Table of Contents

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

Form 10-Q

 

Quarterly Report Pursuant to Section 13 or 15(d)

of the Securities Exchange Act of 1934

 

 

For the quarterly period ended March 31, 2009

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.)

 

550 Monica Circle, Suite 201

Corona, California 92880

(Address of principal executive offices) (Zip code)

 

(951) 739 – 6200

(Registrant’s telephone number, including area code)

 

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 __

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

 

Yes _  No __

 

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company.  See definition of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

 

Large Accelerated Filer x	Accelerated filer o
Non-accelerated filer o (Do not check if smaller reporting	Smaller reporting company o
company)

 

Indicate by check mark whether the Registrant is a shell company (as defined by Rule 12b-2 of the Exchange Act).

 

Yes        No   X   

 

The Registrant had 90,573,984 shares of common stock, par value $0.005 per share, outstanding as of April 29, 2009.

 

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HANSEN NATURAL CORPORATION AND SUBSIDIARIES

MARCH 31, 2009

 

INDEX

 

		Page No.
Part I.	FINANCIAL INFORMATION
Item 1.	Condensed Consolidated Financial Statements (Unaudited)
	Condensed Consolidated Balance Sheets as of March 31, 2009 and December 31, 2008	3
	Condensed Consolidated Statements of Income for the Three-Months Ended March 31, 2009 and 2008	4
	Condensed Consolidated Statements of Cash Flows for the Three-Months Ended March 31, 2009 and 2008	5
	Notes to Condensed Consolidated Financial Statements	7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	25
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	41
Item 4.	Controls and Procedures	42
Part II.	OTHER INFORMATION
Item 1.	Legal Proceedings	42
Item 1A.	Risk Factors	46
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	46
Item 3.	Defaults Upon Senior Securities	46
Item 4.	Submission of Matters to a Vote of Security Holders	46
Item 5.	Other Information	46
Item 6.	Exhibits	46
	Signatures	47

 

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PART I – FINANCIAL INFORMATION

 

ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

 

HANSEN NATURAL CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

AS OF MARCH 31, 2009 AND DECEMBER 31, 2008

(In Thousands, Except Par Value) (Unaudited)

 

		March 31, 2009				December 31, 2008
ASSETS
CURRENT ASSETS:
Cash and cash equivalents		$	279,123			$	256,801
Short-term investments		4,975				29,145
Trade accounts receivable, net		95,739				45,233
Distributor receivables		24,365				90,722
Inventories		110,101				116,326
Prepaid expenses and other current assets		8,990				8,379
Prepaid income taxes		-				4,977
Deferred income taxes		9,741				9,741
Total current assets		533,034				561,324
INVESTMENTS		86,539				89,567
PROPERTY AND EQUIPMENT, net		17,677				14,389
DEFERRED INCOME TAXES		64,583				65,748
INTANGIBLES, net		28,993				28,365
OTHER ASSETS		1,864				2,444
		$	732,690			$	761,837
LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES:
Accounts payable		$	55,784			$	64,787
Accrued liabilities		26,096				12,524
Accrued distributor terminations		11,925				102,282
Accrued compensation		3,169				6,782
Current portion of debt		1,149				959
Income taxes payable		10,847				-
Total current liabilities		108,970				187,334
DEFERRED REVENUE		138,373				138,187
COMMITMENTS AND CONTINGENCIES (Note 9)
STOCKHOLDERS’ EQUITY:
Common stock - $0.005 par value; 120,000 shares authorized; 97,097 shares issued and 90,574 outstanding as of March 31, 2009; 96,851 shares issued and 90,328 outstanding as of December 31, 2008		485				484
Additional paid-in capital		122,060				117,106
Retained earnings		503,245				461,680
Accumulated other comprehensive loss		(8,314		)		(10,825		)
Common stock in treasury, at cost; 6,523 shares as of March 31, 2009 and December 31, 2008, respectively		(132,129		)		(132,129		)
Total stockholders’ equity		485,347				436,316
		$	732,690			$	761,837

 

See accompanying notes to condensed consolidated financial statements.

 

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HANSEN NATURAL CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
FOR THE THREE-MONTHS ENDED MARCH 31, 2009 AND 2008
(In Thousands, Except Per Share Amounts) (Unaudited)

 

		Three-Months Ended March 31,
		2009				2008
NET SALES		$	244,206			$	212,178
COST OF SALES		114,027				107,459
GROSS PROFIT		130,179				104,719
OPERATING EXPENSES		64,402				61,891
OPERATING INCOME		65,777				42,828
OTHER (EXPENSE) INCOME:
Interest and other income, net		1,016				3,626
Other-than-temporary impairment of investments		(3,539		)		-
Total other (expense) income		(2,523		)		3,626
INCOME BEFORE PROVISION FOR INCOME TAXES		63,254				46,454
PROVISION FOR INCOME TAXES		21,689				17,643
NET INCOME		$	41,565			$	28,811
NET INCOME PER COMMON SHARE:
Basic		$	0.46			$	0.31
Diluted		$	0.44			$	0.29
WEIGHTED AVERAGE NUMBER OF SHARES OF COMMON STOCK AND COMMON STOCK EQUIVALENTS:
Basic		90,433				93,314
Diluted		95,316				99,007

 

See accompanying notes to condensed consolidated financial statements.

