Summary of NATIONAL BEVERAGE CORP

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

OVERVIEW

National Beverage Corp. is a holding company for various subsidiaries that develop, manufacture, market and sell a diverse portfolio of beverage products. In this report, the terms "we", "us", "our", "Company" and "National Beverage" mean National Beverage Corp. and its subsidiaries.

Our brands include soft drinks, energy drinks and shots, juices, teas, still and sparkling waters and nutritionally enhanced beverages, and span both carbonated and non-carbonated offerings. In addition, we produce soft drinks for certain retailers ("Allied Brands") who also promote certain of our brands ("Strategic Alliances"). We employ a philosophy that demands vertical integration wherever possible and our vertically integrated manufacturing model unites the procurement of raw materials, production of concentrates and manufacturing of finished products in our twelve manufacturing facilities. To service a diverse customer base that includes numerous national retailers as well as hundreds of smaller "up-and-down-the-street" accounts, we developed a hybrid distribution system which promotes and utilizes customers' warehouse distribution facilities and our own direct-store delivery fleet plus the direct-store delivery systems of independent distributors.

We consider ourselves to be a leader in the development and sale of flavored beverage products. Our soft drink flavor development spans over 100 years originating with our flagship brands, Shasta® and Faygo®, and includes our Ritz® and Big Shot® brands. For the health-conscious consumer, we offer a diverse line of flavored beverage products, including Everfresh®, Home Juice® and Mr. Pure® 100% juice and juice-based products; LaCroix®, Crystal Bay® and Clear Fruit® flavored, sparkling and spring water products; and Àsanté® nutritionally-enhanced beverages. In addition, we produce and market Rip It® energy drinks and shots, Ohana® fruit-flavored non-carbonated drinks, Sundance® teas and lemonades and St. Nick's® holiday soft drinks. We refer to our portfolio of brands other than soft drinks as our "Power+ Brands".

Our strategy emphasizes the growth of our products by (i) offering a beverage portfolio of proprietary flavors with distinctive packaging and broad demographic appeal, (ii) supporting the franchise value of regional brands,
(iii) appealing to the "quality-value" expectations of the family consumer and
(iv) responding to demographic trends by developing innovative products tailored toward healthy lifestyles or designed to expand distribution in higher-margin channels.

The majority of our sales are seasonal with the highest volume typically realized during the summer months. As a result, our operating results from one fiscal quarter to the next may not be comparable. Additionally, our operating results are affected by numerous factors, including fluctuations in the costs of raw materials, changes in consumer preference for beverage products, competitive pricing in the marketplace and weather conditions.

RESULTS OF OPERATIONS

Three Months Ended January 26, 2013 (third quarter of fiscal 2013) compared to Three Months Ended January 28, 2012 (third quarter of fiscal 2012)

Net sales for the third quarter of fiscal 2013 increased 6.1% to $144.7 million compared to $136.4 million for the third quarter of fiscal 2012. The sales improvement is due to case volume growth of 2.8% for our Power+ Brands and 9.9% for carbonated soft drinks. This sales improvement was partially offset by a 1.7% decline in unit pricing, primarily due to product mix changes.

Gross profit approximated 32.0% of net sales for the third quarter of fiscal 2013 compared to 33.2% of net sales for the third quarter of fiscal 2012. The gross profit decline is due to product mix changes and lower unit pricing mentioned above. Cost of sales per unit remained unchanged.

Selling, general & administrative expenses were $33.9 million or 23.4% of net sales for the third quarter of fiscal 2013 compared to $33.4 million or 24.5% of net sales for the third quarter of fiscal 2012. The increase in expenses was due to higher distribution and administrative expenses.

Interest expense increased to $116,000 for the third quarter of fiscal 2013, primarily due to increased borrowings under credit facilities. Other expense includes interest income of $9,000 for the third quarter of fiscal 2013 and $18,000 for the third quarter of fiscal 2012.

The Company's effective income tax rate, based upon estimated annual income tax rates, was 31.5% for the third quarter of fiscal 2013 and 32.9% for the third quarter of fiscal 2012. The difference between the effective rate and the federal statutory rate of 35% was primarily due to the effect of state income taxes and the manufacturing deduction.

