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 June 30, 2000 Commission file number 0-18761
HANSEN NATURAL CORPORATION
(Exact name of Registrant as specified in its charter)
Delaware 39-1679918
(State or other jurisidiction of (I.R.S. Employer
incorporation or organization Identification No.)
2380 Railroad Street, Suite 101,
Corona, California 92880-5471
(Address of principal executive offices) (Zip Code)
(909) 739 - 6200
Registrant's telephone number, including area code:
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 9,928,519 shares of common stock
outstanding as of July 31, 2000
<PAGE>
HANSEN NATURAL CORPORATION AND SUBSIDIARIES
June 30, 2000
INDEX
<TABLE>
<S> <C> <C>
Page No.
Part I. FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements
Consolidated Balance Sheets as of June 30, 2000
and December 31, 1999 3
Consolidated Statements of Operations for the
three and six-months ended June 30, 2000 and 1999 4
Consolidated Statements of Cash Flows for the
six-months ended June 30, 2000 and 1999 5
Notes to Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 7
Part II. OTHER INFORMATION
Items 1-5. Not Applicable 16
Item 6. Exhibits and Reports on Form 8-K 16
Signatures 16
</TABLE>
2
<PAGE>
HANSEN NATURAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
JUNE 30, 2000 AND DECEMBER 31, 1999 (Unaudited)
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
June 30, December 31,
2000 1999
---- ----
ASSETS
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 121,609 $ 2,009,155
Accounts receivable (net of allowance for doubtful
accounts, sales returns and cash discounts of $525,748
in 2000 and $415,305 in 1999 and promotional allowances
of $2,021,216 in 2000 and $1,651,604 in 2000) 7,192,902 3,751,258
Inventories, net 8,998,888 9,894,414
Prepaid expenses and other current assets 975,918 553,689
Deferred income tax asset 743,364 743,364
------------------- ------------------
18,032,681 16,951,880
PROPERTY AND EQUIPMENT, net 1,119,441 504,191
INTANGIBLE AND OTHER ASSETS:
Trademark license and trademarks (net of accumulated amortization
of $3,160,337 in 2000 and $2,995,285 in 1999) 10,607,872 10,768,493
Deposits and other assets 708,116 484,388
------------------- ------------------
11,315,988 11,252,881
------------------- ------------------
$ 30,468,110 $ 28,708,952
=================== ==================
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Short-term borrowings $ 524,991 $ -
Accounts payable 5,204,072 5,936,873
Accrued liabilities 794,172 345,794
Accrued compensation 131,629 462,285
Current portion of long-term debt 987,533 863,501
Income taxes payable 220,867 346,636
------------------- ------------------
7,863,264 7,955,089
LONG-TERM DEBT, less current portion 914,007 902,716
DEFERRED INCOME TAX LIABILITY 1,225,271 1,225,271
SHAREHOLDERS' EQUITY:
Common stock - $.005 par value; 30,000,000 shares authorized; 9,926,983 and
10,010,084 shares issued
and outstanding in 2000 and 1999, respectively 50,562 50,050
Additional paid-in capital 11,569,562 11,340,074
Retained earnings 9,575,942 7,235,752
Common stock in treasury, at cost - 185,375 and 0 shares
in 2000 and 1999, respectively (730,498)
------------------- ------------------
Total shareholders' equity 20,465,568 18,625,876
------------------- ------------------
$ 30,468,110 $ 28,708,952
=================== ==================
</TABLE>
3
<PAGE>
HANSEN NATURAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
FOR THE THREE-MONTHS AND SIX-MONTHS ENDED JUNE 30, 2000 AND 1999 (Unaudited)
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
----------------------------------- ------------------------------------
2000 1999 2000 1999
---------------- --------------- ---------------- -----------------
<S> <C> <C> <C> <C>
NET SALES $ 22,666,775 $ 19,142,247 $ 38,644,777 $ 34,371,351
COST OF SALES 11,974,847 10,161,707 20,748,889 17,983,133
---------------- --------------- ---------------- -----------------
GROSS PROFIT 10,691,928 8,980,540 17,895,888 16,388,218
OPERATING EXPENSES:
Selling, general and administrative 7,793,226 6,481,186 13,746,638 12,252,432
