net (in thousands) | Asset Category | April 29, 2023 | April 30, 2022 | | :------------- | :------------- | :------------- | | Land | $9,835 | $9,835 | | Buildings and improvements | 70,615 | 65,697 | | Machinery and equipment | 289,567 | 277,163 | | Total | 370,017 | 352,695 | | Less accumulated depreciation | (221,594) | (208,437) | | Property, plant and equipment – net | $148,423 | $144,258 | - Depreciation expense was $17.7 million for Fiscal 2023, $15.8 million for Fiscal 2022, and $14.8 million for Fiscal 2021[85] 3. Accrued Liabilities This note provides a breakdown of the company's accrued liabilities, including compensation, promotions, and freight Accrued Liabilities (in thousands) | Accrued Liability | April 29, 2023 | April 30, 2022 | | :---------------- | :------------- | :------------- | | Accrued compensation | $13,036 | $12,079 | | Accrued promotions | 15,865 | 10,826 | | Accrued freight | 2,819 | 3,729 | | Accrued insurance | 2,498 | 2,778 | | Recycling deposits | 5,123 | 5,497 | | Other | 7,977 | 4,181 | | Total | $47,318 | $39,090 | 4. Leases This note details the company's lease obligations, including future minimum lease payments and related liabilities Future Minimum Lease Payments and Related Liabilities (in thousands) | Fiscal Year | Minimum Lease Payments | | :---------- | :--------------------- | | Fiscal 2024 | $12,798 | | Fiscal 2025 | $9,864 | | Fiscal 2026 | $8,039 | | Fiscal 2027 | $7,105 | | Fiscal 2028 | $3,199 | | Thereafter | $3,669 | | Total minimum lease payments | $44,674 | | Less: Amounts representing interest | $(3,147) | | Present value of minimum lease payments | $41,527 | | Less: Current portion of operating lease liabilities | $(11,745) | | Non-current portion of operating lease liabilities | $29,782 | - Operating lease cost was $14.4 million in Fiscal 2023, $14.5 million in Fiscal 2022, and $14.6 million in Fiscal 2021[367] 5. Debt This note describes the company's debt arrangements, including unsecured revolving credit facilities and compliance with covenants - At April 29, 2023, a subsidiary maintained unsecured revolving credit facilities aggregating $100 million, with no borrowings outstanding[369] - A $50 million unsecured revolving term loan facility had $30 million outstanding at April 30, 2022, but no borrowings outstanding at April 29, 2023[370] - The company was in compliance with all loan covenants at April 29, 2023[371] 6. Capital Stock and Transactions with Related Parties This note covers capital stock transactions, including special cash dividends, and management agreements with related parties - The company paid special cash dividends on Common Stock of approximately $280 million ($3.00 per share) on December 29, 2021, and January 29, 2021[372] - The company is party to a management agreement with Corporate Management Advisors, Inc. (CMA), a corporation owned by the Chairman and Chief Executive Officer[373] - Management fees incurred to CMA were $11.7 million for Fiscal 2023, $11.4 million for Fiscal 2022, and $10.7 million for Fiscal 2021[121] 7. Derivative Financial Instruments This note explains the company's use of derivative financial instruments to mitigate raw material cost exposure - The company enters into aluminum swap contracts to partially mitigate exposure to changes in the cost of aluminum cans, designated and accounted for as cash flow hedges[122] Gains (Losses) Recognized from Derivative Financial Instruments (in thousands) | Metric | Fiscal 2023 | Fiscal 2022 | Fiscal 2021 | | :------------------------------------------ | :---------- | :---------- | :---------- | | Recognized in AOCI - (Loss) gain before tax | $(21,100) | $15,105 | $12,973 | | Reclassified from AOCI to cost of sales - (Loss) gain before tax | $(7,785) | $10,001 | $2,550 | | Net change to AOCI | $(10,130) | $3,882 | $7,930 | - At April 29, 2023, the notional amount of outstanding aluminum swap contracts was $60.9 million, with an unrealized loss of $4.6 million before tax expected to be reclassified to earnings over the next 12 months[123] 8. Income Taxes This note details the company's provision for income taxes, including current and deferred components, and effective tax rate reconciliation Provision for Income Taxes (in thousands) | Tax Component | Fiscal 2023 | Fiscal 2022 | Fiscal 2021 | | :------------ | :---------- | :---------- | :---------- | | Current | $48,287 | $42,555 | $51,520 | | Deferred | (4,009) | 