SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
Quarterly Report under Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the Quarterly Period Ended March 31, 2002 Commission file number 0-18761
HANSEN NATURAL CORPORATION
(Exact name of Registrant as specified in its charter)
Delaware 39-1679918
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization Identification No.)
1010 Railroad Street
Corona, California 92882
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code:
(909) 739 - 6200
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports) and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
The registrant had 10,053,003 shares of common stock
outstanding as of May 1, 2002
HANSEN NATURAL CORPORATION AND SUBSIDIARIES
March 31, 2002
INDEX
Page No.
Part I. FINANCIAL INFORMATION
Item 1. Condensed Consolidated Financial Statements
Condensed Consolidated Balance Sheets as of March 31, 2002
and December 31, 2001 3
Condensed Consolidated Statements of Income for the
three-months ended March 31, 2002 and 2001 4
Condensed Consolidated Statements of Cash Flows for the
three-months ended March 31, 2002 and 2001 5
Notes to Condensed Consolidated Financial Statements
for the three-months ended March 31, 2002 and year
ended December 31, 2001 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 9
Item 3. Qualitative and Quantitative Disclosures about Market
Risks 13
Part II. OTHER INFORMATION
Items 1-5. Not Applicable 14
Item 6. Exhibits and Reports on Form 8-K 14
Signatures 14
HANSEN NATURAL CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
MARCH 31, 2002 (Unaudited) AND DECEMBER 31, 2001
- --------------------------------------------------------------------------------
March 31, December 31,
2002 2001
-------------- --------------
(Unaudited)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 451,399 $ 247,657
Accounts receivable (net of allowance for doubtful
accounts, sales returns and cash discounts of $700,649
in 2002 and $625,270 in 2001 and promotional allowances
of $3,079,258 in 2002 and $2,981,556 in 2001) 6,204,394 4,412,422
Inventories, net 10,174,668 11,956,680
Prepaid expenses and other current assets 937,290 974,155
Deferred income tax asset 949,176 949,176
------------------ -----------------
Total current assets 18,716,927 18,540,090
PROPERTY AND EQUIPMENT, net 1,932,364 1,945,146
INTANGIBLE AND OTHER ASSETS:
Trademark licenses and trademarks (net of accumulated amortization
of $42,548 in 2002 and $29,772 in 2001) (Note 2) 17,355,690 17,350,221
Deposits and other assets 678,498 725,825
------------------ -----------------
Total intangible and other assets 18,034,188 18,076,046
------------------ -----------------
$ 38,683,479 $ 38,561,282
================== =================
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 3,724,336 $ 3,919,741
Accrued liabilities 759,930 871,841
Accrued compensation 328,494 432,896
Current portion of long-term debt 324,559 337,872
------------------ -----------------
Total current liabilities 5,137,319 5,562,350
LONG-TERM DEBT, less current portion 5,979,688 5,851,105
DEFERRED INCOME TAX LIABILITY 1,814,278 1,814,278
SHAREHOLDERS' EQUITY:
Common stock - $.005 par value; 30,000,000 shares authorized;
10,259,764 shares issued, 10,053,003 outstanding in 2002;
10,251,764 shares issued, 10,045,003 outstanding in 2001 51,299 51,259
Additional paid-in capital 11,934,564 11,926,604
Retained earnings 14,580,876 14,170,231
Common stock in treasury; at cost - 206,761 shares
in 2002 and 2001 respectively (814,545) (814,545)
------------------ -----------------
Total shareholders' equity 25,752,194 25,333,549
------------------ -----------------
$ 38,683,479 $ 38,561,282
================== =================
See accompanying notes to condensed consolidated financial statements.