Amortization of trademark license and trademarks 82,638 74,148 165,297 148,296
Other expenses 15,000 30,000
---------------- --------------- ---------------- -----------------
Total operating expenses 7,875,864 6,570,334 13,911,935 12,430,728
---------------- --------------- ---------------- -----------------
OPERATING INCOME 2,816,064 2,410,206 3,983,953 3,957,490
NONOPERATING EXPENSE (INCOME)
Interest and financing expense 63,891 40,080 92,186 103,111
Interest Income (1,306) (23,864) (8,550) (50,023)
---------------- --------------- ---------------- -----------------
Net nonoperating expense 62,585 16,216 83,636 53,088
INCOME BEFORE PROVISION
FOR INCOME TAXES 2,753,479 2,393,990 3,900,317 3,904,402
PROVISION FOR INCOME TAXES 1,101,392 953,800 1,560,127 1,555,300
---------------- --------------- ---------------- -----------------
NET INCOME $ 1,652,087 $ 1,440,190 $ 2,340,190 $ 2,349,102
================ =================================== =================
NET INCOME PER COMMON SHARE:
Basic $ 0.17 $ 0.14 $ 0.23 $ 0.24
================ =============== ================ =================
Diluted $ 0.16 $ 0.14 $ 0.22 $ 0.22
================ =============== ================ =================
NUMBER OF COMMON SHARES USED
IN PER SHARE COMPUTATIONS:
Basic 9,941,601 9,951,147 9,970,129 9,938,112
================ =============== ================ =================
Diluted 10,367,602 10,638,447 10,426,526 10,567,539
================ =============== ================ =================
</TABLE>
4
<PAGE>
HANSEN NATURAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX-MONTHS ENDED JUNE 30, 2000 AND 1999 (Unaudited)
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
2000 1999
---- ----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 2,340,190 $ 2,349,102
Adjustments to reconcile net income to
net cash provided by operating activities:
Amortization of trademark license and trademarks 160,621 148,297
Depreciation and other amortization 115,656 72,761
Compensation expense related to issuance of stock options 48,684
Deferred income taxes 199,525
Effect on cash of changes in operating assets and liabilities:
Accounts receivable (3,441,644) (2,983,299)
Inventories 895,526 (1,291,444)
Prepaid expenses and other current assets (422,229) (171,605)
Accounts payable (732,801) 3,193,893
Accrued liabilities 448,378 (34,737)
Accrued compensation (330,656) (161,102)
Income taxes payable (125,769) (164,225)
--------------- ---------------
Net cash (used in) provided by operating activities (1,092,728) 1,205,850
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment (736,138) (96,374)
Increase in trademark license and trademarks 5,232
Decrease in note receivable from director 20,861
Increase in deposits and other assets (223,728) (312,053)
--------------- ---------------
Net cash used in investing activities (954,634) (387,566)
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase in short-term borrowings 524,991
Principal payments on long-term debt (353,085) (1,753,735)
Increase in long-term debt 488,408
Issuance of common stock 230,000 20,700
Redemption of common stock (730,498)
--------------- ---------------
Net cash provided by (used in) financing activities 159,816 (1,733,035)
--------------- ---------------
NET DECREASE IN CASH (1,887,546) (914,751)
CASH, beginning of period 2,009,155 3,806,089
--------------- ---------------
CASH, end of period $ 121,609 $ 2,891,338
=============== ===============
SUPPLEMENTAL INFORMATION Cash paid during the year for:
Interest $ 87,286 $ 117,508
=============== ===============
Income taxes $ 1,335,896 $ 1,520,000
=============== ===============
</TABLE>
NONCASH TRANSACTIONS:
During the six-month period ended June 30, 2000, the Company issued 15,127
shares of common stock to employees in connection with a net exercise of
options to purchase 21,760 shares of common stock.
During the six-month period ended June 30, 1999, the Company issued 32,238
shares of common stock to employees in connection with a net exercise of
options to purchase 41,800 shares of common stock.
