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Mail Stop 3-8
June 9, 2005
Mr. Rodney C. Sacks
Chairman of the Board and Chief Executive Officer
Hansen Natural Corporation
1010 Railroad Street
Corona, California 92882
RE: Hansen Natural Corporation
Form 10-K for Fiscal Year Ended December 31, 2004
Form 10-Q for Fiscal Quarter Ended March 31, 2005
Filed March 16, 2005 and May 10, 2005
File No. 0-18761
Dear Mr. Sacks:
We have reviewed your filings and have the following
comments. We have limited our review to only your financial
statements and related disclosures and do not intend to expand our
review to other portions of your documents. Where indicated, we
think you should revise your documents in response to these
comments.
If you disagree, we will consider your explanation as to why our
comment is inapplicable or a revision is unnecessary. Please be
as
detailed as necessary in your explanation. In some of our
comments,
we may ask you to provide us with supplemental information so we
may
better understand your disclosure. After reviewing this
information,
we may raise additional comments.
Please understand that the purpose of our review process is
to
assist you in your compliance with the applicable disclosure
requirements and to enhance the overall disclosure in your
filings.
We look forward to working with you in these respects. We welcome
any questions you may have about our comments or on any other
aspect
of our review. Feel free to call us at the telephone numbers
listed
at the end of this letter.
Form 10-K for Fiscal Year Ended December 31, 2004
General
1. Except for comment 15 for which amendment is required, where a
comment below requests additional disclosures or other revisions
to
be made, these revisions should be included in your future
filings,
as applicable.
Item 6. Selected Consolidated Financial Data, page 17
2. You have presented a non-GAAP performance measure, "Gross
Sales".
Please include the following wherever this measure is presented:
(a) Cautionary disclosure that the measure presented may not be
comparable to similarly titled measures used by other entities.
(b) A detailed description of how management "internally uses" the
non-GAAP measure that fully explains why management believes it is
useful and meaningful to investors and what additionally
information
it provides that is not provided by the GAAP performance measure.
(c) Whether management uses the non-GAAP measure as liquidity
measures also or as a measure of operating performance.
(d) A statement that the non-GAAP measure should not be considered
as
alternatives to Net sales, which is determined in accordance with
GAAP, as indicators of operating performance.
(e) A reconciliation to Net sales.
(f) A discussion of the comparable GAAP operating performance
measures, when the non-GAAP measure is discussed. Any non-GAAP
measures should be balanced with presentation and discussion of
the
most directly comparable GAAP measure.
Similarly, please revise your Management`s Discussion and Analysis
of
Financial Condition and Results of Operations as well. See Item
10(e) of Regulation S-K.
Item 7. Management`s Discussion and Analysis of Financial
Condition
and Results of Operations
Results of Operations, page 23
3. When two or more factors contributed to a material change in a
financial statement line item between periods please quantify the
extent to which each factor contributed to the overall change.
For
instance, when discussing the various reasons for changes in your
Net
Sales, it would be helpful if you quantified the individual impact
of
changes in sales prices versus volume. This would provide the
reader
with a better understanding of the extent to which each factor
contributed to the overall change. See Item 303(a) of Regulation
S-K
and SEC Release No. 33-8350.
Liquidity and Capital Resources, page 27
4. The discussion and analysis of cash flows should not be merely
a
recitation of changes evident from the financial statements.
Please
revise your Management`s Discussion and Analysis to explain why
there
were material changes in your accounts such as accounts receivable
and payable. Additionally, please expand your discussion to
include
an analysis of known material trends, events, demands, commitments
and uncertainties. See Item 303 of Regulation S-K.
Consolidated Statement of Income, page 52
5. Please remove the line items above net sales from the face of
your
statement of income. Your disclosures elsewhere throughout the
filing should also be revised to remove the implication that both
gross and net amounts represent your GAAP basis sales. You should
still disclose your accounting treatment for discounts, allowances
and promotional payments for each period presented as required by
EITF 01-9 and provide appropriate disclosure in Schedule II of
revenue dilution items in accordance with Rules 5-04 and 12-09 of
Regulation S-X. Please show us what your revised disclosures will
look like.
Notes to Consolidated Financial Statements
General
6. Please tell us more about and disclose, in more detail, the
types
of expenses that you include in the cost of sales line item and
the
types of expenses that you include in the selling, general and
administrative expenses line item. Specifically address whether
you
include inbound freight charges, purchasing and receiving costs,
inspection costs, warehousing costs, internal transfer costs, and
the
other costs of your distribution network in the cost of sales line
item. If you currently exclude a portion of these costs from cost
of
sales, please disclose:
* in a footnote the line items that these excluded costs are
included
in and the amounts included in each line item for each period
presented, and
* in MD&A that your gross margins may not be comparable to those
of
other entities, since some entities include all of the costs
related
to their distribution network in cost of sales and others exclude
a
portion of them from gross margin, including them instead in a
line
item, such as selling, general and administrative expenses.
7. We note that you sell several types of products based on your
discussion in Item 1. Business and the product line references on
your website. Please disclose the product line revenue disclosures
required by paragraph 37 of SFAS 131. In particular, we assume
that
would require revenue disclosures for each period presented for
the
following product categories:
- - Energy
- - Juices and Non Carbonated
- - Sodas
- - Specialty and Nutrition
If you believe that other product categories are more appropriate,
please show us what your future disclosures will look like.