3
HANSEN NATURAL CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
FOR THE THREE MONTHS ENDED MARCH 31, 2002 AND 2001 (Unaudited)
- --------------------------------------------------------------------------------
2002 2001
---- ----
GROSS SALES $ 22,506,610 $ 20,322,162
LESS: Discounts, allowances and promotional payments (3,914,216) (3,414,048)
--------------------- ---------------------
NET SALES 18,592,394 16,908,114
COST OF SALES 11,782,313 10,607,868
--------------------- ---------------------
GROSS PROFIT 6,810,081 6,300,246
OPERATING EXPENSES:
Selling, general and administrative 6,031,864 5,432,927
Amortization of trademark licenses and trademarks (Note 2) 12,776 123,232
--------------------- ---------------------
Total operating expenses 6,044,640 5,556,159
--------------------- ---------------------
OPERATING INCOME 765,441 744,087
NON-OPERATING EXPENSE (INCOME):
Interest and financing expense 75,357 202,956
Interest income (65) (1,284)
--------------------- ---------------------
Net non-operating expense 75,292 201,672
--------------------- ---------------------
INCOME BEFORE PROVISION
FOR INCOME TAXES 690,149 542,415
PROVISION FOR INCOME TAXES 279,504 216,967
--------------------- ---------------------
NET INCOME $ 410,645 $ 325,448
===================== =====================
NET INCOME PER COMMON SHARE:
Basic $ 0.04 $ 0.03
===================== =====================
Diluted $ 0.04 $ 0.03
===================== =====================
NUMBER OF COMMON SHARES USED
IN PER SHARE COMPUTATIONS:
Basic 10,050,893 10,009,955
===================== =====================
Diluted 10,339,732 10,306,699
===================== =====================
See accompanying notes to condensed consolidated financial statements.
4
HANSEN NATURAL CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 2002 AND 2001 (Unaudited)
- --------------------------------------------------------------------------------
2002 2001
---- ----
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 410,645 $ 325,448
Adjustments to reconcile net income to
net cash provided by (used in) operating activities:
Amortization of trademark license and trademarks 12,776 123,232
Depreciation and other amortization 118,897 97,654
Effect on cash of changes in operating assets and liabilities:
Accounts receivable, net (1,791,972) 74,618
Inventories, net 1,782,012 715,107
Prepaid expenses and other current assets 36,865 (180,282)
Accounts payable (195,405) 529,290
Accrued liabilities (111,911) (111,047)
Accrued compensation (104,402) (195,260)
Income taxes payable (29,100)
----------------- -----------------
Net cash provided by operating activities 157,505 1,349,660
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment (106,115) (102,698)
Increase in trademark licenses and trademarks (18,245) (10,009)
Decrease (increase) in deposits and other assets 47,327 (14,623)
----------------- -----------------
Net cash used in investing activities (77,033) (127,330)
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings on long-term debt 174,000
Principal payments on long-term debt (58,730) (1,187,990)
Issuance of common stock 8,000 28,621
----------------- -----------------
Net cash provided by (used in) financing activities 123,270 (1,159,369)
----------------- -----------------
NET INCREASE IN CASH 203,742 62,961
CASH AND CASH EQUIVALENTS, beginning of the period 247,657 130,665
----------------- -----------------
CASH AND CASH EQUIVALENTS, end of the period $ 451,399 $ 193,626
================= =================
SUPPLEMENTAL INFORMATION Cash paid during the period for:
Interest $ 72,858 $ 215,395
================= =================
Income taxes $ 276,000 $ 246,067
================= =================
See accompanying notes to condensed consolidated financial statements.
5
HANSEN NATURAL CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE THREE-MONTHS ENDED
MARCH 31, 2002 (Unaudited) AND YEAR ENDED DECEMBER 31, 2001
- --------------------------------------------------------------------------------
1. BASIS OF PRESENTATION
Reference is made to the Notes to Consolidated Financial Statements, in the
Company's Form 10-K for the year ended December 31, 2001, which is incorporated
by reference, for a summary of significant policies utilized by Hansen Natural
Corporation ("Hansen" or "Company") and its wholly-owned subsidiaries, Hansen
Beverage Company ("HBC") and Hard e Beverage Company ("HEB"). Additionally, the
Company's reporting on Form 10-Q does not include all the information and
footnote disclosures normally included in financial statements prepared in
accordance with accounting principles generally accepted in the United States of
America. HBC owns all of the issued and outstanding common stock of Blue Sky
Natural Beverage Co. and Hansen Junior Juice Company. The information set forth
in these interim condensed consolidated financial statements for the
three-months ended March 31, 2002 and 2001 is unaudited and may be subject to
normal year-end adjustments. The information contained in these interim
consolidated financial statements reflects all adjustments, which include only
normal recurring adjustments, which in the opinion of management are necessary
to make the interim condensed consolidated financial statements not misleading.
