Krause Fund Research

Spring 2021

National Beverage Corp. (NASDAQ: FIZZ) April 20, 2021 Stock Rating: SELL Consumer Staples – Non-Alcoholic Beverages Analysts Target Price: $35 - $42 Emily Ellinger | [email protected] DCF Model: $41.53 Meghan Maleri | [email protected] Rachel Recker | [email protected] Relative Model: $35.27

Investment Thesis Price Data Current Price: $50.19 National Beverage Corp. is a mid-cap provider of juices, sodas, and sparkling water brands. Its 52-Week Range: $23.99-$98.21 emphasis on meeting ever-changing consumer trends, as well as indulging in their loyal customer base has demonstrated historic stability. However, we do not project strong growth in future performance. Due to the increasingly competitive nature of the beverage industry, especially in Key Statistics the sparkling water segment, we believe the stock is overvalued by 16.3-30.3%; therefore, we are Market Capitalization (B): $4.84 recommending a sell position. Shares Outstanding (T): 94,000 Drivers of Thesis Avg 1-5 yr weekly beta: 0.494 • Lack of innovation: National Beverage Corp. is limited by its majority insider ownership which is hesitant to innovate. This is apparent in its limited delegation of funds for its Fwd Price/Earnings: 39.4 research and development facilities, which are almost exclusively used for regulation and compliance testing. As a result, it is falling behind competition in satisfying Price/Earnings (LTM): 36.0 changing consumer trends in the industry as indicated by LaCroix’s loss of retail market Financial Metrics share in 20198. • Weak global presence: National Beverage Corp. operates only in the United States and 2020 Revenue $1,000,394 exports limited volume of products to Canada. Unlike competitors, it is unable to capitalize on growing international demand for non-alcoholic beverages. This limits its 2021E Revenue $1,025,991 growth potential since it competes in a largely saturated North American market. 2020 Profit Margin 37.00% • Inability to raise prices: Future economic projections indicate that the prices of key inputs and commodities in the beverage industry will rise, including the price of 2021E Profit Margin 34.53% aluminum by 4.3% annually16. If National Beverage Corp. is forced to raise its prices, it risks losing price sensitive customers to discount competitors. Company Description Risks to Thesis • Rising discretionary income: US discretionary income is projected to rise by 2.6% National Beverage Corp. (NASDAQ:FIZZ) has 13 annually through 2025 . Sparkling water consumers are typically high income, so established itself as a producer of healthy, increased demand for and sales of LaCroix could outgrow projections. • Brand loyalty and history: Sparkling water drinkers are brand loyal. LaCroix flavored beverages in the non-alcoholic encompasses a large portion of National Beverage’s sales, so it could maintain its beverage industry. The company was founded market share in the long term. The company has also established brands with 110-year by Nick Caporella in 1985 and is headquartered histories that could capitalize on brand recognition with future innovation. in Fort Lauderdale, Florida. National Beverage Corp. first traded as a public company on the Earnings Estimates NASDAQ in 1999 and has about 1,550 Year 2018 2019 2020 2021E 2022E 2023E employees. The company has a strong presence EPS $1.61 $1.51 $1.40 $1.27 $1.31 $1.33 in the United States with a small percentage of Growth 39.57% -5.92% -7.62% -8.72% 2.48% 1.63% sales in Canada.

12-Month Performance Relative Performance

Source: Bloomberg Source: FactSet

Factset declined by 3.5% in 2020, which was the first decline on record since 2009. Executive Summary

Sell Rating Issuance U.S. GDP Percentage Growth YoY

Our team concluded that National Beverage Corp. 8.0 (NASDAQ:FIZZ) is a SELL rating for the Krause Fund 6.0 Portfolio. The recommendation is a result of support 4.0 from a variety of economic, industry, company, S.W.O.T., 2.0 valuation, and sensitivity analyses explained throughout 0.0 the report. We predict stable revenue growth year-over- -2.0 1980 1983 1986 1989 1992 1995 1998 2001 2004 2007 2010 2013 2016 2019 2022 2025 year within our projection period, with decreased -4.0 revenue growth into perpetuity. Due to saturation in the -6.0 beverage industry and volatility in future profit margins, Source: IBIS World we are apprehensive to rely on historic returns to continue. We recommend no action to be taken for the Looking into the future, short-term economic recovery Krause Fund, as we project future growth of National suggests GDP will grow at a rate of 3.5% in the next two Beverage Corp. to be limited by their conservative quarters and grow at an average of 4.5% during 2021, 1 management structure. As our DCF and EP valuation then return to a slower rate of growth in 2022 of 2.7% . The expected rates of growth are influenced by the models indicate, the intrinsic valuation of FIZZ is $41.53, vaccination deployment by Pfizer and Moderna, with solidifying the overvaluation of the company. herd immunity forecasting a full reopening of the Economic Analysis economy by 2021-year end. Consumer spending drives a majority of GDP, leading to growth in the Consumer Staples sector by 2022. Gross Domestic Product (GDP) Inflation GDP is a reliable measure of economic prosperity by demonstrating the total value in dollars of Consumer Price Index (CPI) all the goods and services produced in an economy. Personal consumption accounts for two-thirds The consumer price index (CPI) provides a reflection of of GDP in the United States, while investment in the average change over time in prices paid for a variety of consumer goods and services3. Increases in businesses and households and government spending CPI reflect a decrease in consumer purchasing power for account for the remaining components 1 . As increased the market basket of goods and services. The consumer and commercial spending can lead to low data volatility in the CPI is due to government increased GDP, the Consumer Staples sector benefits regulation by the Federal Reserve4. from this aspect of GDP growth effects. CPI post-pandemic displays promising short- GDP forecasts labor markets and consumer spending. term recovery from 1.22% in 2020 to current 0.177% to The labor market is anticipated to return to pre- a long term per year growth of 1.7%5. This pattern shows pandemic levels by mid-2023 and consumer spending is the forecasted continuing steady growth rate to be expected to return to levels of confidence by Q4 of 2021. consistent with expansionary fiscal policy. The Federal Historically, GDP has grown year-over-year at an average Reserve continues to keep interest rates near zero, causing the risk of inflation to disrupt markets further in rate of 2.5%. Q1 2019 produced strong economic growth the short-term. Due to the nature of the Consumer that slowed throughout the rest of the year. Due to the Staples sector, the anticipated increase in CPI in the long- COVID-19 outbreak, GDP declined by 31.4% in Q2 2020, term will be closely followed by growth in the sector6. along with the effects of the collapse of crude oil in Q1 2020 continued to deplete growth of GDP2. Overall, GDP

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U.S. CPI Projection 266 265 264 263 262 261 260 259 258 257 Source: US Bureau of Labor Statistics

2020-09-01 2020-10-01 2020-11-01 2020-12-01 2021-01-01 2021-02-01 2021-03-01 The PPI final demand will increase another 3.5% in two Source: St. Louis Federal Reserve years from now. This is supported by the past demand indices of the Producer Price Index for final Producer Price Index (PPI) demand and the PPI projection like Capital IQ4.

The Producer Price Index measures the costs derived Consumer Confidence Index (CCI) from industries that produce products within an organized industry, commodity, and intermediate The Consumer Confidence Index is an indicator of how demand. Specifically, it measures the average change in confident the public is about the health of the nation’s prices received by domestic producers. PPI is a economy, and details consumer attitude toward the fundamental source of assessing margins and net economy and their buying intentions. CCI drives the Consumer Staples sector due to the correlation between income7. consumer spending and consumer confidence in the

economy. Additionally, the Producer Price index is a major factor in the Consumer Staples sector due to costs associated Confidence decreased because of trade tensions and with creating the products. The customer base for economic uncertainty in 2019. The coronavirus (COVID- Consumer Staples products has been consolidating over 19) pandemic caused further decrease in consumer the last several years, showing fewer customers with confidence in Q2 2020 due to needs to save, rather than purchasing power. Limited purchasing power from spend, and a decrease in outlets to purchase products, consumers limits National Beverage Corp.’s ability to such as restaurant closures. In hopes increase prices. Commodity price increases ultimately of economic recovery in Q3, a moderate increase result in a corresponding increase in the cost of raw in September and October CCI materials and energy. Commodity prices within the showed consumer confidence rise, and then decrease Consumer Staples sector will be directly impacted by the once again in November 2020, as another wave of coronavirus cases was confirmed. increase in PPI. Due to this impact, companies must decide whether to push costs of products to consumers. National Beverage Corp. does not have the ability to push Consumer Confidence Index costs to consumers. 150

100 The Consumer Staples sector is expected to be affected by the increase in commodity inputs, therefore causing 50 costs to increase as well. CPI and PPI closely relate to one 0 another, as well as closely measures the rate of inflation

year over year. Jul-20 Jan-20 Jan-21 Jun-20 Oct-20 Apr-20 Feb-20 Sep-20 Feb-21 Dec-20 Aug-20 Nov-20 Mar-20 Mar-21 May-20 Source: Bloomberg

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The average percent change over the past 6 months for the past 20 years is 0.91%. The confidence in economic 10 Year Unemployment Rate recovery post-pandemic will moderately increase this 16.0 percent to reach 0.95%8. However, skepticism in new 14.0 strains of the coronavirus, health concerns regarding 12.0 10.0 effects of the vaccine, and the possibility of another 8.0 pandemic in the future will lead consumers to continue 6.0 buying less expensive store brands, rather than trading 4.0 up to premium brands as a consumer purchasing 2.0 decision. 0.0 Jun-12 Jun-15 Jun-18 Jun-21 Sep-11 Sep-14 Sep-17 Sep-20 Dec-10 Dec-13 Dec-16 Dec-19 Unemployment Rate Mar-10 Mar-13 Mar-16 Mar-19