 

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HANSEN NATURAL CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE-MONTHS ENDED MARCH 31, 2009 AND 2008
(In Thousands) (Unaudited)

 

		Three-Months Ended
		March 31, 2009				March 31, 2008
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income		$	41,565			$	28,811
Adjustments to reconcile net income to net cash (used in) provided by operating activities:
Amortization of trademark		32				14
Depreciation and other amortization		1,069				730
Loss on disposal of property and equipment		62				1
Stock-based compensation		2,735				2,110
Impairment on investments		3,539				-
Deferred income taxes		-				(55		)
Tax benefit from exercise of stock options		(1,205		)		(1,047		)
Reversal of doubtful accounts		-				(15		)
Effect on cash of changes in operating assets and liabilities:
Accounts receivable		(50,559		)		(246		)
Distributor receivables		66,358				-
Inventories		5,910				(11,644		)
Prepaid expenses and other current assets		(613		)		(3,787		)
Prepaid income taxes		4,977				-
Accounts payable		(8,146		)		3,901
Accrued liabilities		12,279				3,303
Accrued distributor terminations		(90,335		)		(260		)
Accrued compensation		(3,614		)		(3,101		)
Income taxes payable		12,052				7,688
Deferred revenue		186				(475		)
Net cash (used in) provided by operating activities		(3,708		)		25,928
CASH FLOWS FROM INVESTING ACTIVITIES:
Sales and maturities of held-to-maturity investments		14,966				-
Sales of available-for-sale investments		11,629				114,850
Purchases of available-for-sale investments		-				(102,358		)
Purchases of property and equipment		(3,354		)		(886		)
Proceeds from sale of property and equipment		42				-
Additions to trademarks		(660		)		(323		)
Decrease (increase) in other assets		578				(12		)
Net cash provided by investing activities		23,201				11,271
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments on long-term debt		(397		)		(319		)
Tax benefit from exercise of stock options		1,205				1,047
Issuance of common stock		1,031				808
Net cash provided by financing activities		1,839				1,536
Effect of exchange rate changes on cash and cash equivalents		990				-
NET INCREASE IN CASH AND CASH EQUIVALENTS		22,322				38,735
CASH AND CASH EQUIVALENTS, beginning of period		256,801				12,440
CASH AND CASH EQUIVALENTS, end of period		$	279,123			$	51,175
SUPPLEMENTAL INFORMATION:
Cash paid during the year for:
Interest		$	16			$	14
Income taxes		$	4,662			$	10,011

 

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HANSEN NATURAL CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE THREE-MONTHS ENDED MARCH 31, 2009 AND 2008

(In Thousands) (Unaudited) (Continued)

 

SUPPLEMENTAL DISCLOSURE OF NON-CASH ITEMS

 

Hansen Natural Corporation entered into capital leases for the acquisition of promotional vehicles of $0.6 million and $0.09 million for the three-months ended March 31, 2009 and 2008, respectively.

 

Included in accounts payable is equipment purchased of $0.5 million and $0.04 million as of March 31, 2009 and 2008, respectively.

 

See accompanying notes to condensed consolidated financial statements.

 

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HANSEN NATURAL CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Tabular Dollars in Thousands, Except Per Share Amounts) (Unaudited)

1.                                    BASIS OF PRESENTATION

 

Reference is made to the Notes to Consolidated Financial Statements, in the Company’s Annual Report on Form 10-K for the year ended December 31, 2008 (“Form 10-K”), for a summary of significant accounting policies utilized by Hansen Natural Corporation (“Hansen” or the “Company”) and its wholly-owned subsidiaries, Hansen Beverage Company (“HBC”), Monster LDA Company, formerly known as Hard e Beverage Company and previously known as Hard Energy Company and as CVI Ventures, Inc., Monster Energy UK Limited (Incorporated in the United Kingdom), a direct wholly owned subsidiary of HBC, Monster Energy Limited (incorporated in Ireland), a direct wholly owned subsidiary of HBC, Monster Energy AU Pty, Ltd. (incorporated in Australia), a direct wholly owned subsidiary of HBC, Blue Sky Natural Beverage Co. (“Blue Sky”), a direct wholly owned subsidiary of HBC and Hansen Junior Juice Company (“Junior Juice”), a direct  wholly owned subsidiary of HBC and other disclosures, which should be read in conjunction with this Quarterly Report on Form 10-Q (“Form 10-Q”).  HBC conducts the vast majority of the Company’s operating business and generates substantially all of the Company’s operating revenues.

 

The Company’s financial statements included in this Form 10-Q have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and Securities and Exchange Commission (“SEC”) rules and regulations applicable to interim financial reporting.  They do not include all the information and footnote disclosures normally included in annual financial statements prepared in accordance with GAAP.  The information set forth in these interim condensed consolidated financial statements for the three-months ended March 31, 2009 and 2008 is unaudited and reflects all adjustments, which include only normal recurring adjustments and which in the opinion of management are necessary to make the interim condensed consolidated financial statements not misleading.  Results of operations for periods covered by this report may not necessarily be indicative of results of operations for the full year.

 

The preparation of financial statements in conformity with GAAP necessarily requires management to make estimates and assumptions that affect the reported amount of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods.  Actual results could differ from these estimates.

 

2.         RECENT ACCOUNTING PRONOUNCEMENTS

 

On January 1, 2008, the Company adopted Statement of Financial Accounting Standard (“SFAS”) No. 157, “Fair Value Measurements” (“SFAS No. 157”), for its financial assets and liabilities. The Company’s adoption of SFAS No. 157 did not have a material impact on its financial position, results of operations or liquidity.  In  accordance with Financial Accounting Standards Board (“FASB”) Staff Position (“FSP”) FAS 157-2, “Effective Date of FASB Statement No. 157” (“FSP 157-2”), the Company elected to defer until January 1, 2009 the adoption of SFAS No. 157 for all nonfinancial assets and liabilities that are not recognized or disclosed at fair value in the financial statements on a recurring basis. The adoption of SFAS No. 157 for those assets and liabilities within the scope of FSP 157-2 did not have a material impact on the Company’s financial position, results of operations and liquidity.

 

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HANSEN NATURAL CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Tabular Dollars in Thousands, Except Per Share Amounts) (Unaudited)

On January 1, 2009, the Company adopted FSP FAS 142-3, “Determination of Useful Life of Intangible Assets” (“FSP 142-3”). FSP 142-3 amends the factors that should be considered in developing the renewal or extension assumptions used to determine the useful life of a recognized intangible asset under SFAS No.142, “Goodwill and Other Intangible Assets.” FSP 142-3 also requires expanded disclosure related to the determination of intangible asset useful lives. FSP 142-3 is effective for fiscal years beginning after December 15, 2008. The Company’s adoption of FSP 142-3 did not have a material impact on its financial position, results of operations and liquidity.