Note 1. Organization and Summary of Significant Accounting
Policies
Change in Accounting for Goodwill and Other Intangible Assets,
page
60
8. Please disclose separately the trademarks you license from
third
parties from the trademarks you own, to the extent material. See
paragraph 45 of SFAS 142.
Advertising and Promotional Allowances, page 57
9. Please disclose the amount of advertising costs reported as
assets
in each balance sheet presented. See paragraph 49 of SOP 93-7.
Concentration Risk, page 59
10. If material, please quantify the volume of business transacted
with individual suppliers for components which you have identified
as
having a "limited number of sources." See paragraph 22 of SOP 94-
6.
11. Please disclose the basis for attributing revenues to
individual
countries and disclose revenues and assets attributable to
individual
foreign countries, to the extent material. Tell us your threshold
for assessing materiality for disclosure purposes. See paragraph
38
of SFAS 131 for guidance.
Segment Information, page 59
12. Based on your discussion of gross profit in Management`s
Discussion and Analysis, it appears that your energy products
business may represent a separate operating segment as defined in
paragraph 10 of SFAS 131. It appears that the gross margins for
your
energy drinks are significantly higher than your other products
and
therefore do not meet the aggregation criteria of paragraph 17 of
SFAS 131. If you do not agree that this business represents a
separate operating segment, please tell us in detail why not.
Please ensure that your response compares the revenues and gross
margins for your energy drinks and your other products and
demonstrate how this information supports your segment
presentation
under SFAS 131. If after reassessing the criteria in SFAS 131,
you
now believe that you have separate reportable segments, please
revise
your future financial statements accordingly.
Note 2. Inventories, page 61
13. Please be advised that an inventory write down due to
obsolescence establishes a new cost basis and should not be
presented
as a reserve. See Chapter 4, footnote 2, of ARB 43 and SAB Topic
5:BB. We assume the company is presenting the reserve for
informational purposes only and that subsequently you do not
increase
the cost basis of inventory items after a write down has been
recorded. Please confirm whether our understanding is correct and
clarify your policy in future filings. Additionally, if the sale
of
inventory previously written-down resulted in the recognition of
gross margin in excess of your typical margin and the effects were
material to reported results of operations, please provide
appropriate MD&A disclosure.
Index to Exhibits, page 48
14. Pursuant to Item 601(b)(21) of Regulation S-K please file an
updated list of all of your subsidiaries. We note from your MD&A
discussion you have subsidiaries, Hansen Junior Juice Company and
Blue Sky Natural Beverage, incorporated in May 2001 and September
2000, not listed on your current list, which is incorporated by
reference to your Form 10KSB for the year ended December 31, 1992.
Exhibits 31.1 and 31.2
15. We note that your certifications exclude paragraph 4(b)
regarding
internal control over financial reporting. In addition, you have
omitted the portion of the introductory language in paragraph 4 of
the certification that refers to the certifying officers`
responsibility for establishing and maintaining internal control
over
financial reporting for the company. Please amend the filing to
include the above disclosures since they are required to be
included
in your Section 302 certifications in the first annual report
required to contain management`s internal control report and
thereafter.
Forms 8-K
16. We notice you have not been consistently filing information
under
Item 2.02, Results of Operations and Financial Condition, of Form
8-
K. Please tell us in detail why you believe you have not met the
reporting requirement of this item in light of your quarterly
earnings releases.
As appropriate, please amend your filing and respond to
these
comments within 10 business days or tell us when you will provide
us
with a response. You may wish to provide us with marked copies of
the amendment to expedite our review. Please furnish a cover
letter
with your amendment that keys your responses to our comments and
provides any requested information. Detailed cover letters
greatly
facilitate our review. Please understand that we may have
additional
comments after reviewing your amendment and responses to our
comments.
We urge all persons who are responsible for the accuracy and
adequacy of the disclosure in the filings to be certain that the
filings includes all information required under the Securities
Exchange Act of 1934 and that they have provided all information
investors require for an informed investment decision. Since the
company and its management are in possession of all facts relating
to
a company`s disclosure, they are responsible for the accuracy and
adequacy of the disclosures they have made.
In connection with responding to our comments, please
provide,
in writing, a statement from the company acknowledging that:
* the company is responsible for the adequacy and accuracy of the
disclosure in the filing;
* staff comments or changes to disclosure in response to staff
comments do not foreclose the Commission from taking any action
with
respect to the filing; and
* the company may not assert staff comments as a defense in any
proceeding initiated by the Commission or any person under the
federal securities laws of the United States.
In addition, please be advised that the Division of
Enforcement has access to all information you provide to the staff
of
the Division of Corporation Finance in our review of your filing
or
in response to our comments on your filing.
If you have any questions regarding these comments,
please
direct them to Anthony Watson, Staff Accountant, at (202) 551-3318
or, in his absence, to me at (202) 551-3843.
Sincerely,
George F. Ohsiek, Jr.
Branch Chief
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Mr. Rodney C. Sacks
Hansen Natural Corporation
June 9, 2005
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