Source: St. Louis Federal Board The unemployment rate measures the proportion of

Americans aged 16 and older who The Consumer Staples space has a labor-intensive currently are unemployed and looking for work. The business model that will see the threat of jobless claims unemployment rate follows trends in GDP because affect consumer spending the most heavily, but demand for labor follows demand for a company’s consumers will continue to demand the products within products. Unemployment rises as demand declines, the industry. Products within the sector tend to be more shaping the Consumer Staples space by reflecting the resistant to impacts of an economic slowdown. A strong downward spiral of unemployed laborers unable to job market encourages spending across the whole sustain spending patterns9. economy, so as our forecast horizon depicts, we expect

a return to stable growth for the Consumer Staples Following economic recovery post-2008 financial crisis, sector, with room to grow in innovation. unemployment began descending in 2011 until historic lows in February 2020 of 3.6%, below natural labor Industry Analysis market rates10. This increase in employment came from higher demand in hiring in the ‘gig economy’ paired with a reduction in upwards wage pressure which ultimately Overview caused wage gains to be lower than anticipated. The beverage industry is segmented into alcoholic and

non-alcoholic beverages. The non-alcoholic beverage The coronavirus outbreak ended the longest economic expansion to date, resulting in millions of jobs lost, with segment is further divided into five segments: bottled an unemployment rate in April 2020 of 14.8%. The water, juices, ready to drink (RTD) tea and coffee, soft unemployment rate fluxed due to pandemic health drinks, and others. The primary competitors in the concerns in the workplace, travel restrictions, and local beverage industry consist of The Coca-Cola Company, stay-at-home orders. The unemployment rate currently PepsiCo, Keurig Dr. Pepper Group, Nestle, Groupe sits at 6.0% and is expected to continue to decrease as Danone, Kraft Foods, Monster, Campbell Soup, and the US recovers from the pandemic11. We anticipate a Unilever. The size of the industry in the United States was return to an unemployment rate of 5.5% by Q4 2021 about $186.3 billion in 2019, a growth of 3.5% from 2018. because of the $1.9 trillion stimulus package passed by National Beverage Corp. sells four types of products the Biden administration. The influx of spending will including sparkling water, juices, energy drinks, stimulate the economy, but hesitation in relation to risk and carbonated soft drinks (CSDs). This industry is of hyperinflation will cause the unemployment rate to highly saturated and competitive due to extensive not return to the over-heated pre-pandemic rates. 12 product variety and increasing competition .

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Trends Ice, a product of Talking Rain Beverage Co., was one of the first to offer caffeine in its beverages and is gaining Declining CSD Consumption market share. Additionally, its extensive flavor offerings and strength have threatened established brands like Consumers today are more focused than ever on health LaCroix. Larger firms such as Coca-Cola are also entering and wellness when it comes to their beverage choices especially in North America and Europe. Although the into product development for caffeinated sparkling industry used to be dominated by CSDs, consumer waters, further threatening National Beverage Corp.’s preferences have now shifted towards position in the industry. Firms that take advantage of natural, unsweetened drinks due to health concerns these consumer driven trends will be able to tap into a stemming from high sugar intake, such as diabetes and loyal customer base since seltzer drinkers tend to be obesity. Diet CSD sales have also fallen due to the repeat buyers for their brand of choice15. potential long-term health implications of artificial sweeteners. As a result, global soda consumption is Premiumization projected to decline 0.7% annually and has been partially In developed countries, consumers are growing more replaced by sparkling water13. Due to this shift, US health-conscious and disposable incomes are rising by sparkling water sales have increased by 118% since 13 14 about 2.6% annually . Sparkling water consumers tend 2015 . 15 to be high income . Therefore, they increasingly seek organic and premium drink offerings. Since these premium priced offerings have higher profit margins compared to traditional beverages like sodas and bottled water, this trend will likely drive the growth of the industry in mature markets, specifically in North America and Europe16.

International Markets

Today, there is a low amount of international trade in the industry. As developing countries continue to experience GDP growth and rising incomes, consumption of

Source: IBIS World packaged beverages in these geographies will continue to grow. Multinational companies such as Coca-Cola and National Beverage Corp. has capitalized on the sparkling Nestle SA will be able to take advantage of this growing water trend by offering its naturally flavored product customer base as they continue to acquire local bottlers line, LaCroix, as an alternative to sugary soft to increase their international presence16. drinks. Initially, it captured significant market share but now faces intense competition from established Structural Changes competitors including PepsiCo and Coca-Cola as well as In order to capitalize on expanding international markets smaller, private firms such as Talking Rain Beverage Company. as mentioned above, multinational firms may begin to acquire local firms in order to expand production Product Innovations capacities and overall presence in new geographies16. This may pose a competitive threat to smaller firms who Sparkling Water may be at risk of acquisition by large corporations.

The sparkling water market has grown in recent years Beverage and bottler mergers and acquisitions also offer and is becoming competitively saturated. Only 36% of a competitive advantage by tapping into niche markets, consumers reported keeping it stocked at home versus particularly health-conscious consumers. Through these 61% for bottled water. In this growing market, acquisitions, firms can expand their product lines, consumers are seeking innovation, new flavor varieties, particularly by adding natural, organic products to their and caffeine in their sparkling water beverages. Sparkling mixes that are in line with industry trends. This poses a 5 further threat to firms whose product mixes serve niche Threat of Substitutes: High markets and who do not have comparable economies of There are many substitutes in the non-alcoholic scale to multinational corporations. Therefore, their beverage industry due to the wide product variety. sales may be captured by these giants, threatening the Since this market is so saturated, it is important that basis of their business models. firms are at the forefront of new product innovation in order to capture consumer attention and gain initial Porter’s Five Forces market share. To maintain market share, small firms Degree of Rivalry & Competition: High must continue to adapt their product lines in order to compete with established players who are beginning to Internal and external competition in this industry is develop their own sparkling waters and other natural extremely high and increasing. Firms compete based on beverages. consumer trends, product variety, price, taste, branding, and manufacturing. Since the beverage Threat of New Entrants: High industry is driven by consumer trends, firms must constantly develop new products while also advertising Due to the heavy influence on consumer trends in the existing beverages to maintain market share. Price- industry, there are constantly new product offerings based competition has also intensified which benefits coming to the market. In order to keep up with these established competitors. Externally, there are many trends, established corporations such as Coca-Cola and alternative goods such as hot coffee, powdered drinks, PepsiCo are constantly developing new products and and alcohol that create additional competition in the entering previously untapped segments, particularly, beverage industry17. sparkling water. This poses a threat to smaller competitors already in the industry. Additionally, Bargaining Power of Buyers: High companies that target niche markets often enter the market to serve unmet needs of consumer trends. Consumer trends and demand drive this industry. Therefore, new entrants are able compete regardless of As they become more health conscious and seek low their large or small scales. sugar, natural products, companies must invest in research and development to create new offerings that Competitive Analysis appeal to these changing consumer preferences. It is also important that firms continue to provide goods Sparkling Water that compete with new, emerging products developed by the competition17. Sparkling water, particularly the LaCroix product line, encompasses a significant percentage of National Bargaining Power of Suppliers: Moderate Beverage Corp.’s sales. This market segment is in the In recent years, there has been a decrease in the price top five fastest-growing categories in the beverage of key industry inputs including sugar, corn syrup, industry and has an increasing number of new plastic, and aluminum due to oil price fluctuations entrants18. The largest competitors in the sparkling exacerbated by the global pandemic. These changes water segment are the following15: affect profitability for smaller firms who may lose customers if they are forced to raise prices in the future • Talking Rain Beverage Co. (Sparkling Ice) and provides a competitive advantage to large firms • Nestle SA (San Pellegrino & Perrier) who are able to maintain a loyal customer base despite • PepsiCo (Bubly) price hikes. One concerning projection for beverage • Coca-Cola (AHA) profitability is the expected rise of aluminum prices by • Private label brands 4.3% annually through 202516. Therefore, it is important that firms secure long-term contracts with suppliers in order to reduce the volatility of input prices which could reduce profitability in the future.

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The juice segment of the industry is subject to Sparkling Water Market Share 2020 competition based on consumer trends and price. Talking Rain Others Driven by consumer demand for more natural offerings, Beverage 17% Co firms in this universe invest heavily in product 18% development.

There are many small-scale competitors that serve National Beverage niche markets but have increasingly been acquired by Private larger corporations. For example, Odwalla, originally an Label Corp 19% 16% independent juice and smoothie company was acquired by Coca-Cola in 2011 for $181 million. PepsiCo later The Coca- Nestlé SA Cola 17% acquired Naked juice to directly compete. Company PepsiCo Inc 5% 8% Juice Production Market Share Talking Rain Beverage Co National Beverage Corp Keurig Dr. Nestlé SA PepsiCo Inc Pepper 15% The Coca-Cola Company Private Label Others

PepsiCo Source: Mintel 14% Other As a result of new entrants, the sparkling water segment 57% The Coca- has seen increased competition in recent years. Most Cola Bottling Co. notably, Bubly, a PepsiCo brand, saw sales growth of Campbell 7% 87.4% in 2020 and gained 3.44% market share in 2020. Soup Other products including Sparkling Ice (Talking Rain Co.), 7% Spindrift (Spindrift Beverage Co.), and Top Chico (Coca- Source: IBIS World Cola), also saw strong sales growth and captured market share. On the other hand, Lacroix lost 1.99% of its market Like Coca-Cola and PepsiCo, other established players share due to a 2.5% decline in sales18. can bring down the prices of their juice products compared to smaller firms due to their larger Ultimately, National Beverage’s position in the sparkling production capacities and infrastructural capabilities. water industry is threatened due the entry of both multinational corporations and private firms. The Finally, this segment is most sensitive to economic intensity of competition will most likely continue to fluctuations in disposable income since they are priced escalate as a result of increasing consumer demand for at a premium relative to other beverage offerings. innovative variety of sparkling waters. Overall, small-scale competitors can enter the market due to changing consumer trends but face tough Juices, Energy Drinks, CSDs competition and risk of acquisition by established National Beverage Corp. sells juices, energy drinks, and a corporations. small amount of CSDs. Therefore, it competes with global bottlers and juice producers since it owns its means of production and distribution. The major competitors in these industry segments include: • Keurig Dr. Pepper • Pepsico • Coca-Cola • Campbell Soup

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drinks19. The company’s most well-known brand is Global Soft Drink and LaCroix, which is one of the most popular brand of Bottled Water Manufacturing Market sparkling water20. Other brands that make up National Share Beverage Corp.’s portfolio consist of Big Shot, Clear Fruit, Crystal Bay, Everfresh, Everfresh Premier Varietals, Faygo, Mr. Pure, NiCola by LaCroix, Ohana, Ritz, Rip It and 19 The Coca- Shasta . Cola Company Corporate Strategy 18% National Beverage Corp. places an emphasis on vertical Pepsico integration, from acquiring raw materials to producing Inc. and distributing the finished products. The company Other 17% 65% essentially manufactures all the concentrates and essences it uses in its goods. This strategy gives National Beverage Corp. an advantage over other companies in the industry who rely on outsourcing their manufacturing and marketing to third-party companies.

