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, 2001 Commission file number 0-18761
HANSEN NATURAL CORPORATION
(Exact name of Registrant as specified in its charter)
Delaware 39-1679918
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization Identification No.)
1010 Railroad Street
Corona, California 92882
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code:
(909) 739 - 6200
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports) and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
The registrant had 10,045,003 shares of common stock
outstanding as of July 24, 2001
HANSEN NATURAL CORPORATION AND SUBSIDIARIES
June 30, 2001
INDEX
Page No.
Part I. FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements
Consolidated Balance Sheets as of June 30, 2001
and December 31, 2000 3
Consolidated Statements of Income for the
three and six-months ended June 30, 2001 and 2000 4
Consolidated Statements of Cash Flows for the
six-months ended June 30, 2001 and 2000 5
Notes to Consolidated Financial Statements for the
six-months ended June 30, 2001 and year
ended December 31, 2000 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
HANSEN NATURAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
JUNE 30, 2001 (Unaudited) AND DECEMBER 31, 2000
- --------------------------------------------------------------------------------
June 30, December 31,
2001 2000
(Unaudited)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 403,736 $ 130,665
Accounts receivable (net of allowance for doubtful
accounts, sales returns and cash discounts of $706,239
in 2001 and $486,462 in 2000 and promotional allowances
of $3,434,003 in 2001 and $2,583,088 in 2000) 7,690,997 6,584,486
Inventories, net 9,949,442 10,907,895
Prepaid expenses and other current assets 805,275 823,387
Deferred income tax asset 881,618 881,618
------------------ -----------------
Total current assets 19,731,068 19,328,051
PROPERTY AND EQUIPMENT, net 1,935,309 1,863,044
INTANGIBLE AND OTHER ASSETS:
Trademark license and trademarks (net of accumulated amortization
of $3,615,559 in 2001 and $3,366,358 in 2000) 17,683,792 16,887,914
Deposits and other assets 742,578 665,731
------------------ -----------------
Total intangible and other assets 18,426,370 17,553,645
------------------ -----------------
$ 40,092,747 $ 38,744,740
================== =================
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 6,446,065 $ 3,681,956
Accrued liabilities 893,096 607,443
Accrued compensation 176,369 281,629
Current portion of long-term debt 388,493 234,655
Income taxes payable 337,513 878,266
------------------ -----------------
Total current liabilities 8,241,536 5,683,949
LONG-TERM DEBT, less current portion 7,060,782 9,731,956
DEFERRED INCOME TAX LIABILITY 1,274,139 1,274,139
SHAREHOLDERS' EQUITY:
Common stock - $.005 par value; 30,000,000 shares authorized; 10,251,764 shares
issued, 10,045,003 outstanding
in 2001; 10,148,882 shares issued, 9,942,121 outstanding in 2000. 51,259 50,744
Additional paid-in capital 11,695,725 11,667,619
Retained earnings 12,583,851 11,150,878
Common stock in treasury; at cost - 206,761 shares
in 2001 and 2000 respectively (814,545) (814,545)
------------------ -----------------
Total shareholders' equity 23,516,290 22,054,696
------------------ -----------------
$ 40,092,747 $ 38,744,740
================== =================
See accompanying notes to consolidated financial statements.