 

In April 2009, the FASB issued FSP FAS 107-1 and Accounting Principles Board (“APB”) 28-1, “Interim Disclosures about Fair Value of Financial Instruments” (“FSP 107-1”).  FSP 107-1 amends SFAS No. 107, “Disclosures About Fair Value of Financial Instruments,” to require disclosures about fair value of financial instruments for interim reporting periods of publicly traded companies as well as in annual financial statements.  FSP 107-1 also amends APB Opinion No. 28, “Interim Financial Reporting,” to require those disclosures in summarized financial information at interim reporting periods.  FSP 107-1 is effective for interim reporting periods ending after June 15, 2009, with early adoption permitted for periods ending after March 15, 2009.  FSP 107-1 does not require disclosures for earlier periods presented for comparative purposes at initial adoption.  In periods after initial adoption, FSP 107-1 requires comparative disclosures only for periods ending after initial adoption.  The Company is currently evaluating the effect of adopting FSP 107-1 on its financial position, results of operations and liquidity.

 

In April 2009, the FASB issued FSP FAS 115-2 and FAS 124-2, “Recognition and Presentation of Other-Than-Temporary Impairments” (“FSP 115-2”).  FSP 115-2 amends the other-than-temporary impairment guidance for debt securities to make the guidance more operational and to improve the presentation and disclosure of other-than-temporary impairments on debt and equity securities in the financial statements.  FSP 115-2 does not amend existing recognition and measurement guidance related to other-than-temporary impairments of equity securities.  FSP 115-2 is effective for interim and annual reporting periods ending after June 15, 2009, with early adoption permitted for periods ending after March 15, 2009.  FSP 115-2 does not require disclosures for earlier periods presented for comparative purposes at initial adoption.  In periods after initial adoption, FSP 115-2 requires comparative disclosures only for periods ending after initial adoption.  The Company is currently evaluating the effect of adopting FSP 115-2 on its financial position, results of operations and liquidity.

 

In April 2009, the FASB issued FSP FAS 157-4, “Determining Fair Value When the Volume and Level of Activity for the Asset or Liability Have Significantly Decreased and Identifying Transactions That Are Not Orderly” (“FSP 157-4”).  FSP 157-4 provides additional guidance for estimating fair value in accordance with SFAS No. 157, “Fair Value Measurements,” when the volume and level of activity for the asset or liability have significantly decreased.  FSP 157-4 also includes guidance on identifying circumstances that indicate a transaction is not orderly.  FSP 157-4 is effective for interim and annual reporting periods ending after June 15, 2009, with early adoption permitted for periods ending after March 15, 2009.  FSP 157-4 does not require disclosures for earlier periods presented for comparative purposes at initial adoption.  In periods after initial adoption, FSP 157-4 requires comparative disclosures only for periods ending after initial adoption.  The Company is currently evaluating the effect of adopting FSP 157-4 on its financial position, results of operations and liquidity.

 

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HANSEN NATURAL CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

3.         FAIR VALUE MEASUREMENTS

 

SFAS No. 157 provides a framework for measuring fair value and requires expanded disclosures regarding fair value measurements. SFAS No. 157 defines fair value as the price that would be received for an asset or the exit price that would be paid to transfer a liability in the principal or most advantageous market in an orderly transaction between market participants on the measurement date. SFAS No. 157 also establishes a fair value hierarchy which requires an entity to maximize the use of observable inputs, where available. The following summarizes the three levels of inputs required by the standard that the Company uses to measure fair value.

 

·                Level 1: Quoted prices in active markets for identical assets or liabilities.

 

·             Level 2: Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the related assets or liabilities.

 

·                Level 3: Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

 

SFAS No. 157 requires the use of observable market inputs (quoted market prices) when measuring fair value and requires a Level 1 quoted price to be used to measure fair value whenever possible.

 

The following tables present the fair value of the Company’s financial assets recorded at fair value on a recurring basis segregated among the appropriate levels within the fair value hierarchy at March 31, 2009:

 

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HANSEN NATURAL CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Tabular Dollars in Thousands, Except Per Share Amounts) (Unaudited)

		Level 1			Level 2			Level 3			Total
Cash		$	31,144		$	-		$	-		$	31,144
Money market funds		187,676			-			-			187,676
U.S. Treasuries		65,278			-			-			65,278
Municipal securities		-			-			-			-
Auction rate securities		-			-			86,539			86,539
Total		$	284,098		$	-		$	86,539		$	370,637
Amounts included in:
Cash and cash equivalents		$	279,123		$	-		$	-		$	279,123
Short-term investments		4,975			-			-			4,975
Investments		-			-			86,539			86,539
Total		$	284,098		$	-		$	86,539		$	370,637

 

The Company’s Level 3 assets are comprised of municipal or educational related or other public body notes with an auction reset feature (“auction rate securities”). The majority of these notes carry an investment grade or better credit rating and are additionally backed by various federal agencies and/or monoline insurance companies. The applicable interest rate is reset at pre-determined intervals, usually every 7 to 35 days.  Liquidity for these auction rate securities was typically provided by an auction process which allowed holders to sell their notes at periodic auctions.  During the three-months ended March 31, 2009, the auctions for these auction rate securities failed.  The auction failures appear to have been attributable to inadequate buyers and/or buying demand and/or the lack of support from financial advisors and sponsors.  In the event that there is a failed auction, the indenture governing the security in some cases requires the issuer to pay interest at a default rate that may be above market rates for similar instruments. The securities for which auctions have failed will continue to accrue and/or pay interest at their predetermined rates and be auctioned every 7 to 35 days until their respective auction succeeds, the issuer calls the securities, they mature or the Company is able to sell the securities to third parties. As a result, the Company’s ability to liquidate and fully recover the carrying value of its auction rate securities in the near term may be limited. Consequently, these securities are classified as long-term investments in the accompanying condensed consolidated balance sheets.