By controlling all production, distribution, and marketing Source: IBIS World of its products, National Beverage Corp. can manage The bottling segment of the beverage industry is quality control more effectively and quickly react to characterized by many competitors, and due to product fluctuations in the market19. variety, no one firm dominates. In fact, industry sales are National Beverage Corp. is confident that its product split between a small number of large corporations (35%) designs, innovative packaging, and variety of imaginative and a large universe of small firms (65%). Therefore, flavors help it stand out in the beverage industry. The smaller, domestic producers usually dominate in their company has differentiated itself from competitors by given geographies due control of distribution that developing healthier beverages in response to a shift in 16 reduces logistical costs and maximizes profits . In order consumer buying habits, appealing to a wide variety of to compete, firms must have economies of scope that demographics, and stressing consumer engagement in incorporate product differentiation due to the significant comparison to larger competition. With the millennial influence of buyer demands on industry sales. generation becoming more prominent consumers who are influencing older generations, National Beverage Company Analysis Corp. has put emphasis on the design of packaging and the placement of their products on shelves at retailers19. Business Overview National Beverage Corp. (NASDAQ:FIZZ) has established Production & Distribution itself as a producer of healthy, flavored beverages in the National Beverage has twelve production facilities non-alcoholic beverage industry. The company was located strategically near major metropolitan areas founded by Nick Caporella in 1985 and is headquartered across the United States. The location of these centers in Fort Lauderdale, Florida. National Beverage Corp. first allows the company to efficiently manufacture and traded as a public company on the NASDAQ in 1999 and distribute products to the entire United States. Within a has about 1,550 employees. The company holds a strong few of the company’s production facilities are research presence in the United States with a small percentage of and development labs where products are tested for 19 sales in Canada . compliance with quality control standards and new 19 National Beverage Corp. holds several subsidiaries which products and flavors are researched . have created a variety of beverages including sparkling National Beverage Corp. maintains a hybrid distribution waters, energy drinks, juices, and carbonated soft system to serve its customers. This system has three 8 distribution channels including take-home, Beverage Corp. had a stronger performance during the convenience, and food service. The take-home category second quarter of 2021 compared to the second quarter provides products to national and regional grocery of 2020, and it reported its best quarter in history for the stores, club stores, mass-merchandisers, wholesalers, e- third quarter of 202123. Looking forward, we feel the commerce stores, drug stores and dollar stores. The ongoing pandemic is not a risk to National Beverage convenience channel distributes products to Corp. due to the distribution and development of the convenience stores, gas stations and other smaller vaccine. accounts. Lastly, the food service division supplies SWOT Analysis products to private, specialized distributors who then sell the products to hospitals, schools, military bases, Strengths airlines, hotels, and food-service wholesalers19. Longevity of Brands: Brands in National Beverage Corp.’s portfolio, specifically Shasta and Faygo, have existed for National Beverage Corp. focuses on geographic more than 110 years, demonstrating the company’s locations in the United States and Canada. Management ability to create long-sustained products and build has discussed expanding their distribution locations to customer loyalty19. The company’s diverse assortment of other regions19. brands and products help in reaching a broad variety of Ownership demographics and ensure the company is satisfying a multitude of preferences. Of National Beverage Corp’s 93.3 million shares outstanding, 75.02% are held by insiders, while the Quality Control: Given that National Beverage Corp. remaining 24.98% are held by institutions and retail manufactures all its products in its own facilities instead traders. Nick Caporella, the current CEO of the company, of outsourcing to a third company, management is able holds 73.42% of the shares, valued at approximately to reduce its cost of goods sold19. In addition, the $3.54 billion. Five other insiders, including Nick company can adjust to new consumer trends quicker Caporella’s son, own a combined 1.6% of the company’s than companies who outsource their production, and shares outstanding. There are two activist investors in any defaults in the quality of products are managed more National Beverage Corp, Renaissance Technologies LLC efficiently. and Kayne Anderson Rudnick Investment Management

LLC, who own a total of 11.25% of the shares Weaknesses outstanding21. The significant ownership by insider Marketing Strategy: National Beverage Corp. focuses on investors limits shareholder’s voting rights. Therefore, local marketing programs to promote products to its management’s conservative nature restricts innovation consumers19. Competitors like PepsiCo and Coca-Cola and ability to remain competitive in a newly saturated utilize larger scale advertising practices including industry. television commercials, social media, and sponsorship of Impact of COVID-19 on Operations national and international sporting events to interact with customers across the globe24. National Beverage While the COVID-19 pandemic had a massive impact on Corp. relies on customer loyalty for revenue growth the economy, National Beverage was able to continue rather than investing in the appropriate marketing and operating at a normal rate. The risk of being forced to advertisement to reach new consumers19. shut down a facility due to illness or government restrictions was significant over the last year; however, International Exposure: National Beverage Corp. has a National Beverage Corp. was never faced with these weak geographic presence, with 92.5% of total revenue challenges. In fact, the company saw an increase in sales coming from the United States and the other 7.5% from and EPS for the first quarter of 2021 compared to the first Canada25. The company currently only operates in two quarter of 2020. Net sales for the three months ended countries, while other companies including PepsiCo and August 1, 2020 were $293.4 million and EPS was $1.10, Coca-Cola have expanded to most countries around the up 11.3% and 48.6%, respectively, from the three world. Many companies in the beverage industry have months ended July 27, 201922. Additionally, National 9 fueled growth by increasing their presence companies having stronger financial resources, they will internationally. If National Beverage Corp. is unable to be efficient in continuing to increase their market share follow this trend, it will be difficult for the company to in the industry, which will further decrease National see future growth. Beverage Corp.’s share20.

Seasonality: National Beverage Corp.’s revenue is highly Country Map of Revenue Exposure impacted by the seasonality of raw material prices and weather conditions. During summer months when Percent of Revenue outdoor activities are more prevalent, demand for 92.50% flavored beverages and sparkling water increases. As shown in the graph below, National Beverage Corp. has seen a consistent schedule of high revenue during its first quarter, which ends in July, and low revenue in the third quarter ending in January27. 7.50%

Powered by Bing Quarterly Revenue Source: FactSet 350 300 Opportunities 250 Shift in Consumer Trends: The significant increase in the 200 popularity of sparkling water in recent years has helped 150 100 National Beverage Corp. increase revenues. As a new 50 generation of consumers has shifted their focus to 0 healthier, lower calorie and sugar beverages, sparkling 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 water has replaced carbonated soft drinks as the fastest 2016 2017 2018 2019 2020 2021 growing drink category26. With LaCroix being one of the Source: FactSet most popular brands of sparkling water in previous years, National Beverage Corp. has experienced high revenue Valuation Analysis growth since 2016. This growth could continue in future years if the swing from carbonated soft drinks to Key Assumptions sparkling water intensifies. Revenue Growth Threats Our annual growth estimate of 2.56% encompasses Safety Compliance: Due to the rise in popularity of aggregate historical performance, industry projections, organic food and beverages and increased concerns and declining sales of LaCroix. We began by taking the about food safety, it is important for companies in the average historical growth rate and adjusting for food and beverage industry to monitor the regulatory extrapolation by removing abnormally high or low environment. National Beverage Corp. must be certain growth years. This was on target with the projected there are no recalls on any of its products and that all non-alcoholic beverage growth rate through 2026 of products manufactured by the company are safe to the 2.2-2.8%. Although some projections were cited to be consumer20. higher for 2021 at 4.2%, we do not expect the same Decreased Market Share: Although National Beverage amount of COVID-19 recovery growth from National Corp.’s brand, LaCroix, has been amongst the fastest- Beverage Corp. since LaCroix sales declined by 2.5% in growing brands in the United States beverage industry, 2020 while other leading sparkling water brands saw companies including PepsiCo and Coca-Cola have growth between 8.7-87.4%16,18. launched their own brands of sparkling water and, as a result, have increased their market share. With larger

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Cost of Goods Sold Cost of Debt (Rd)

The direct correlation between the cost to produce a The pre-tax cost of debt calculation is an estimate based product and how the product can be priced caused the on comparable companies. National Beverage Corp. cost of goods sold forecast to be estimated by does not have any public bond data, so we took an evaluating historical ratios between FIZZ’s cost of goods average of yields on PepsiCo, Coca-Cola, and Dr. sold and net sales. In the past decade, the ratio of cost Pepper’s 30-year bonds. The average, 3.2%, was then of goods sold to net sales is consistently in the range of recorded as our pre-tax cost of debt28. The after-tax 60-65% annually. As expectations in the future for FIZZ cost of debt used to compute the WACC was found by indicate slow and stable growth, the cost of goods sold multiplying the pre-tax cost of debt by 1-marginal tax throughout the valuation period is 62.27%, an average rate of 23.9%. The final value for the after-tax cost of of 2010-2020 published financial data. Due to the high debt is 2.43%. competition in the beverage industry, FIZZ is not Cost of Equity (Re) expected to decrease costs for products soon, as the forecast reflects. To value the cost of equity for National Beverage Corp., the Capital Asset Pricing Model (CAPM) was utilized. SG&A The CAPM is used due to its creation of a neutral We forecasted SG&A expense to be decreasing as a structure by implementing the risk-free rate, beta, and percentage of revenue by 0.58% each year. This figure equity risk premium to the calculation. We used the 30- was calculated using an average over the last five years year US treasury yield, as of April 14, 2021, for the risk- due to outliers in earlier years inconsistent with most free rate, which is 2.32%29. Beta was calculated using an current years. In recent periods, National Beverage average of National Beverage Corp’s 1-5-year weekly Corp. has seen a declining SG&A expense as a raw betas from Bloomberg, resulting in a beta of percentage of sales because of increased revenue and 0.49430. Although this is a low beta, we feel the constant fixed costs. The company has seen a growth in measurement is reasonable given National Beverage volume of sales; however, the fixed costs of bottling Corp. is in the Consumer Staples sector. For our equity and production have remained the same because the risk premium of 4.86%, we used the 1928-2019 company invested in machinery and facilities in geometric average return of the 10-year treasury bond previous years. Marketing and advertisement costs for over the S&P500. The cost of equity was calculated by National Beverage Corp. do not increase substantially as first multiplying the beta and the equity risk premium revenue grows because the company primarily focuses and then adding the risk-free rate. Our final cost of on using in-store brand ambassadors and the placement equity is 4.72% of products on the shelf. Value of Debt Continuing Value Growth for NOPLAT The current value of debt is $51,440. We estimate that National Beverage’s continuing value Value of Equity growth for NOPLAT is 1.2%. Due to the saturation of this industry and the sparkling water segment, we reflected The company’s equity value is currently $4,733,840. the high level of competition in these universes while also accounting for National Beverage’s scale of Weighted Average Cost of Capital (WACC) independent bottling operations. There is also value in The cost of debt and cost of equity measures are used its most recognizable brand name, LaCroix, which has a to calculate the weighted average cost of capital, as well strong position in the sparkling water segment. Other as the capital structure of FIZZ, shown through the brands including Shasta, Faygo, etc. are established metrics of the market value of the weights of debt and names with 100+ years of brand recognition and loyalty. equity. We used the total shares outstanding of 94,000 Therefore, this estimate is careful to weigh the intensity and the current stock price as of April 14, 2021 of of competition alongside the value of the National $50.19 to calculate the market value of equity, which Beverage Corp.’s brands. 11 has a weight of 98.93% in the WACC calculation. operating assets and liabilities. We added back assets National Beverage Corp. does not carry debt year-over- including excess cash, intangible assets, net PPE, and year historically, resulting in the market value of debt other assets and subtracted the following liabilities: PV equating to the present value of operating leases of of operating leases, preferred stock, employee stock $51,440, or 1.07% of the capital structure. The final ownership plan (ESOP), and other liabilities to get to the WACC used as the discount rate for valuation is 4.70%. value of equity. Finally, after dividing by the number of shares outstanding, we found FIZZ’s intrinsic value of Dividends $41.53 as of today. Due to the inconsistent nature of National Beverage EP Corp.’s dividends, we took an average of dividends paid over the last 10 years, which equated to $0.82. We Like the discounted cash flow model, we forecasted estimated the company would pay dividends three economic profit for each year from 2021 to 2026 and times during our forecast horizon based on the the continuing value for 2027. Next, we discounted schedule of dividends paid during the previous 10 years. each year’s forecasted value and the continuing value Using our estimate and the average dividends paid, we by the weight average cost of capital (WACC). This total computed a dividend of $1.92 every other year during resulted in the value of operating assets. Then, we our projection period. made non-operating adjustments which resulted in the value of equity. Once we divided this value by the

