Note 1 - Significant Accounting Policies

12 Months Ended

May 03, 2025

Notes to Financial Statements

Significant Accounting Policies [Text Block]

1. SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The consolidated financial statements have been prepared in accordance with United States Generally Accepted Accounting Principles (“GAAP”) and rules and regulations of the Securities and Exchange Commission. The consolidated financial statements include the accounts of National Beverage Corp. and all subsidiaries. All significant intercompany transactions and accounts have been eliminated. The Company’s fiscal year ends the Saturday closest to April 30 and, as a result, an additional week is added every five or six years. The fiscal year ended May 3, 2025 (“Fiscal 2025”) consisted of 53 weeks. The fiscal years ended April 27, 2024 (“Fiscal 2024”) and April 29, 2023 (“Fiscal 2023”) both consisted of 52 weeks.

Segment Reporting

The Company has one reportable segment for purposes of presenting financial information and evaluating performance. See Note 13- Segment Information, for additional information.

Use of Estimates

The preparation of the Company’s financial statements in conformity with GAAP 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 anticipated future actions, actual results may vary from reported amounts.

Fair Value of Financial Instruments

The carrying values of the Company’s financial instruments, including cash and cash equivalents, accounts receivable, accounts payable and accrued liabilities, approximate fair value due to the relatively short maturity of the respective instruments. As of May 3, 2025 and April 27, 2024, cash and cash equivalents included money-market instruments of $109.1 million and $240.9 million, respectively. These financial instruments are Level 1 as defined by the fair value hierarchy since they are based on quoted prices in active markets for identical assets and liabilities. Derivative financial instruments which are used to partially mitigate the Company’s exposure to changes in certain raw material costs are recorded at fair value. Derivative financial instruments are not used for trading or speculative purposes. Credit risk related to derivative financial instruments is managed by requiring high credit standards for counterparties and frequent cash settlements. The estimated fair values of derivative financial instruments are calculated based on market rates to settle the instruments. See Note 7-Derivative Financial Instruments.

Cash and Cash Equivalents

Cash and cash equivalents are comprised of cash and highly liquid securities (consisting primarily of bank deposits and short-term government money-market investments) with original maturities of three months or less from the date of purchase.

Trade Receivables, Net

Trade receivables are recorded at net realizable value, which includes an estimated allowance for credit losses. The Company extends 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. The Company continually monitors its exposure to credit losses and maintains allowances for anticipated credit losses based on its experience with past due accounts, collectability and its analysis of customer data. Actual future losses from uncollectible accounts could differ from the Company’s estimate.

Changes in the allowance for credit losses were as follows:

	(In thousands)
	Fiscal 2025			Fiscal 2024			Fiscal 2023
Balance at beginning of year	$	868		$	523		$	559
Net charge to expense		357			427			11
Net charge-off		(1	)		(82	)		(47	)
Balance at end of year	$	1,224		$	868		$	523

The Company’s trade receivables, net balances as of April 29, 2023 and April 30, 2022 were $104.9 million and $93.6 million, respectively.

Inventories

Inventories are stated at the lower of first-in, first-out cost or net realizable value. Adjustments, if required, to reduce the cost of inventory to net realizable value are made for estimated excess, obsolete or impaired balances. Inventories at May 3, 2025 were comprised of finished goods of $44.0 million and raw materials of $41.1 million. Inventories at April 27, 2024 were comprised of finished goods of $50.3 million and raw materials of $34.3 million.

Property, Plant and Equipment, Net

Property, plant and equipment is recorded at cost. Additions, replacements and betterments are capitalized, while maintenance and repairs that do not extend the useful life of an asset are expensed as incurred. Depreciation is recorded using the straight-line method over estimated useful lives of 2 to 30 years for buildings and improvements and 3 to 15 years for machinery and equipment. Leasehold improvements are amortized using the straight-line method over the shorter of the remaining lease term or the estimated useful life of the improvement. When assets are retired or otherwise disposed, the cost and accumulated depreciation are removed from the respective accounts and any related gain or loss is recognized.

Leases

The Company leases office and warehouse space, machinery and other equipment under noncancelable operating lease agreements. The Company uses the following policies and assumptions to evaluate its leases:

● Determining a lease: The Company assesses contracts at inception to determine whether an arrangement is or includes a lease, which conveys the Company’s right to control the use of an identified asset for a period of time in exchange for consideration. Operating lease right-of-use assets and associated liabilities are recognized at the commencement date and initially measured based on the present value of lease payments over the defined lease term.

● Allocating lease and non-lease components: The Company has elected the practical expedient to not separate lease and non-lease components for certain classes of underlying assets. The Company has equipment and vehicle lease agreements, which generally have the lease and associated non- lease components accounted for as a single lease component. The Company has real estate lease agreements with lease and non-lease components, which are accounted for separately where applicable.

● Calculating the discount rate: The Company calculates the discount rate based on the discount rate implicit in the lease, or if the implicit rate is not readily determinable from the lease, then the Company calculates an incremental borrowing rate.

● Recognizing leases: The Company does not recognize leases with an initial contractual term of less than 12 months on its consolidated balance sheets. Lease expense for these short-term leases is expensed on a straight-line basis over the lease term.