6,529 | 2,471 | | Total | $44,278 | $49,084 | $53,991 | Reconciliation of Statutory Federal Income Tax Rate to Effective Tax Rate | Item | Fiscal 2023 | Fiscal 2022 | Fiscal 2021 | | :--- | :---------- | :---------- | :---------- | | Statutory federal income tax rate | 21.0% | 21.0% | 21.0% | | State income taxes, net of federal benefit | 2.9% | 2.9% | 2.9% | | Other differences | (0.2)% | (0.3)% | (0.2)% | | Effective income tax rate | 23.7% | 23.6% | 23.7% | - At April 29, 2023, the gross amount of unrecognized tax benefits was $2.1 million, with $6 thousand recognized as tax expense in Fiscal 2023[166] 9. Legal Proceedings This note reiterates the company's involvement in legal proceedings and its belief regarding their material impact - The company has been named in certain legal proceedings, including class action allegations, and is vigorously defending them, believing they will not have a material adverse effect[130] 10. Stock-Based Compensation This note describes the company's stock-based compensation plans, including stock options and related expenses - The 1991 Omnibus Incentive Plan provides for compensatory awards (stock options, stock awards, etc.) for up to 9,600,000 shares of common stock to officers, key employees, and consultants[131] - The Special Stock Option Plan allows for the issuance of stock options to purchase up to 3,600,000 shares of common stock, with vesting and exercise price tied to recipient's ownership level[132] - The Key Employee Equity Partnership Program (KEEP Program) grants stock options to key employees who purchase shares in the open market, equal to 50% of shares purchased (up to 12,000 shares in any two-year period)[170] Stock Option Activity for Fiscal 2023 | Metric | Number of Shares | Price (a) | | :----------------------------- | :--------------- | :-------- | | Options outstanding, beginning of year | 536,600 | $18.97 | | Exercised | (15,300) | 20.35 | | Options outstanding, end of year | 521,300 | 18.13 | | Options exercisable, end of year | 336,520 | 11.90 | - No stock options were granted in Fiscal 2023. Unrecognized compensation expense related to unvested stock options was $2.3 million at April 29, 2023[134][143] - Stock-based compensation expense was $677,000 for Fiscal 2023, $695,000 for Fiscal 2022, and $462,000 for Fiscal 2021[144] 11. Pension Plans This note details the company's participation in multi-employer defined benefit pension plans and annual contributions - The company participates in three multi-employer defined benefit pension plans under certain collective bargaining agreements[146] - Annual contributions to pension plans (including multi-employer plans) were $3.8 million for Fiscal 2023, $4.0 million for Fiscal 2022, and $3.7 million for Fiscal 2021[174] Multi-Employer Pension Plan Contributions (in thousands) | Pension Fund | Fiscal 2023 | Fiscal 2022 | Fiscal 2021 | | :----------- | :---------- | :---------- | :---------- | | CSSS Fund | $1,601 | $1,462 | $1,469 | | WCT Fund | 768 | 817 | 746 | | Other multi-employer pension funds | 197 | 181 | 166 | | Total | $2,566 | $2,460 | $2,381 | 12. Commitments and Contingencies This note outlines the company's purchase commitments for raw materials, plant, and equipment - At April 29, 2023, the company had purchase commitments for raw materials of $14.0 million through 2024[149] - Purchase commitments for plant and equipment amounted to $5.5 million, anticipated to be completed in Fiscal 2024[177] Report of Independent Registered Public Accounting Firm RSM US LLP issued unqualified opinions on the company's financial statements and internal control over financial reporting - RSM US LLP, the independent registered public accounting firm, issued unqualified opinions on the company's consolidated financial statements as of April 29, 2023, and April 30, 2022, and on the effectiveness of its internal control over financial reporting[152][179] - The audits were conducted in accordance with PCAOB standards, aiming to obtain reasonable assurance about whether financial statements are free of material misstatement and whether effective internal control over financial reporting was maintained[153][181] - No critical audit matters were determined during the current period audit[157] ITEM 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure The company reported that there were no changes in or disagreements with accountants on accounting and financial