SecProbe.io

CORRESP
1
filename1.htm

July 15,
2005

Mr. George
F. Ohsiek, Jr.

Branch Chief

U.S.
Securities and Exchange Commission

Division of
Corporation Finance

450 Fifth
Street, N.W., MS 03-08

Washington
D.C. 20549

Re:  Hansen Natural Corporation

Dear Mr. Ohsiek:

Reference is made to your letter of June 9, 2005
and to our telephone conversation of June 23, 2005 during the course of
which you were kind enough to extend the deadline for our response until July 23,
2005.  We have now had the opportunity to
consider the comments in your letter and respond as set forth below.  For ease of reference we have used the same
paragraph numbers as were used in your letter and have included your comment
immediately above our response.

References in the “Hansen’s Response” sections of this
letter to the words “Hansen”, “the Company”, “we”, “us”, and “our”, mean Hansen
Natural Corporation and its subsidiaries.
References herein to “you”, “your”, “staff” and “Commission” mean the
U.S. Securities and Exchange Commission and its staff.

1.              Except for comment 15
for which amendment is required, where a comment below requests additional
disclosures or other revisions to be made, these revisions should be included
in your future filings, as applicable.

Hansen’s Response:

We have
noted your comments and have complied with your request for an amendment in
accordance with comment 15.  Form 10K/A,
including amended Section 302 certifications, was filed on June 22,
2005.  We accept certain of the revisions
suggested by you and they will be included in our future filings, as
applicable.  In those instances where we
have not agreed with the revisions suggested by you, we have explained our
position and look forward to working with you to resolve any open items.

1

2.              You have presented a
non-GAAP performance measure, “Gross Sales”. Please include the following
wherever this measure is presented:

2a.       Cautionary disclosure that the
measure presented may not be comparable to similarly titled measures used by
other entities.

Hansen’s Response:

We propose to include the following statement in
future filings: 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.

2b.       A detailed description of how
management “internally uses” the non-GAAP measure that fully explains why
management believes it is useful and meaningful to investors and what
additionally information it provides that is not provided by the GAAP
performance measure.

Hansen’s Response:

Management uses gross sales as an indicator of operating performance in
various ways, including, by way of illustration, the following:

•                  Sales reports are generated and made available to management on a
gross sales basis.  Management analyzes such
gross sales information by product, territory, channel and customer.  Sales reports are not prepared on a net sales
basis.

•                  Gross sales including Budgeted Gross Sales is the starting point in
management’s assessment of the extent of promotional activity that is to be
authorized on a specific product basis.

•                  Sales performance including the performance of sales personnel is
periodically evaluated based on gross sales achieved taking into account
promotional expenditures incurred to achieve such gross sales.  Incentive based compensation for sales
personnel is, in many instances, based upon the level of gross sales achieved
within predetermined promotional expenditure levels.

Management believes such non-GAAP measure is useful and meaningful to
investors in various ways, including by way of illustration, the following:

•                  Certain promotions with retailers are recorded as reductions of
gross sales whereas other selling activity/promotions are recorded in selling,
general and administrative expenses.  For
example, when certain in-store advertising is used for product promotions, it
is recorded as a reduction of gross sales whereas radio or television
advertising is recorded as selling expense.
As a result, while the underlying gross sales and sales volumes might be
precisely the same, the amount of net sales recorded

2

in the two instances above would be distinctly different depending on
the specific type of promotional and advertising activity chosen.  As a result, management believes that the
disclosure of gross sales is an important indicator of operating performance,
and further, facilitates evaluation of promotional activities to achieve sales
volumes regardless of whether the cost is recorded as a reduction of gross
sales or recorded in selling expenses.

•                  Evaluation of the Company’s sales growth and market share (which
requires a more consistent correlation to volumes and ought to be based on
measures unaffected by different characterizations of different types of
promotional activities) is more meaningful from an analysis of gross
sales.  In light of the numerous sales
promotional programs, it is meaningful to investors to understand the level of
all promotional expenditures to achieve sales.

2c.        Whether management uses the non-GAAP measure as liquidity measures
also or as a measure of operating performance.

Hansen’s
Response:

Management
uses gross sales as a measure of operating performance.

2d.       A statement that the non-GAAP measure should not be considered as
alternatives to Net sales, which is determined in accordance with GAAP, as
indicators of operating performance.

Hansen’s Response:

Please see our proposed disclosure above in response
to comment 2a.

2e.        A reconciliation to Net sales.

