Corona, Calif., Aug. 7, 2008 - Hansen Natural Corporation today reported record sales and profits for the second quarter and six-months ended June 30, 2008.
Gross sales for the 2008 second quarter increased 15.5 percent to $324.1 million, from $280.6 million a year earlier. Net sales for the second quarter increased 15.3 percent to $282.2 million from $244.8 million a year ago.
Gross profit, as a percentage of net sales, for the 2008 second quarter was 51.8 percent compared with 52.4 percent in the comparable 2007 quarter and increased from 49.4 percent in the first quarter of 2008. The differences in gross profit as a percentage of net sales is primarily due to changes in product mix.
Operating expenses for the 2008 second quarter increased to $68.0 million from $66.8 million in the same quarter last year.
Distribution costs as a percentage of net sales were 5.5 percent for the quarter, compared with 5.4 percent in the same quarter last year.
Selling expenses as a percentage of net sales for the 2008 second quarter were 12.1 percent, compared with 10.6 percent a year ago. Increases in sponsorship expenditures, sampling activities and commissions, as well as costs relating to event and athlete sponsorships in the United Kingdom, contributed to the increase in such expenses over the prior year.
General and administrative expenses for the 2008 second quarter were $18.3 million compared with $27.6 million for the comparable quarter last year. Included in such expenses are costs associated with terminating existing distributors and legal and accounting fees relating to the special investigation of stock option grants, and granting practices and related litigation (see Certain Identified Items below). Stock based compensation (a non-cash item) was $3.7 million in the second quarter of 2008, compared with $2.0 million in the prior-year period.
Operating income for the 2008 second quarter increased 27.3 percent to $78.2 million from $61.4 million a year ago.
Net income for the second quarter of 2008 increased 31.1 percent to $50.2 million, or $0.51 per diluted share, compared with $38.3 million, or $0.39 per diluted share last year.
Net sales for the Company's DSD segment were $258.6 million for the three-months ended June 30, 2008, an increase of approximately $38.1 million, or 17.3 percent higher than net sales of $220.4 million for the three-months ended June 30, 2007. Net sales for the Company's warehouse segment were $23.7 million for the three-months ended June 30, 2008, a decrease of approximately $0.7 million, or 2.7 percent lower than net sales of $24.3 million for the three-months ended June 30, 2007.
Within the DSD segment, sales of Monster(r) and Java Monster(tm) drinks increased 22.3 percent during the 2008 second quarter while sales of Lost(r) Energy(tm), and other energy drinks were lower.
Sales to customers outside the United States were $19.5 million in the 2008 second quarter (including sales of approximately $1.9 million in the United Kingdom), compared with $13.4 million in the comparable quarter last year.
In the six-months ended June 30, 2008 gross sales increased 20.7 percent to $568.1 million from $470.7 million for the comparable period a year earlier. Net sales increased 20.4 percent to $494.4 million from $410.6 million for the comparable period a year earlier. Gross profit as a percentage of net sales was 50.8 percent for the first half of 2008 compared to 52.1 percent for the same period in 2007.
Operating expenses for the six-months ended June 30, 2008, increased to $129.9 million from $120.6 million in the same period last year (see Certain Identified Items below). Operating income increased 29.7 percent to $121.0 million from $93.3 million in the first six months of 2007.
Net income for the first half of 2008 increased 35.1 percent to $79.0 million, or $0.80 per diluted share, compared with $58.5 million, or $0.59 per diluted share, for the same period last year.
Rodney C. Sacks, chairman and chief executive officer, said that the record revenues and profits reflect continued strong sales of Monster Energy(r) and Java Monster(tm) drinks which continued to grow in excess of the category and gain market share.
"We are proud of the continued strong performance of the Monster(r) brand at a time when almost all categories of ready-to-drink beverages in the United States are experiencing weakness. This weakness is most pronounced in convenience store cold drink channels, where the vast majority of energy drinks are sold. We continue to believe that the moderating growth that we have seen in energy drinks appears, in part, to be due to the challenging macro economic environment and the resulting decline in store traffic primarily in the convenience and gas sector especially in Southern California," added Sacks.
In the first six months of 2008 the Company experienced increased costs of certain raw materials principally apple juice concentrate, aluminum cans and sugar which had a greater impact on the warehouse segment than on the DSD segment.
During the three-months ended June 30, 2008 the Company purchased 1.7 million shares of common stock at an average purchase price of $29.46 per share which the Company holds in treasury.