5
<PAGE>
HANSEN NATURAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE SIX-MONTHS ENDED JUNE 30,
2000 AND YEAR-ENDED DECEMBER 31, 1999
--------------------------------------------------------------------------------
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, 1999, which is incorporated
by reference, for a summary of significant policies utilized by Hansen Natural
Corporation ("Hansen" or "Company") and its subsidiaries, Hansen Beverage
Company ("HBC") and Hard e Beverage Company. The information set forth in these
interim financial statements is unaudited and may be subject to normal year-end
adjustments. The information reflects all adjustments, which include only normal
recurring adjustments, which in the opinion of management are necessary to make
the financial statements not misleading. Results of operations covered by this
report may not necessarily be indicative of results of operations for the full
fiscal year.
2. INVENTORIES
Inventories consist of the following at:
June 30, December 31,
2000 1999
--------------------- ---------------------
Raw materials $ 3,640,096 $3,615,269
Finished goods 5,527,200 6,442,193
--------------------- ---------------------
9,167,296 10,057,462
Less inventory reserves (168,408) (163,048)
--------------------- ---------------------
$ 8,998,888 $9,894,414
===================== =====================
6
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
--------------------------------------------------------------------------------
General
During the three months ended June 30, 2000, net sales were $22.7
million, an increase of $3.5 million or 18.4% over net sales of $19.1
million for the three months ended June 30, 1999. The increase in net sales
during the three months ended June 30, 2000 was primarily attributable to
increased sales of the Company's functional drinks, the Company's new line
of children's multi-vitamin juice drinks in 8.45-oz. aseptic packaging,
which was introduced in the third quarter of 1999, and increased sales of
Natural Sodas in cans. The increase in net sales was also attributable, to
a lesser extent, to increased sales of apple juice and juice blends, sales
of the Company's new line of premium functional Smoothies introduced in the
third quarter of 1999, and the introduction of Healthy Start in 12-oz.
glass bottles in the first quarter of 2000. The increase in net sales was
partially offset by decreased sales of Smoothies in glass and polyethylene
terephthalale (P.E.T.) plastic bottles, Healthy Start in P.E.T. plastic
bottles and Signature Sodas. Sales of Smoothies in cans and teas, lemonades
and juice cocktails were marginally lower.
The Company is currently in the process of launching a line of
functional fruit and grain energy bars as well as a line of gourmet
genetically modified organism-free (G.M.O. free) functional cereals.
During the three months ended June 30, 2000, the gross profit margins
achieved by the Company increased to 47.2% from 45.1% during the first
quarter of 2000. For the six months ended June 30, 2000, the gross profit
margin was 46.3%, which was lower than the gross profit margin of 47.7%
achieved by the Company for the six months ended June 30, 1999.
The Company is planning to introduce a malt based energy drink, called
Hard e, which contains 5% alcohol, during the third quarter of 2000. The
Hard e product will not be marketed under the Hansen's name.
The Company continues to incur expenditures in connection with
development and introduction of new products and flavors.
During the three months ended June 30, 2000, the Company repurchased
36,200 shares of its common stock at an average price of $3.88 per share.
During the six months ended June 30, 2000, the Company repurchased an
aggregate of 185,375 shares of its common stock at an average price of
$3.94 per share.
7
<PAGE>
Results of Operations For The Three-Months Ended June 30, 2000 Compared to the
Three-Months Ended June 30, 1999
Net Sales. For the three months ended June 30, 2000, net sales were
$22.7 million, an increase of $3.5 million or 18.4% over net sales of $19.1
million for the three months ended June 30, 1999. The increase in net sales
during the three months ended June 30, 2000 was primarily attributable to
increased sales of the Company's functional drinks, the Company's new line
of children's multi-vitamin juice drinks in 8.45-oz. aseptic packaging,
which was introduced in the third quarter of 1999, and increased sales of
Natural Sodas in cans. The increase in net sales was also attributable, to
a lesser extent, to increased sales of apple juice and juice blends, sales
of the Company's new line of premium functional Smoothies introduced in the
third quarter of 1999, and the introduction of Healthy Start in 12-oz.
glass bottles in the first quarter of 2000. The increase in net sales was
partially offset by decreased sales of Smoothies in glass and P.E.T.
plastic bottles, Healthy Start in P.E.T. plastic bottles and Signature
Sodas. Sales of Smoothies in cans and teas, lemonades and juice cocktails
were marginally lower.
