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Hansen Natural (HANS)

Q4 2010 Earnings Call

February 24, 2011 5:00 pm ET


Rodney Sacks - Chairman, Chief Executive Officer, Member of Executive Committee and Chairman of Hansen Beverage Company

Hilton Schlosberg - Vice Chairman, President, Chief Operating Officer, Chief Financial Officer, Secretary and Member of Executive Committee


Judy Hong - Goldman Sachs Group Inc.

Mark Astrachan - Stifel, Nicolaus & Co., Inc.

Kaumil Gajrawala - UBS Investment Bank

Michael Lavery - Sidoti & Company



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Good afternoon, ladies and gentlemen. Thank you for standing by. Welcome to the Hansen Natural Corporation Fourth Quarter and Year End 2010 Financial Results Conference call. [Operator Instructions] I will now turn the conference over to Mr. Rodney Sacks, Chairman and CEO. Please go ahead, sir.

Rodney Sacks

Good afternoon, ladies and gentlemen. Thank you for attending this call. I'm Rodney Sacks. Hilton Schlosberg, our Vice Chairman and President, is with me today, as is Tom Kelly, our Vice President of Finance.

Before we begin, I would like to remind listeners that certain statements made during this call 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, and which are based on currently available information regarding the expectations of management with respect to revenues, profitability, future business, future events, financial performance and trends.

Management cautions that these statements are based on management's current knowledge and expectations and are subject to certain risks and uncertainties, many of which are outside the control of the company that may cause actual results to differ materially from the forward-looking statements made herein. Please refer to our filings with the Securities and Exchange Commission, including our most recent Annual Report on Form 10-K filed on March 1, 2010, and our most recent quarterly report on Form 10-Q, including the sections contained therein entitled Risk Factors and Forward-looking Statements for a discussion on specific risks and uncertainties that may affect our performance. The company assumes no obligation to update any forward-looking statements whether as a result of new information, future events, or otherwise.

An explanation of the non-GAAP measures of gross sales and certain expenditures, which may be mentioned during the course of this call, is provided in the notes designated with asterisks in the condensed consolidated statements of income and other information attached to the earnings release dated February 24, 2011. A copy of this information is also available on our website at in the Investor Relations section.

The improved trend in the beverage market in general in North America and certain countries internationally to which I referred in our recent communications to stockholders, although choppy, appears to be continuing. In particular, the energy category appears to be continuing to gain momentum with increased growth principally in the important convenience and gas store channel and to a lesser degree, in the grocery and growth channels.

The macro environment continues to be challenging as we continue to face economic uncertainty and high unemployment levels in the United States and many of the other countries in which we are selling our product. A consumer-led recovery continues to be kept at bay in many regions, particularly in developed markets such as United States and Europe including United Kingdom. Despite these conditions, we were able to continue to grow the Monster brand during the fourth quarter.

During the third quarter of last year, we launched Monster Absolutely Zero to address increasing consumer demand for low- or 0-calorie beverage products. Early indications are that Absolute Zero has been well received by distributors, retail customers and consumers and has resulted in limited chemicalization of Monster lo-carb. The other new product launched by us during the third quarter of last year continue to be well received. Worx Energy shot packed in 2-oz PET plastic bottles have achieved reasonable distribution through CCR. We intend to support the launch of Worx Energy through traditional television advertising, which commenced a few days ago.

The repositioning of our Java Monster line and the introduction of the new X-Presso Monster SKUs is progressing, although it is still too early to evaluate the success of such repositioning. The rollout of our super concentrated energy drink, Monster M3, which is packed in 5-oz glass bottles has been slow, but we are taking steps to secure increased distribution of M3. Trends are proceeding well for the launch of our new non-carbonated Monster Rehab energy drink, with electrolytes and additional supplements in March 2011. Sales of Peace Tea continue to meet our expectations, and we are about to launch a line extension named Peace Tea Caddyshack, which is a combination of tea and lemonade.

Turning to some reported sales numbers. According to Nielsen, for the 13 weeks ended January 22, 2011, all outlets combined, namely, convenience, grocery, drug and mass merchandisers excluding Wal-Mart, sales in the energy drink category including shots increased 14.8% versus the same period a year ago. Sales of Monster grew 18.3% in the 13-week period concerned, while sales of Red Bull increased by 12.1%. Sales of Rockstar increased by 15.2%. Sales of 5-Hour Energy increased 63.7%, while sales of Amp dropped 1%. Sales of NOS increased 11.2%. Sales of Full Throttle dropped 21.9%, and No Fear was down 46%.

According to the Nielsen report for the four weeks ended January 22, 2011, sales of energy drinks in the convenience and gas channel, as defined by us, increased 16.9% over the comparable four-week period in 2010. Over this four-week period, sales of Monster increased by 19.6% over last year, while sales of Red Bull increased by 15.9% and Rockstar was up 19.4%. Amp was up 3.5%, while NOS was up 12.9% and Full Throttle was down 24.8%. 5-Hour Energy increased 56.7%.

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