Nine Months Ended January 26, 2013 (first nine months of fiscal 2013) compared to
Nine Months Ended January 28, 2012 (first nine months of fiscal 2012)

Net sales for the first nine months of fiscal 2013 increased 6.6% to $494.1 million compared to $463.5 million for the first nine months of fiscal 2012. The sales improvement is due to case volume growth of 7.3% for our Power+ Brands and 9.9% for carbonated soft drinks. This sales improvement was partially offset by a 2.4% decline in unit pricing, primarily due to product mix changes.

Gross profit approximated 32.2% of net sales for the first nine months of fiscal 2013 compared to 34.6% of net sales for the first nine months of fiscal 2012. The gross profit decline is due to product mix changes and lower unit pricing mentioned above. Cost of sales increased 1.2% on a per unit basis.

Selling, general & administrative expenses were $106.3 million or 21.5% of net sales for the first nine months of fiscal 2013 compared to $110.7 million or 23.9% of net sales for the first nine months of fiscal 2012. The decrease in expenses was due to lower marketing and administrative expenses.

Interest expense increased to $179,000 for the first nine months of fiscal 2013, primarily due to increased borrowings under credit facilities. Other expense includes interest income of $34,000 for the first nine months of fiscal 2013 and $41,000 for the first nine months of fiscal 2012.

The Company's effective income tax rate, based upon estimated annual income tax rates, was 33.8% for the first nine months of fiscal 2013 and 34.5% for the first nine months of fiscal 2012. The difference between the effective rate and the federal statutory rate of 35% was primarily due to the effect of state income taxes and the manufacturing deduction.

LIQUIDITY AND FINANCIAL CONDITION

Liquidity and Capital Resources
Our principal source of funds is cash generated from operations and borrowings under our credit facilities. At January 26, 2013, we maintained $100 million unsecured revolving credit facilities of which $60 million of borrowings were outstanding and $2.4 million was used for standby letters of credit. We believe that existing capital resources will be sufficient to meet our liquidity and capital requirements for the next twelve months.

On January 25, 2013, the Company sold 400,000 shares of Special Series D Preferred Stock, par value $1 per share for an aggregate purchase price of $20 million. See Note 6 of Notes to Consolidated Financial Statements.

On November 23, 2012, the Company declared a special cash dividend of $2.55 per share payable to shareholders of record on December 7, 2012. The cash dividend, aggregating $118.1 million, was paid from available cash and borrowings under credit facilities on December 27, 2012.

Cash Flows
The Company's cash position for the first nine months of fiscal 2013 decreased $17.1 million from April 28, 2012, which compares to an increase of $12.6 million for the similar 2012 fiscal period.

Net cash provided by operating activities for the first nine months of fiscal 2013 amounted to $27.0 million compared to $18.5 million for the similar 2012 fiscal period. For the first nine months of fiscal 2013, cash flow was principally provided by net income of $34.8 million and depreciation and amortization aggregating $8.4 million, offset in part by a decline in accounts payable.

Net cash used in investing activities for the first nine months of fiscal 2013, principally capital expenditures, amounted to $6.0 million compared to $6.1 million for the similar 2012 fiscal period.

Net cash used in financing activities for the first nine months of fiscal 2013 amounted to $38.1 million, which included cash dividends paid of $118.1 million partially offset by $60 million in borrowings under credit facilities and $19.7 million in net proceeds from sale of preferred stock.

Financial Position
During the first nine months of fiscal 2013, working capital decreased $2.8 million to $67.0 million. The decline in working capital resulted from lower cash and receivable levels, partially offset by a lower accounts payable balance. Due to seasonality, trade receivables decreased $10.4 million and accounts payable decreased $19.9 million. Trade receivables represented approximately 32.2 days sales outstanding at January 26, 2013, compared to 33.5 days sales outstanding at January 28, 2012. Inventories increased approximately $3.5 million from the year ago quarter, which represents a decrease in inventory turnover from 9.6 times to 9.4 times. The increase in inventory is due primarily to higher finished goods levels to support increased sales volumes and planned customer promotions. The current ratio was 2.3 to 1 at January 26, 2013 and 1.9 to 1 at April 28, 2012.