Gross Profit. Gross profit was $10.7 million for the three-months
ended June 30, 2000, an increase of $1.7 million or 19.1% over the $9.0
million gross profit for the three-months ended June 30, 1999. Gross profit
as a percentage of net sales increased to 47.2% for the three-months ended
June 30, 2000 from 46.9% for the three-months ended June 30, 1999. The
increase in gross profit and gross profit as a percentage of net sales was
primarily attributable to higher margins achieved as a result of a change
in the Company's product mix.
Total Operating Expenses. Total operating expenses were $7.9 million
for the three-months ended June 30, 2000, an increase of $1.3 million or
19.9% over total operating expenses of $6.6 million for the three-months
ended June 30, 1999. Total operating expenses as a percentage of net sales
increased to 34.7% for the three-months ended June 30, 2000 from 34.3% for
the three-months ended June 30, 1999. The increase in total operating
expenses and total operating expenses as a percentage of net sales was
primarily attributable to increased selling, general and administrative
expenses.
Selling, general and administrative expenses were $7.8 million for the
three-months ended June 30, 2000, an increase of $1.3 million or 20.2% over
selling, general and administrative expenses of $6.5 million for the
three-months ended June 30, 1999. Selling, general and administrative
expenses as a percentage of net sales increased to 34.4% for the
three-months ended June 30, 2000 from 33.9% for the three-months ended June
30, 1999. The increase in selling expenses and selling expenses as a
percentage of net sales was primarily attributable to increases in
distribution (freight) costs, expenditures for point of sale items and
merchandise displays, and promotional expenditures and allowances. The
increase in general and administrative expenses and general and
administrative expenses as a percentage of net sales was primarily
attributable to increased payroll and other costs in connection with
operating activities to support increased net sales.
Amortization expense was $83,000 for the three-months ended June 30,
2000, an increase of $9,000 or 11.5% over amortization expense of $74,000
for the three-months ended June 30, 1999.
Other expenses were $15,000 for the three-months ended June 30, 1999.
8
<PAGE>
Operating Income. Operating income was $2.8 million for the
three-months ended June 30, 2000, an increase of $406,000 or 16.8% over
operating income of $2.4 million for the three- months ended June 30, 1999.
Operating income as a percentage of net sales decreased to 12.4% for the
three-months ended June 30, 2000 from 12.6% in the comparable period in
1999. The increase in operating income was attributable to the $1.7 million
increase in gross profit which was partially offset by the increase of $1.3
million in operating expenses. The decrease in operating income as a
percentage of net sales was primarily attributable to the increase in
selling, general and administrative expenses as a percentage of net sales.
Net Nonoperating Expense. Net nonoperating expense was $63,000 for the
three-months ended June 30, 2000, an increase of $46,000 from net
nonoperating expense of $16,000 for the three-months ended June 30, 1999.
Net nonoperating expense consists of interest and financing expense and
interest income. Interest and financing expense was $64,000 for the
three-months ended June 30, 2000 as compared to $40,000 for the comparable
period in 1999. The increase in interest and financing expense was
primarily attributable to interest incurred on income taxes. Interest
income was $1,000 for the three-months ended June 30, 2000, as compared to
interest income of $24,000 during the comparable period in 1999. The
decrease in interest income is attributable to a decrease in cash available
for investing in interest bearing securities.
Provision for Income Taxes. Provision for income taxes was $1.1
million, for the three-months ended June 30, 2000, an increase of $148,000
over the provision for income taxes of $954,000 for the comparable period
in 1999. The effective tax rate for the three-months ended June 30, 2000
was 40.0% as compared to 39.8% for the comparable period in 1999. The
increase in provision for income taxes was attributable to the increase in
income before provision for income taxes and the increase in the effective
tax rate for the three-months ended June 30, 2000.
Net Income. Net income was $1,652,000 for the three-months ended June
30, 2000, compared to net income of $1,440,000 for the three-months ended
June 30, 1999, an increase of $212,000 or 14.7%. The increase in net income
consists of an increase in operating income of $406,000 which was partially
offset by an increase in net interest and financing expense of $46,000 and
a $148,000 increase in provision for income taxes.