3
HANSEN NATURAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
FOR THE THREE-MONTHS AND SIX-MONTHS ENDED JUNE 30, 2001 AND 2000 (Unaudited)
- --------------------------------------------------------------------------------
Three Months Ended Six Months Ended
June 30, June 30,
------------------------------------ -------------------------------------
2001 2000 2001 2000
----------------- ---------------- ---------------- -----------------
NET SALES $ 25,715,071 $ 22,666,775 $ 44,483,867 $ 38,644,777
COST OF SALES 14,038,278 11,974,847 24,556,749 20,748,889
----------------- ---------------- ---------------- -----------------
GROSS PROFIT 11,676,793 10,691,928 19,927,118 17,895,888
OPERATING EXPENSES:
Selling, general and administrative 9,575,503 7,793,226 16,958,509 13,746,638
Amortization of trademark license and trademarks 125,969 82,638 249,201 165,297
----------------- ---------------- ---------------- -----------------
Total operating expenses 9,701,472 7,875,864 17,207,710 13,911,935
----------------- ---------------- ---------------- -----------------
OPERATING INCOME 1,975,321 2,816,064 2,719,408 3,983,953
NONOPERATING EXPENSE (INCOME)
Interest and financing expense 135,347 63,891 338,303 92,186
Interest income (5,898) (1,306) (7,182) (8,550)
----------------- ---------------- ---------------- -----------------
Net nonoperating expense 129,449 62,585 331,121 83,636
INCOME BEFORE PROVISION
FOR INCOME TAXES 1,845,872 2,753,479 2,388,287 3,900,317
PROVISION FOR INCOME TAXES 738,347 1,101,392 955,314 1,560,127
----------------- ---------------- ---------------- -----------------
NET INCOME $ 1,107,525 $ 1,652,087 $ 1,432,973 $ 2,340,190
================= ================ ================= =================
NET INCOME PER COMMON SHARE:
Basic $ 0.11 $ 0.17 $ 0.14 $ 0.23
================= ================ ================ =================
Diluted $ 0.11 $ 0.16 $ 0.14 $ 0.22
================= ================ ================ =================
NUMBER OF COMMON SHARES USED
IN PER SHARE COMPUTATIONS:
Basic 10,045,003 9,941,601 10,027,479 9,970,129
================= ================ ================ =================
Diluted 10,292,316 10,367,602 10,298,630 10,426,526
================= ================ ================ =================
See accompanying notes to consolidated financial statements.
4
HANSEN NATURAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 2001 AND 2000 (Unaudited)
- --------------------------------------------------------------------------------
2001 2000
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 1,432,973 $ 2,340,190
Adjustments to reconcile net income to
net cash provided by (used in) operating activities:
Amortization of trademark license and trademarks 249,201 160,621
Depreciation and other amortization 207,136 115,656
Gain on disposal of fixed assets (11,410)
Effect on cash of changes in operating assets and liabilities:
Accounts receivable (1,106,511) (3,441,644)
Inventories 958,453 895,526
Prepaid expenses and other current assets 18,112 (422,229)
Accounts payable 2,764,109 (732,801)
Accrued liabilities 88,976 448,378
Accrued compensation (105,260) (330,656)
Income taxes payable (540,753) (125,769)
------------------ -----------------
Net cash provided by (used in) operating activities 3,955,026 (1,092,728)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment (290,743) (736,138)
Proceeds from sale of fixed assets 22,752
Increase in trademark license and trademarks (98,402) 5,232
Increase in deposits and other assets (76,847) (223,728)
------------------ -----------------
Net cash used in investing activities ( 443,240) (954,634)
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase in short-term borrowings 524,991
Principal payments on long-term debt (3,267,336) (353,085)
Increase in long-term debt 488,408
Issuance of common stock 28,621 230,000
Purchases of common stock, held in treasury (730,498)
------------------ -----------------
Net cash (used in) provided by financing activities (3,238,715) 159,816
------------------ -----------------
NET INCREASE (DECREASE) IN CASH 273,071 (1,887,546)
CASH AND CASH EQUIVALENTS, beginning of the period 130,665 2,009,155
------------------ -----------------
CASH AND CASH EQUIVALENTS, end of the period $ 403,736 $ 121,609
================== =================
SUPPLEMENTAL INFORMATION Cash paid during the period for:
Interest $ 373,557 $ 87,286
================== =================
Income taxes $ 1,496,067 $ 1,335,896
================== =================
NONCASH TRANSACTIONS:
During the six month period ended June 30, 2001, the Company assumed
long-term debt of $750,000 and accrued liabilities of $196,677 in
connection with the acquisition of the Junior Juice trademark.