 

At March 31, 2009, the Company held auction rate securities with a face value of $102.0 million (cost basis of $101.5 million). A Level 3 valuation was performed on the Company’s auction rate securities as of March 31, 2009, which indicated an impairment of $15.5 million, an increase of $0.6 million from $14.9 million as of December 31, 2008, resulting in a fair value of $86.5 million, which is included in long-term investments.  This valuation utilized a mark to model approach which included estimates for interest rates, timing and amount of cash flows, credit and liquidity premiums, and expected holding periods for the auction rate securities.  These assumptions are typically volatile and subject to change as the underlying data sources and market conditions evolve.

 

In addition to the Company’s Level 3 valuation performed as of March 31, 2009, the Company also reviewed various factors in determining whether to record a temporary or other-than-temporary impairment charge related to the decline in fair value on our available-for-sale securities, including

 

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HANSEN NATURAL CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Tabular Dollars in Thousands, Except Per Share Amounts) (Unaudited)

length of time and extent to which the investment’s fair value has been less than the cost basis, the financial condition and near-term prospects of the issuer and any guarantors if applicable, any specific events which may influence the operations of the issuer, and our intent and ability to retain the investment for a period of time sufficient to allow for any anticipated recovery of fair value.  Based on this analysis, the Company determined that of the $15.5 million impairment of its auction rate securities, $11.5 million was deemed temporary.  This amount has been recorded, net of a tax benefit of $4.5 million, as a component of accumulated other comprehensive loss as of March 31, 2009.  In addition, the Company determined that $3.5 million of impairment was other than temporary and recorded a charge to other (expense) income for the three-months ended March 31, 2009 ($0.5 million had been previously deemed other-than-temporary and was charged to interest and other income, net for the year ended December 31, 2008).

 

Based on the Company’s ability to access cash and cash equivalents and other short-term investments and based on the Company’s expected operating cash flows, the Company does not anticipate that the current lack of liquidity of these investments will have a material effect on its liquidity or working capital.  If uncertainties in the credit and capital markets continue or there are ratings downgrades on the auction rate securities held by the Company, the Company may be required to recognize additional impairments on these investments.

 

The following table provides a summary of changes in fair value of the Company’s Level 3 financial assets as of March 31, 2009:

 

		Level 3 Auction Rate Securities
Balance at December 31, 2008		$	97,617
Transfers to Level 3		-
Recognized loss included in income		(3,539		)
Unrealized gain included in other comprehensive income (loss)		2,936
Net settlements		(10,475		)
Balance at March 31, 2009		$	86,539

 

4.         INVESTMENTS

 

The following table summarizes the Company’s investments at March 31, 2009 and December 31, 2008:

 

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HANSEN NATURAL CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Tabular Dollars in Thousands, Except Per Share Amounts) (Unaudited)

March 31, 2009		Amortized Cost			Gross Unrealized Holding Gains			Gross Unrealized Holding Losses			Fair Value			Continuous Unrealized Loss Position less than 12 Months
Held to Maturity
Short-term
U.S. Treasuries		$	4,975		$	-		$	-		$	4,975		$	-
Available-for-sale
Short-term:
Municipal securities		$	-		$	-		$	-		$	-		$	-
Auction rate securities		-			-			-			-			-
Long-term:
Auction rate securities		97,960			-			11,421			86,539			11,421
Total		$	102,935		$	-		$	11,421		$	91,514		$	11,421
December 31, 2008		Amortized Cost			Gross Unrealized Holding Gains			Gross Unrealized Holding Losses			Fair Value			Continuous Unrealized Loss Position less than 12 Months
Held to Maturity
Short-term
U.S. Treasuries		$	19,941		$	-		$	-		$	19,941		$	-
Available-for-sale
Short-term:
Municipal securities		$	1,154		$	-		$	-		$	1,154		$	-
Auction rate securities		8,050			-			-			8,050			-
Long-term:
Auction rate securities		103,923			-			14,356			89,567			14,356
Total		$	133,068		$	-		$	14,356		$	118,712		$	14,356

 

The following table summarizes the maturities of the Company’s investments at March 31, 2009.

 

		Amortized Cost			Fair Value
Less than 1 year		$	4,975		$	4,975
Due 1 - 10 years		700			660
Due 11 - 20 years		8,325			7,298
Due 21 - 30 years		64,775			56,758
Due 31 - 40 years		24,160			21,823
Total		$	102,935		$	91,514

 

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HANSEN NATURAL CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

5.                                    INVENTORIES

 

Inventories consist of the following at:

 

		March 31, 2009			December 31, 2008
Raw materials		$	28,090		$	24,454
Finished goods		82,011			91,872
		$	110,101		$	116,326

 

6.                                    PROPERTY AND EQUIPMENT, Net

 

Property and equipment consist of the following at:

 

		March 31, 2009			December 31, 2008
Land		$	1,417		$	1,417
Leasehold improvements		2,113			2,112
Furniture and office equipment		6,924			6,025
Equipment		6,509			3,850
Vehicles		8,735			8,175
		25,698			21,579
Less: accumulated depreciation and amortization		(8,021)			(7,190		)
		$	17,677		$	14,389

 

7.         INTANGIBLES, Net

 

Intangibles consist of the following at:

 

		March 31, 2009			December 31, 2008
Amortizing trademarks		$	1,059		$	1,169
Accumulated amortization		(378)			(456		)
		681			713
Non-amortizing trademarks		28,312			27,652
		$	28,993		$	28,365

 

All amortizing trademarks have been assigned an estimated useful life and such trademarks are amortized on a straight-line basis over the number of years that approximate their respective useful lives ranging from one to 25 years (weighted-average life of 20 years).  Amortization expense recorded was $0.03 and $0.01 million for the three-months ended March 31, 2009 and 2008, respectively.