9
<PAGE>
Results of Operations For The Six-months Ended June 30, 2000 Compared to The
Six-months Ended June 30, 1999
Net Sales. For the six-months ended June 30, 2000, net sales were
approximately $38.6 million, an increase of $4.3 million or 12.4% over the
$34.4 million net sales for the six-months ended June 30, 1999. The
increase in net sales was primarily attributable to increased sales of
functional drinks, the introduction of the Company's new line of children's
multi-vitamin juice drinks in aseptic packaging which was introduced in the
third quarter of 1999, and increased sales of Natural Sodas. The increase
in net sales was also attributable, to a lesser extent, to the introduction
of Super Smoothies in cans in the third quarter of 1999, increased sales of
apple juice and juice blends, and the introduction of Healthy Start in
12-ounce bottles in the first quarter of 2000. The increase in net sales
was partially offset by decreased sales of Healthy Start in P.E.T. bottles,
Smoothies in glass bottles and P.E.T. plastic bottles, Signature Sodas,
Smoothies in cans and teas, lemonades and juice cocktails.
Gross Profit. Gross profit was $17.9 million for the six-months ended
June 30, 2000, an increase of $1.5 million or 9.2% over the $16.4 million
gross profit for the six-months ended June 30, 1999. Gross profit as a
percentage of net sales decreased to 46.3% for the six-months ended June
30, 2000 from 47.7% for the six-months ended June 30, 1999. The increase in
gross profit was primarily attributable to increased net sales. The
decrease in gross profit as a percentage of net sales was primarily
attributable to lower margins achieved as a result of a change in the
Company's product mix.
Total Operating Expenses. Total operating expenses were $13.9 million
for the six-months ended June 30, 2000, an increase of $1.5 million or
11.9% over total operating expenses of $12.4 million for the six-months
ended June 30, 1999. Total operating expenses as a percentage of net sales
decreased to 36.0% for the six-months ended June 30, 2000 from 36.2% for
the six-months ended June 30, 1999. The increase in total operating
expenses was primarily attributable to increased selling, general and
administrative expenses. The decrease in total operating expenses as a
percentage of net sales was primarily attributable to the elimination of
other expenses for the six-months ended June 30, 2000.
Selling, general and administrative expenses were $13.7 million for
the six-months ended June 30, 2000, an increase of $1.4 million or 12.2%
over selling, general and administrative expenses of $12.3 million for the
six-months ended June 30, 1999. Selling, general and administrative
expenses as a percentage of net sales remained consistent at 35.6% for the
six-months ended June 30, 2000 and for the comparable period in 1999. The
increase in selling expenses was primarily attributable to increases in
distribution (freight) costs, fees paid for slotting, promotional
allowances and expenditures, and expenditures for point of sale items and
merchandise displays. The increase in selling expenses was partially offset
by a decrease in expenditures for in-store demonstrations. The increase in
general and administrative expenses was primarily attributable to increased
payroll and other costs in connection with operating activities to support
increased net sales.
10
<PAGE>
Amortization expense was $165,000 for the six-months ended June 30,
2000, an increase of $17,000 or 11.5% over amortization expense of $148,000
for the six-months ended June 30, 1999.
Other expenses were $30,000 for the six-months ended June 30, 1999.
Operating Income. Operating income was $3,984,000 for the six-months
ended June 30, 2000, an increase of $27,000 or 0.7% over operating income
of $3,957,000 for the six-months ended June 30, 1999. Operating income as a
percentage of net sales decreased to 10.3% for the six-months ended June
30, 2000 from 11.5% in the comparable period in 1999. The decrease in
operating income as a percentage of net sales was primarily attributable to
the reduction in gross profit as a percentage of net sales for the
six-months ended June 30, 2000.