During the six month period ended June 30, 2001, the Company issued
84,882 shares of common stock to employees in connection with a
net exercise of options to purchase 134,500 shares of common stock.
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.
See accompanying notes to consolidated financial statements.
5
HANSEN NATURAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE SIX-MONTHS
ENDED JUNE 30, 2001 (Unaudited) AND YEAR ENDED DECEMBER 31, 2000
- --------------------------------------------------------------------------------
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, 2000, which is
incorporated by reference, for a summary of significant policies
utilized by Hansen Natural Corporation ("Hansen" or "Company") and its
wholly-owned subsidiaries, Hansen Beverage Company ("HBC") and Hard e
Beverage Company ("HEB"). Additionally, the Company's reporting on Form
10-Q does not include all the information and footnote disclosures
normally included in financial statements prepared in accordance with
accounting principles generally accepted in the United States of
America. HBC owns all of the issued and outstanding common stock of
Blue Sky Natural Beverage Co. and Hansen Junior Juice Company. The
information set forth in these interim consolidated financial
statements for the six months ended June 30, 2001 and 2000 is unaudited
and may be subject to normal year-end adjustments. The information
contained in these interim consolidated financial statements reflects
all adjustments, which include only normal recurring adjustments, which
in the opinion of management are necessary to make the interim
consolidated financial statements not misleading. Results of operations
covered by this report may not necessarily be indicative of results of
operations for the full year.
New Accounting Pronouncements - In April, 2001, the Emerging Issues
Task Force ("EITF") reached a consensus on Issue 00-25 ("EITF 00-25"),
"Vendor Income Statement Characterization of Consideration Paid to a
Reseller of the Vendors' Products." EITF 00-25 addresses the income
statement classification of consideration from a vendor to a reseller
or another party that purchases the vendors' products. The consensus
requires certain sales promotions and customer allowances currently
classified as selling, general and administrative expenses to be
classified as a reduction of net sales. The Company is currently
evaluating the impact of EITF 00-25 on its financial statements.
2. INVENTORIES
Inventories consist of the following at:
June 30,
2001 December 31,
(Unaudited) 2000
------------------ -----------------
Raw materials $ 5,191,710 $ 4,704,363
Finished goods 4,951,214 6,371,941
------------------ -----------------
10,142,924 11,076,304
Less inventory reserves (193,482) (168,409)
------------------ -----------------
$ 9,949,442 $10,907,895
================== =================
6
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
- --------------------------------------------------------------------------------
General
The increase in net sales during the second quarter of 2001 was primarily
attributable to sales of Blue Sky Natural Sodas, which business was acquired
during the third quarter of 2000, an increase in sales of natural sodas, apple
juice, juice blends and smoothies in cans and sales of Junior Juice 100% juices,
which business was acquired in May 2001. The Company also benefited from sales
of its new Medicine Man line which was launched during the current quarter. The
increase in net sales was partially offset by decreased sales of the smoothies
in glass and polyethylene terephthalate ("P.E.T.") bottles, Signature Sodas,
teas, lemonades and juice cocktails and Healthy Start in glass and P.E.T.
bottles.
During the three months ended June 30, 2001, gross profit as a percentage
of net sales increased to 45.4% from 44.0% during the first quarter of 2001. For
the six months ended June 30, 2001, gross profit as a percentage of net sales
decreased to 44.8% from 46.3% during the six months ended June 30, 2000. The
changes in gross profit as a percentage of net sales are primarily due to
changes in the Company's product mix.
The Company continues to incur expenditures in connection with the
development and introduction of new products and flavors.