 

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(Tabular Dollars in Thousands, Except Per Share Amounts) (Unaudited)

8.                                    DISTRIBUTION AGREEMENTS

 

Pursuant to certain new and/or amended distribution agreements entered into with certain distributors, net amounts of $8.8 million and $0.1 million due from such distributors were accounted for as deferred revenue in the accompanying condensed consolidated balance sheets for the three-months ended March 31, 2009 and 2008, respectively. Deferred revenue is recognized as revenue ratably over the anticipated life of the respective distribution agreements, generally 20 years. Revenue recognized was $1.9 million and $0.5 million for the three-months ended March 31, 2009 and 2008, respectively.  The Company incurred termination costs to certain of its prior distributors amounting to $1.1 million during the three-months ended March 31, 2009.  No termination costs were incurred by the Company during the three-months ended March 31, 2008.

 

9.                                    COMMITMENTS AND CONTINGENCIES

 

Purchase Commitments – The Company has purchase commitments aggregating approximately $66.3 million, which represent commitments made by the Company and its subsidiaries to various suppliers of raw materials for the manufacturing and packaging of its products.  These obligations vary in terms and are due within the next twelve months.

 

The Company has noncancelable contractual obligations aggregating approximately $51.0 million, which are related primarily to sponsorships and other marketing activities.

 

In addition to the above obligations, pursuant to a can supply agreement between the Company and Rexam Beverage Can Company (“Rexam”) dated as of January 1, 2006, as amended, the Company has undertaken to purchase a minimum volume of 24-ounce resealable aluminum beverage cans over the four year period commencing from January 1, 2006 through December 31, 2009.  Under the terms of the agreement, if the Company fails to purchase the minimum volume, the Company will be obligated to reimburse Rexam for certain capital reimbursements on a pro-rated basis.  The Company’s maximum liability under this agreement as of March 31, 2009 is $3.5 million, subject to compliance by Rexam with certain conditions.

 

In the fourth quarter of 2008, the Company entered into licensing and programming agreements with SAP America, Inc. for its global enterprise resource planning software initiative to replace its existing legacy software.  The Company estimates the remaining cost for implementation of the initiative will be approximately $3.5 million.  The project commenced in the first quarter of 2009 with a targeted production live date in the first quarter of 2010.

 

Litigation – In August 2006, HBC filed a lawsuit against National Beverage Company, Shasta Beverages, Inc., Newbevco Inc. and Freek’N Beverage Corp. (collectively “National”) seeking an injunction and damages for trademark infringement, trademark dilution, unfair competition and deceptive trade practices based on National’s unauthorized use of HBC’s valuable and distinctive Monster Energy® trade dress in connection with a line of energy drinks it launched under the “Freek” brand name.  In June 2007, the parties entered into a confidential settlement

 

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agreement resolving the parties’ disputes in the litigation.  National subsequently repudiated the settlement agreement and HBC responded by filing a motion in the United States District Court for the Central District of California to enforce the terms of the confidential settlement agreement.  On August 14, 2007, the United States District Court entered an Order enforcing the settlement agreement and permanently enjoining National from manufacturing, distributing, shipping, marketing, selling and offering to sell “Freek” energy drinks in containers using the original “Freek” trade dress that was subject to the District Court’s preliminary injunction.  National appealed the District Court’s decision to the Ninth Circuit Court of Appeals, which heard oral arguments on December 11, 2008.  No decision has been issued on the appeal.

 

In September 2006, Christopher Chavez purporting to act on behalf of himself and a class of consumers yet to be defined filed an action in the Superior Court of the State of California, City and County of San Francisco, against the Company and its subsidiaries for unfair business practices, false advertising, violation of California Consumers Legal Remedies Act, fraud, deceit and/or misrepresentation alleging that the Company misleadingly labels its Blue Sky beverages as originating in and/or being canned under the authority of a company located in Santa Fe, New Mexico.  Defendants removed this Superior Court action to the United States Court for the Northern District of California under the Class Action Fairness Act, and filed motions for dismissal or transfer.  On June 11, 2007, the United States District Court, Northern District of California granted the Company’s motion to dismiss Chavez’s complaint with prejudice. On June 21, 2007, Chavez filed an appeal with the U.S. Court of Appeals for the Ninth Circuit, and the Court heard oral arguments on January 14, 2009.  No decision has been issued on the appeal.

 

In January 2007, the Company’s former distributor for the Riverside County and San Bernardino County, California territories, Gate City Beverage Company (“Gate City”), notified the Company of its intention to sell its business and requested the Company consent to the assignment of the distribution agreement with the Company.  The Company declined its consent and exercised its contractual right to terminate the Gate City distribution agreement upon thirty days prior written notice.  Gate City threatened to take “appropriate action” against the Company and third parties for what it contended was an improper termination of the distribution agreement.  The Company denied Gate City’s assertion regarding improper termination of the applicable distribution agreement.  On February 6, 2008, Gate City filed a demand for arbitration with the American Arbitration Association to be held in Orange County, California, claiming damages in an amount exceeding $5.0 million, plus attorneys’ fees and costs. The litigation was settled between the parties in April 2009 for an amount substantially lower than that claimed.