Net Nonoperating Expense. Net nonoperating expense was $84,000 for the
six-months ended June 30, 2000, an increase of $31,000 from net
nonoperating expense of $53,000 for the six-months ended June 30, 1999. Net
non-operating expense consists of interest and financing expense and
interest income. Interest and financing expense was $92,000 for the
six-months ended June 30, 2000 as compared to $103,000 for the comparable
period in 1999. The decrease in interest and financing expense was
attributable to the fact that the principal amounts outstanding on the
Company's term loan were lower in 2000 than during the comparable period in
1999. Such decrease was partially offset by interest incurred on income
taxes. Interest income was $9,000 for the six-months ended June 30, 2000,
as compared to interest income of $50,000 during the comparable period in
1999. The decrease in interest income is attributable to a decrease in cash
available for investing in interest bearing securities.
Provision for Income Taxes. Provision for income taxes was $1,560,000
for the six months ended June 30, 2000, an increase of $5,000 over the
provision for income taxes of $1,555,000 for the comparable period in 1999.
The effective tax rate for the six-months ended June 30, 2000 was 40.0% as
compared to 39.8% for the comparable period in 1999. The increase in
provision for income taxes was attributable to the increase in income
before provision for income taxes and the increase in the effective tax
rate for the six-months ended June 30, 2000.
Net Income. Net income was $2,340,000 for the six-months ended June
30, 2000 compared to net income of $2,349,000 for the six-months ended June
30, 1999. The $9,000 decrease in net income consists of an increase in
operating income of 27,000 which was offset by an increase of $31,000 in
net interest and financing expenses and a $5,000 increase in provision for
income taxes.
11
<PAGE>
Liquidity and Capital Resources
As of June 30, 2000, the Company had working capital of $10,169,000
compared to working capital of $8,997,000 as of December 31, 1999. The
increase in working capital was primarily attributable to net income earned
after adjustments for certain noncash expenses, primarily amortization of
trademark license and trademarks and depreciation and other amortization.
The increase in working capital was also attributable to increases in
accounts receivable, prepaid expenses and other current assets as well as a
decrease in accounts payable and accrued compensation. The increase in
working capital was partially offset by repayments made in reduction of
HBC's term loan, decreases in inventories, increases in accrued
liabilities, and acquisitions of property and equipment.
Net cash used in operating activities was $1,093,000 for the
six-months ended June 30, 2000 as compared to net cash provided by
operating activities of $1,206,000 for the comparable period in 1999. The
increase in net cash used in operating activities was primarily
attributable to increases in operating assets and decreases in operating
liabilities including increases in accounts receivable and increased
payments on account of accounts payable. The increase in cash used in
operating activities was partially offset by a decrease in inventories.
Net cash used in investing activities was $955,000 for the six-months
ended June 30, 2000 as compared to net cash used in investing activities of
$388,000 for the comparable period in 1999. The increase in net cash used
in investing activities was primarily attributable to the acquisition of
several vans and promotional vehicles as well as increased deposits and
other assets.
Net cash provided by financing activities was $160,000 for the
six-months ended June 30, 2000 as compared to net cash used in financing
activities of $1,733,000 for the comparable period in 1999. The increase in
net cash provided by financing activities was primarily attributable to
borrowings on the Company's line of credit and capital leases entered into
to finance the acquisition of vans and promotional vehicles. The increase
in cash provided by financing activities was partially offset by
repurchases of the Company's common stock and principal payments made in
reduction of HBC's term loan.
Increases in accounts receivable, acquisitions of inventory, property
and equipment, increases in deposits and other assets, repayment of the
Company's long-term debt, repurchases of the Company's common stock, as
well as HBC's acquisition and development plans are, and for the
foreseeable future are, expected to remain HBC's principle recurring use of
cash and working capital funds. Management, from time to time, considers
the acquisition of capital equipment, particularly coolers, merchandise
displays, vans and promotional vehicles, trademarks, 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 in connection with, such activities
depending upon the cash requirements relating thereto. Any such activities
will also be subject to the terms and restrictions of HBC's credit
facilities.
12
<PAGE>
As of June 30, 2000, $982,000 was outstanding under the term loan, as
compared to $1,332,000 outstanding on December 31, 1999. The Company's
current borrowing rate on the term loan is the bank's base rate ("prime")
plus 1/2%.