● Rent increases or escalation clauses: Certain leases contain scheduled rent increases or escalation clauses, which can be based on the Consumer Price Index or other rates. The Company assesses each contract individually based on the terms of the agreement.

● Renewal options and/or purchase options: The Company does not assume renewals in its determination of the lease term unless the renewals are deemed to be reasonably assured at lease commencement.

● Residual value guarantees, restrictions or covenants: The Company’s lease agreements do not contain material residual value guarantees, restrictions or covenants.

Intangible Assets

Intangible assets at May 3, 2025 and April 27, 2024 consisted of non-amortizable acquired trademarks.

Impairment of Long-Lived Assets

All long-lived assets, excluding goodwill and intangible assets not subject to amortization, are evaluated for impairment on the basis of undiscounted cash flows whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Goodwill and intangible assets not subject to amortization are evaluated for impairment annually or sooner if management believes such assets may be impaired. An impaired asset is written down to its estimated fair value based on discounted future cash flows.

Insurance Reserves

The Company maintains self-insured and deductible programs for certain liability, medical and workers’ compensation exposures. Accordingly, the Company accrues for known claims and estimated incurred but not reported claims not otherwise covered by insurance based on actuarial assumptions and historical claims experience. At May 3, 2025 and April 27, 2024, other liabilities included accruals of $5.5 million for estimated non-current risk retention exposures, of which $3.8 million and $4.0 million, respectively, was covered by insurance at both dates and included as a component of non-current other assets.

Revenue Recognition

Revenue is recognized when the performance obligation is satisfied. The Company’s written sales terms do not allow a right of return except in rare instances. The Company’s products are typically sold on credit; however smaller direct store delivery accounts may be sold on a cash on delivery basis. The Company’s credit terms normally require payment within 30 days of delivery and may allow discounts for early payment. The Company estimates and reserves for credit losses based on the Company’s experience with past due accounts, collectability and its analysis of customer data. Various sales incentive arrangements are offered to the Company’s customers that may require customer performance or achievement of certain sales volume targets. Sales incentives are accrued over the period of benefit or expected sales. When an 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.

Shipping and Handling Costs

Shipping and handling costs are reported in selling, general and administrative expenses in the accompanying consolidated statements of income. Shipping and handling costs were $75.5 million, $77.8 million and $86.8 million for Fiscal 2025, Fiscal 2024 and Fiscal 2023, respectively. Although the Company’s classification is consistent with many beverage companies, its gross margin may not be comparable to companies that include shipping and handling costs in cost of sales.

Marketing Costs

The Company utilizes a variety of marketing programs, including cooperative advertising programs with customers, to advertise and promote its products to consumers. Marketing costs are expensed when incurred, except for prepaid advertising and production costs, which are expensed when the advertising takes place. Marketing costs, which are included in selling, general and administrative expenses, were $45.3 million, $50.0 million and $44.1 million for Fiscal 2025, Fiscal 2024 and Fiscal 2023, respectively.

Income Taxes

Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. A valuation allowance would be provided against deferred tax assets if the Company determines it is more likely than not such assets will not ultimately be realized. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.

Earnings Per Common Share

Basic earnings per common share is computed by dividing earnings available to common shareholders by the weighted average number of common shares outstanding during the period. Diluted earnings per common share is calculated in a similar manner, but includes the dilutive effect of stock options amounting to 78,000, 201,000 and 261,000 shares in Fiscal 2025, Fiscal 2024 and Fiscal 2023, respectively. The weighted-average number of antidilutive stock options excluded from the calculation of diluted earnings per share was immaterial for Fiscal 2025.

Recently Issued Accounting Pronouncements

In November 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2023-07, “Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures,” which requires additional disclosure of significant segment expenses included in the reported measure of segment profit or loss and regularly provided to the Chief Operating Decision Maker. This standard does not change how an entity identifies its operating segments or applies quantitative thresholds to determine its reportable segments. The standard is effective for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years beginning after December 15, 2024. The Company adopted ASU 2023-07 effective for Fiscal 2025 without a material impact on its consolidated financial statements. See Note 13-Segment Information, for disclosure related to the Company’s segment reporting.

In December 2023, the FASB issued ASU 2023-09, “Income Taxes (Topic 740): Improvements to Income Tax Disclosures,” which requires disclosure of specific categories in the rate reconciliation, including additional information for reconciling items that meet a quantitative threshold and specific disaggregation of income taxes paid and tax expense. The amendment is effective for annual periods beginning after December 15, 2024. Early adoption is permitted. The Company intends to adopt ASU 2023-09 on a prospective basis for its fiscal year ended May 2, 2026.

In November 2024, the FASB issued ASU 2024-03, “Income Statement –Reporting Comprehensive Income – Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses,” which requires entities to disaggregate operating expenses into specific categories such as employee compensation, depreciation, and intangible asset amortization, by relevant expense caption on the statement of operations. The standard is effective for annual reporting periods beginning after December 15, 2026, and interim periods within annual reporting periods beginning after December 15, 2027. Early adoption is permitted on either a prospective or retrospective basis. The Company is currently evaluating the impact of adopting ASU 2024-03 on its consolidated financial statements and related disclosures.