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, 1998 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.)
2380 Railroad Street, Suite 101,
Corona, California 91720
(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 9,296,502 shares of common stock
outstanding as of August 1, 1998
1
HANSEN NATURAL CORPORATION AND SUBSIDIARIES
June 30, 1998
INDEX
Page No.
Part I. FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements
Consolidated Balance Sheets as of June 30, 1998
and December 31, 1997 3
Consolidated Statements of Operations for the
three and six months ended June 30, 1998 and 1997 4
Consolidated Statements of Cash Flows for the
six months ended June 30, 1998 and 1997 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 14
Item 6. Exhibits and Reports on Form 8-K 14
Signatures 14
2
HANSEN NATURAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited)
- ---------------------------------------------------------------------------------------------------------------------------------
June 30, December 31,
1998 1997
ASSETS
CURRENT ASSETS:
Cash $ 2,146,543 $ 395,231
Accounts receivable (net of allowance for doubtful
accounts, sales returns and cash discounts of $464,521
in 1998 and $315,629 in 1997 and promotional allowances
of $1,673,848 in 1998 and $1,067,749 in 1997) 2,873,885 1,533,748
Inventories 3,996,739 3,915,983
Prepaid expenses and other current assets 163,643 214,468
----------- -----------
Total current assets 9,180,810 6,059,430
PROPERTY AND EQUIPMENT, net 622,135 412,496
INTANGIBLE AND OTHER ASSETS:
Trademark license and trademarks (net of accumulated amortization
of $2,538,478 in 1998 and $2,390,878 in 1997) 10,089,733 10,208,116
Notes receivable from officer and director 46,536 68,235
Deposits and other assets 203,297 185,082
----------- -----------
Total intangible and other assets $10,339,566 $10,461,433
=========== ===========
$20,142,511 $16,933,359
=========== ===========
LIABILITIES & SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 2,855,444 $ 2,195,200
Accrued liabilities 474,721 444,807
Accrued compensation 447,251 322,114
Current portion of long-term debt 740,660 520,835
Income taxes payable 990,590 81,800
----------- -----------
Total current liabilities 5,508,666 3,564,756
LONG-TERM DEBT, less current portion 2,935,954 3,407,824
SHAREHOLDERS' EQUITY:
Common stock - $.005 par value; 30,000,000 shares authorized; 9,149,191 and
9,130,869 shares issued
and outstanding in 1998 and 1997, respectively 45,746 45,654
Additional paid-in capital 10,858,223 10,858,315
Retained earnings (accumulated deficit) 861,163 (875,949)
Foreign currency translation adjustment (67,241) (67,241)
------------ ------------
Total shareholders' equity 11,697,891 9,960,779
------------ ------------
$20,142,511 $16,933,359
============ ============
3
HANSEN NATURAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
- --------------------------------------------------------------------------------
Three Months Ended Six Months Ended
June 30, June 30,
--------------------------- ----------------------------
1998 1997 1998 1997
------------ ------------ ------------ ------------
NET SALES $13,950,530 $11,496,228 $25,215,385 $18,615,814
COST OF SALES 7,009,343 6,791,491 12,622,771 11,027,737
------------ ------------ ------------ ------------
GROSS PROFIT 6,941,187 4,704,737 12,592,614 7,588,077
OPERATING EXPENSES:
Selling, general and administrative 5,283,867 3,809,192 9,562,351 6,396,957
Amortization of trademark license and trademarks 73,800 73,500 147,600 147,000
Other expenses 15,000 72,991 30,000 147,135
----------- ---------- ------------ ------------
Total operating expenses 5,372,667 3,955,683 9,739,951 6,691,092
----------- ----------- ------------ ------------
OPERATING INCOME 1,568,520 749,054 2,852,663 896,985
NET INTEREST AND FINANCING EXPENSE 102,824 148,691 211,657 273,066
------------ ----------- ----------- ------------
INCOME BEFORE PROVISION
FOR INCOME TAXES 1,465,696 600,363 2,641,006 623,919
PROVISION FOR INCOME TAXES 450,000 37,800 920,123 40,200
------------ ------------ ----------- -----------
NET INCOME $ 1,015,696 $ 562,563 $ 1,720,883 $ 583,719
=========== =========== ============ ===========
NET INCOME PER COMMON SHARE:
Basic $ 0.11 $ 0.06 $ 0.19 $ 0.06
============ =========== ============ ===========
Diluted $ 0.10 $ 0.06 $ 0.17 $ 0.06
============ =========== ============ ===========
NUMBER OF COMMON SHARES USED
IN PER SHARE COMPUTATIONS:
Basic 9,140,948 9,214,962 9,135,936 9,195,639
============= =========== ============ ===========
Diluted 10,361,279 9,219,049 10,391,250 9,219,049
============= =========== ============ ===========
4
HANSEN NATURAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 1998 AND 1997 (Unaudited)
- --------------------------------------------------------------------------------
1998 1997
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 1,720,883 $ 583,719
Adjustments to reconcile net income to
net cash provided by (used in) operating activities:
Amortization of trademark license and trademarks 147,600 147,000
Depreciation and other amortization 100,899 124,034
Compensation expense related to issuance of stock options 16,229
Effect on cash of changes in operating assets and liabilities:
Accounts receivable (1,340,137) (1,079,485)
Inventories (80,756) (38,372)
Prepaid expenses and other current assets 50,825 (320,434)
Accounts payable 660,244 937,861
Accrued liabilities 29,914 (7,629)
Accrued compensation 125,137 (26,972)
Income taxes payable 908,790 81,800
------------ ------------
Net cash provided by operating activities 2,339,628 401,522
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment (310,538) (151,592)
Increase in trademark license and trademarks (29,217) (44,750)
Decrease (increase) in notes receivable from officer and director 21,699 (1,169)
Increase in deposits and other assets (18,215) (56,497)
------------- ------------
Net cash used in investing activities (336,271) (254,008)
CASH FLOWS FROM FINANCING ACTIVITIES:
Decrease in short-term borrowings 6,028
Increase in long-term debt 14,546
Principal payments on long-term debt (252,045) (621)
------------ ------------
Net cash (used in) provided by financing activities (252,045) 19,953
EFFECT OF EXCHANGE RATE CHANGES ON CASH - (66,334)
------------ ------------
NET INCREASE IN CASH 1,751,312 101,133
CASH, beginning of period 395,231 186,931
============ ============
CASH, end of period $ 2,146,543 $ 288,064
============ ============
SUPPLEMENTAL INFORMATION:
Cash paid during the year for:
Interest $ 193,520 $ 225,505
============ ============
Income taxes $ 2,400 $ 2,400
============ ============
5
HANSEN NATURAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- ------------------------------------------------------------------------------
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, 1997, 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 CVI Ventures, Inc.