Results of operations covered by this report may not necessarily be indicative
of results of operations for the full year.
The preparation of the financial statements in conformity with accounting
principles generally accepted in the United States of America necessarily
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the reported amounts of
revenues and expenses during the reporting periods. Actual results could differ
from these estimates.
2. NEW ACCOUNTING PRONOUNCEMENTS
During 2000 and 2001, the Emerging Issues Task Force ("EITF") addressed various
issues related to the income statement classification of certain promotional
payments, including consideration from a vendor to a reseller or another party
that purchases the vendor's products. EITF No. 01-9, Accounting for
Consideration Given by a Vendor to a Customer or Reseller of the Vendor's
Products, was issued in November 2001 and codified earlier pronouncements. The
consensus requires certain sales promotions and customer allowances previously
classified as selling, general and administrative expenses to be classified as a
reduction of net sales or as cost of goods sold. The Company adopted EITF No.
01-9 on January 1, 2002. The effect of the change in accounting related to the
adoption of EITF 01-9 for the three-months ended March 31, 2002 was to decrease
net sales by $2,242,621, increase cost of goods sold by $52,597 and decrease
selling, general and administrative expenses by $2,295,218. For the three-months
ended March 31, 2001, $1,860,682 has been classified as a reduction of net sales
and $89,397 as an increase in cost of goods sold both of which were previously
reported as selling, general and administrative expense.
6
Effective July 1, 2001, the Company adopted the provisions of Statement of
Financial Accounting Standards ("SFAS") No. 142, Goodwill and Other Intangible
Assets. This statement discontinued the amortization of goodwill and
indefinite-lived intangible assets, subject to periodic impairment testing. Upon
adoption of SFAS No. 142, the Company evaluated the useful lives of its various
trademark licenses and trademarks and concluded that certain of the trademark
licenses and trademarks have indefinite lives. Unamortized trademark licenses
and trademarks ceased to be amortized effective January 1, 2002 and will be
subject to periodic impairment analysis. The effect of the change in accounting
during the three-months ended March 31, 2002 was to increase net income by
$69,740, or $.01 per basic and diluted share.
For the three-months ended
March 31,
2002 2001
---------- ----------
Net income, as reported $410,645 $325,448
Add back: Amortization of trademark licenses
and trademarks (net of tax effect) - 73,251
---------- ----------
Adjusted net income $410,645 $398,699
========== ==========
Net income per common share - basic and diluted,
as reported $0.04 $ 0.03
Amortization of trademark licenses and
trademarks (net of tax effect) - 0.01
---------- ----------
Adjusted net income per common share - basic and
diluted $0.04 $ 0.04
========== ==========
On January 1, 2002, the trademark licenses and trademarks were tested for
impairment in accordance with the provisions of SFAS No. 142. Fair values were
estimated based on the Company's best estimate of the expected present value of
future cash flows. No amounts were impaired at that time. In addition, the
remaining useful lives of trademark licenses and trademarks being amortized were
reviewed and deemed to be appropriate. The following provides additional
information concerning the Company's trademark licenses and trademarks as of
March 31, 2002:
Amortizing trademark licenses and trademarks $ 1,117,855
Accumulated amortization (42,548)
--------------
1,075,307
Non-amortizing trademark licenses and trademarks 16,280,383
--------------
$17,355,690
==============
7
All amortizing trademark licenses and trademarks have been assigned an estimated
finite useful life, and are amortized on a straight-line basis over the number
of years that approximate their respective useful lives ranging from 1 to 40
years. The straight-line method of amortization allocates the cost of the
trademark licenses and trademarks to earnings in proportion to the amount of
economic benefits obtained by the Company in that report period. Total
amortization expense during the three-month periods ended March 31, 2002 and
2001 was $12,776 and $123,232, respectively. As of March 31, 2002, future
estimated amortization expense related to amortizing trademark licenses and
trademarks through the year ended December 31, 2007 is:
2002 - Remainder $38,328
2003 40,321
2004 37,096
2005 37,096
2006 37,052
2007 32,579
Effective January 1, 2002, the Company also adopted the provisions of SFAS No.