Valuation Models number of shares outstanding, we were left with the implied price of $41.53 as of today. Our target price range of $35-$42 for National Beverage DDM Corp.’s stock was generated through a combination of our overarching economic projection theses and key Our DDM valuation uses our forecasts for dividends performance drivers of the company found to decipher from 2021 to 2026. National Beverage Corp. does not future value. The valuation models used are the pay a regular dividend. Instead, they issue special discounted cash flow analysis (DCF), economic profit dividends in irregular increments. Therefore, we (EP), dividend discount model (DDM), and relative projected these dividends to follow a biannual pattern company analysis. whose amounts are based on average historical payouts. We projected our biannual dividends of $1.92 Revenue Decomposition to fall in years 2022, 2024, and 2026. Then, we National Beverage Corp. does not report product or calculated the price to earnings multiple in the geographical segmentations of its revenues. Due to its continuing value year using the CV Year earnings per lack of transparency, we turned to external sources to share and return on equity and the cost of equity. Next, find segmented revenue data and discovered the we multiplied this by the earnings per share in the company has 92.5% revenue exposure in the United continuing value year, 2027, to find the future stock States and 7.5% in Canada25. LaCroix sales were $479.4 price. We discounted this value, and our biannual million for fiscal year 201915. dividend estimates to today using the cost of equity by their respective periods, notably one less period for the DCF and EP Valuation future stock price. This total amounts to the implied DCF price as of today of $37.02.

To find the intrinsic value, we estimated free cash flows Relative Price/ Earnings Model (FCF) for each year from 2021 through 2026 and the To value National Beverage Corp., we identified six continuing value in 2027. Then, we discounted these by comparable companies to analyze against. Due to the our weighted average cost of capital (WACC) and range of competitors that align with the characteristics summed these values to get the present value of FIZZ’s of National Beverage Corp., we chose to use Coca-Cola operating assets. Next, we had to adjust for non- (KO), PepsiCo (PEP), Keurig Dr Pepper Inc (KDP), Nestle 12

(NSRGY), Campbell Soup (CPB), and Monster Beverage Risk-Free Rate vs. CV Growth of NOPLAT (MNST). These companies are analyzed qualitatively in We chose to examine the sensitivity of the risk-free rate comparison to FIZZ in the Industry Analysis section. because it has a significant influence on our discounted Using the peer companies, we found the P/E to be free cash flows used in our DCF and EP models. We trading at 25.28x. After adjusting for outlying used the 30-year Treasury note as of the report date to comparable companies, we used EPS of $1.40 for 2020 estimate the risk-free rate which we expect to rise as to find that the implied relative value is $35.27. The economic recovery from the pandemic continues to implied price of $35.27 is at the lower end of our accelerate. Our CV growth of NOPLAT influences valuation range due to the discount in comparison to intrinsic value in these models because it estimates the similar companies. continuing value in the terminal year which comprises Key Takeaways most of the value of operating assets. This rate reflects projected future performance of FIZZ and the high level We believe that the most accurate assumptions are of competition in the industry. As the risk-free rate built into our DCF, EP, and Relative PE models. Since and/or CV growth of NOPLAT rise, our intrinsic price National Beverage Corp. does not pay a regular increases. dividend, we are not as confident in the precision of our DDM model because its dividend estimates rely on historical special dividends paid in irregular amounts.

Sensitivity Analysis

Our sensitivity analysis tables reflect variables that pose Source: Krause Fund Model the most risk and volatility to our estimates. Due to the CV Growth of EPS vs. Revenue Growth ongoing COVID-19 pandemic, it is important to evaluate how changes in the market could affect our models Since our revenue growth estimates are based off since there is uncertainty in future economic conditions. historical company and industry performance, we The following tables analyze the variables we see as wanted to test its sensitivity against CV growth of EPS impacting our valuation most significantly especially our which is correlated as an estimate of profitability. Due DCF and EP models. to the uncertainty of economic conditions as a result of the COVID-19 pandemic and recovery in relation to Beta vs. Equity Risk Premium sales and revenue growth, we want to account for variability in these estimates. We see that as CV growth Our first table tests the sensitivity of beta versus equity of EPS and/or revenue growth increase, our intrinsic risk premium (ERP). These factors significantly affect price increases and vice versa. our weighted average cost of capital (WACC) estimate which is used as our discount rate in our DCF and EP models. Additionally, since there is no long-term debt on National Beverage Corp.’s balance sheet, a significant majority of its WACC (98.63%) is comprised of equity. Therefore, these factors could significantly affect our valuation. We see that as beta increases, our Source: Krause Fund Model implied price decreases. Similarly, as equity risk premium increases, implied price decreases. Cost of Equity vs. CV Year ROIC Testing the sensitivity between the cost of equity and continuing value ROIC is imperative because National Beverage Corp. is funded almost entirely by equity and CV ROIC heavily influences the estimated cash flows Source: Krause Fund Model used in our DCF and EP valuation models. For the cost 13 of equity, we used weekly beta and the 30-year normal cash will shift ROIC and cause fluctuations in our Treasury yield as of the report date. We see that as CV implied price. Normal cash could vary in the future if Year ROIC and cost of equity increase, our intrinsic price the company has an increased or decreased cash as a decreases. percentage of revenue. After testing normal cash against the marginal tax rate, we concluded that if the marginal tax rate and normal cash percentages were to increase, our implied price would decrease.

Source: Krause Fund Model

PPE, net Growth 2027 vs. COGS % of Revenue 2027

Our forecast assumptions for PPE and COGS are Source: Krause Fund Model primarily based on historical data, so any differences in future years from our assumptions will have an impact on the implied price. We wanted to test the sensitivity of changes in both short-term and long-term costs to see if one affected the stock price more than the other.

Increasing the PP&E growth percentage by 2% only decreases the implied price of the stock by about $0.10. For every 2% increase in cost of goods sold as a percentage of revenue, the implied stock price decreases by about $4.34. From this sensitivity analysis, we concluded that the short-term costs of goods sold has a more significant impact on the implied price of the stock than the longer-term costs of PP&E.

Source: Krause Fund Model

Normal Cash % vs. Marginal Tax Rate

We wanted to test the marginal tax rate against normal cash to identify how fluctuations in these factors would affect the implied price of stock for National Beverage

Corp. The company’s marginal tax rate has varied in recent years due to changes in government policies. With the new one-party government administration and the threat of increased tax rates on corporations, we wanted to consider how this could affect National Beverage Corp. in the future. Increases in the marginal tax rate would lead to higher tax expenses and lower net income for the company, and consequentially, the implied price of the stock would decrease. Changes in

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Important Disclaimer This report was created by s tudents enrolled in the Applied Equity Valuation (FIN:4250) class at the University of Iowa. The report was originally created to offer an internal investment recommendation for the University of Iowa Krause Fund and its advisory board. The report also provides potential employers and other interested parties an example of the students’ skills, knowledge, and abilities. Members of the Krause Fund are not registered investment advisors, brokers, or officially licensed financial professionals. The investment advice contained in this report does not represent an offer or solicitation to buy or sell any of the securities mentioned. Unless otherwise noted, facts and figures included in this report are from publicly available sources. This report is not a complete compilation of data, and its accuracy is not guaranteed. From time to time, the University of Iowa, its faculty, staff, students, or the Krause Fund may hold a financial interest in the companies mentioned in this report.