 

On July 3, 2008, the Company filed a lawsuit in the Superior Court for the State of California for Los Angeles County against St. Paul Mercury Insurance Company (“St. Paul”) due to St. Paul’s failure to reimburse the Company for certain costs and expenses incurred and paid by the Company for and in connection with the investigation and defense of various proceedings relating to certain stock option grants made by the Company, including Special Committee investigation costs (the “St. Paul Complaint”).   The Company purchased from St. Paul a directors and officers insurance policy that the Company contends covered such expenses during the pertinent time period.   St. Paul has reimbursed the Company for certain of the costs and expenses associated with the Company’s successful defense against the subject proceedings, but has refused to pay the remainder of the limits

 

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of its policy.  The St. Paul Complaint alleges that St. Paul is liable to the Company for the difference. The Company seeks damages arising from St. Paul’s breach of the policy, punitive damages, and reimbursement of the attorneys’ fees expended in the investigation and litigation.  On August 1, 2008, St. Paul removed the lawsuit to the United States District Court for the Central District of California and shortly thereafter answered the St. Paul Complaint, denying that it has any further responsibility to the Company beyond the amount for which it had previously reimbursed the Company.  On January 30, 2009, St. Paul filed a motion for partial summary judgment on certain issues in the litigation.  The Court entered an order on St. Paul’s motion on April 9, 2009, partially granting but partially denying its motion.  Pre-trial discovery on damages and other issues is continuing.  The parties are preparing for a court-ordered mediation scheduled for June 2009.  A trial has been scheduled on the remaining issues in this litigation in January 2010.

 

On July 11, 2008, the Company initiated an action against Citigroup Inc., Citigroup Global Markets, Inc. and Citi Smith Barney, in the United States District Court, Central District of California, for violations of federal securities laws and the Investment Advisors Act, arising out of the Company’s purchase of auction rate securities.  The Court granted defendants’ motion to compel arbitration before the Financial Industry Regulatory Authority (“FINRA”).  The matter is now proceeding before FINRA.

 

On August 28, 2008, the Company initiated an action against Oppenheimer Holdings Inc., Oppenheimer & Co. Inc., and Oppenheimer Asset Management Inc., in the United States District Court, Central District of California, for violations of federal securities laws and the Investment Advisors Act, arising out of the Company’s purchase of auction rate securities.  The defendants answered the complaint on October 14, 2008 denying the allegations set forth therein.  The Oppenheimer action was deemed a related case to the Company’s action against Citigroup Inc. (described above).  After the Court granted defendants’ motion to compel arbitration in the Citigroup Inc. case, the Company stipulated to arbitration before FINRA, where the matter is now proceeding.

 

Securities Litigation - On September 11, 2008, a federal securities class action complaint styled Cunha v. Hansen Natural Corp., et al. was filed in the United States District Court for the Central District of California (the “District Court”). On September 17, 2008, a second federal securities class action complaint styled Brown v. Hansen Natural Corp., et al. was also filed in the District Court.

 

Both actions, filed by single individual shareholders purportedly on behalf of a class of purchasers of the Company’s stock during the period May 23, 2007 through November 8, 2007 (the “Class Period”), name as defendants the Company, Rodney C. Sacks, and Hilton H. Schlosberg. The allegations of both complaints are substantially similar. Plaintiffs allege violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder. Plaintiffs allege, among other things, that during the Class Period, the defendants issued materially false and misleading statements that failed to disclose that: (i) the Company’s second quarter sales results were “materially impacted by inventory loading as customers were induced to purchase more product before the Company raised its prices in its Monster Energy® drink line and its Java Monster™ drink line” (ii) the Company was “experiencing declining sales in its non-core drink lines” (iii) the Company was “experiencing production shortfalls with its Java Monster drink line” and (iv) as a result of the foregoing, defendants “lacked a reasonable basis for their positive statements about the Company and its prospects.” The complaints seek an unspecified amount of damages.

 

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The New Jersey Carpenters Pension Fund and the Structural Ironworkers Local Union #1 Pension Fund filed motions on November 10, 2008 for consolidation of the actions and for appointment of Lead Plaintiff and Lead Counsel.  A hearing on the motions (which had been previously scheduled for March 2009, but which was adjourned) is currently scheduled for June 2009.  If a motion for consolidation is granted, defendants must respond within forty-five days from the date of service of any consolidated complaint or the designation of one complaint as the operative complaint in the consolidated class actions.  If a motion for consolidation is denied, then defendants must respond to the complaints within forty-five days from the date on which the denial of such motion is entered on the Court’s docket.

 

Derivative Litigation - On October 15, 2008, a derivative complaint was filed in the United States District Court for the Central District of California (the “District Court”), styled Merckel v. Sacks, et al.  On November 17, 2008, a second derivative complaint styled Dislevy v. Sacks, et al. was also filed in the District Court.  The derivative suits were each brought, purportedly on behalf of the Company, by a shareholder of the Company who made no prior demand on the Company’s Board of Directors.

 

The Merckel complaint names as defendants certain current and former officers, directors, and employees of the Company and HBC, including Rodney C. Sacks (“Sacks”), Hilton H. Schlosberg (“Schlosberg”), Harold C. Taber, Jr., Benjamin M. Polk, Norman C. Epstein, Mark S. Vidergauz, Sydney Selati (“Selati”), Thomas J. Kelly (“Kelly”), Mark J. Hall (“Hall”), Kirk S. Blower (“Blower”), and Hilrod Holdings, L.P.  The Company is named as a nominal defendant.  The factual allegations of the complaint are substantially similar to those set forth in the two securities class action complaints described above.  The complaint also alleges, among other things, that between May 2007 and the date of the filing of the complaint, the defendants directed the Company to issue a series of improper statements concerning its business prospects. The complaint further alleges that while the Company’s shares were purportedly artificially inflated because of those improper statements, certain defendants sold Company stock while in possession of material non-public information regarding the Company’s “true” business prospects. The complaint asserts various causes of action, including breach of fiduciary duty, aiding and abetting breach of fiduciary duty, violation of Cal. Corp. Code §§ 25402 and 25403 for insider selling, and unjust enrichment. The suit seeks an unspecified amount of damages to be paid to the Company, adoption of corporate governance reforms, and equitable and injunctive relief.

 

The Dislevy complaint, which has not been served, makes substantially similar factual allegations as the Merckel complaint, but names only Sacks, Schlosberg, Selati, Kelly, Hall, and Blower as defendants.  The Dislevy complaint asserts only two causes of action:  breach of fiduciary duty and unjust enrichment.  The suit seeks an unspecified amount of damages to be paid to the Company and equitable relief.