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,
1998 1997
------------ ------------
Raw materials $ 1,851,552 $ 388,877
Finished goods 2,145,187 3,527,106
------------ ------------
$ 3,996,739 $3,915,983
============ ============
6
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
- --------------------------------------------------------------------------------
General
During the three months ended June 30, 1998, the Company continued to
make progress towards achieving its goal of geographically expanding the
Hansen's(R) brand as well as expanding the Hansen's(R) brand product range.
During the three months ended June 30, 1998, the expansion of distribution of
certain of the Company's products into markets outside of California continued
to make good progress. In April 1997, the Company introduced its lightly
carbonated functional energy drink in an 8.2-ounce slim can. Repeat sales of
this product have been encouraging. During the first quarter of 1998, the
Company extended its "functional" beverage product line by introducing three
additional functional drinks in 8.2-ounce slim cans, a ginger flavored d-stress
drink, an orange flavored anti-ox drink and a guarana flavored stamina drink.
During the second quarter of 1998, the Company launched its new Healthy
Start(TM) line of juices with DynaJuice(TM), a shelf stable 100% juice blend
with 15 vitamins and minerals. Also during the quarter, the Company introduced
two new 100% juice blends, Hansen's (R) Natural Apple Strawberry and Apple Grape
juices, both of which contain vitamin C. The Company intends to introduce
additional functional drinks and a new line of premium functional Smoothies
later in 1998. Other new product developments include additional Healthy
Start(TM) juices as well as new lines of premium natural sodas and premium
functional iced teas in proprietary glass bottles, which the Company intends to
introduce later in 1998 or in 1999. The Company continues to incur expenditures
in connection with the development and introduction of new products and flavors.
The increase in net sales and profitability in the second quarter of
1998 was primarily attributable to increased sales of the Company's functional
energy drink and sales of the Company's three new functional drinks in 8.2-ounce
slim cans and, to a lesser extent, to sales of the Company's newly introduced
DynaJuice(TM) and apple juice blends.
The increase in sales of functional drinks was attributable to the fact
the Company only launched its functional energy drink in April 1997, and also to
the fact that during the comparable period in 1997, the Company did not have any
sales of the three new functional drinks which were only introduced in the first
quarter of 1998. Portion of the sales of the three new functional drinks during
the second quarter of 1998 were attributable to opening orders from distributors
prior to their launching such products in their respective territories.
Consequently, sales of the three new functional drinks during the second quarter
of 1998 may not be indicative of sales that will be achieved in subsequent
periods.
The increase in net sales and profitability in the second quarter of
1998 was partially offset by a slight decrease in sales of soda and lower sales
of apple juice. For the second quarter of 1998, sales of Smoothies, iced teas
lemonades and juice cocktails, were about the same as in the second quarter of
1997.
7
Results of Operations For The Three-Months Ended June 30, 1998 Compared to the
Three-Months Ended June 30, 1997
Net Sales. For the three-months ended June 30, 1998, net sales were
approximately $14.0 million, an increase of $2.5 million or 21.3% over the $11.5
million net sales for the three-months ended June 30, 1997. The increase in net
sales was primarily attributable to increased sales of the Company's functional
energy drink which was introduced in the second quarter of 1997, sales of the
Company's three new functional drinks which were introduced in the first quarter
of 1998 and, to a lesser extent, sales of DynaJuice(TM) and apple juice blends.
The increase in net sales was partially offset by decreased sales of soda and
apple juice. Sales of Smoothies, iced teas lemonades and juice cocktails, were
about the same as in the comparable period in 1997.
Gross Profit. Gross profit was $6.9 million for the three-months ended
June 30, 1998, an increase of $2.2 million or 47.5% over the $4.7 million gross
profit for the three-months ended June 30, 1997. Gross profit as a percentage of
net sales increased to 49.8% for the three-months ended June 30, 1998 from 40.9%
for the three-months ended June 30, 1997. The increase in gross profit was
primarily attributable to increased net sales and higher margins achieved. The
increase in 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 $5.4 million
for the three-months ended June 30, 1998, an increase of $1.4 million or 35.8%
over total operating expenses of $4 million for the three-months ended June 30,
1997. Total operating expenses as a percentage of net sales increased to 38.5%
for the three-months ended June 30, 1998 from 34.4% for the three-months ended
June 30, 1997. The increase in total operating expenses was primarily
attributable to increased selling, general and administrative expenses which was
partially offset by a decrease in other expenses. The increase in total
operating expenses as a percentage of net sales was primarily attributable to an
increase in selling, general and administrative expenses and the comparatively
smaller increase in net sales from the comparable period in 1997.