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Citations

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16 Koronios, E. (2020, December). Global Soft Drink and 5 Federal Reserve Economic Data. (2021, January 13). Bottled Water Manufacturing in the US: US Industry Consumer price index for all urban consumers: All Report C1124-GL. IBIS World. Retrieved April 19, 2021, items in U.S. city average. Retrieved February 3, 2021, from https://my-ibisworld- from https://fred.stlouisfed.org/series/CPIAUCSL com.proxy.lib.uiowa.edu/gl/en/industry/c1124-

6 gl/about. FactSet. (2021 February 03). Consumer staples select sector. Retrieved February 17 Ross, G. (2020, October). Juice Production in the US: US 3, 2021 from https://my.apps.factset.com/navigator/c Industry Report 31211C. IBIS World. Retrieved April 19, ompany-security/price-history/76399W50 2021, from https://my-ibisworld- com.proxy.lib.uiowa.edu/us/en/industry/31211c/abou 7 Producer Price Index News Release Summary (2021, January t. 15). Retrieved February 07, 2021,

from https://www.bls.gov/news.release/ppi.nr0.htm 18 2020 state of the Beverage Industry: All bottled Water 8 Consumer confidence index®: The Conference Board. (n.d.). Segments See Growth. (2020, June 25). Retrieved April Retrieved February 08, 2021, from https://conference- 14, 2021, from board.org/data/consumerconfidence.cfm https://www.bevindustry.com/articles/93226-state-of- the-beverage-industry-all-bottled-water-segments-see- 9 National Unemployment Rate. (2021, March). Retrieved growth April 14, 2021, from https://my.ibisworld.com/us/en/business- 19 National Beverage Corp. (2020). 2020 annual report. environment-profiles/b102/business-environment- https://ir.nationalbeverage.com/static-files/fbbbed85- profile 163b-45be-82fa-ae35bbba937d

10 Current Employment Statistics - CES (National). (n.d.). 20 Nelson, G. (2021, April 17). CFRA equity reports: National Retrieved February 07, 2021, Beverage Corp. from http://www.bls.gov/ces/home.htm https://www.capitaliq.com/CIQDotNet/Research/Docu mentViewer.aspx?documentViewerDocumentId=4789 11 Unemployment rate. (2021, April 02). Retrieved April 14, 5058 2021, from https://fred.stlouisfed.org/series/UNRATE

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21 Bloomberg L.P. (2021). Ownership Summary for National 26 As Americans turn away from Soda, Carbonated Water Beverage Corp. Retrieved from Bloomberg database. Becomes a Multibillion-dollar Industry. (2019, January 15). Retrieved April 14, 2021, from 22 National Beverage Corp. (2020). 2021 first quarter form 10- https://www.cbsnews.com/news/carbonated-water- Q. https://ir.nationalbeverage.com/static- has-become-a-multibillion-dollar-industry/ files/08210b33-e096-4b60-b7b2-bf604eb8fc36 27 FactSet Research Systems. (n.d.). National Beverage 23 National Beverage Corp. (2020). 2021 third quarter form Corp. [Financials]. Retrieved April 14, 2021, 10-Q. https://ir.nationalbeverage.com/static- from https://my.apps.factset.com/navigator/company- files/4642daa5-aba2-41f5-b632-2d72b0b151fd security/income-statement/FIZZ-US

24 Bin Sattar, S. (2020, October 08). 7 advertising strategies of 28 Bloomberg L.P. (2021). NIA function for PepsiCo, Coca-Cola Coca-Cola. Retrieved April 14, 2021, from and Dr. Pepper. Retrieved from Bloomberg database. https://www.thestrategywatch.com/advertising- strategies-coca-cola/ 29 Daily Treasury Yield Curve Rates. (2021, April 13). Retrieved April 14, 2021, from 25 FactSet Research Systems. (n.d.). National Beverage https://www.treasury.gov/resource-center/data-chart- Corp. [GeoRev]. Retrieved April 14, 2021, center/interest-rates/Pages/TextView.aspx?data=yield from https://my.apps.factset.com/navigator/company- security/geographic-revenue/FIZZ-US 30 Bloomberg L.P. (2021 Beta function for National Beverage Corp. Retrieved from Bloomberg database.

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National Beverage Corp Income Statement (in thousands, except per share amounts) Fiscal Years Ending May 2 2017 2018 2019 2020 2021E 2022E 2023E 2024E 2025E 2026E 2027E REVENUE Net Sales 826,918 975,734 1,014,105 1,000,394 1,025,991 1,052,243 1,079,166 1,106,779 1,135,098 1,164,142 1,193,928 EXPENSES Cost of Sales (excluding D&A) 488,007 571,373 614,316 613,020 641,985 658,411 675,258 692,536 710,256 728,429 747,067 Depreciation & Amortization Expense 12,834 13,226 15,439 17,234 29,750 38,465 44,932 51,486 58,130 64,864 71,689 Depreciation 10,700 11,100 12,800 27,750 27,933 36,548 42,908 49,351 55,876 62,486 69,180 Amortization of Intangibles 2,134 2,126 2,639 2,830 1,817 1,917 2,023 2,135 2,253 2,378 2,509 Gross Profit 326,077 391,135 384,350 370,140 354,256 355,366 358,977 362,757 366,713 370,849 375,173 SG&A Expense 163,600 186,947 204,415 204,394 203,695 202,827 201,782 200,549 199,122 197,490 195,645 EBIT (Operating Income) 162,477 204,188 179,935 165,746 150,561 152,539 157,195 162,208 167,591 173,359 179,528 OTHER INCOME (EXPENSE) Interest Expense 189 201 202 - 244 267 290 314 348 367 396 Interest Income 641 1,600 4,100 3,900 7,065 9,109 7,194 9,392 7,631 10,094 8,675 (Loss) gain on disposal of property, net (72) (149) (12) 206 ------Other income (expense) - net (32) 51 56 (397) - - - - - Income Before Income Taxes 162,825 205,489 183,877 169,455 157,381 161,380 164,099 171,285 174,874 183,086 187,807 Provision for Income Taxes 55,780 55,715 43,024 39,483 37,614 38,570 39,220 40,937 41,795 43,758 44,886 Net Income 107,045 149,774 140,853 129,972 119,767 122,810 124,880 130,348 133,079 139,329 142,921 Per Share Basic Earnings Per Share (EPS) 1.15 1.61 1.51 1.40 1.27 1.31 1.33 1.38 1.41 1.48 1.52 Total Shares Outstanding (Basic) 94,000 94,000 94,000 94,000 94,053 94,105 94,158 94,195 94,195 94,195 94,195 Wtd Avg Shares Outst (bsc) 93,128 93,196 93,266 93,256 Annual Dividend per Share 0.75 0.75 1.45 3.00 - 1.92 - 1.92 - 1.92 - National Beverage Corp Bal ance Sheet (in thousands) Fiscal Years Ending May 2 2018 2019 2020 2021E 2022E 2023E 2024E 2025E 2026E 2027E ASSETS Cash and equivalents 189,864 156,200 304,518 392,616 310,105 404,819 328,915 435,078 373,944 486,895 Accounts Receivables, Net 84,360 84,841 84,921 86,576 88,792 93,518 100,833 102,191 98,313 103,099 Inventories 60,920 70,702 63,482 65,921 67,607 65,952 79,087 73,982 87,691 87,269 Prepaid and other assets 17,823 9,714 7,791 7,927 8,129 10,804 8,522 9,756 12,227 13,917 Total Current Assets 352,967 321,457 460,712 553,040 474,633 575,093 517,356 621,008 572,174 691,180 Property, plant and equipment - net 85,807 111,316 120,627 144,697 168,768 192,838 216,909 240,979 265,049 289,120 Right of use asset, net - - 47,884 51,440 55,259 59,362 63,770 68,505 73,592 79,057 Goodwill 13,145 13,145 13,145 13,145 13,145 13,145 13,145 13,145 13,145 13,145 Intangible Assets 1,615 1,615 1,615 1,615 1,615 1,615 1,615 1,615 1,615 1,615 Other Assets 5,298 4,660 4,663 4,921 5,193 5,480 5,783 6,103 6,440 6,796 Total Assets 458,832 452,193 648,646 768,857 718,613 847,533 818,578 951,355 932,016 1,080,912 CURRENT LIABILITIES Accounts Payable 74,853 66,202 74,369 76,458 78,414 76,494 91,728 85,808 101,708 101,218 Accrued liabilities 29,718 30,433 42,476 44,083 45,751 47,482 49,279 51,144 53,079 55,087 Operating lease liabilities - - 16,980 16,980 16,980 16,980 16,980 16,980 16,980 16,980 Income Tax Payable 99 402 7,863 810 830 844 881 900 942 966 Total Current Liabilities 104,670 97,037 141,688 138,331 141,976 141,800 158,868 154,831 172,708 174,251 Deferred income tax - net 14,502 15,987 14,823 14,787 14,751 14,715 14,679 14,644 14,608 14,572 Operating lease liabilities - non current - - 32,159 34,547 37,112 39,868 42,828 46,008 49,425 53,095 Long-term Debt Other Liabilities 8,220 7,560 7,639 8,352 9,068 9,827 10,870 11,460 12,388 13,186 Total Liabilities 127,392 120,584 196,309 196,016 202,907 206,211 227,246 226,944 249,129 255,105 SHAREHOLDERS EQUITY Preferred Stock 150 150 150 150 150 150 150 150 150 150 Equity Account 36,865 37,572 38,438 39,175 39,911 40,648 41,164 41,164 41,164 41,164 Retained Earnings 307,824 313,430 443,402 563,169 505,298 630,177 579,672 712,751 671,226 814,147 AOCI 4,601 (1,543) (5,420) (5,420) (5,420) (5,420) (5,420) (5,420) (5,420) (5,420) Treasury Stock - at cost: (18,000) (18,000) (24,233) (24,233) (24,233) (24,233) (24,233) (24,233) (24,233) (24,233) Series C preferred stock (5,100) (5,100) (5,100) (5,100) (5,100) (5,100) (5,100) (5,100) (5,100) (5,100) Common stock (12,900) (12,900) (19,133) (19,133) (19,133) (19,133) (19,133) (19,133) (19,133) (19,133) Total Shareholders Equity 331,440 331,609 452,337 572,841 515,706 641,322 591,332 724,412 682,887 825,808 Total Liabilities & Shareholders' Equity 458,832 452,193 648,646 768,857 718,613 847,533 818,578 951,355 932,016 1,080,912 National Beverage Corp Historical Cash Flow Statement (in thousands) Fiscal Years Ending May 2 2018 2019 2020 OPERATING ACTIVITIES Net Income 149,774 140,853 129,972 Adjustments to reconcile net income to net cash provided by operating activites: Depreciation & amortization 13,226 15,439 17,234 Deferred income tax provision (benefit) 676 3,351 11 Loss (gain) on disposal of property, net 149 12 206 Stock-based compensation 161 251 125 Amortization of operating right of use assets - - 13,351 CHANGES IN ASSETS AND LIABILITIES Tr ade r ecei vabl es (13,041) (481) (80) Inventories (7,565) (9,782) 7,220 Prepaid and other assets (5,437) (2,806) (5,633) Account s payable 16,753 (8,651) 8,168 Accrued and other liabilities 25 1,256 7,118 Net cash provided by operating activities 154,721 139,442 177,692 INVESTING ACTIVITIES Additions to property, plant and equipment (31,974) (38,333) (23,890) Proceeds from sale of property, plant and equipment 63 18 9 Net cash used in investing activities (31,911) (38,315) (23,881) FI NANCI NG ACTI VI TI ES Dividends paid on common stock (69,878) (135,247) - Dividends paid on preferred stock - - - Repayments under credit facilities, net - - - Redemption of preferred stock - - - Proceeds from stock options exercised 560 456 740 Stock-based tax benefits - - - Repurchase of common stock - - (6,233) Net cash used in financing activities (69,318) (134,791) (5,493) Net increase (decrease) in cash & cash equivalents 53,492 (33,664) 148,318 Cash and cash equivalents - beginning of year 136,372 189,864 156,200 Cash and cash equivalents - end of year 189,864 156,200 304,518 OTHER CASH FLOW INFORMATION Interest paid 101 51 51 Income taxes paid 56,737 36,833 29,364 National Beverage Corp For ecast ed Cash Fl ow St at ement