HBC's revolving line of credit has been renewed by its bank until May
1, 2002. The effective borrowing rate under the revolving line of credit is
prime plus 1/4%. HBC anticipates that the revolving line of credit will be
renewed when it expires on May 1, 2002; however, there can be no assurance
that it will in fact be renewed or, if renewed, that the terms of such
renewal will not be disadvantageous to HBC and its business.
Management believes that cash generated from operations and the
Company's cash resources and amounts available under HBC's revolving line
of credit, will be sufficient to meet its operating cash requirements in
the foreseeable future, including purchase commitments for raw materials,
debt servicing, expansion and development needs as well as any purchases of
capital assets or equipment and repurchases of the Company's common stock.
Year 2000 Compliance
Prior to January 1, 2000, the Company reviewed the readiness of its
computer systems and business practices for handling Year 2000 issues.
These issues involve systems that are date sensitive and may not be able to
properly process the transition from year 1999 to year 2000 and beyond,
resulting in miscalculations and software failures. Year 2000 compliance
updates were completed in the fourth quarter of 1999 and the Company's
information technology ("IT") and non-information technology ("NIT")
computer systems completed the transition to the year 2000 without material
issues or problems. No additional expenditures to enable the Company to
become Year 2000 compliant are currently anticipated. The Company has been
in contact with critical suppliers, co-packers, customers, and other third
parties to determine the extent to which they may be vulnerable to Year
2000 issues. The Company cannot currently predict any future effect of
third parties' Year 2000 issues. However, the Company has not been made
aware of any matter which would materially impact the Company's business
from third parties.
European Monetary Union
Within Europe, The European Economic and Monetary Union (the "EMU")
introduced a new currency, the euro, on January 1, 1999. The new currency
is in response to the EMU's policy of economic convergence to harmonize
trade policy, eliminate business costs associated with currency exchange
and to promote the free flow of capital, goods and services.
On January 1, 1999, the participating countries adopted the euro as
their local currency, initially available for currency trading on currency
exchanges and noncash transactions such as banking. The existing local
currencies, or legacy currencies, will remain legal tender through January
1, 2002. Beginning on January 1, 2002, euro-denominated bills and coins
will be used for cash transactions. For a period of up to six-months from
this date, both legacy currencies and the euro will be legal tender. On or
before July 1, 2002, the participating countries will withdraw all legacy
currencies and exclusively use the euro.
13
<PAGE>
The Company's transactions are recorded in U.S. Dollars and the
Company does not currently anticipate future transactions being recorded in
the euro. Based on the lack of transactions recorded in the euro, the
Company does not believe that the euro will have a material effect on the
financial position, results of operations or cash flows of the Company. In
addition, the Company has not incurred and does not expect to incur any
significant costs from the continued implementation of the euro, including
any currency risk, which could materially affect the Company's business,
financial condition or results of operations.
The Company has not experienced any significant operational
disruptions to date and does not currently expect the continued
implementation of the euro to cause any significant operational
disruptions.
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 it's 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 2000 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;
14
<PAGE>
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 it's 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 functional drinks in 8.2-ounce slim cans and Smoothies in 11.5-ounce
cans;
o The Company's customers', co-packers' and suppliers' ability to replace,
modify or upgrade computer programs in ways that adequately address Year
2000 issues. Given the numerous and significant uncertainties involved,
there can be no assurance regarding their ability to identify and correct
all relevant computer codes and imbedded chips and other unanticipated
difficulties or the ability of third parties to remediate their respective
systems.
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.
15
<PAGE>
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: August 9, 2000
/s/ Rodney C. Sacks
Chairman of the Board
and Chief Executive Officer
Date: August 9, 2000
/s/ Hilton H. Schlosberg
Vice Chairman of the Board,
President, Chief Operating Officer,
Chief Financial Officer and Secretary
16
<PAGE>
EXHIBIT INDEX
Exhibit 10 (yyy) Sixth Modification to Revolving Credit Loan &
Security Agreement by and between Hansen Beverage Company and
Comerica Bank - California, dated May 23, 2000
Exhibit 10 (zzz) Contract Brewing Agreement by and between Hard e
Beverage Company and Rello, Inc. dated March 23, 2000
Exhibit 27 Financial Data Schedule
17