Selling, general and administrative expenses were $5.3 million for the
three-months ended June 30, 1998, an increase of $1.5 million or 38.7% over
selling, general and administrative expenses of $3.8 million for the
three-months ended June 30, 1997. Selling, general and administrative expenses
as a percentage of net sales increased to 37.9% for the three-months ended June
30, 1998 from 33.1% for the three-months ended June 30, 1997. The increase in
selling expenses was primarily attributable to increases in promotional
expenditures and allowances, costs of promotional materials, advertising and
distribution costs. The increase in general and administrative expenses was
primarily attributable to increased payroll and other costs in connection with
the Company's expansion activities into additional states and operating
activities to support the increase in net sales.
8
Other expenses were approximately $15,000 for the three months ended
June 30, 1998 compared to $73,000 for the three months ended June 30, 1997. The
decrease in other expenses was primarily attributable to the expiration of
certain consulting agreements entered into in connection with the acquisition of
the Hansen business. The decrease was partially offset by a new consulting
agreement entered into with the former president of HBC in June 1997.
Operating Income. Operating income was $1,569,000 for the three-months
ended June 30, 1998, an increase of $820,000 or 109.4% over operating income of
$749,000 for the three- months ended June 30, 1997. Operating income as a
percentage of net sales increased to 11.2% for the three-months ended June 30,
1998 from 6.5% in the comparable period in 1997. The increase in operating
income was attributable to a $2.2 million increase in gross profit which was
partially offset by an increase of $1.4 million in operating expenses.
Net Interest and Financing Expense. Net interest and financing expense
was $103,000 for the three-months ended June 30, 1998, a decrease of $46,000
from net interest and financing expense of $149,000 for the three-months ended
June 30, 1997. The decrease in net interest and financing expense was primarily
attributable to the fact that during the three-months ended June 30, 1998, no
amounts were outstanding on the Company's revolving line of credit, and the
principal amounts outstanding on the Company's term loan were lower than during
the comparable period in 1997. Interest income of $6,000 for the three-months
ended June 30, 1998, as compared to no interest income during the comparable
period in 1997, is included in net interest and financing expense.
Provision for Income Taxes. Provision for income taxes was $450,000, an
increase of $412,000 over the provision for income taxes of $38,000 for the
comparable period in 1997. During the first and second quarters of 1997, the
provision for income taxes was reduced by a reduction in the valuation allowance
which was applied against certain tax benefits. During the first and second
quarters of 1998, the provision for income taxes was not reduced to the same
extent as in 1997 as the valuation allowance was fully reduced during the first
and second quarters of 1998.
Net Income. Net income was $1,016,000 for the three-months ended June
30, 1998, compared to net income of $563,000 for the three-months ended June 30,
1997. The $453,000 increase in net income consists of an increase in operating
income of $820,000 and a decrease of $46,000 in net interest and financing
expense which was partially offset by a $412,000 increase in provision for
income taxes.
9
Results of Operations For The Six-months Ended June 30, 1998 Compared to The
Six-months Ended June 30, 1997
Net Sales. For the six-months ended June 30, 1998, net sales were
approximately $25.2 million, an increase of $6.6 million or 35.5% over the $18.6
million net sales for the six-months ended June 30, 1997. The increase in net
sales was primarily attributable to increased sales of the Company's functional
energy drink which was introduced in the second quarter of 1997 and sales of the
Company's three new functional drinks which were introduced in the first quarter
of 1998 and, to a lesser extent, to increased sales of Smoothies, soda, iced
teas lemonades and juice cocktails, and sales of DynaJuice(TM) and apple juice
blends. The increase in net sales was partially offset by decreased sales of
apple juice.
Gross Profit. Gross profit was $12.6 million for the six-months ended
June 30, 1998, an increase of $5 million or 66% over the $7.6 million gross
profit for the six-months ended June 30, 1997. Gross profit as a percentage of
net sales increased to 49.9% for the six-months ended June 30, 1998 from 40.8%
for the six-months ended June 30, 1997. The increase in gross profit was
primarily attributable to increased net sales and higher margins achieved. The
increase in 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 $9.7 million
for the six-months ended June 30, 1998, an increase of $3.0 million or 45.6%
over total operating expenses of $6.7 million for the six-months ended June 30,
1997. Total operating expenses as a percentage of net sales increased to 38.6%
for the six-months ended June 30, 1998 from 35.9% for the six-months ended June
30, 1997. The increase in total operating expenses were primarily attributable
to increased selling, general and administrative expenses which was partially
offset by a decrease in other expenses. The increase in total operating expenses
as a percentage of net sales was primarily attributable to the increase in
operating expenses and the comparatively smaller increase in net sales from the
comparable period in 1997.
Selling, general and administrative expenses were $9.6 million for the
six-months ended June 30, 1998, an increase of $3.2 million or 49.5% over
selling, general and administrative expenses of $6.4 million for the six-months
ended June 30, 1997. Selling, general and administrative expenses as a
percentage of net sales increased to 37.9% for the six-months ended June 30,
1998 from 34.4% for the comparable period in 1997. The increase in selling
expenses was primarily attributable to increases in promotional expenditures and
allowances, costs of promotional materials, advertising and distribution costs.
The increase in general and administrative expenses was primarily attributable
to increased payroll and other costs in connection with the Company's expansion
activities into additional states and operating activities to support the
increase in net sales.
Other expenses were approximately $30,000 for the six months ended
June 30, 1998 compared to $147,000 for the three months ended June 30, 1997. The
decrease in other expenses was primarily attributable to the expiration of
certain consulting agreements entered into in connection with the acquisition of
the Hansen business. The decrease was partially offset by a new consulting
agreement entered into with the former president of HBC in June 1997.