Certain Identified Items
Contributions net of reimbursements totaling ($0.4) million and $6.5 million for the three-months and ($0.4) million and $19.8 million for the six-months, ended June 30, 2008 and 2007, respectively, were recorded by the Company related to Anheuser-Busch distributors for their contributions to offset the costs of terminating prior distributors. Such amounts have been accounted for as deferred revenue, and are being recognized as revenue ratably over the anticipated 20-year life of the respective Anheuser-Busch distribution agreements. Revenue recognized was $0.5 million for the three-months and $1.0 million for the six-months ended June 30, 2008 and 2007, respectively.
In connection with the transition of certain of the Company's distribution arrangements, the Company incurred termination costs amounting to $0.1 million and $8.4 million in the three-months and $0.1 million and $14.7 million in the six-months, ended June 30, 2008 and 2007, respectively, to certain of its prior distributors, who have been replaced by Anheuser-Busch distributors. Such termination costs have been expensed in full and are included in operating expenses for the corresponding periods.
In connection with the Company's special investigation of stock option grants and granting practices, related litigation and other related matters, the Company incurred professional service fees, net of insurance proceeds, of ($0.4) million and $4.2 million for the three-months and ($0.2) million and $10.9 million for the six-months ended June 30, 2008, and 2007 respectively, which have been fully expensed in the respective periods.
The following table summarizes the identified items discussed above for the three and six-months ended June 30, 2008 and 2007:
Three-Months Ended Six-Months Ended
June 30, June 30,
2008 2007 2008 2007
---------- ---------- ---------- ----------
(In (In (In (In
Deferred Revenue: Thousands) Thousands) Thousands) Thousands)
Contributions from, net
of reimbursements to,
Anheuser-Busch
Distributors $ (412) $ 6,497 $ (365) $ 19,847
Recognition of deferred
revenue $ 493 $ 509 $ 1,016 $ 936
Operating Expenses:
Termination payments to
prior distributors $ 150 $ 8,353 $ 150 $ 14,700
Professional service fees
(net of insurance
proceeds) associated
with the review of stock
option grants and
granting practices,
related litigation and
other related matters $ (430) $ 4,221 $ (200) $ 10,905
Auction Rate Securities
At June 30, 2008 the Company held auction rate securities with a face value of $129.8 million ($207.5 million at March 31, 2008). Additional redemptions amounting to $8.9 million were received by the Company during July. The Company determined that a temporary impairment of $5.8 million had occurred at June 30, 2008 and recorded a charge of $3.4 million net of taxes as a component of accumulated other comprehensive loss for the six-months ended June 30, 2008. These securities will continue to accrue interest at their contractual rates until their respective auctions succeed or they are redeemed.
"Based on our ability to access cash and other short term investments and based on our expected operating cash flows, we do not anticipate that the current lack of liquidity of these investments will have a material effect on our liquidity or working capital," Sacks said.
Hansen Natural Corporation
Based in Corona, California, Hansen Natural Corporation markets and distributes Hansen's(r) Natural Sodas, sparkling beverages, fruit juice Smoothies, Energy drinks, Energade(r) energy sports drinks, multi-vitamin juice drinks in aseptic packaging, iced teas, apple juice and juice blends, Junior Juice(r) juices, Blue Sky(r) brand beverages, Monster Energy(r) brand energy drinks, Java Monster(tm) brand non-carbonated dairy based coffee drinks, Lost(r) Energy(tm) brand energy drinks, Joker Mad Energy(tm), Unbound(r) Energy and Ace(tm) Energy brand energy drinks, Rumba(tm), Samba and Tango brand energy juices.