 

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(Tabular Dollars in Thousands, Except Per Share Amounts) (Unaudited)

On December 4, 2008, Plaintiff in the Merckel action filed a motion to consolidate that action with the Dislevy action.  A hearing on the motion to consolidate (which had been previously scheduled for March 2009, but which was adjourned) is currently scheduled for June 2009.  If the motion to consolidate is granted, defendants must respond within 45 days after the filing and service of a consolidated amended complaint.  If the motion to consolidate is denied, defendants must respond to the Merckel complaint within 45 days from entry of the order denying the motion or from the filing of any amended complaint, whichever is later.

 

Although the ultimate outcome of these matters cannot be determined with certainty, the Company believes that the complaints are without merit. The Company intends to vigorously defend against these lawsuits.

 

10.                            COMPREHENSIVE INCOME

 

The components of comprehensive income are as follows:

 

		Three-Months Ended
		March 31,
		2009				2008
Net income, as reported		$	41,565			$	28,811
Other comprehensive income (loss):
Change in unrealized loss on available-for-sale securities, net of tax		1,771				(3,228		)
Foreign currency translation adjustments		740				1
Comprehensive income		$	44,076			$	25,584

 

The components of accumulated other comprehensive loss is as follows:

 

		March 31, 2009				December 31, 2008
Accumulated net unrealized loss on available-for-sale securities, net of tax benefit of $4.5 million and $5.7 million as of March 31, 2009 and December 31, 2008, respectively.		$	(6,889)			$	(8,660)
Foreign currency translation adjustments		(1,425)				(2,165)
Total accumulated other comprehensive loss		$	(8,314)			$	(10,825)

 

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11.                            STOCK-BASED COMPENSATION

 

The Company has two stock option plans under which shares were available for grant at December 31, 2008: the Hansen Natural Corporation Amended and Restated 2001 Stock Option Plan (the “2001 Option Plan”) and the 2005 Hansen Natural Corporation Stock Option Plan for Non-Employee Directors (the “2005 Directors Plan”).

 

The 2001 Option Plan permits the granting of options to purchase up to 22,000,000 shares of the common stock of the Company to certain key employees or non-employees of the Company and its subsidiaries.  Options granted under the 2001 Option Plan may be incentive stock options under Section 422 of the Internal Revenue Code, as amended, non-qualified stock options or stock appreciation rights.  Stock options are exercisable at such time and in such amounts as determined by the Compensation Committee of the Board of Directors of the Company up to a ten-year period after their date of grant.  As of March 31, 2009, options to purchase 17,485,500 shares of the Company’s common stock had been granted, net of cancellations, and options to purchase 4,514,500 shares of the Company’s common stock remain available for grant under the 2001 Option Plan.

 

The 2005 Directors Plan permits the granting of options to purchase up to an aggregate of 800,000 shares of common stock of the Company to non-employee directors of the Company.  On the date of the annual meeting of stockholders at which an eligible director is initially elected, each eligible director is entitled to receive a one-time grant of an option to purchase 24,000 shares of the Company’s common stock exercisable at the closing price for a share of common stock on the date of grant. Additionally, on the fifth anniversary of the election of eligible directors elected or appointed to the Board of Directors, and each fifth anniversary thereafter, each eligible director shall receive an additional grant of an option to purchase 19,200 shares of the Company’s common stock.  Options become exercisable in four equal installments, with the grant immediately vested with respect to 25% of the grant and the remaining installments vesting on the three successive anniversaries of the date of grant; provided that all options held by an eligible director become fully and immediately exercisable upon a change in control of the Company.  Options granted under the 2005 Directors Plan that are not exercised generally expire ten years after the date of grant.  Option grants may be made under the 2005 Directors Plan for ten years from the effective date of the 2005 Directors Plan.  The 2005 Directors Plan is a “formula plan” so that a non-employee director’s participation in the 2005 Directors Plan does not affect his status as a “disinterested person” (as defined in Rule 16b-3 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)).  As of March 31, 2009, options to purchase 76,800 shares of the Company’s common stock had been granted under the 2005 Directors Plan and options to purchase 723,200 shares of the Company’s common stock remained available for grant.

 

Under the Company’s stock option plans, all grants are made at prices based on the fair value of the options on the date of grant.  Outstanding options generally vest over five years from the grant date and generally expire up to ten years after the grant date. The Company recorded $2.7 million and $2.1 million of compensation expense relating to outstanding options during the three-months ended March 31, 2009 and 2008, respectively.  Refer to “Change in Estimated Forfeiture Rate” later within this Note 11 for additional information.

 

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The Company records compensation expense for employee stock options based on the estimated fair value of the options on the date of grant using the Black-Scholes-Merton option pricing formula with the assumptions included in the table below. The Company records compensation expense for non-employee stock options based on the estimated fair value of the options as of the earlier of (1) the date at which a commitment for performance by the non-employee to earn the stock option is reached, or (2) the date at which the non-employee’s performance is complete, using the Black-Scholes-Merton option pricing formula with the assumptions included in the table below. The Company uses historical data to determine the exercise behavior, volatility and forfeiture rate of the options.  The following weighted-average assumptions were used to estimate the fair value of options granted during the three-months ended March 31, 2009 and 2008:

 

		Three-Months Ended March 31,
		2009			2008
Dividend yield		0.0 %			0.0 %
Expected volatility		66.2 %			61.8 %
Risk free interest rate		1.8 %			3.1 %
Expected lives		5.0 Years			6.0 Years

 

The following table summarizes the Company’s activities with respect to its stock option plans as follows:

 

Options			Number of Shares (In Thousands)				Weighted- Average Exercise Price Per Share			Weighted- Average Remaining Contractual Term (In Years)			Aggregate Intrinsic Value
Balance at January 1, 2009			10,030				$	12.38		6.4			$	216,580
Granted			123				$	33.90
Exercised			(246	)			$	4.20
Cancelled or forfeited			(115	)			$	4.43
Outstanding at March 31, 2009			9,792				$	12.95		6.2			$	228,880
Vested and expected to vest in the future at March 31, 2009			8,908				$	11.44		6.0			$	221,065
Exercisable at March 31, 2009			5,974				$	6.00		5.2			$	179,924

 

The weighted-average grant-date fair value of options granted during the three-months ended March 31, 2009 and 2008 was $19.04 per share and $23.97 per share, respectively. The total intrinsic value of options exercised during the three-months ended March 31, 2009 and 2008 was $7.6 million and $9.2 million, respectively.