10
Operating Income. Operating income was $2,853,000 for the six-months
ended June 30, 1998, an increase of $1,956,000 or 218.0% over operating income
of $897,000 for the six- months ended June 30, 1997. Operating income as a
percentage of net sales increased to 11.3% for the six-months ended June 30,
1998 from 4.8% in the comparable period in 1997. The increase in operating
income was attributable to a $5 million increase in gross profit which was
partially offset by an increase of $3 million in operating expenses.
Net Interest and Financing Expense. Net interest and financing expense
was $212,000 for the six-months ended June 30, 1998, a decrease of $61,000 from
net interest and financing expense of $273,000 for the six-months ended June 30,
1997. The decrease in net interest and financing expense was attributable to the
fact that during the six-months ended June 30, 1998, no amounts were outstanding
on the Company's revolving line of credit and the principal amounts outstanding
on the Company's term loan were lower than during the comparable period in 1997.
Interest income of $7,000 for the six-months ended June 30, 1998, as compared to
no interest income during the comparable period in 1997, is included in net
interest and financing expense.
Provision for Income Taxes. Provision for income taxes was $920,000, an
increase of $880,000 over the provision for income taxes of $40,000 for the
comparable period in 1997. During the first and second quarters of 1997, the
provision for income taxes was reduced by a reduction in the valuation allowance
which was applied against certain tax benefits. During the first and second
quarters of 1998, the provision for income taxes was not reduced to the same
extent as in 1997 as the valuation allowance was fully reduced during the first
and second quarters of 1998.
Net Income. Net income was $1,721,000 for the six-months ended June 30,
1998 compared to net income of $584,000 for the six-months ended June 30, 1997.
The $1,137,000 increase in net income consists of an increase in operating
income of $1,956,000 and a decrease of $61,000 in net interest and financing
expenses which was partially offset by a $880,000 increase in provision for
income taxes.
Liquidity and Capital Resources
As of June 30, 1998, the Company had working capital of $3,672,000
compared to working capital of $2,495,000 as of December 31, 1997. Net cash
provided by operating activities increased to $2,340,000 for the six months
ended June 30, 1998 as compared to $402,000 for the comparable period in 1997.
The increase in working capital and net cash provided by operating activities
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, during the six-months ended June 30, 1998.
Management believes that cash generated from operations and its 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.
11
Net cash used in investing activities increased to $336,000 for the
six-months ended June 30, 1998 as compared to $254,000 for the comparable period
in 1997. The increase in net cash used in investing activities was primarily
attributable to purchases of property and equipment to support the Company's
expansion and development plans. Although the Company has no current plans to
incur any material capital expenditures, management, from time to time,
considers the acquisition of capital equipment, particularly coolers and vans,
and businesses compatible with the image of the Hansen's(R) brand as well as the
introduction of new product lines. The Company may require additional capital
resources in the event of any such transaction, depending upon the cash
requirements relating thereto. Any such transaction will also be subject to the
terms and restrictions of HBC's credit facilities.
Net cash used in financing activities increased to $252,000 for the six
months ended June 30, 1998 as compared to net cash provided by financing
activities of $20,000 for the comparable period in 1997. The increase in net
cash used in financing activities was primarily attributable to the fact that
during the six-months ended June 30, 1998, principal payments of $252,000 were
made in reduction of HBC's term loan. As of June 30, 1998, the sum of $3,667,000
was outstanding under the term loan.
The revolving line of credit is renewable on September 1, 1998. HBC has
received a written proposal from its bank to renew its revolving line of credit
for a period of two years. In terms of such proposal, HBC's effective borrowing
rate under the revolving line of credit would be reduced from prime plus 1% to
prime plus 1/4%. The Company anticipates that such line will be renewed by this
date; 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.
Year 2000 Compliance
Many currently installed computer systems and software products are
coded to accept only two digit entries in the date code field. These date code
fields will need to accept four digit entries or be modified in some fashion to
distinguish 21st century dates from 20th century dates. This problem could force
computers to either shut down or provide incorrect data. As a result, in less
than two years, computer systems and software used by many companies may need to
be upgraded to comply with such "Year 2000" requirements. The Company has
examined its internal computer systems and contacted its software providers to
determine whether the Company's software applications are compliant with the
Year 2000. While the Company believes that its internal systems are fully Year
2000 compliant, the Company intends to continue to review its internal systems
for any problems as well as monitor its key customers and suppliers for any
impact that the Year 2000 may have on their information systems which in turn
could impact the Company. While it is difficult to quantify the total cost to
the Company of the Year 2000 compliance activities, the Company does not expect
the cost to be material.
12
Forward Looking Statements
Certain statements made in this Report, including certain statements
made in this Management's Discussion and Analysis, contain "forward looking
statements" within the meaning of Section 27A of the Securities Act of 1933, as
amended, and Section 21E 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.
Management cautions that these statements are qualified by their terms
and/or important factors, many of which are outside of the control of the
Company, that could cause actual results and events to differ materially from
the statements made herein, including, but not limited to, the following:
changes in consumer preferences, changes in demand that are weather related,
particularly in areas outside of California, competitive pricing pressures,
changes in the price of the raw materials for the Company's beverage products,
the marketing efforts of the distributors of the Company's products, most of
which distribute products that are competitive with the products of the Company,
the introduction of new products, as well as unilateral decisions that may be
made by grocery chain stores, 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. Management further notes that the Company's plans and
results may be affected by any change in the availability of the Company's
credit facilities and the actions of its creditors.
Inflation
The Company does not believe that inflation has a significant impact on
the Company's results of operations for the periods presented.