disclosure - The company reported that this item is not applicable, indicating no changes in or disagreements with accountants[160] ITEM 9A. Controls and Procedures Management concluded that disclosure controls and internal control over financial reporting were effective as of April 29, 2023 - Management, including the Chief Executive Officer and Principal Financial Officer, concluded that the company's disclosure controls and procedures were effective as of April 29, 2023[184] - Management concluded that the company's internal control over financial reporting was effective at April 29, 2023, based on the COSO 2013 framework[205] - There were no changes in internal control over financial reporting during the quarter ended April 29, 2023, that materially affected, or are reasonably likely to materially affect, internal control over financial reporting[206] ITEM 9B. Other Information The company reported that this item is not applicable - The company reported that this item is not applicable[187] ITEM 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections The company reported that this item is not applicable - The company reported that this item is not applicable[208] PART III This section provides information on directors, executive officers, corporate governance, and related party matters ITEM 10. Directors, Executive Officers and Corporate Governance Information on directors, executive officers, and corporate governance is incorporated by reference from the 2023 Proxy Statement - Information required by Item 10 is incorporated by reference from the company's 2023 Proxy Statement[188] - Key officers include Nick A. Caporella (Chairman of the Board and Chief Executive Officer), Joseph G. Caporella (President), and George R. Bracken (Executive Vice President – Finance)[165][189] ITEM 11. Executive Compensation Information regarding executive compensation is incorporated by reference from the company's 2023 Proxy Statement - Information required by Item 11 is incorporated by reference from the company's 2023 Proxy Statement[191][210] ITEM 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters Information concerning security ownership and related stockholder matters is incorporated by reference from the company's 2023 Proxy Statement - Information required by Item 12 is incorporated by reference from the company's 2023 Proxy Statement[191][211] ITEM 13. Certain Relationships and Related Transactions, and Director Independence Information regarding certain relationships, related party transactions, and director independence is incorporated by reference from the company's 2023 Proxy Statement - Information required by Item 13 is incorporated by reference from the company's 2023 Proxy Statement[191] ITEM 14. Principal Accounting Fees and Services Information on principal accounting fees and services is incorporated by reference from the company's 2023 Proxy Statement - Information required by Item 14 is incorporated by reference from the company's 2023 Proxy Statement[212] PART IV This section lists exhibits and financial statement schedules filed as part of the Annual Report on Form 10-K ITEM 15. Exhibits, Financial Statement Schedules This section lists the financial statements, schedules, and exhibits filed as part of the Annual Report on Form 10-K - The following documents are filed as part of this report: Financial Statements (Consolidated Statements of Income, Comprehensive Income, Shareholders' Equity, Cash Flows, Notes to Consolidated Financial Statements, Report of Independent Registered Public Accounting Firm)[193][212] - Exhibits include the Restated Certificate of Incorporation, Amended and Restated By-Laws, various stock plans (Omnibus Incentive Plan, Special Stock Option Plan, Key Employee Equity Partnership Program), and Credit Agreements[196][213][243] - The Cover Page Interactive Data File (formatted as Inline XBRL) is included as Exhibit 104, containing the consolidated financial statements and notes[218][228] ITEM 16. Form 10-K Summary This item is reserved and contains no information SIGNATURES This section contains the signatures of the registrant's authorized officers and directors, affirming the filing of the report - The report is signed by Nick A. Caporella (Chairman of the Board and Chief Executive Officer), Joseph G. Caporella (President and Director), George R. Bracken (Executive Vice President – Finance), and other directors[222][231]