Results of Operations for the Three-months Ended June 30, 2001 Compared to the
Three-months Ended June 30, 2000
Net Sales. For the three-months ended June 30, 2001, net sales were $25.7
million, an increase of $3.0 million or 13.4% higher than the $22.7 million net
sales for the three-months ended June 30, 2000. The increase in net sales during
the second quarter of 2001 was primarily attributable to sales of Blue Sky
Natural Sodas, which business was acquired during the third quarter of 2000, an
increase in sales of natural sodas, apple juice, juice blends and smoothies in
cans and sales of Junior Juice 100% juices, which business was acquired in May
2001. The Company also benefited from sales of its new Medicine Man line which
was launched during the current quarter. The increase in net sales was partially
offset by decreased sales of the smoothies in glass and polyethylene
terephthalate ("P.E.T.") bottles, Signature Sodas, teas, lemonades and juice
cocktails and sales of Healthy Start in glass and P.E.T. bottles.
Gross Profit. Gross profit was $11.7 million for the three-months ended
June 30, 2001, an increase of $1.0 million or 9.2% higher than the gross profit
for the three-months ended June 30, 2000 of $10.7 million. Gross profit as a
percentage of net sales, decreased to 45.4% for the three-months ended June 30,
2001 from 47.2% for the three-months ended June 30, 2000 but increased from
44.0% for the quarter ended March 31, 2001. The increase in gross profit was
primarily attributable to an increase in net sales whereas the decrease in gross
profit as a percentage of net sales was primarily attributable to a change in
the product mix.
Total Operating Expenses. Total operating expenses were $9.7 million for
the three-months ended June 30, 2001, an increase of $1.8 million or 23.2%
higher than total operating expenses of $7.9 million for the three-months ended
June 30, 2000. Total operating expenses as a percentage of net sales increased
to 37.7% for the three-months ended June 30, 2001 from 34.7% for the
three-months ended June 30, 2000. 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 and, to a lesser
extent, increased amortization of trademark license and trademarks due to the
acquisition of the Blue Sky trademark in the third quarter of 2000.
7
Selling, general and administrative expenses were $9.6 million for the
three-months ended June 30, 2001, an increase of $1.8 million or 22.9% higher
than selling, general and administrative expenses of $7.8 million for the
three-months ended June 30, 2000. The increase in selling expenses was primarily
attributable to increased promotional allowances granted to customers and
increased expenditures for slotting fees. The increase in selling expenses was
partially offset by decreases in expenditures for merchandise displays and
point-of-sale materials. The increase in general and administrative expenses was
primarily attributable to increased legal, insurance, travel and payroll
expenses primarily for sales and administrative activities and other operating
expenses.
Amortization expense was $126,000 for the three-months ended June 30, 2001,
an increase of $43,000 over amortization expense of $83,000 for the three months
ended June 30, 2000. The increase in amortization expense is primarily
attributable to the acquisition of the Blue Sky trademark in the third quarter
of 2000.
Operating Income. Operating income was $2.0 million for the three-months
ended June 30, 2001, a decrease of $841,000 or 29.9% lower than operating income
of $2.8 million for the three-months ended June 30, 2000. Operating income as a
percentage of net sales decreased to 7.7% for the three-months ended June 30,
2001 from 12.4% for the three-months ended June 30, 2000. The decrease in
operating income was attributable to a $1.8 million increase in operating
expenses which was partially offset by a $1.0 million increase in gross profit.
The 4.7% decrease in operating income as a percentage of net sales was partially
attributable to a 1.8% decrease in gross profit as a percentage of net sales, a
2.8% increase in operating expenses as a percentage of net sales and a 0.1%
increase in amortization of trademark license and trademarks.
Net Nonoperating Expense. Net nonoperating expense was $129,000 for the
three-months ended June 30, 2001, an increase of $67,000 over net non-operating
expense of $62,000 for the three-months ended June 30, 2000. The increase in net
non-operating expense was primarily attributable to increased interest expense
incurred on the Company's increased borrowings, which were primarily
attributable to the acquisition of the Blue Sky Natural Soda business and the
financing of motor vehicles and equipment acquired by the Company.
Provision for Income Taxes. Provision for income taxes for the three-months
ended June 30, 2001 was $738,000 as compared to provision for income taxes of
$1.1 million for the comparable period in 2000. The $363,000 decrease in
provision for income taxes was primarily attributable to the decrease in
operating income and an increase in non-operating expense.