Fiscal Years Ending May 2 2021E 2022E 2023E 2024E 2025E 2026E 2027E OPERATING ACTIVITIES Net Income 119,767 122,810 124,880 130,348 133,079 139,329 142,921 Adjustments to reconcile net income to net cash provided by operating activites: Depreciation & amortization 31,253 39,974 46,502 53,375 59,554 66,567 73,269 Allowance for doubtful accounts (671) (688) (725) (782) (792) (762) (799) CHANGES IN ASSETS AND LIABILITIES Increase in receivables (1,655) (2,215) (4,727) (7,314) (1,359) 3,878 (4,786) Increase in inventories (2,439) (1,687) 1,656 (13,135) 5,104 (13,708) 422 Increase in prepaid and other assets (136) (203) (2,675) 2,282 (1,234) (2,471) (1,690) Increase (decrease) in accounts payable 2,089 1,956 (1,920) 15,234 (5,920) 15,900 (490) Increase in accrued liabilities 1,607 1,668 1,731 1,797 1,865 1,935 2,008 Increase in operating lease liabilities ------Increase (decrease) in income taxes payable (7,053) 21 14 37 18 42 24 Increase (decrease) in deferred taxes (36) (36) (36) (36) (36) (36) (36) Net cash provided by operating activities 142,726 161,600 164,700 181,806 190,279 210,674 210,844 INVESTING ACTIVITIES Ca p i t al Exp e n d i t u r e s (52,003) (60,618) (66,979) (73,421) (79,947) (86,556) (93,250) Capitalization of intangible assets (3,104) (3,275) (3,457) (3,648) (3,849) (4,062) (4,287) Increase in other assets (258) (272) (287) (303) (320) (337) (356) Net Cash used in investing activities (55,365) (64,166) (70,722) (77,372) (84,116) (90,955) (97,893) FI NANCI NG ACTI VI TI ES Dividends paid on common stock - (180,682) - (180,854) - (180,854) - Proceeds from issuance of common stock 737 737 737 516 - - - Repurchases of common stock ------Net cash used in financing activities 737 (179,945) 737 (180,338) - (180,854) - Net increase (decrease) in cash & cash equivalents 88,098 (82,511) 94,714 (75,904) 106,163 (61,135) 112,952 Cash and cash equivalents - beginning of year 304,518 392,616 310,105 404,819 328,915 435,078 373,944 Cash and cash equivalents - end of year 392,616 310,105 404,819 328,915 435,078 373,944 486,895 National Beverage Corp Income Statement (in thousands, excep per share amounts) Fiscal Years Ending May 2 2018 2019 2020 2021E 2022E 2023E 2024E 2025E 2026E 2027E REVENUE Net Sales 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% EXPENSES Cost of Sales (excluding D&A) 58.56% 60.58% 61.28% 62.57% 62.57% 62.57% 62.57% 62.57% 62.57% 62.57% Depreciation & Amortization Expense 1.36% 1.52% 1.72% 2.90% 3.66% 4.16% 4.65% 5.12% 5.57% 6.00% Depreci at i on 1.14% 1.26% 2.77% 2.72% 3.47% 3.98% 4.46% 4.92% 5.37% 5.79% Amortization of Intangibles 0.22% 0.26% 0.28% 0.18% 0.18% 0.19% 0.19% 0.20% 0.20% 0.21% Gr oss Pr of i t 40.09% 37.90% 37.00% 34.53% 33.77% 33.26% 32.78% 32.31% 31.86% 31.42% SG& A Ex p e n se 19.16% 20.16% 20.43% 19.85% 19.28% 18.70% 18.12% 17.54% 16.96% 16.39% EBIT (Operating Income) 20.93% 17.74% 16.57% 14.67% 14.50% 14.57% 14.66% 14.76% 14.89% 15.04% OTHER INCOME (EXPENSE) Interest Expense 0.02% 0.02% 0.00% 0.02% 0.03% 0.03% 0.03% 0.03% 0.03% 0.03% Interest Income 0.16% 0.40% 0.39% 0.69% 0.87% 0.67% 0.85% 0.67% 0.87% 0.73% (Loss) gain on disposal of property, net -0.02% 0.00% 0.02% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% Other income (expense) - net 0.01% 0.01% -0.04% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% Income Before Income Taxes 21.06% 18.13% 16.94% 15.34% 15.34% 15.21% 15.48% 15.41% 15.73% 15.73% Provision for Income Taxes 5.71% 4.24% 3.95% 3.67% 3.67% 3.63% 3.70% 3.68% 3.76% 3.76% Net Income 15.35% 13.89% 12.99% 11.67% 11.67% 11.57% 11.78% 11.72% 11.97% 11.97% National Beverage Corp Bal ance Sheet

Fiscal Years Ending May 2 2018 2019 2020 2021E 2022E 2023E 2024E 2025E 2026E 2027E ASSETS Cash and equivalents 19.46% 15.40% 30.44% 38.27% 29.47% 37.51% 29.72% 38.33% 32.12% 40.78% Accounts Receivables, Net 8.65% 8.37% 8.49% 8.44% 8.44% 8.67% 9.11% 9.00% 8.45% 8.64% Inventories 6.24% 6.97% 6.35% 6.43% 6.43% 6.11% 7.15% 6.52% 7.53% 7.31% Prepaid and other assets 1.83% 0.96% 0.78% 0.77% 0.77% 1.00% 0.77% 0.86% 1.05% 1.17% Total Current Assets 36.17% 31.70% 46.05% 53.90% 45.11% 53.29% 46.74% 54.71% 49.15% 57.89% Property, plant and equipment - net 8.79% 10.98% 12.06% 14.10% 16.04% 17.87% 19.60% 21.23% 22.77% 24.22% Right of use asset, net 0.00% 0.00% 4.79% 5.01% 5.25% 5.50% 5.76% 6.04% 6.32% 6.62% Goodwill 1.35% 1.30% 1.31% 1.28% 1.25% 1.22% 1.19% 1.16% 1.13% 1.10% Intangible Assets 0.17% 0.16% 0.16% 0.16% 0.15% 0.15% 0.15% 0.14% 0.14% 0.14% Other Assets 0.54% 0.46% 0.47% 0.48% 0.49% 0.51% 0.52% 0.54% 0.55% 0.57% Total Assets 47.02% 44.59% 64.84% 74.94% 68.29% 78.54% 73.96% 83.81% 80.06% 90.53% CURRENT LIABILITIES Accounts Payable 7.67% 6.53% 7.43% 7.45% 7.45% 7.09% 8.29% 7.56% 8.74% 8.48% Accrued liabilities 3.05% 3.00% 4.25% 4.30% 4.35% 4.40% 4.45% 4.51% 4.56% 4.61% Operating lease liabilities 0.00% 0.00% 1.70% 1.65% 1.61% 1.57% 1.53% 1.50% 1.46% 1.42% Income Tax Payable 0.01% 0.04% 0.79% 0.08% 0.08% 0.08% 0.08% 0.08% 0.08% 0.08% Total Current Liabilities 10.73% 9.57% 14.16% 13.48% 13.49% 13.14% 14.35% 13.64% 14.84% 14.59% Deferred income tax - net 1.49% 1.58% 1.48% 1.44% 1.40% 1.36% 1.33% 1.29% 1.25% 1.22% Operating lease liabilities - non current 0.00% 0.00% 3.21% 3.37% 3.53% 3.69% 3.87% 4.05% 4.25% 4.45% Long-term Debt 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% Other Liabilities 0.84% 0.75% 0.76% 0.81% 0.86% 0.91% 0.98% 1.01% 1.06% 1.10% Total Liabilities 13.06% 11.89% 19.62% 19.11% 19.28% 19.11% 20.53% 19.99% 21.40% 21.37% SHAREHOLDERS EQUITY Preferred Stock 0.02% 0.01% 0.01% 0.01% 0.01% 0.01% 0.01% 0.01% 0.01% 0.01% Equity Account 3.78% 3.70% 3.84% 3.82% 3.79% 3.77% 3.72% 3.63% 3.54% 3.45% Retained Earnings 31.55% 30.91% 44.32% 54.89% 48.02% 58.39% 52.37% 62.79% 57.66% 68.19% AOCI 0.47% -0.15% -0.54% -0.53% -0.52% -0.50% -0.49% -0.48% -0.47% -0.45% Treasury Stock - at cost: -1.84% -1.77% -2.42% -2.36% -2.30% -2.25% -2.19% -2.13% -2.08% -2.03% Series C preferred stock -0.52% -0.50% -0.51% -0.50% -0.48% -0.47% -0.46% -0.45% -0.44% -0.43% Common stock -1.32% -1.27% -1.91% -1.86% -1.82% -1.77% -1.73% -1.69% -1.64% -1.60% Total Shareholders Equity 33.97% 32.70% 45.22% 55.83% 49.01% 59.43% 53.43% 63.82% 58.66% 69.17% Total Liabilities & Shareholders' Equity 47.02% 44.59% 64.84% 74.94% 68.29% 78.54% 73.96% 83.81% 80.06% 90.53% National Beverage Corp Value Driver Estimation