141, Business Combinations, and SFAS No. 144, Accounting for the Impairment or
Disposal of Long-Lived Assets, respectively. The initial adoption of these
Statements did not have a material impact on the Condensed Consolidated
Statements of Income.
The Financial Accounting Standards Board ("FASB") recently issued SFAS No. 143,
Accounting for Asset Retirement Obligations, which addresses financial
accounting and reporting for obligations associated with the retirement of
tangible long-lived assets and the associated asset retirement costs. SFAS No.
143 is effective for financial statements issued for fiscal years beginning
after June 15, 2002. The Company is currently in the process of evaluating the
impact of this Statement on its financial condition and results of operations.
3. INVENTORIES
Inventories consist of the following at:
March 31,
2002 December 31,
(Unaudited) 2001
------------- -------------
Raw materials $ 4,711,116 $ 4,742,102
Finished goods 5,863,816 7,615,345
------------- -------------
10,574,932 12,357,447
Less inventory reserves (400,264) (400,767)
------------- -------------
$10,174,668 $11,956,680
============= =============
8
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following discussion and analysis of the Company's financial condition
and results of operations should be read in conjunction with the Company's
historical consolidated financial statements and notes thereto.
General
The increase in sales in the first quarter of 2002 was primarily
attributable to the introduction of Energade(R) in July 2001, sales of Junior
Juice, which trademark was acquired in May 2001, and the introduction of E2O
Energy Water in June 2001. The Company also benefited from increased sales of
natural sodas, children's multi-vitamin juice drinks and apple juice. The
increase in sales was partially offset by decreased sales of Hard e, a
malt-based alcoholic beverage, Signature Sodas, Healthy Start (which has been
discontinued), Smoothies, and functionals as well as increased promotional
expenses.
The decrease in gross profit margin as a percentage of net sales to 36.6%
for the quarter ended March 31, 2002 from 37.3% for the quarter ended March 31,
2001 was primarily due to a change in the customer and product mix.
The Company continues to incur expenditures in connection with the
development and introduction of new products and flavors.
Results of Operations for the Three-months Ended March 31, 2002 Compared to the
Three-months Ended March 31, 2001
Gross Sales. For the three-months ended March 31, 2002, gross sales
increased to $22.5 million from the $20.3 million for the three-months ended
March 31, 2001. As discussed below, the increase in gross sales is primarily due
to the introduction of new products as well as increased sales of existing
products.
Net Sales. For the three-months ended March 31, 2002, net sales were $18.6
million, an increase of $1.7 million or 10.0% higher than the $16.9 million net
sales for the three-months ended March 31, 2001. The increase in net sales in
the first quarter of 2002 was primarily attributable to the introduction of
Energade(R) in July 2001, sales of Junior Juice, which trademark was acquired in
May 2001 and the introduction of E2O Energy Water in June 2001. The Company also
benefited from increased sales of natural sodas, children's multi-vitamin juice
drinks and apple juice as well. The increase in net sales was partially offset
by decreased sales of Hard e, a malt-based alcoholic beverage, Signature Sodas,
Healthy Start (which has been discontinued), Smoothies, and functionals as well
as increased promotional expenses. On January 1, 2002, the Company adopted EITF
01-9. The effect of the change in accounting related to the adoption of EITF
01-9 for the three-months ended March 31, 2002 was to decrease net sales by
$2,242,621, increase cost of goods sold by $52,597 and decrease selling, general
and administrative expenses by $2,295,218. For the three-months ended March 31,
2001, $1,860,682 has been classified as a reduction of net sales and $89,397 as
an increase in cost of goods sold which wa previously reported as selling,
general and administrative expense (Note 2 of financial statements).