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: August 14, 1998
/s/ RODNEY C. SACKS
Rodney C. Sacks
Chairman of the Board
and Chief Executive Officer
Date: August 14, 1998
/s/ HILTON H. SCHLOSBERG
Hilton H. Schlosberg
Vice Chairman of the Board,
President, Chief Operating Officer,
Chief Financial Officer and Secretary
14
EXHIBIT INDEX
Exhibit 10 (ddd) Warrant Agreement dated as of April 23, 1998
between Hansen Natural Corporation and Rick Dees
Exhibit 27 Financial Data Schedule
15
WARRANT AGREEMENT
This Warrant agreement (this "Agreement") is made as of April 23, 1998
by and between Hansen Natural Corporation, a Delaware corporation (the
"Company"), and Rick Dees (the "Holder").
Preliminary Recitals
A Rick Dees is an international radio personality and talk show host
and has been appointed to be an endorser of and a spokesman for the products of
the Hansen Beverage Company, ("HBC"), the Company's wholly-owned subsidiary (the
"Products"), pursuant to a certain written letter agreement entered into between
the Hansen Beverage Company and the Holder (the "Representation Agreement").
B. As compensation to the Holder for the services to be rendered by him
for and on behalf of the Company and to actively represent, promote and develop
the Hansen's brand and products over the period of the Agreement, the Company
desires to grant to the Holder a warrant to purchase up to 150,000 shares of
common stock, par value $.005 per share, of the Company ("Common Stock"), on the
terms and subject to the conditions set forth below.
NOW, THEREFORE, the Company and Holder agree as follows:
1. Grant of Warrant The Company hereby grants to Holder a warrant to
purchase up to 150,000 shares of Common Stock at a purchase price of $2.50 per
share.
2. Exercise Period The Warrant shall be exercisable during the period
(the "Exercise Period") commencing on the respective dates provided for in
Section 3 below and expiring on the earlier to occur of:
(x) one (1) year after the expiration or termination of the
Representation Agreement and
(y) December 14, 2000.
3. Exercise of Warrant
(a) Subject to the other terms of this Agreement regarding the
exercisability of the Warrant, the Warrant may be exercised during the Exercise
Period in respect of the number of shares of Common Stock listed in Column A
from and after the exercise dates listed opposite such number in Column B:
A B
Number of Shares Exercise Date
8,333 July 15, 1998
8,333 August 15, 1998
8,333 September 15, 1998
8,333 October 15, 1998
8,333 November 15, 1998
8,333 December 15, 1998
8,333 January 15, 1999
8,333 February 15, 1999
8,333 March 15, 1999
8,333 April 15, 1999
8,333 May, 15, 1999
8,333 June 15, 1999
8,333 July 15, 1999
8,333 August 15, 1999
8,333 September 15, 1999
8,333 October 15, 1999
8,333 November 15, 1999
8,339 December 15, 1999
(b) The Warrant vesting schedule set forth in paragraph (a) above shall
in respect of each exercise date be subject to the Holder having actively
promoted the Hansen's brand and products up to and including that date in
accordance with the Representation Agreement.
(c) This Warrant may be exercised, to the extent exercisable by its
terms, from time to time, in whole or in part, at any time prior to the
expiration thereof. Any exercise shall be accompanied by written notice to the
Company specifying the number of shares as to which this Warrant is being
exercised, in the form attached to the Warrant Certificate. Notations of any
partial exercise or installment exercise, shall be made by the Company and
attached as a schedule hereto.
(d) The Company shall issue the Warrant Certificate or certificates
evidencing the Warrant Shares within fifteen (15) days after receipt of such
notice and payment as hereinafter provided.
4. Payment of Purchase Price Upon Exercise. At the time of any exercise
of the Warrant the purchase price for the Warrant Shares shall be paid in full
to the Company in either or any combination of the following ways:
(a) by check or other immediately available funds; or
(b) with property consisting of shares of Common Stock or by
relinquishing a portion of the Warrant that is at that time exercisable, equal
in value (determined as set forth below) to the exercise price for the Warrant
Shares then purchased. The shares of Common Stock or the portion of the Warrant
that Holder relinquishes shall be valued as of the date of exercise of the
Warrant by the Holder, at the closing price, in the case of consideration
consisting of shares, or at the excess of the closing price over $2.50
multiplied by number of shares subject to that portion of the Warrant that is
being relinquished, in the case of a portion of the Warrant being relinquished.
For example, if a Holder exercises the Warrant for 300 shares for a total
exercise price of $750.00 and the closing price is $5.00, the Holder may pay for
the 300 Warrant Shares by delivering 150 shares of Common Stock to the Company
or by relinquishing his right to exercise the Warrant for an additional 300
shares that are subject to the Warrant and are then exercisable.
For the purpose of this Agreement, the term "closing price"
means, with respect to the Company's Common Stock, the last sale price regular
way or, in case no such sales take place on such date, the average of the
closing and asked prices regular way on the principal national securities
exchange on which the Common Stock is listed or admitted to trading; or if the
Common Stock is not then listed or admitted to trading on any national
securities exchange, the last sale price of the Common Stock on the consolidated
transaction reporting system of the National Association of Securities Dealers
Inc. ("NASD"), if such last sale information is reported on such system or, if
not so reported, the average of the closing bid and asked prices of the Common
Stock on the National Association of Securities Dealers Automated Quotation
System ("NASDAQ") or any comparable system or, if the securities are not listed
on NASDAQ or a comparable system, the average of the closing bid and asked
prices as furnished by two members of the NASD selected from time to time by the
Company for that purpose.