HANSEN NATURAL CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND OTHER INFORMATION
FOR THE THREE- AND SIX-MONTHS ENDED JUNE 30, 2008 AND 2007
(In Thousands, Except Per Share Amounts) (Unaudited)
---------------------------------------------------------------------
Three-Months Ended Six-Months Ended
June 30, June 30,
------------------ ------------------
2008 2007 2008 2007
-------- -------- -------- --------
Gross sales, net
of discounts & returns* $324,134 $280,582 $568,132 $470,651
Less: Promotional and other
allowances** 41,890 35,819 73,710 60,036
-------- -------- -------- --------
Net sales 282,244 244,763 494,422 410,615
Cost of sales 136,031 116,510 243,489 196,726
-------- -------- -------- --------
Gross profit 146,213 128,253 250,933 213,889
Gross profit margin as a
percentage of net sales 51.8% 52.4% 50.8% 52.1%
Operating expenses (1) 68,023 66,830 129,916 120,557
Operating expenses as a
percentage of net sales 24.1% 27.3% 26.3% 29.4%
-------- -------- -------- --------
Operating income 78,190 61,423 121,017 93,332
Operating income as a
percentage of net sales 27.7% 25.1% 24.5% 22.7%
Interest and other income,
net 2,769 1,752 6,395 3,278
-------- -------- -------- --------
Income before provision for
income taxes 80,959 63,175 127,412 96,610
Provision for income taxes 30,727 24,864 48,369 38,101
-------- -------- -------- --------
Net income $ 50,232 $ 38,311 $ 79,043 $ 58,509
======== ======== ======== ========
Net income as a percentage of
net sales 17.8% 15.7% 16.0% 14.2%
Net income per common share:
Basic $0.54 $0.43 $0.85 $0.65
Diluted $0.51 $0.39 $0.80 $0.59
Case sales (in thousands)
(in 192-ounce case
equivalents) 28,716 26,950 50,990 46,345
Average net sales price per
case $ 9.83 $ 9.08 $ 9.70 $ 8.86
(1) Includes costs associated with terminating existing distributors
and legal and accounting fees relating to the special investigation
of stock option grants and granting practices and related litigation,
net of insurance proceeds.
* Gross sales, although used internally by management as an indicator
of operating performance, should not be considered as an alternative
to net sales, which is determined in accordance with accounting
principles generally accepted in the United States of America
("GAAP"), and should not be used alone as an indicator of operating performance in place of net sales. Additionally, gross sales may not
be comparable to similarly titled measures used by other companies as
gross sales has been defined by our internal reporting requirements.
However, gross sales is used by management to monitor operating
performance including sales performance of particular products,
salesperson performance, product growth or declines and our overall
performance. The use of gross sales allows evaluation of sales
performance before the effect of any promotional items, which can
mask certain performance issues. Management believes the presentation
of gross sales allows a more comprehensive presentation of our
operating performance. Gross sales may not be realized in the form
of cash receipts as promotional payments and allowances may be
deducted from payments received from customers.
** Although the expenditures described in this line item are
determined in accordance with GAAP and meet GAAP requirements, the
disclosure thereof does not conform with GAAP presentation
requirements. Additionally, the presentation of promotional and other
allowances may not be comparable to similar items presented by other
companies. The presentation of promotional and other allowances
facilitates an evaluation of the impact thereof on the determination
of net sales and illustrates the spending levels incurred to secure
such sales. Promotional and other allowances constitute a material
portion of our marketing activities.
HANSEN NATURAL CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
AS OF JUNE 30, 2008 AND DECEMBER 31, 2007
(In Thousands, Except Share Amounts) (Unaudited)
------------------------------------------------------------------
June 30, Dec. 31,
2008 2007
-------- --------
ASSETS
------
CURRENT ASSETS:
Cash and cash equivalents $182,953 $ 12,440
Short-term investments 22,066 63,125
Accounts receivable, net 83,404 81,497
Inventories 123,218 98,140
Prepaid expenses and other current assets 10,614 3,755
Deferred income taxes 11,902 11,192
-------- --------
Total current assets 434,157 270,149
INVESTMENTS 115,181 227,085
PROPERTY AND EQUIPMENT, net 9,238 8,567
DEFERRED INCOME TAXES
16,399 14,006
INTANGIBLES, net 24,723 24,066
OTHER ASSETS 774 730
-------- --------
$600,472 $544,603
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
CURRENT LIABILITIES:
Accounts payable $ 71,272 $ 56,766
Accrued liabilities 11,791 9,019
Accrued distributor terminations 4,052 4,312
Accrued compensation 4,536 5,827
Current portion of capital leases 313 663
Income taxes payable 13,298 6,294
-------- --------
Total current liabilities 105,262 82,881
DEFERRED REVENUE 38,174 39,555
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Common stock - $0.005 par value; 120,000,000 shares
authorized; 96,533,211 shares issued and
92,179,460 outstanding as of June 30, 2008;
95,848,711 shares issued and 93,191,191
outstanding as of December 31, 2007 483 479
Additional paid-in capital 105,919 96,749
Retained earnings 432,691 353,648
Accumulated other comprehensive loss (3,429) (47)
Common stock in treasury, at cost; 4,353,751 and
2,657,520 shares as of June 30, 2008 and
December 31, 2007, respectively (78,628) (28,662)
-------- --------
Total stockholders' equity 457,036 422,167
-------- --------
$600,472 $544,603
======== ========