Hansen Natural Reports Record Second Quarter Sales and Profits

Hansen Natural Corporation (NASDAQ:HANS) today reported record financial results, including sharp increases in sales and profits, for the three and six months ended June 30, 2007. Gross sales for the second quarter increased 54.1 percent to $280.6 million from $182.1 million a year earlier. Net sales for the second quarter increased 56.9 percent to $244.8 million from $156.0 million a year ago. Operating income for the second quarter increased 34.3 percent to $61.4 million from $45.8 million a year ago. Net income for the second quarter increased 35.9 percent to $38.3 million, or $0.39 per diluted share, from $28.2 million, or $0.28 per diluted share, last year. Operating income for the second quarter, excluding certain non-recurring expense items described below, increased 61.7 percent to $74.0 million from $45.8 million a year ago. Net income for the second quarter, on the same basis, increased 62.7 percent to $45.9 million, or $ 0.47 per diluted share, from $28.2 million, or $ 0.28 per diluted share, last year. Gross sales for the six months ended June 30, 2007 increased 47.1 percent to $470.7 million from $320.0 million a year earlier. Net sales for the first half of 2007 were up 48.9 percent to $410.6 million from $275.8 million a year ago. Operating income for the six months ended June 30, 2007 advanced 15.8 percent to $93.3 million from $80.6 million a year ago. Net income for the first half of 2007 increased 18.7 percent to $58.5 million, or $0.59 per diluted share, from $49.3 million, or $0.50 per diluted share, last year. Operating income for the six months ended June 30, 2007, excluding certain non-recurring expense items described below, increased 47.6 percent to $118.9 million from $80.6 million a year ago. Net income for the first half of 2007 on the same basis, increased 50.0 percent to $73.9 million, or $0.75 per diluted share, from $49.3 million, or $0.50 per diluted share, last year. Rodney C. Sacks, chairman and chief executive officer, said the record revenues reflected continued strong sales of Monster Energy® brand energy drinks, as well as certain new products such as Java Monster™ brand non-carbonated dairy based coffee drinks (introduced in April 2007) and Monster® M-80 energy drinks (introduced in March 2007). "The energy category continues to show strong growth over the prior year, and the Monster Energy® brand continues to increase market share,” Sacks said. Gross profit as a percentage of net sales for the three months ended June 30, 2007 increased to 52.4 percent, from 51.9 percent for the comparable 2006 quarter. In connection with the transition of certain of the Company’s distribution arrangements, the Company incurred termination costs amounting to $8.4 million and $14.7 million during the three- and six-months ended June 30, 2007, respectively, to certain of its prior distributors, who have been replaced by newly appointed Anheuser-Busch distributors. Such termination costs have been expensed in full and are included in operating expenses for the three- and six-months ended June 30, 2007. The Company received from newly appointed Anheuser-Busch distributors non-refundable payments and commitments for the costs of terminating its prior distributors amounting to $6.5 million and $19.8 million in the three- and six-months ended June 30, 2007. Such payments and commitments have been accounted for as deferred revenue, which 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 and $0.9 million for the three- and six-months ended June 30, 2007, respectively. The anticipated Anheuser-Busch distribution transition arrangements have now largely been completed. In connection with the review of the Company’s stock option grants and granting practices and related litigation and matters, the Company incurred professional service fees of $4.2 million and $10.9 million for the three- and six-months ended June 30, 2007, respectively, which have also been fully expensed in the respective periods. The following table summarizes the selected items discussed above for the three- and six-months ended June 30, 2007: Three-Months Ended Six-Months Ended June 30, 2007 June 30, 2007 Deferred Revenue: (In Thousands) (In Thousands) Receipts from newly appointed AB Distributors $ 6,497 $ 19,847   Operating Expenses: Termination payments to prior distributors $ 8,353 $ 14,700 Professional fees associated with review of stock option grants and stock option granting practices and related litigation and matters $ 4,221 $ 10,905 $ 12,574 $ 25,605   Operating income, as reported $ 61,423 $ 93,332   Operating income, excluding certain non-recurring expense items $ 73,997 $ 118,937 The Company will host an investor conference call on August 8, 2007 at 11:30 a.m. Pacific Time (2:30 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 not able 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® Natural Sodas, Signature Sodas, fruit juice Smoothies, Energy drinks, Energade® energy sports drinks, E20 Energy Water®, multi-vitamin juice drinks in aseptic packaging, Junior Juice® juice, iced teas, apple juice and juice blends, Blue Sky® brand beverages, Monster Energy® brand energy drinks, Java Monster™ brand non-carbonated dairy based coffee drinks, Lost® Energy™ brand energy drinks, Joker Mad Energy™, Unbound® Energy and Ace™ Energy brand energy drinks, Rumba™ brand energy juice, and Fizzit™ brand powdered drink mixes. For more information visit www.hansens.com and www.monsterenergy.com. 