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 - -------------------------------------------------------------------------------- <TABLE> <S> <C> <C> 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 ================== ================= </TABLE> 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) - -------------------------------------------------------------------------------- <TABLE> <S> <C> <C> <C> <C> 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 ================= ================ ================ ================= </TABLE> 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) - -------------------------------------------------------------------------------- <TABLE> <S> <C> <C> 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 ================== ================= </TABLE> 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; 12
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. 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 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 14