5. Purchase for Investment; Resale Restrictions. (a) The Holder hereby
represents, and each assignee of Holder as a condition to transfer shall
represent, that he is acquiring or will acquire the Warrant and the Warrant
Shares for his own account, for investment only with no present intention of
distributing or reselling such securities or any part thereof. Unless at the
time of the acquisition of the Warrant or the exercise of the Warrant, as the
case may be, there shall be, in the opinion of counsel for the Company, a valid
and effective registration statement under the Securities Act 1933 ("1933 Act")
and appropriate qualification and registration under applicable state securities
laws relating to the Warrant or the Warrant Shares, as the case may be, the
Holder shall, prior to the assignment of the Warrant or upon exercise of the
Warrant or any portion thereof, as the case may be, give a representation that
he is acquiring such Warrant or Warrant Shares, as the case may be, for his own
account, only for investment and not with the view to the resale or distribution
of any of such securities. In the absence of such registration statement, the
Holder shall execute a written affirmation, in form reasonably satisfactory to
the Company, of such investment intent. The Holder further agrees that he will
not sell or transfer the Warrant or any Warrant Shares, as the case may be,
until he requests and receives an opinion from the Company's counsel, or other
counsel reasonably satisfactory to the Company, to the effect that such proposed
sale or transfer will not result in a violation of the 1933 Act or a
registration statement covering the sale or transfer of the Warrant or Warrant
Shares, as the case may be, has been declared effective by the Securities and
Exchange Commission ("SEC"), or he obtains a no action letter from the SEC with
respect to the proposed transfer. There shall be stamped on the certificate(s)
representing the Warrant or Warrant Shares, as the case may be, an appropriate
legend giving notice of the acquisition of such Warrant or Warrant Shares, as
the case may be, for investment and the restriction on their transfer by reason
thereof.
6. Adjustments. In the event of any change in the outstanding Common
Stock of the Company by reason of any stock recapitalization, merger,
consolidation, combination or exchange of shares, the kind of shares subject to
the Warrant and/or their purchase price per share and/or the number of shares
shall be appropriately adjusted consistent with such change in such manner as
the Board of Directors of the Company may deem equitable in their reasonable
discretion. In the event of a stock dividend or stock split, the kind of shares,
the purchase price per share and number of shares shall be appropriately
adjusted, consistent with such change in such manner as the Board of Directors
may deem equitable in their reasonable discretion.
7. No Rights of Stockholder. The Holder shall have no rights as a
stockholder with respect to any Warrant Shares prior to the date of purchase
thereof and issuance to him of a certificate or certificates for such shares.
8. No Right to Continue Representation Agreement. This Agreement shall
not confer on the Holder or Licensee any rights with respect to continuance of
the Representation Agreement nor shall it interfere in any way with the rights
of any of the parties to terminate the Representation Agreement at any time.
9. Compliance With Law and Regulations. This Agreement and the
obligation of the Company to sell and deliver the Warrant and the Warrant Shares
shall be subject to all applicable federal and state laws, rules and regulations
and to such approvals by any government or regulatory agency as may be required.
If, at any time, the Board of Directors of the Company shall determine that (a)
the listing, registration or qualification of the Warrant Shares upon any
securities exchange or under any state or federal law or (b) the consent or
approval of any government regulatory body, is necessary or desirable as a
condition to, or in connection with, the offer, sale and issuance of the Warrant
Shares, the Warrant shall not be exercised by the Holder in whole or in part
unless such listing, registration, qualification, consent, approval or agreement
shall have been effected or obtained, free of any conditions not acceptable to
the Board of Directors of the Company, acting reasonably.
10. Tax Withholding Requirements. The Company shall have the right to
require the Holder to remit to the Company an amount sufficient to satisfy any
federal, state or local withholding or other tax requirements applicable to the
sale of the Warrant or the issuance and sale of the Warrant Shares prior to the
delivery of any Warrant Certificate or Certificates for the Warrant Shares.
11. Change of Control. Notwithstanding anything herein to the contrary
upon the occurrence of a change in control then provided that Holder is not in
breach of any of the provisions of the Representation Agreement and the
Representation Agreement is of full force and effect at that time, Holder shall
have the right to elect to terminate the Representation Agreement and in that
event fifty percent (50%) of the remaining shares subject to this Warrant which
have not yet vested in the Holder in terms of 3(a) above shall thereupon
immediately vest in him and the balance shall fall way and the Exercise Period
shall expire one (1) year after the date of such election. Consequently, at any
time prior to the expiration of the Exercise Period Holder shall be entitled to
exercise this Warrant in respect of that number of Warrant Shares that shall
have vested in the Holder prior thereto together with that number of Warrant
Shares that shall automatically vest in him upon such termination, in accordance
with the provisions of this agreement. In exercising his right to elect to
terminate the Representation Agreement in terms of this paragraph, Holder shall
be obliged to act reasonably in the circumstances existing at that time. For the
purposes of this agreement "change in control" means
A. The acquisition of "beneficial ownership" by any person (as
defined in rule 13(d) - 3 under the Securities Exchange Act 1934), corporation
or other entity other than Hansen or a wholly owned subsidiary of Hansen of
forty percent (40%) or more of the outstanding stock,
B. the sale or disposition of substantially all of the assets
of Hansen.
12. Fractional Shares. Notwithstanding any other provision of this
Agreement, no fractional shares of stock shall be issued upon the exercise of
this Warrant and the company shall not be under any obligation to compensate the
Holder in any way for such fractional shares.
13. Severability. Whenever possible, each provision of this Agreement
will be interpreted in such manner as to be effective and valid under applicable
law, but if any provision of this Agreement is held to be prohibited by or
invalid under applicable law, such provision will be ineffective only to the
extent of such prohibition or invalidity, without invalidating the remainder of
this Agreement.
14. Counterparts. This Agreement may be executed in two or more
counterparts, any one of which need not contain the signatures of more than one
party, but all of such counterparts taken together will constitute one and the
same Agreement.