Net Income. Net income was $1.1 million for the three-months ended June 30,
2001, a decrease of $545,000 or 33.0% lower than net income of $1.7 million for
the three-months ended June 30, 2000. The decrease in net income was
attributable to the increase in operating expenses of $1.8 million and the
increase in nonoperating expense of $67,000 which was partially offset by the
increase in gross profit of $1.0 million and the decrease in provision for
income taxes of $363,000.
8
Results of Operations For The Six-months Ended June 30, 2001 Compared to the
Six-months Ended June 30, 2000
Net Sales. For the six-months ended June 30, 2001, net sales were
approximately $44.5 million, an increase of $5.9 million or 15.1% over the $38.6
million net sales for the six-months ended June 30, 2000. The increase in net
sales was primarily attributable to sales of Blue Sky Natural Sodas, which
business was acquired during the third quarter of 2000, an increase in sales of
natural sodas, apple juice and functional drinks, sales of Hard e, an alcoholic
beverage launched in the third quarter of 2000, and sales of Junior Juice 100%
juices, which business was acquired in May 2001. The Company also benefited from
modest increases in sales of juice blends and smoothies in cans and sales of
natural bars which were introduced in 2000 and sales of its new Medicine Man
line, which was launched during the current quarter. The increase in net sales
was partially offset by decreased sales of smoothies in glass and P.E.T.
bottles, children's multi-vitamin juice drinks in aseptic packaging, Signature
Sodas, teas, lemonades and juice cocktails and Healthy Start in glass and P.E.T.
bottles.
Gross Profit. Gross profit was $19.9 million for the six-months ended June
30, 2001, an increase of $2.0 million or 11.4% over the $17.9 million gross
profit for the six-months ended June 30, 2000. Gross profit as a percentage of
net sales decreased to 44.8% for the six-months ended June 30, 2001 from 46.3%
for the six-months ended June 30, 2000. 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 $17.2 million for
the six-months ended June 30, 2001, an increase of $3.3 million or 23.7% over
total operating expenses of $13.9 million for the six-months ended June 30,
2000. Total operating expenses as a percentage of net sales increased to 38.7%
for the six-months ended June 30, 2001 from 36.0% for the six-months ended June
30, 2000. 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 $17.0 million for the
six-months ended June 30, 2001, an increase of $3.2 million or 23.4% over
selling, general and administrative expenses of $13.7 million for the six-months
ended June 30, 2000. Selling, general and administrative expenses as a
percentage of net sales increased to 38.1% for the six-months ended June 30,
2001 as compared to 35.6% for the six-months ended June 30, 2000. The increase
in selling expenses was primarily attributable to increased promotional
allowances granted to customers, increased expenditures for slotting fees and
increased expenditures for in-store demonstrations. The increase in selling
expenses was partially offset by a decrease in advertising and coupon promotions
and decreased expenditures for point of sale items and merchandise displays. The
increase in general and administrative expenses was primarily attributable to
increased payroll expenses primarily for sales, sales support and administrative
activities and other operating expenses.
9
Amortization expense was $249,000 for the six-months ended June 30, 2001,
an increase of $84,000 over amortization expense of $165,000 for the six-months
ended June 30, 2000. The increase in amortization expense is primarily
attributable to the acquisition of the Blue Sky trademark in the third quarter
of 2000.
Operating Income. Operating income was $2.7 million for the six-months
ended June 30, 2001, a decrease of $1.3 million or 31.7% lower than operating
income of $4.0 million for the six-months ended June 30, 2000. Operating income
as a percentage of net sales decreased to 6.1% for the six-months ended June 30,
2001 from 10.3% in the comparable period in 2000. The decrease in operating
income was primarily attributable to the increase in selling, general and
administrative expense of $3.2 million which was partially offset by the $2.0
million increase in gross profit. 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 as well as the increase in selling, general
and administrative expenses as a percentage of net sales for the six-months
ended June 30, 2001.