9
Gross Profit. Gross profit was $6.8 million for the three-months ended
March 31, 2002, an increase of $510,000 or 8.1% higher than the gross profit for
the three-months ended March 31, 2001 of $6.3 million. Gross profit as a
percentage of net sales, however, decreased to 36.6% for the three-months ended
March 31, 2002 from 37.3% for the three-months ended March 31, 2001. The
decrease in gross profit as a percentage of net sales was primarily attributable
to a change in the customer and product mix.
Total Operating Expenses. Total operating expenses were $6.0 million for
the three-months ended March 31, 2002, an increase of $488,000 or 8.8% higher
than total operating expenses of $5.6 million for the three-months ended March
31, 2001. Total operating expenses as a percentage of net sales decreased to
32.5% for the three-months ended March 31, 2002 from 32.9% for the three-months
ended March 31, 2001. The increase in total operating expenses was primarily
attributable to increased selling, general and administrative expenses which was
partially offset by decreased amortization of trademark licenses and trademarks
due to the adoption of SFAS No. 142 in the first quarter of 2002 (Note 2 of
financial statements). In 2002, the Company adopted SFAS No. 142 which
eliminated amortization on indefinite-lived intangible assets. Amortization of
trademark licenses and trademarks for the three-months ended March 31, 2002 was
$13,000, a decrease of $110,000 or 89.6% from amortization of $123,000 for the
three-months ended March 31, 2001.
Selling, general and administrative expenses were $6.0 million for the
three-months ended March 31, 2002, an increase of $599,000 or 11.0% higher than
selling, general and administrative expenses of $5.4 million for the
three-months ended March 31, 2001. Although selling expenses for the three-month
period ended March 31, 2002 were comparable to selling expenses for the
three-months ended March 31, 2001, expenditures for distribution, graphic design
and advertising increased while expenditures for in-store demonstrations,
premiums and sponsorships decreased. General and administrative expenses
increased by $510,000. Such increase was primarily attributable to increased
payroll expenses primarily for selling and marketing support activities as well
as increased in bad debts, travel and other operating expenses to support the
increase in sales.
Operating Income. Operating income was $765,000 for the three-months ended
March 31, 2002, which was comparable to operating income of $744,000 for the
three-months ended March 31, 2001. Operating income as a percentage of net sales
decreased to 4.1% for the three-months ended March 31, 2002 from 4.4% for the
three-months ended March 31, 2001. The 0.3% decrease in operating income as a
percentage of net sales was partially attributable to a 0.7% decrease in gross
profit as a percentage of net sales which was partially offset by a 0.4%
decrease in operating expenses as a percentage of net sales.
Net Non-operating Expense. Net non-operating expense was $75,000 for the
three-months ended March 31, 2002, a decrease of $126,000 from net non-operating
expense of $202,000 for the three-months ended March 31, 2001. The decrease in
net non-operating expense was primarily attributable to decreased interest
expense incurred on the Company's borrowings, which was primarily attributable
to the decrease in outstanding loan balances and lower interest rates on the
Company's borrowings.
10
Provision for Income Taxes. Provision for income taxes for the three-months
ended March 31, 2002 was $280,000 as compared to provision for income taxes of
$217,000 for the comparable period in 2001. The $63,000 increase in provision
for income taxes was primarily attributable to the increase in operating income
and a decrease in non-operating expense.