Fiscal Years Ending May 2 2018 2019 2020 2021E 2022E 2023E 2024E 2025E 2026E 2027E NOPLAT: EBITA Operating Revenues 975,734 1,014,105 1,000,394 1,025,991 1,052,243 1,079,166 1,106,779 1,135,098 1,164,142 1,193,928 - Cost of goods sold (571,373) (614,316) (613,020) (641,985) (658,411) (675,258) (692,536) (710,256) (728,429) (747,067) - Selling, general, and administrative (186,947) (204,415) (204,394) (203,695) (202,827) (201,782) (200,549) (199,122) (197,490) (195,645) - Depreciation (11,100) (12,800) (27,750) (27,933) (36,548) (42,908) (49,351) (55,876) (62,486) (69,180) - Amortization of non-goodwill intangibles (2,126) (2,639) (2,830) (1,817) (1,917) (2,023) (2,135) (2,253) (2,378) (2,509) + Implied interest on operating leases 889 842 1,537 1,795 2,051 2,306 2,562 2,818 3,074 3,330 EBITA 205,077 180,777 153,937 152,356 154,589 159,502 164,770 170,409 176,433 182,858 Less: Adjusted Taxes Tax Rate 32.80% 23.90% 23.90% 23.90% 23.90% 23.90% 23.90% 23.90% 23.90% 23.90% Income Tax Expense 55,715 43,024 39,483 37,614 38,570 39,220 40,937 41,795 43,758 44,886 + Tax shield on interest expense 66 48 - 58 64 69 75 83 88 95 - Tax shield on interest income (525) (980) (932) (1,688) (2,177) (1,719) (2,245) (1,824) (2,412) (2,073) +/- Tax shield on loss/gain on disposal of property 49 3 (49) ------+/- Tax shield on other expense/income (17) (13) 95 ------+ Tax shield on operating lease interest 292 201 367 429 490 551 612 674 735 796 Adjusted Taxes 55,580 42,283 38,964 36,413 36,947 38,121 39,380 40,728 42,168 43,703 Plus: Change in Net Deferred Tax Liabilities 676 3,351 11 (36) (36) (36) (36) (36) (36) (36) NOPLAT 150,173 141,845 114,984 115,907 117,606 121,345 125,354 129,646 134,230 139,119 Invested Capital (IC): Operating Current Assets Normal Cash 11,985 12,456 12,288 12,602 12,924 13,255 13,594 13,942 14,299 14,665 Accounts receivable 84,360 84,841 84,921 86,576 88,792 93,518 100,833 102,191 98,313 103,099 Inventory 60,920 70,702 63,482 65,921 67,607 65,952 79,087 73,982 87,691 87,269 Prepaid Expenses 17,823 9,714 7,791 7,927 8,129 10,804 8,522 9,756 12,227 13,917 Operating Current Liabilities Accounts Payable 74,853 66,202 74,369 76,458 78,414 76,494 91,728 85,808 101,708 101,218 Accrued liabilities 29,718 30,433 42,476 44,083 45,751 47,482 49,279 51,144 53,079 55,087 Income taxes payable 99 402 7,863 810 830 844 881 900 942 966 Net operating working capital 70,418 80,676 43,774 51,675 52,457 58,709 60,147 62,021 56,801 61,678 Net PPE 85,807 111,316 120,627 144,697 168,768 192,838 216,909 240,979 265,049 289,120 Other Operating Assets Net Intangible assets 1,615 1,615 1,615 1,615 1,615 1,615 1,615 1,615 1,615 1,615 Capitalized PV of Operating Leases 26,340 48,043 48,106 51,440 55,259 59,362 63,770 68,505 73,592 79,057 Other Operating Liabilities 8,220 7,560 7,639 8,352 9,068 9,827 10,870 11,460 12,388 13,186 Total IC 175,960 234,090 206,482 241,075 269,031 302,697 331,571 361,660 384,670 418,283 Free Cash Flow (FCF): NOPLAT 150,173 141,845 114,984 115,907 117,606 121,345 125,354 129,646 134,230 139,119 Change in IC 31,673 58,130 (27,607) 34,593 27,956 33,666 28,874 30,088 23,010 33,614 FCF 118,500 83,716 142,591 81,314 89,650 87,679 96,480 99,557 111,220 105,506 Return on Invested Capital (ROIC): NOPLAT 150,173 141,845 114,984 115,907 117,606 121,345 125,354 129,646 134,230 139,119 Beginning IC 144,287 175,960 234,090 206,482 241,075 269,031 302,697 331,571 361,660 384,670 ROIC 104.08% 80.61% 49.12% 56.13% 48.78% 45.10% 41.41% 39.10% 37.12% 36.17% Economic Profit (EP): Beginning IC 144,287 175,960 234,090 206,482 241,075 269,031 302,697 331,571 361,660 384,670 x (ROIC - WACC) 99.38% 75.92% 44.42% 51.44% 44.09% 40.41% 36.72% 34.41% 32.42% 31.47% EP 143,398.57 133,583.75 103,993.05 106,211.94 106,287.70 108,713.54 111,142.32 114,077.98 117,249.82 121,058.80 National Beverage Corp Weighted Average Cost of Capital (WACC) Estimation

Cost of Equity: ASSUMPTIONS: Risk-Free Rate 2.32% 30-year Treasury Yield Beta 0.494 Average of 1, 1.5, 2, 2.5, 3, 3.5, 4, 4.5, and 5-year weekly beta Equity Risk Premium 4.86% 1928-2019 geometric average over 10-year Treasury Cost of Equity 4.72%

Cost of Debt: Risk-Free Rate 2.32% 30-year Treasury Yield Implied Default Premium 0.88% Pre-Tax Cost of Debt 3.20% Average of Pepsico, Coca Cola, & Dr. Pepper's 30-year bond yields Marginal Tax Rate 24% After-Tax Cost of Debt 2.43%

Market Value of Common Equity: MV Weights Total Shares Outstanding 94,000 Current Stock Price 50.19 MV of Equity 4,717,860 98.92%

Market Value of Debt: Short-Term Debt - Current Portion of LTD - Long-Term Debt - PV of Operating Leases 51,440 MV of Total Debt 51,440 1.08%

Market Value of the Firm 4,769,300 100.00%

Estimated WACC 4.70% National Beverage Corp Discounted Cash Flow (DCF) and Economic Profit (EP) Valuation Models

Key Input s: CV Growth of NOPLAT 1.20% CV Year ROIC 36.17% WACC 4.70% Cost of Equity 4.72%

2021E 2022E 2023E 2024E 2025E 2026E 2027E

DCF M odel: Fr ee Cash Fl ow (FCF) 81,314 89,650 87,679 96,480 99,557 111,220 105,506 Co n t i n u i n g Val u e ( CV) 3,848,335 PV of FCF 77,667 81,790 76,404 80,303 79,148 84,455 2,922,231

Value of Operating Assets: 3,401,998.40 Non-Operating Adjustments Asset s Exce ss Cash 291,916.04 Intangible Assets 1,615.00 Net PPE 144,697.40 Ot her Asset s 4,920.79 Li abi l i t i es PV of Operating Leases (51,439.56) Ot her Liabilit ies 8,351.86 ESOP (6,911.97) Value of Equit y 3,795,147.95 Sh a r e s Ou t st a n d i n g 94,052.58 Intrinsic Value of Last FYE $ 40.35 Implied Price as of Today $ 41.53

EP M o d el : Eco n o m i c Pr o f i t ( EP) 106,212 106,288 108,714 111,142 114,078 117,250 121,059 Co n t i n u i n g Val u e ( CV) 3,463,665 PV of EP 101,449 96,968 94,734 92,507 90,692 89,034 2,630,132

Tot al PV of EP 3,195,515.90 Invested Capital (last FYE) 206,482.50 Value of Operating Assets: 3,401,998.40 Non-Operating Adjustments Exce ss Cash 291,916.04 Intangible Assets 1,615.00 Net PPE 144,697.40 Ot her Asset s 4,920.79 Li abi l i t i es PV of Operating Leases (51,439.56) Ot her Liabilit ies 8,351.86 ESOP (6,911.97) Value of Equit y 3,795,147.95 Sh a r e s Ou t st a n d i n g 94,052.58 Intrinsic Value of Last FYE 40.35 Implied Price as of Today $ 41.53 National Beverage Corp Dividend Discount Model (DDM) or Fundamental P/ E Valuation Model

Fiscal Years Ending May 2 2021E 2022E 2023E 2024E 2025E 2026E 2027E

EPS $ 1.27 $ 1.31 $ 1.33 $ 1.38 $ 1.41 $ 1.48 $ 1.52

Key Assumpt i ons CV growth of EPS 1.20% CV Year ROE 20.93% Cost of Equity 4.72%

Fut ur e Cash Fl ow s P/E Multiple (CV Year) 26.78 EPS (CV Year) $ 1.52 Future Stock Price $ 40.64 Dividends Per Share - 1.92 - 1.92 - 1.92 - Discounted Cash Flows - 2.11 - 1.60 - 1.46 30.81

Intrinsic Value as of Last FYE $ 35.97 Implied Price as of Today $ 37.02 National Beverage Corp Relative Valuation Models

EPS EPS Ticker Company Price 2020E 2021E P/E 20 P/E 21 KO Coca-Cola $52.21 $1.95 $2.14 26.77 24.40 PEP PepsiCo $141.28 $5.52 $6.05 25.59 23.35 KDP Keurig Dr Pepper Inc $34.50 $1.40 $1.60 24.64 21.56 NSRGY Nestle $112.45 $4.69 $4.77 23.98 23.57 CPB Campbell Soup $49.40 $3.07 $3.06 16.09 16.14 MNST Monster Beverage $91.36 $2.64 $2.69 34.61 33.96 Average 25.28 23.83

FIZZ National Beverage Corp $50.19 1.40 1.27 36.0 39.4

Implied Relative Value: P/E (EPS20) $ 35.27 Overvalued P/E (EPS21) $ 30.35 Overvalued National Beverage Corp Key Management Ratios