Net Nonoperating Expense. Net nonoperating expense was $331,000 for the
six-months ended June 30, 2001, an increase of $247,000 from net nonoperating
expense of $84,000 for the six-months ended June 30, 2000. The increase in net
nonoperating expense was primarily attributable to increased interest expense
incurred on the Company's increased borrowings, which were primarily
attributable to the acquisition of the Blue Sky Natural Soda business in the
third quarter of 2000 and the financing of motor vehicles and equipment acquired
by the Company.
Provision for Income Taxes. Provision for income taxes was $955,000 for the
six months ended June 30, 2001, a decrease of $605,000 from the provision for
income taxes of $1.6 million for the comparable period in 2000. The effective
tax rate for the six-months ended June 30, 2001 was 40.0% which was the same as
in 2000. The decrease in provision for income taxes was attributable to the
decrease in income before provision for income taxes.
Net Income. Net income was $1.4 million for the six-months ended June 30,
2001 compared to net income of $2.3 million for the six-months ended June 30,
2000. The $907,000 decrease in net income is attributable to a decrease in
operating income of $1.3 million and an increase in net interest and financing
expenses of $247,000 which was partially offset by a $605,000 decrease in
provision for income taxes.
Liquidity and Capital Resources
As of June 30, 2001, the Company had working capital of $11.5 million, as
compared to working capital of $13.6 million as of December 31, 2000. The
decrease in working capital is primarily attributable to the repayment by the
Company of a portion of the Company's long-term debt and the acquisition of
trademarks and property and equipment which was partially offset by net income
earned after adjustment for certain noncash expenses, primarily amortization of
trademark license and trademarks and depreciation and other amortization.
10
Net cash provided by operating activities was $4.0 million for the
six-months ended June 30, 2001 as compared to net cash used in operating
activities of $1.1 million in the comparable period in 2000. For the six-months
ended June 30, 2001, cash provided by operating activities was attributable to
net income plus amortization of trademark license and trademarks, depreciation
and other amortization, as well as increases in accounts payable and accrued
liabilities and a decrease in inventories. For the six-months ended June 30,
2001, cash used in operating activities was attributable to an increase in
accounts receivable and decreases in income taxes payable and accrued
compensation.
Net cash used in investing activities decreased to $443,000 for the
six-months ended June 30, 2001 as compared to net cash used in investing
activities of $1.0 million for the comparable period in 2000. The decrease in
cash used in investing activities was primarily attributable to decreased
purchases of property and equipment and decreased expenditures for deposits and
other assets as well as proceeds received from the disposal of fixed assets. The
decrease was partially offset by increased expenditures for acquisitions of
trademark license and trademarks. Management, from time to time, considers the
acquisition of capital equipment, particularly manufacturing equipment and
coolers, merchandise display racks, vans and promotional vehicles, and
businesses compatible with the image of the Hansen's(R) brand, as well as the
development and introduction of new product lines. The Company may require
additional capital resources for or as a result of any such activities or
transactions, depending upon the cash requirements relating thereto. Any such
activities or transactions will also be subject to the terms and restrictions of
HBC's credit facilities.
Net cash used in financing activities increased to $3.2 million for the
six-months ended June 30, 2001 as compared to net cash provided by financing
activities of $160,000 for the comparable period in 2000. The increase in net
cash used in financing activities as compared to the prior year was primarily
attributable to increased principal payments of long-term debt, the reduction of
short-term borrowings and borrowings on long-term debt and decreased proceeds
from the issuance of common stock during 2001. During the six-months ended June
30, 2000, the Company purchased common stock to be held in treasury, whereas no
such purchases occurred in 2001.
HBC's revolving line of credit was renewed by its bank until September
2005. The rate of interest payable by the Company on advances under the line of
credit is based on bank's base (prime) rate, plus an additional percentage of up
to 0.5% or the LIBOR rate, plus an additional percentage of up to 2.5% depending
upon certain financial ratios of the Company from time to time. As of June 30,
2001, approximately $5.9 million was outstanding under the revolving line of
credit.