15. Descriptive Headings. The descriptive headings of this Agreement
are inserted for convenience only and do not constitute a part of this Agreement
and shall not be used in the interpretation hereof.
16. Successors and Assigns. This Agreement shall be binding upon any
and all successors and assigns of the parties.
17. Amendments. This Agreement may not be modified, amended, altered,
or supplemented except upon the execution and delivery of a written agreement
executed by Holder and the Company.
18. Governing Law. This Agreement shall be construed according to the
laws of the State of Delaware without giving effect to the conflict of law
provisions thereof, and all provisions hereof shall be administered according to
and its validity shall be determined under, the laws of such state, except where
preempted by federal laws.
19. Notices. Any notice or other required or permitted communication
hereunder shall be in writing directed as follows:
(a) If to the Company to:
Hansen Natural Corporation
2380 Railroad, Suite 650
Corona, California 91720
Attention, Chairman
with copies to:
Whitman Breed Abbott & Morgan
200 Park Avenue
New York, New York 10166
Attention, Benjamin M. Polk, Esq.
(b) If to the Holder;
c/o Edward White
Edward White & Company, LLP
21700 Oxnard, Suite 400
Woodland Hills, CA 91367
All notices shall be deemed duly given and received on the
date of actual receipt if delivered in person or by facsimile and on the fifth
day next succeeding the date of mailing if sent by U.S. mail.
20. No Third Party Beneficiaries. The rights, benefits, releases and
obligations set forth herein are solely for the benefit of the parties and,
except as expressly provided herein, no third party shall have any rights
hereunder.
21. If, at any time prior to the expiration of a period of one (1) year
after the date on which this option is exercised by Holder the Company proposes
to file a registration statement under the 1933 Act with respect to an offering
by the Company for its own account of its shares of common stock (other than a
registration statement on Form S4 or S8 (or any substitute form that may be
adopted by the SEC) or a registration statement filed in connection with an
exchange offering of securities solely to the Company's existing security
holders), then the Company shall give written notice of such proposed filing to
Holder as soon as practicable (but in no event less than 20 days before the
anticipated filing date) and such notice shall offer the Holder the opportunity
to register the Warrant and/or the Warrant Shares, as the case may be, provided
the Holder requests such registration within 10 days of receipt of such notice
(which request shall specify the Warrant and/or number of Warrant Shares
intended to be disposed of by Holder and the intended method of distribution
thereof) (a "Piggy Back" Registration). The Company shall, or in an underwritten
offering shall use its best efforts to cause the managing Underwriter or
Underwriters of a proposed underwritten offering to permit the Warrant and/or
the Warrant Shares requested to be included in a Piggy Back Registration to be
included on the same terms and conditions as any similar securities of the
Company included therein and to permit the sale or other disposition of such
Warrant and/or Warrant Shares in accordance with the intended method of
distribution thereof as specified by the Holder by written notice given in
accordance with the terms hereof. The Company may withdraw a Piggy Back
Registration at any time prior to the time it becomes effective. Notwithstanding
anything contained herein, if the managing Underwriter or Underwriters of an
offering described above determines, in good faith, that the size of the
offering that the Company, the Holder and any other persons intend to make is
such that the success of the offering would be adversely affected by the
inclusion of the Warrant and/or Warrant Shares requested to be included, then,
if securities are being offered for the account of other persons as well as the
Company, the securities the Company seeks to include shall have priority however
securities sought to be included by any other person (including the Holder) and,
with respect to the securities intended to be offered by Holder, the proportion
by which the amount of such class of securities intended to be offered by Holder
is reduced shall not exceed the proportion by which the amount of such class of
securities intended to be offered by such other persons is reduced (it being
understood that with respect to the Holder and third parties such reduction may
be all of such class of securities). The Holder undertakes to do all such things
and sign all such documents and provide all such information as may be required
by the Company to prepare the appropriate Registration Statement and Prospectus
and which may be reasonably required to facilitate the disposition of the
Warrant and/or Warrant Shares.
22. This Agreement is conditional upon and subject to the Board of
Directors of the Company ratifying this Agreement on or before June 20, 1998.
23. The Company represents and warrants that it is not aware of any
existing federal or state law or governmental or regulatory agency requirement
that would limit the ability of the Company to issue the Warrants contemplated
herein in terms of this Agreement or the Holders ability to exercise such
warrants. The Company undertakes to take reasonable steps to ensure that it
remains in compliance with any and all such federal and state rules, regulations
and laws.
24. Any disagreement, dispute or claim arising out of or relating to
this agreement or the breach or termination hereof shall be settled by
arbitration in accordance with the rules of the American Arbitration Association
and judgement on the award rendered by the arbitrator may be entered in any
court having jurisdiction. The parties agree that in rendering an award the
arbitrator shall have no jurisdiction to consider evidence with respect to or to
render any award or judgement for punitive or exemplary damages or any other
amount awarded for the purposes of imposing a penalty. The parties specifically
waive any claims for punitive or exemplary damages or any other amount awarded
for the purposes of imposing a penalty, that arise out of or are related to this
Agreement or the conduct of the parties in connection with this Agreement. The
arbitrator shall have the power to award reasonable attorney's fees.
IN WITNESS WHEREOF the parties have executed this Agreement as the date
first written above.
HANSEN NATURAL CORPORATION
By:
Name: Rodney C. Sacks
Title: Chairman and Chief
Executive Officer
HOLDER
By:
Name:
RCS-2946.Doc
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933 OR THE SECURITIES LAW OF ANY STATE AND MAY NOT BE
SOLD OR OTHERWISE DISPOSED OF EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER SUCH ACT AND APPLICABLE STATE SECURITIES LAWS OR AN APPLICABLE
EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF SUCH ACT OR SUCH LAWS.