Fiscal Years Ending May 2 2018 2019 2020 2021E 2022E 2023E 2024E 2025E 2026E 2027E Liquidity Ratios: Current ratio (Current assets/ current liabilities) 3.37 3.31 3.25 4.00 3.34 4.06 3.26 4.01 3.31 3.97 Cash/ quick ratio ((Current assets- inventory)/ current liabilities) 1.81 1.61 2.15 2.84 2.18 2.85 2.07 2.81 2.17 2.79 Cash & ST Inv/Current Assets 53.8% 48.6% 66.1% 71.0% 65.3% 70.4% 63.6% 70.1% 65.4% 70.4% CFO/Current Liabilities 147.8% 143.7% 125.4% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% Asset-Management Ratios: Cash Turnover (Net sales/ Cash & cash equiv) 5.98 5.86 4.34 2.94 2.99 3.02 3.02 2.97 2.88 2.77 Receivables Turnover (Net Sales/ Average A/R) 12.54 11.99 11.79 11.97 12.00 11.84 11.39 11.18 11.61 11.86 Inventories Turnover (COGS/ Average inventory) 10.23 9.57 9.39 10.38 10.44 10.78 10.26 10.04 9.81 9.36 Current Assets Turnover (Net Sales/ Average current assets) 3.12 3.01 2.56 2.02 2.05 2.06 2.03 1.99 1.95 1.89 Fixed Assets Turnover (Net sales/ average fixed assets) 12.93 10.29 8.63 7.73 6.71 5.97 5.40 4.96 4.60 4.31 Financial Leverage Ratios: LT Debt/Total Equity 0.0% 0.0% 7.1% 6.0% 7.2% 6.2% 7.2% 6.4% 7.2% 6.4% LT Debt/Total Capital 0.0% 0.0% 7.1% 6.0% 7.2% 6.2% 7.2% 6.4% 7.2% 6.4% LT Debt/Total Assets 1.8% 1.7% 1.2% 1.1% 1.3% 1.2% 1.3% 1.2% 1.3% 1.2% Profitability Ratios: Return on Equity (NI/Beg TSE) 61.0% 42.5% 39.2% 26.5% 21.4% 24.2% 20.3% 22.5% 19.2% 20.9% Return on Assets (Operating income/ total assets) 41.8% 30.7% 28.7% 18.5% 16.0% 17.4% 15.4% 16.3% 14.6% 15.3% Profit Margin ((Revenue - COGS)/Revenue) 40.1% 37.9% 37.0% 34.5% 33.8% 33.3% 32.8% 32.3% 31.9% 31.4% Operating Margin 20.9% 17.7% 16.6% 14.7% 14.5% 14.6% 14.7% 14.8% 14.9% 15.0% Payout Policy Ratios: Dividend Payout Ratio (Dividend/EPS) 0.47 0.96 2.15 0.00 1.47 0.00 1.39 0.00 1.30 0.00 Total Payout Ratio ((Divs. + Repurchases)/NI) 0.47 0.96 0.05 0.00 1.47 0.00 1.39 0.00 1.30 0.00 National Beverage Corp Present Value of Operating Lease Obligations

Fiscal Years Ending May 2 2018 2019 2020 Year 1 9,182 16,105 14,206 Year 2 7,615 12,084 13,276 Year 3 5,241 9,894 8,975 Year 4 3,223 7,741 7,361 Year 5 1,656 4,510 4,475 Thereafter 1,531 1,703 4,101 Total Minimum Payments 28,448 52,037 52,394 Less: Cumulative Interest 2,108 3,994 4,288 PV of Minimum Payments 26,340 48,043 48,106

Implied Interest in Year 1 Payment 889 842 1,537

Pre-Tax Cost of Debt 0 0 0 Years Implied by Year 6 Payment 1 1 1 Expected Obligation in Year 6 & Beyond 1,531 1,703 4,101

Present Value of Lease Payments PV of Year 1 8,897 15,606 13,766 PV of Year 2 7,150 11,347 12,466 PV of Year 3 4,769 9,002 8,166 PV of Year 4 2,842 6,825 6,490 PV of Year 5 1,415 3,853 3,823 PV of 6 & beyond 1,267 1,410 3,395 Capitalized PV of Payments 26,340 48,043 48,106 National Beverage Corp Effects of ESOP Exercise and Share Repurchases on Common Stock Account and Number of Shares Outstanding

Number of Options Outstanding (shares): 195 Average Time to Maturity (years): 3.70 Expected Annual Number of Options Exercised: 53

Current Average Strike Price: $ 14.01 Cost of Equity: 4.72% Current Stock Price: $50.19

Fiscal Years Ending May 2 2021E 2022E 2023E 2024E 2025E 2026E 2027E 2028E 2029E 2030E Increase in Shares Outstanding: 53 53 53 37 0 0 0 0 0 0 Average Strike Price: $ 14.01 $ 14.01 $ 14.01 $ 14.01 $ 14.01 $ 14.01 $ 14.01 $ 14.01 $ 14.01 $ 14.01 Increase in Common Stock Account: 737 737 737 516 ------

Share Repurchases ($) 0 0 0 0 0 0 0 0 0 0 Expected Price of Repurchased Shares: $ 50.19 $ 51.74 $ 53.33 $ 54.97 $ 56.67 $ 58.41 $ 60.21 $ 62.06 $ 63.98 $ 65.95 Number of Shares Repurchased: ------

Shares Outstanding (beginning of the year) 94,000 94,053 94,105 94,158 94,195 94,195 94,195 94,195 94,195 94,195 Plus: Shares Issued Through ESOP 53 53 53 37 0 0 0 0 0 0 Less: Shares Repurchased in Treasury ------Shares Outstanding (end of the year) 94,053 94,105 94,158 94,195 94,195 94,195 94,195 94,195 94,195 94,195 National Beverage Corp Valuation of Options Granted under ESOP

Current Stock Price $50.19 Risk Free Rate 2.32% Current Dividend Yield 1.64% 0.82 average of expected dividends Annualized St. Dev. of Stock Returns 53.68%

Average Average B-S Value Range of Number Exercise Remaining Option of Options Outstanding Options of Shares Price Life (yrs) Price Granted Range 1 195 14.01 3.70 $ 35.53 $ 6,912 Total 195 $ 14.01 3.70 $ 38.37 $ 6,912 National Beverage Corp Se n si t i v i t y Ta b l e s

Bet a CV Gr o w t h EPS 41.53 0.35 0.40 0.45 0.49 0.55 0.60 0.65 37.02 0.90% 1.00% 1.10% 1.20% 1.30% 1.40% 1.50%

m 4.70% 51.78 48.03 44.83 42.39 39.66 37.53 35.65 2.26% 34.86 35.50 36.18 36.89 37.65 38.46 39.31 h u i 4.75% 51.47 47.74 44.55 42.12 39.39 37.28 35.41 t 2.36% 34.90 35.54 36.22 36.94 37.70 38.50 39.36 w m e o r 4.80% 51.18 47.45 44.27 41.85 39.14 37.03 35.17 r 2.46% 34.94 35.58 36.26 36.98 37.74 38.55 39.40 P 7 G 2 k e

4.86% 50.83 47.11 43.95 41.53 38.83 36.74 34.88 0 2.56% 34.98 35.62 36.30 37.02 37.79 38.59 39.45 s i u 2 R 4.90% 50.60 46.89 43.73 41.32 38.63 36.54 34.70 n 2.66% 35.02 35.67 36.35 37.07 37.83 38.64 39.50 e y t v i e

u 4.95% 50.31 46.61 43.46 41.06 38.38 36.31 34.47 2.76% 35.06 35.71 36.39 37.11 37.88 38.69 39.55 R q

E 5.00% 50.03 46.34 43.20 40.81 38.14 36.07 34.24 2.86% 35.10 35.75 36.43 37.16 37.92 38.73 39.60

CV Gr o w t h NOPLAT Co st o f Eq u i t y 41.53 0.90% 1.00% 1.10% 1.20% 1.30% 1.40% 1.50% 41.53 4.40% 4.50% 4.60% 4.72% 4.80% 4.90% 5.00% 2.20% 40.40 41.17 41.99 42.86 43.77 44.75 45.79 21.17% 40.63 40.67 40.71 40.76 40.78 40.82 40.86 C I e 2.25% 39.92 40.66 41.46 42.29 43.18 44.12 45.13 26.17% 40.99 41.03 41.07 41.11 41.14 41.18 41.22 t O a R

R 2.30% 39.44 40.17 40.94 41.75 42.61 43.52 44.49 31.17% 41.23 41.27 41.31 41.36 41.39 41.42 41.46 h e t e

2.32% 39.26 39.97 40.73 41.53 42.38 43.28 44.23 w 36.17% 41.41 41.45 41.49 41.53 41.56 41.60 41.64 r f o - r

k 2.35% 38.98 39.69 40.43 41.22 42.05 42.93 43.86 41.17% 41.54 41.58 41.62 41.67 41.70 41.73 41.77 G s i V R 2.40% 38.53 39.22 39.94 40.70 41.50 42.36 43.26 46.17% 41.65 41.69 41.72 41.77 41.80 41.84 41.88 C 2.45% 38.10 38.76 39.46 40.20 40.98 41.80 42.68 51.17% 41.73 41.77 41.81 41.86 41.88 41.92 41.96

Normal Cash % 2027 PPE, Net Gr ow t h 2027 41.53 0.93% 1.03% 1.13% 1.23% 1.33% 1.43% 1.53% 41.53 1.43% 3.43% 5.43% 7.43% 9.43% 11.43% 13.43% 17.90% 44.73 44.72 44.70 44.68 44.67 44.65 44.64 56.57% 54.76 54.68 54.59 54.50 54.39 54.28 54.16 e t f 7 a 19.90% 43.68 43.67 43.65 43.63 43.62 43.60 43.58 58.57% 50.44 50.36 50.27 50.18 50.07 49.96 49.83 2 o R 0 x % 21.90% 42.63 42.61 42.60 42.58 42.57 42.55 42.53 2 60.57% 46.12 46.04 45.95 45.86 45.75 45.64 45.51 a s T e a l 23.90% 41.58 41.56 41.55 41.53 41.52 41.50 41.48 u 62.57% 41.80 41.72 41.63 41.53 41.43 41.31 41.18 a S n n e G i 25.90% 40.53 40.51 40.50 40.48 40.47 40.45 40.43 64.57% 37.49 37.40 37.31 37.22 37.11 36.99 36.87 v g O r e C a 27.90% 39.48 39.46 39.45 39.43 39.41 39.40 39.38 R 66.57% 33.17 33.09 32.99 32.90 32.79 32.67 32.54 M 29.90% 38.43 38.41 38.40 38.38 38.36 38.35 38.33 68.57% 28.85 28.77 28.67 28.58 28.47 28.35 28.22