Net Income. Net income was $411,000 for the three-months ended March 31,
2002, an increase of $85,000 or 26.2% higher than net income of $325,000 for the
three-months ended March 31, 2001. The increase in net income was attributable
to an increase in gross profit of $510,000 and a decrease in non-operating
expense of $126,000 which was partially offset by an increase in operating
expense of $488,000 and an increase in provision for taxes of $63,000.
Liquidity and Capital Resources
As of March 31, 2002, the Company had working capital of $13.6 million
which was comparable to working capital of $13.0 million as of December 31,
2001. The increase in working capital was primarily attributable to net income
earned after adjustment for certain noncash expenses, primarily depreciation and
amortization, and cash received from the increase in borrowings on the Company's
debt which was partially offset by acquisition of property and equipment.
Net cash provided by operating activities was $158,000 for the three-months
ended March 31, 2002 as compared to net cash provided by operating activities of
$1.3 million for the comparable period in 2001. For the three-months ended March
31, 2002, cash provided by operating activities was attributable to net income
plus amortization of trademark license and trademarks, depreciation and other
amortization, as well as decreases in inventories and prepaid expenses and other
current assets. The cash provided by operating activities was partially offset
by increased accounts receivable as well as decreased accounts payable, accrued
liabilities and accrued compensation.
Net cash used in investing activities decreased to $77,000 for the
three-months ended March 31, 2002 as compared to net cash used in investing
activities of $127,000 for the comparable period in 2001. Net cash used in
investing activities for the three-months ended March 31, 2002 consisted
primarily of purchases of property and equipment and increases in trademark
licenses and trademarks. Management, from time to time, considers the
acquisition of capital equipment, particularly coolers, merchandise display
racks, vans and promotional vehicles, and businesses compatible with the image
of the Hansen's(R) brand, as well as the development and introduction of new
product lines. The Company may require additional capital resources for or as a
result of any such activities or transactions, depending upon the cash
requirements relating thereto. Any such activities or transactions will also be
subject to the terms and restrictions of HBC's credit facilities.
Net cash provided by financing activities was $123,000 for the three-months
ended March 31, 2002 as compared to net cash used in financing activities of
$1.2 million for the comparable period in 2001. The increase in net cash
provided by financing activities was primarily attributable to decreased
principal payments on long-term debt as well as borrowings on long-term debt in
2002 which did not occur in 2001.
HBC's revolving line of credit has been renewed by its bank until September
2005. The rate of interest payable by the Company on advances under the line of
credit is based on bank's base (prime) rate, plus an additional percentage of up
to 0.5% or the LIBOR rate, plus an additional percentage of up to 2.5% depending
upon certain financial ratios of the Company. As of March 31, 2002,
approximately $5.2 million was outstanding under the revolving line of credit.
11
The credit facility contains financial covenants, which require the Company
to maintain certain financial ratios and achieve certain levels of annual
income. The facility also contains certain non-financial covenants. As of March
31 2002, the Company was in compliance with all covenants.
Management believes that cash available from operations, including cash
resources and the revolving line of credit, will be sufficient for its working
capital needs, including purchase commitments for raw materials, payments of tax
liabilities, debt service, expansion and development needs, purchases of shares
of common stock of the Company, as well as any purchases of capital assets or
equipment over the current year.
Forward Looking Statements
The Private Security Litigation Reform Act of 1995 (the "Act") provides a
safe harbor for forward-looking statements made by or on behalf of the Company.
The Company and its representatives may from time to time make written or oral
forward looking statements, including statements contained in this report and
other filings with the Securities and Exchange Commission and in reports to
shareholders and announcements. Certain statements made in this report,
including certain statements made in management's discussion and analysis, may
constitute forward looking statements (within the meaning of Section 27.A of the
Securities Act 1933 as amended and Section 21.E of the Securities Exchange Act
of 1934, as amended) regarding the expectations of management with respect to
revenues, profitability, adequacy of funds from operations and the Company's
existing credit facility, among other things. All statements which address
operating performance, events or developments that management expects or
anticipates will or may occur in the future including statements related to new
products, volume growth, revenues, profitability, adequacy of funds from
operations, and/or the Company's existing credit facility, earnings per share
growth, statements expressing general optimism about future operating results
and non-historical Year 2002 information, are forward looking statements within
the meaning of the Act.
