How did Hansen Natural perform financially in 2000?

Net sales reached a record $79.7 million, up 10.3%, and operating income was $6.9 million, down from $7.5 million in 1999 because operating expenses grew faster than sales. Net income was $3.9 million, or $0.38 per diluted share, compared with $4.5 million, or $0.43, in 1999.

What drove the revenue growth?

Growth came mainly from the company's 8.2-ounce functional energy drinks in slim cans and its children's multi-vitamin juice drinks, with additional contributions from apple juice, natural sodas, and the Blue Sky brand acquired in September 2000. Sales of Smoothies, Signature Sodas, Silver Foxes juices, and iced teas declined.

Is the company's balance sheet a concern?

Debt increased substantially, with long-term debt of $9.7 million versus $0.9 million a year earlier, and cash fell to about $131,000. Management said cash from operations, cash resources, and the revolving credit line would be sufficient through 2001, and the company was in compliance with its loan covenants at year-end.

What are the main risks investors should consider?

Key risks include dependence on a single major customer (23% of 2000 sales), limited co-packing and single-source supply for some products such as functional drink cans, competition from much larger beverage companies, the uncertain performance of newer product lines, the pending Sosa arbitration, and the litigation against SoBe. The company also has a small share float, and insiders hold about 44% of shares.

Does the company pay dividends or have significant insider ownership?

Hansen has never paid dividends and does not expect to in the foreseeable future. Officers and directors as a group own about 44.1% of the common stock, with co-founders Rodney Sacks and Hilton Schlosberg each holding about 39%, which gives them substantial control over corporate decisions.

MNST 10-K FY2000 Annual Report — Revenue, Net Income, EPS

01—Abstract

Summary

Summary of the 10-K filed March 30, 2001. Cited figures are marked; the original filing is the authoritative source.

This filing is Hansen Natural Corporation's (NASDAQ Small-Cap: HANS, later MNST) Form 10-K for fiscal 2000, filed March 30, 2001.

The company reported record net sales of $79.7 million^a, up 10.3% from $72.3 million in 1999, driven primarily by its 8.2-ounce functional energy drinks in slim cans, new children's multi-vitamin juice drinks, and the Blue Sky natural soda business acquired in September 2000. Gross margin was essentially flat at 46.5% versus 46.4%, but operating expenses rose 16.0% (selling, general and administrative expenses up 17.7%), compressing operating income to $6.9 million from $7.5 million. Net income fell 12.6% to $3.9 million, and diluted EPS declined to $0.38 from $0.43.

The balance sheet changed meaningfully. Total assets rose to $38.7 million^b from $28.7 million, largely due to the $6.5 million Blue Sky acquisition and trademark additions, and long-term debt jumped to $9.7 million from $0.9 million as the company drew $9.2 million on its Comerica revolving line of credit. Cash fell to just $131,000.

Shareholders' equity grew to $22.1 million^c. Operating cash flow was negative at $1.1 million, reflecting heavier receivables and inventory build, which is a notable concern for investors even as earnings were positive.

Investors should weigh the growth in the core functional drinks business against several risks disclosed in the filing: heavy customer concentration (one customer accounted for 23% of 2000 sales), dependence on single-source components such as the cans for functional drinks, weak early results from the Healthy Start/Silver Foxes juice line and single-serve juices that management is reevaluating, a pending $2.8 million^d counterclaim from Sammy Sosa, and a patent-infringement suit against South Beach Beverage (SoBe). Insiders, led by Rodney Sacks and Hilton Schlosberg, control roughly 44% of the stock, and the company is very small, with 107 employees and a market value of nonaffiliate shares of about $20.7 million.

02—Key points

Key Highlights

Record net sales of $79.7 million in 2000, up 10.3% year over year, led by functional drinks in 8.2-ounce slim cans and new children's multi-vitamin juice drinks.
Net income declined 12.6% to $3.9 million; diluted EPS fell to $0.38 from $0.43 as SG&A grew 17.7% faster than sales.
Gross margin held steady at 46.5% (vs. 46.4% in 1999), indicating stable pricing and product mix despite a diversified portfolio.
Acquired Blue Sky Natural Soda business in September 2000 for $6.5 million, adding a health-food-channel natural soda brand.
Long-term debt rose to $9.7 million from $0.9 million after drawing $9.2 million on the Comerica revolving credit line, which was expanded to $12.0 million; cash on hand was only $131,000.
Operating cash flow was negative $1.1 million in 2000, versus positive $1.3 million in 1999, due to higher receivables, inventories, and lower payables.
Concentration and execution risks: one customer represented 23% of sales, several Healthy Start and Silver Foxes juice lines underperformed, and a $2.8 million counterclaim by Sammy Sosa is pending.

03—Questions

Frequently Asked Questions

How did Hansen Natural perform financially in 2000?
Net sales reached a record $79.7 million, up 10.3%, and operating income was $6.9 million, down from $7.5 million in 1999 because operating expenses grew faster than sales. Net income was $3.9 million, or $0.38 per diluted share, compared with $4.5 million, or $0.43, in 1999.
What drove the revenue growth?
Growth came mainly from the company's 8.2-ounce functional energy drinks in slim cans and its children's multi-vitamin juice drinks, with additional contributions from apple juice, natural sodas, and the Blue Sky brand acquired in September 2000. Sales of Smoothies, Signature Sodas, Silver Foxes juices, and iced teas declined.
Is the company's balance sheet a concern?
Debt increased substantially, with long-term debt of $9.7 million versus $0.9 million a year earlier, and cash fell to about $131,000. Management said cash from operations, cash resources, and the revolving credit line would be sufficient through 2001, and the company was in compliance with its loan covenants at year-end.
What are the main risks investors should consider?
Key risks include dependence on a single major customer (23% of 2000 sales), limited co-packing and single-source supply for some products such as functional drink cans, competition from much larger beverage companies, the uncertain performance of newer product lines, the pending Sosa arbitration, and the litigation against SoBe. The company also has a small share float, and insiders hold about 44% of shares.
Does the company pay dividends or have significant insider ownership?
Hansen has never paid dividends and does not expect to in the foreseeable future. Officers and directors as a group own about 44.1% of the common stock, with co-founders Rodney Sacks and Hilton Schlosberg each holding about 39%, which gives them substantial control over corporate decisions.

04—Continue

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