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 generally accepted accounting principles in the United States ("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 the Company’s internal reporting requirements. Certain statements made in this announcement may constitute "forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, regarding the expectations of management with respect to revenues and profitability. Management cautions that these statements are qualified by their terms or important factors, many of which are outside of the control of the Company, that could cause actual results and events to differ materially from the statements made herein, including, but not limited to, the following: changes in consumer preferences; changes in demand that are weather related, particularly in areas outside of California; competitive pricing and/or marketing pressures; activities and strategies of competitors; changes in the price and/or availability of raw materials for the Company’s products; the availability of production and/or suitable facilities; the marketing efforts of the distributors of the Company’s products, most of which distribute products that are competitive with the products of the Company; the introduction of new products, as well as unilateral decisions that may be made by grocery and/or convenience chain stores, 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; and other risks detailed from time to time in the Company’s reports filed with the Securities and Exchange Commission. The Company’s actual results could differ materially from those contained in the forward-looking statements. The Company assures no obligation to update any forward-looking statements. HANSEN NATURAL CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF INCOME FOR THE THREE-AND SIX-MONTHS ENDED JUNE 30, 2007 AND 2006 (In thousands, except per share data) (Unaudited)   Three-Months Ended Six-Months Ended June 30 June 30   2007   2006   2007   2006   GROSS SALES, net of discounts and returns(a) $ 280,582 $ 182,126 $ 470,651 $ 319,950   LESS: PROMOTIONAL AND OTHER ALLOWANCES(b)     35,819   26,089   60,036   44,167   NET SALES 244,763 156,037 410,615 275,783   COST OF SALES   116,510   75,047   196,726   131,795   GROSS PROFIT 128,253 80,990 213,889 143,988   OPERATING EXPENSES   66,830   35,238   120,557   63,407   OPERATING INCOME 61,423 45,752 93,332 80,581   INTEREST INCOME, net   1,752   872   3,278   1,574   INCOME BEFORE PROVISION FOR INCOME TAXES   63,175 46,624 96,610 82,155   PROVISION FOR INCOME TAXES     24,864   18,424   38,101   32,864   NET INCOME $ 38,311 $ 28,200 $ 58,509 $ 49,291   NET INCOME PER COMMON SHARE: Basic $ 0.43 $ 0.31 $ 0.65 $ 0.55 Diluted $ 0.39 $ 0.28 $ 0.59 $ 0.50   WEIGHTED AVERAGE NUMBER OF SHARES OF COMMON STOCK AND COMMON STOCK EQUIVALENTS: Basic   90,118   89,912   90,089   89,523 Diluted   98,455   99,289   98,388   98,815   (a) 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 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   (b) 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, 2007 AND DECEMBER 31, 2006 (In thousands, except share data) (Unaudited)   June 30, December 31, 2007 2006 ASSETS CURRENT ASSETS: Cash and cash equivalents $ 55,482 $ 35,129 Short-term investments 142,613 101,667 Accounts receivable, net 111,928 54,624 Inventories 87,498 77,013 Prepaid expenses and other current assets 6,382 771 Deferred income tax asset 5,170 5,953 Total current assets 409,073 275,157   PROPERTY AND EQUIPMENT, net 6,778 5,565 DEFERRED INCOME TAXES 13,813 5,001 INTANGIBLES, net 23,555 21,202 OTHER ASSETS 1,280 1,447 $ 454,499 $ 308,372   LIABILITIES AND STOCKHOLDERS' EQUITY   CURRENT LIABILITIES: Accounts payable $ 91,822 $ 34,362 Accrued liabilities 8,097 9,465 Accrued distributor terminations 7,931 7,024 Customer deposit liabilities 1,123 3,324 Accrued compensation 3,682 4,378 Current portion of long-term debt 590 299 Income taxes payable 903 3,991 Total current liabilities 114,148 62,843   LONG-TERM DEBT, less current portion - 4 DEFERRED REVENUE 39,352 20,441   COMMITMENTS AND CONTINGENCIES   STOCKHOLDERS' EQUITY: Common stock - $0.005 par value; 120,000,000 shares authorized; 93,652,862 shares issued and 90,995,800 outstanding as of June 30, 2007; 92,713,212 shares issued and 90,059,124 outstanding as of December 31, 2006   468 464 Additional paid-in capital 66,422 48,892 Retained earnings 262,751 204,242 Common stock in treasury, at cost; 2,657,062 shares as of June 30, 2007 and 2,654,088 shares as of December 31, 2006 (28,642) (28,514) Total stockholders' equity 300,999 225,084 $ 454,499 $ 308,372