Management cautions that these statements are qualified by their terms
and/or important factors, many of which are outside the control of the Company
that could cause actual results and events to differ materially from the
statements made including, but not limited to, the following:
o Company's ability to generate sufficient cash flows to support capital
expansion plans and general operating activities;
o Changes in consumer preferences;
o Changes in demand that are weather related, particular in areas outside of
California;
o Competitive products and pricing pressures and the Company's ability to
gain or maintain share of sales in the marketplace as a result of actions
by competitors;
o The introduction of new products;
o Laws and regulations, and/or any changes therein, including changes in
accounting standards, taxation requirements (including tax rate changes,
new tax laws and revised tax law interpretations) and environmental laws as
well as the Federal Food Drug and Cosmetic Act, the Dietary Supplement
Health and Education Act, and regulations made thereunder or in connection
therewith, especially those that may affect the way in which the Company's
products are marketed as well as laws and regulations or rules made or
enforced by the Food and Drug Administration and/or the Bureau of Alcohol,
Tobacco and Firearms and/or certain state regulatory agencies;
12
o Changes in the cost and availability of raw materials and the ability to
maintain favorable supply arrangements and relationships and procure timely
and/or adequate production of all or any of the Company's products;
o The Company's ability to achieve earnings forecasts, which may be based on
projected volumes and sales of many product types and/or new products,
certain of which are more profitable than others. There can be no assurance
that the Company will achieve projected levels or mixes of product sales;
o The Company's ability to penetrate new markets;
o The marketing efforts of distributors of the Company's products, most of
which distribute products that are competitive with the products of the
Company;
o Unilateral decisions by distributors, grocery chains, specialty chain
stores, club stores and other customers to discontinue carrying all or any
of the Company's products that they are carrying at any time;
o The terms and/or availability of the Company's credit facilities and the
actions of its creditors;
o The effectiveness of the Company's advertising, marketing and promotional
programs;
o Adverse weather conditions, which could reduce demand for the Company's
products;
o The Company's ability to make suitable arrangements for the co-packing of
its Energy and functional drinks in 8.3-ounce slim cans, Smoothies in 11.5
ounce cans, E2O Energy Water, Energade and other products.
The foregoing list of important factors is not exhaustive.
Inflation
The Company does not believe that inflation has a significant impact on the
Company's results of operations for the periods presented.
ITEM 3. QUALITATIVE AND QUANTITATIVE DISCLOSURES ABOUT MARKET RISKS
The principal market risks (i.e., the risk of loss arising from advers
changes in market rates and prices) to which the Company is exposed, are
fluctuations in commodity prices, affecting the cost of raw materials, and
changes in interest rates on the Company's long term debt. The Company is
subject to market risk with respect to the cost of commodities because its
ability to recover increased costs through higher pricing may be limited by the
competitive environment in which it operates.
At March 31, 2002, the majority of the Company's debt consisted of variable
rate debt. The amount of variable rate debt fluctuates during the year based on
the Company's cash requirements. If average interest rates were to increase one
percent for the three-months ended March 31, 2002, the net impact on the
Company's pre-tax earnings would have been approximately $13,000.
13
PART II - OTHER INFORMATION
Items 1 - 5. Not Applicable
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits - See Exhibit Index
(b) Reports on Form 8-K - None
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
HANSEN NATURAL CORPORATION
Registrant
Date: May 15, 2002 /s/ RODNEY C. SACKS
----------------------------------
Rodney C. Sacks
Chairman of the Board of Directors and
Chief Executive Officer
(Principal Executive Officer)
Date: May 15, 2002 /s/ HILTON H. SCHLOSBERG
----------------------------------
Hilton H. Schlosberg
Vice Chairman of the Board of Directors,
President, Chief Operating Officer,
Chief Financial Officer and Secretary
14