Hansen Natural's Q1 earnings fall 21.6% to US$32.6M, as sales decline 2.5% to US$238.1M due to advance purchases made by customers in fiscal Q4, lower Monster Hitman energy shooters sales
May 6, 2010
– Hansen Natural Corporation (Nasdaq:HANS - News) today reported financial results for the first quarter ended March 31, 2010.
Gross sales for the 2010 first quarter decreased 3.0 percent to $270.6 million from $278.9 million in the same period last year. Net sales for the first three months of 2010 decreased 2.5 percent to $238.1 million from $244.2 million in the same period last year. Both gross and net sales for the 2010 first quarter were impacted by advance purchases made by customers in the fiscal 2009 fourth quarter due to the Company's announcement of a new per case marketing contribution program for Monster Energy(R) distributors commencing January 1, 2010, as well as to avoid potential interruptions in product supply due to the announcement of our transition to the SAP enterprise resource planning system commencing January 1, 2010. The Company previously estimated that approximately 4 percent to 6 percent of our fiscal 2009 fourth quarter gross sales were attributable to such advance purchases. In addition, sales of Monster Hitman(TM) energy shooters were significantly down from the same quarter in the prior year.
Gross profit as a percentage of net sales was 52.3 percent for the three months ended March 31, 2010, compared with 53.3 percent for the comparable 2009 first quarter, which decrease was largely as a result of product and geographic mix.
Operating expenses for the 2010 first quarter increased to $73.8 million from $64.4 million in the same quarter last year, partially attributable to increased payroll expenses and increased expenditures for sponsorships and endorsements.
Distribution costs as a percentage of net sales were 4.9 percent for the 2010 first quarter, compared with 4.5 percent in the same quarter last year.
Selling expenses as a percentage of net sales for the 2010 first quarter were 13.0 percent, compared with 12.5 percent in the same quarter a year ago.
General and administrative expenses for the 2010 first quarter were $31.2 million, compared with $23.0 million for the corresponding quarter last year. Stock based compensation (a non-cash item) was $5.0 million in the first quarter of 2010, compared with $2.7 million in the corresponding prior year period. Increased payroll, legal fees and SAP costs also contributed to the higher expenses versus the 2009 first quarter.
Operating income for the 2010 first quarter was $50.8 million, compared with $65.8 million in the 2009 comparable quarter.
The effective tax rate for the 2010 first quarter was 37.1% compared with 34.3% in the same quarter last year, largely as a result of a reduction in our uncertain tax positions in the 2009 first quarter.
Net income for the 2010 first quarter was $32.6 million, or $0.35 per diluted share, compared with $41.6 million, or $0.44 per diluted share in the same quarter last year.
Net sales for the Company's DSD segment were $217.2 million for the 2010 first quarter, compared with $220.9 million in the same quarter last year.
Gross sales to customers outside the United States rose to $37.8 million in the 2010 first quarter, from $35.3 million in the corresponding quarter in 2009.
Rodney C. Sacks, chairman and chief executive officer, noted that the core Monster Energy(R) brand continues to gain strength both in the United States and internationally. "Nielsen continues to report ongoing improved results for the Monster Energy(R) brand, ahead of category growth," said Sacks.
"We are planning to introduce new products in 2010, both domestically and internationally and we are continuing with our international expansion plans in Western, Central and Eastern Europe, the Middle East and South America, as well as evaluating additional geographies and opportunities for the Monster Energy(R) brand," Sacks added.
Auction Rate Securities
In March 2010, the Company entered into an agreement relating to $54.2 million in par value auction rate securities, which enables the Company to sell such securities (the "Put Option") in semi-annual or annual installments beginning March 22, 2011 with full sale rights available on or after March 22, 2013. Such auction rate securities, which have been reclassified from available for sale to trading securities, will continue to accrue interest until redeemed through the Put Option, or as determined by the auction process or by the terms outlined in their respective prospectuses in the event of auction failure. The fair market value of the Put Option of $5.1 million, offset by a $4.9 million loss on trading securities, has been recognized in the income statement for the first quarter of 2010. The Company also recognized a gain of $0.4 million, resulting from the redemption at par of a separate security, which previously had been other-than-temporary impaired.
At March 31, 2010 the Company held auction rate securities with a face value of $92.7 million ($96.4 million at December 31, 2009). The Company determined that an impairment of $7.0 million existed at March 31, 2010, of which $3.0 million was deemed temporary and $4.0 million was deemed other-than-temporary. As a result, included as a component of accumulated other comprehensive loss is $1.8 million, net of taxes as of March 31, 2010. The auction rate securities will continue to accrue interest at their contractual rates until their respective auctions succeed or they are redeemed.
Investor Conference Call
The Company will host an investor conference call today, May 6, 2010, at 2:00 p.m. Pacific Time (5:00 p.m. Eastern Time). The conference call will be open to all interested investors through a live audio web broadcast via the internet at www.hansens.com and www.opencompany.info. For those who are unable to listen to the live broadcast, the call will be archived for approximately one year on both websites.
Hansen Natural Corporation
Based in Corona, California, Hansen Natural Corporation markets and distributes Hansen's(R) natural sodas, sparkling beverages, apple juice and juice blends, fruit juice smoothies, multi-vitamin juice drinks in aseptic packaging, iced teas, energy drinks, Junior Juice(R) juices and water beverages, Blue Sky(R) brand beverages, Monster Energy(R) brand energy drinks, Nitrous(TM) Monster Energy(R) brand energy drinks, Monster Hitman(TM) energy shooters, Java Monster(TM) brand non-carbonated coffee + energy drinks, X-Presso Monster(TM) brand non-carbonated espresso energy drinks, Lost(R) Energy(TM) brand energy drinks, Rumba(R), Samba and Tango brand energy juices, Vidration(TM) brand vitamin enhanced waters and Peace Tea(TM) iced teas. For more information visit www.hansens.com and www.monsterenergy.com