The credit facility contains financial covenants, which require the Company
to maintain certain financial ratios and achieve certain levels of annual
income. The facility also contains certain non-financial covenants. As of June
30 2001, the Company was in compliance with all covenants.
Management believes that cash available from operations, including cash
resources and the revolving line of credit, will be sufficient for its working
capital needs, including purchase commitments for raw materials, payments of tax
liabilities, debt servicing, expansion and development needs, purchases of
shares of common stock of the Company, as well as any purchases of capital
assets or equipment over the current year.
11
Forward Looking Statements
The Private Security Litigation Reform Act of 1995 (the "Act") provides a
safe harbor for forward looking statements made by or on behalf of the Company.
The Company and its representatives may from time to time make written or oral
forward looking statements, including statements contained in this report and
other filings with the Securities and Exchange Commission and in reports to
shareholders and announcements. Certain statements made in this report,
including certain statements made in management's discussion and analysis, may
constitute forward looking statements (within the meaning of Section 27.A of the
Securities Act 1933 as amended and Section 21.E of the Securities Exchange Act
of 1934, as amended) regarding the expectations of management with respect to
revenues, profitability, adequacy of funds from operations and the Company's
existing credit facility, among other things. All statements which address
operating performance, events or developments that management expects or
anticipates will or may occur in the future including statements related to new
products, volume growth, revenues, profitability, adequacy of funds from
operations, and/or the Company's existing credit facility, earnings per share
growth, statements expressing general optimism about future operating results
and non-historical Year 2001 information, are forward looking statements within
the meaning of the Act.
Management cautions that these statements are qualified by their terms
and/or important factors, many of which are outside the control of the Company
that could cause actual results and events to differ materially from the
statements made including, but not limited to, the following:
o Company's ability to generate sufficient cash flows to support capital
expansion plans and general operating activities;
o Changes in consumer preferences;
o Changes in demand that are weather related, particular in areas outside of
California;
o Competitive products and pricing pressures and the Company's ability to
gain or maintain share of sales in the marketplace as a result of actions
by competitors;
o The introduction of new products;
o Laws and regulations, and/or any changes therein, including changes in
accounting standards, taxation requirements (including tax rate changes,
new tax laws and revised tax law interpretations) and environmental laws as
well as the Federal Food Drug and Cosmetic Act, the Dietary Supplement
Health and Education Act, and regulations made thereunder or in connection
therewith, especially those that may affect the way in which the Company's
products are marketed as well as laws and regulations or rules made or
enforced by the Food and Drug Administration and/or the Bureau of Alcohol,
Tobacco and Firearms and/or certain state regulatory agencies;
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;
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o The marketing efforts of distributors of the Company's products, most of
which distribute products that are competitive with the products of the
Company;
o Unilateral decisions by distributors, grocery chains, specialty chain
stores, club stores and other customers to discontinue carrying all or any
of the Company's products that they are carrying at any time;
o The terms and/or availability of the Company's credit facilities and the
actions of its creditors;
o The effectiveness of the Company's advertising, marketing and promotional
programs;
o Adverse weather conditions, which could reduce demand for the Company's
products;
o The Company's ability to make suitable arrangements for the co-packing of
its functional drinks in 8.2-ounce slim cans, Smoothies in 11.5 ounce cans
and other products.
The foregoing list of important factors is not exhaustive.
Inflation
The Company does not believe that inflation has a significant impact on the
Company's results of operations for the periods presented.
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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 13, 2001 /s/ RODNEY C. SACKS
Rodney C. Sacks
Chairman of the Board of Directors
and Chief Executive Officer
(Principal Executive Officer)
Date: August 13, 2001 /s/ HILTON H. SCHLOSBERG
Hilton H. Schlosberg
Vice Chairman of the Board of Directors,
President, Chief Operating Officer,
Chief Financial Officer and Secretary
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