Hansen Natural Announces Stock Option Investigation Findings

| About: Monster Beverage (MNST)

Yesterday, Hansen released some great information to investors regarding the whole options investigation. Here the main highlights.

  • The errors from unintentional accounting acts related to stock options amounts to only $1 million total since January 1, 2001 to today
  • No unintentional acts found before January 1, 2001
  • Impact of these adjustments have been included in the three and nine months ended September 30, 2006 (the 3Q) - the adjustments weren't material to these months (i.e. the errors didn't happen in that period)
  • Adjustments will not affect net income
  • Nasdaq has extended time for the company to file its 10-K report to June 14, 2007
  • Company believes it will file report in time, also expects to file 10-Q around the same time, give or take a couple of weeks it looks like
  • New distributor Anheuser-Busch (NYSE:BUD) has given Hansen payments for terminating distribution deals with old distributors
  • According to the release, the A-B distribution agreement has an anticipated life of 20 years
  • Receipts from A-B in these past quarters have been added in by a reduction in operating expenses during the relevant periods
  • A large part of the A-B partnership arrangements have been completed, in the 1Q 2007 press release they stated it is expected to be fully complete by the end of the 2Q
  • Wow. And to think that at one time the stock was down 25% on worries of what turned out to be only $1 million over a 5 1/2 period. In five years I doubt we'll even notice the adjustments in the 3Q 2006 release. By the end of June, Hansen should be completely clean and have all of this behind them. It's amazing and incredibly motivating to me that even with all this going on, Hansen was able to net an awesome, improved distribution deal with Anheuser-Busch and several days later announce that PepsiCo (NYSE:PEP) Canada would step in and start distributing their products in Canada. Two of the greatest beverage businesses in the world are now behind Hansen. And these deals were signed when management and the reputation of Hansen's corporate side were being questioned by investors and some analysts alike. Management remained firm, steady, and continued to do what's best for the company's long-term success. It's also great to know that the A-B is expected to go on for 20 years, and if things go well with it, it will probably be much longer than that. This should turn out to be very rewarding for shareholders in the long run.

    I'm very confident in Hansen's future. I wouldn't be surprised to see Monster snatch the top spot in the energy drink market from Red Bull in the next few years, the balance sheet is becoming increasingly strong ($178.7 million in cash, no debt), and now management has more time and space to look for new opportunities. I think foreign expansion (Europe seems like a high possibility, especially considering Anheuser-Busch's presence there) and acquisitions will be important areas for Hansen in the next few years; I would be surprised if management doesn't make any moves in either of those areas in the next 3-5 years.

    Disclosure: Author has a long position in HANS

    HANS 1-yr chart


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