 

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Cash received from option exercises under all plans for the three-months ended March 31, 2009 and 2008 was approximately $1.0 million and $0.8 million, respectively.  The actual tax benefit realized for tax deductions from non-qualified stock option exercises and disqualifying dispositions of incentive stock options for the three-months ended March 31, 2009 and 2008 was $1.2 million and $0.6 million, respectively.

 

At March 31, 2009, there was $35.7 million of total unrecognized compensation expense related to nonvested shares granted to both employees and non-employees under the Company’s share-based payment plans.  That cost is expected to be recognized over a weighted-average period of 2.7 years.

 

Change in Estimated Forfeiture Rate

 

During the three-months ended March 31, 2009, based on historical experience, the Company modified the estimated annual forfeiture rate used in recognizing stock-based compensation expense for its most senior executives based on their dissimilar historical forfeiture experience as compared to non-senior executives.  This modification resulted in a change from a 3.0% forfeiture rate to an 11.2% forfeiture rate. During the same period, the Company also realized a benefit from actual forfeiture experience that was higher than previously estimated for unvested stock options, resulting primarily from non-senior executives and other employee departures from the Company. The impact of these events was a benefit of approximately $1.1 million which was included in operating expenses in the condensed consolidated statement of income for the three-months ended March 31, 2009.

 

12.                            INCOME TAXES

 

Effective January 1, 2007, the Company adopted the provisions of FASB Interpretation No. 48, “Accounting for Uncertainty in Income Taxes” (“FIN No. 48”).  FIN No. 48 clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements in accordance with SFAS No. 109, “Accounting for Income Taxes.”  FIN No. 48 prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of tax positions taken or expected to be taken in a tax return. This pronouncement also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure, and transition.

 

Upon adoption of FIN No. 48 as of January 1, 2007, the Company’s reassessment of its tax positions did not have a material impact on the consolidated financial statements.  The following is a rollforward of the Company’s total gross unrecognized tax benefits for the three-months ended March 31, 2009 (in thousands):

 

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		Gross Unrealized Tax Benefits
Balance at December 31, 2008		$	1,912
Additions for tax positions related to the current year		-
Decreases related to settlement with taxing authorities		(1,912		)
Balance at March 31, 2009		$	-

 

In March 2009, the Internal Revenue Service concluded its examination of the Domestic Production tax claim attributable to the 2005 and 2006 years.  The Company’s position was upheld on its uncertain tax positions attributable to the Domestic Production Deduction.  As a result, the FIN No. 48 liability was reduced by $1.9 million of unrecognized tax benefits.  The removal of accrued uncertain tax positions and related interest and penalties previously recorded resulted in a $2.1 million increase in net income for the three-months ended March 31, 2009.

 

On August 9, 2007, the Internal Revenue Service began its examination of the Company’s U.S. federal income tax return for the period ended December 31, 2005.  The examination was completed in March 2009 with no significant adjustments.

 

The Company is subject to U.S. federal income tax as well as to income tax in multiple state jurisdictions.  Federal income tax returns of the Company are subject to IRS examination for the 2006 through 2007 tax years. State income tax returns are subject to examination for the 2004 through 2007 tax years.

 

13.                            EARNINGS PER SHARE

 

A reconciliation of the weighted-average shares used in the basic and diluted earnings per common share computations for the three-months ended March 31, 2009 and 2008 is presented below:

 

		Three-Months Ended
		March 31,
		2009		2008
Weighted-average shares outstanding:
Basic		90,433		93,314
Dilutive securities		4,883		5,693
Diluted		95,316		99,007

 

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For the three-months ended March 31, 2009 and 2008, options outstanding totaling 2.3 million and 0.5 million shares, respectively, were excluded from the calculations as their effect would have been antidilutive.

 

14.                            SEGMENT INFORMATION

 

The Company has two reportable segments, namely Direct Store Delivery (“DSD”), whose principal products comprise energy drinks, and Warehouse, whose principal products comprise juice based and soda beverages.  The DSD segment develops, markets and sells products primarily through an exclusive distributor network, whereas the Warehouse segment develops, markets and sells products primarily direct to retailers. Corporate and unallocated amounts that do not relate to DSD or Warehouse segments have been allocated to “Corporate & Unallocated.”

 

The net revenues derived from DSD and Warehouse segments and other financial information related thereto for the three-months ended March 31, 2009 and 2008 are as follows:

 

		Three-Months Ended March 31, 2009
		DSD			Warehouse			Corporate and Unallocated			Total
Net sales		$	222,519		$	21,687		$	-		$	244,206
Contribution margin		79,286			1,170			-			80,456
Corporate and unallocated expenses		-			-			(14,679)			(14,679)
Operating income											65,777
Other (expense) income		(16)			-			(2,507)			(2,523)
Income before provision for income taxes											63,254
Depreciation and amortization		564			8			497			1,069
Trademark amortization		-			11			21			32

 

		Three-Months Ended March 31, 2008
		DSD			Warehouse			Corporate and Unallocated			Total
Net sales		$	189,711		$	22,467		$	-		$	212,178
Contribution margin		56,278			(1,127)			-			55,151
Corporate and unallocated expenses		-			-			(12,323)			(12,323)
Operating income											42,828
Other (expense) income		(14)			-			3,640			3,626
Income before provision for income taxes											46,454
Depreciation and amortization		278			8			444			730
Trademark amortization		-			11			3			14

 

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