HANSEN NATURAL CORPORATION
WARRANT TO PURCHASE SHARES OF COMMON STOCK
The Transferability of this Warrant is restricted as set forth in the
related Warrant Agreement, a copy of which may be obtained from the
Company at its principal office.
No. DIP-_______ Up to 150,000 SHARES
THIS CERTIFIES THAT for value received Rick Dees (the
"Holder") or registered assigns is the owner of a Warrant to purchase during the
period expiring no later than 5:00 p.m. New York time on December 14, 2000
(subject to earlier expiration as provided in the Warrant Agreement between the
Company and the Holder, the "Warrant Agreement"), the number of fully paid and
non-assessable shares of Common Stock, $.005 par value per share, of Hansen
Natural Corporation, a Delaware corporation (hereinafter called the "Company"),
specified above upon payment of the Warrant Price (as defined below); provided,
however, that, as set forth in the Warrant Agreement, the right to purchase the
number of shares of the Company's Common Stock set forth above shall vest and
become exercisable only in accordance with the schedule set forth in the Warrant
Agreement and may in addition be reduced in the circumstances described therein.
In addition to the foregoing, as provided in the Warrant
Agreement, certain adjustments may be made in the discretion of the Board of
Directors of the Company in the number of shares of Common Stock issuable upon
exercise of this Warrant in the event of the change in the number of shares of
Common Stock of the Company outstanding by reason a stock split, combination of
stock or stock dividend in such manner as the Board of Directors may deem
equitable.
The warrant price per share (hereinafter called the "Warrant
Price") shall be $2.50. As provided in the Warrant Agreement, the Warrant Price
is payable upon the exercise of this Warrant, either in cash by check or other
immediately available funds or in shares of Common Stock or by relinquishing a
portion of this Warrant.
Upon the exercise of this Warrant, the form of election to
purchase attached hereto must be properly completed and executed and surrendered
to the Company or its transfer agent. In the event that this Warrant is
exercised in respect of fewer than all of such shares, a new Warrant for the
remaining number of such shares, substantially in the form hereof, will be
issued on such surrender.
This Warrant is issued under, and the rights represented
hereby are subject to, the terms and provisions contained in the Warrant
Agreement. By acceptance of an assignment of this Warrant any assignee agrees
and assents to all the terms and provisions of the Warrant Agreement. Reference
is hereby made to terms and conditions of the Warrant Agreement for a more
complete statement of the rights and limitations of rights of the registered
holder hereof and the rights and obligations of the Company thereunder, which
terms and conditions are incorporated herein by reference. Copies of the Warrant
Agreement are on file at the principal office of the Company.
The Company shall not be required upon the exercise of this
Warrant to issue fractions of shares.
This Warrant is transferable at the office of the Company (or
of its transfer agent) by the registered holder hereof in person or by attorney
duly authorized in writing, but only in the manner and subject to the
limitations provided in the Warrant Agreement, and upon surrender of this
Warrant and the payment of any transfer taxes. Upon any such transfer, a new
Warrant, or new Warrants of different denominations, of like tenor and
representing in the aggregate the right to purchase a like number of shares of
Common Stock will be issued to the transferee in exchange for this Warrant.
This Warrant when surrendered at the office of the Company (or
of its transfer agent) by the registered holder hereof, in person or by attorney
duly authorized in writing, may be exchanged, in the manner and subject to the
limitations provided in the Warrant Agreement for another Warrant, or other
Warrants of different denominations, of like tenor and representing in the
aggregate the right to purchase a like number of shares of Common Stock.
If this Warrant shall be surrendered for exercise within any
period during which the transfer books for shares of the Common Stock of the
Company or other securities purchasable upon the exercise of this Warrant are
closed for any purpose, the Company shall not be required to make delivery of
certificates for the securities purchasable upon such exercise until the date of
the reopening of said transfer books.
The Holder this Warrant shall not be entitled to any of the
rights of a stockholder of the Company prior to the exercise hereof.
PURCHASE FORM
Dated _______________, 19__
The undersigned hereby irrevocably elects to exercise the
within Warrant to the extent of purchasing __________ shares of Common Stock and
hereby makes payment by [check or other immediately available funds totaling
$_______] [delivery of shares of Common Stock having a value (as calculated
pursuant to paragraph 4(b) of the Warrant Agreement) of [$__________]]
[relinquishing a portion of the within Warrant having a value calculated in
accordance with paragraph 4(b) of the Warrant Agreement of $ ___________]
(delete inapplicable phrase) in payment of the actual exercise price thereof.
INSTRUCTIONS FOR REGISTRATION OF STOCK
Name________________________________________________________
(Please typewrite or print in block letters)
Address_____________________________________________________
Signature________________________________________________
ASSIGNMENT FORM
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers unto
Name________________________________________________________
(Please typewrite or print in block letters)
Address_____________________________________________________
the right to purchase Common Stock represented by this Warrant to the extent of
________ shares as to which such right is exercisable and does hereby
irrevocably constitute and appoint _______________, Attorney, to transfer the
same on the books of the Company with full power of substitution in the
premises.
Date________________, 19__
Signature___________________________________________________
5
000865752
HANSEN NATURAL CORPORATION
3-MOS
DEC-31-1998
APR-01-1998
JUN-30-1998
2,146,543
0
5,012,254
2,318,369
3,996,739
9,180,810
1,350,268
728,133
20,142,511
5,508,666
0
0
0
45,746
11,652,145
20,142,511
25,215,385
25,215,385
12,622,771
12,622,771
9,739,951
0
211,657
2,641,006
920,123
1,720,883
0
0
0
1,720,883
.19
.17