Hansen’s
Response:

We respectfully inform the staff that the
requested reconciliation already appears in our Consolidated Statement of
Income and in our Results of Operations in Item 7 of our Form 10-K.  However, based on our response to comment 5
below, we propose to eliminate the presentation of gross sales as a line item
in our Consolidated Statement of Income in future filings.  To the extent that gross sales will remain a
line item in the Results of Operations in Item 7, we will continue to provide a
reconciliation to net sales.

3

2f.          A discussion of the comparable GAAP operating performance measures,
when the non-GAAP measure is discussed. Any non-GAAP measures should be
balanced with presentation and discussion of the most directly comparable GAAP
measure.

Hansen’s
Response:

We respectfully believe we have met your
requirement in our filings to date.  We
have taken note of your comment and will balance our discussions of non-GAAP
measures with our discussions of directly comparable GAAP measures in future
filings.

Similarly, please revise your Management’s Discussion and Analysis of
Financial Condition and Results of Operations as well. See Item 10(e) of
Regulation S-K.

Hansen’s Response:

Management’s Discussion and Analysis will be prepared with the above
comments in mind in future filings.

3.              When two or more factors
contributed to a material change in a financial statement line item between
periods please quantify the extent to which each factor contributed to the
overall change. For instance, when discussing the various reasons for changes
in your Net Sales, it would be helpful if you quantified the individual impact
of changes in sales prices versus volume. This would provide the reader with a
better understanding of the extent to which each factor contributed to the
overall change. See Item 303(a) of Regulation S-K and SEC Release No. 33-8350.

Hansen’s Response:

If there are two or more factors contributing to a material change in a
financial statement line item, we will quantify the extent to which each factor
contributed to the overall change in future filings.

4.              The discussion and
analysis of cash flows should not be merely a recitation of changes evident
from the financial statements. Please revise your Management’s Discussion and
Analysis to explain why there were material changes in your accounts such as
accounts receivable and payable. Additional1y, please expand your discussion to
include an analysis of known material trends, events, demands, commitments and
uncertainties. See Item 303 of Regulation S-K.

Hansen’s Response:

In future filings, we will expand our discussion to explain material
changes in our accounts, including if material, accounts receivable, accounts
payable and inventory.  We will also
include an analysis of known material trends, events, demands, commitments and
uncertainties.

4

5.              Please remove the line
items above net sales from the face of your statement of income. Your disclosures
elsewhere throughout the filing should also be revised to remove the
implication that both gross and net amounts represent your GAAP basis sales.
You should still disclose your accounting treatment for discounts, allowances
and promotional payments for each period presented as required by EITF 01-9 and
provide appropriate disclosure in Schedule II of revenue dilution items in
accordance with Rules 5-04 and 12-09 of Regulation S-X. Please show us
what your revised disclosures will look like.

Hansen’s Response:

We will remove gross sales from our Consolidated Statement of Income in
our future filings.

In our Results of Operations section in Item 7, we propose to
eliminate any implication that both gross and net sales amounts meet GAAP sales
reporting requirements by adding a footnote disclosure as proposed in response
to comment 2a.

Additionally, we will provide the following footnote disclosure to the
disclosure of discounts, allowances and promotional payments in the Results of
Operations:  *Although
the expenditures described in this line item are determined in accordance with
GAAP and meet GAAP requirements, the disclosure thereof as aforesaid does not
conform with GAAP presentation requirements.

We will disclose our accounting treatment for discounts, allowances and
promotional payments as required by EITF 01-9 and will provide appropriate
disclosure in Schedule II of revenue dilution items in accordance with Rules 5-04
and 12-09 of Regulation S-X in future filings.
Please see proposed disclosures in Exhibit ”A.”

6.              Please tell us more about and
disclose, in more detail, the types of expenses that you include in the cost of
sales line item and the types of expenses that you include in the selling,
general and administrative expenses line item. Specifica11y address whether you
include inbound freight charges, purchasing and receiving costs, inspection
costs, warehousing costs, internal transfer costs, and the other costs of your
distribution network in the cost of sales line item. If you currently exclude a
portion of these costs from cost of sales, please disclose:

•                  in a footnote the line items that
these excluded costs are included in and the amounts included in each line item
for each period presented, and

•                  in MD&A that your gross
margins may not be comparable to those of other entities, since some entities
include all of the costs related to their distribution network in cost of sales
and others exclude a portion of them from gross margin, including them instead
in a line item, such as selling, general and administrative expenses.

Hansen’s Response:

The principal elements that make up the cost of sales are raw materials
utilized in the manufacture of our products, co-packing fees, in-bound freight
charges as well as certain internal transfer costs and warehouse expenses
incurred prior to the manufacture of the Company’s finished products.  Raw materials account for the largest portion
of the cost of sales.  Raw materials
include cans, bottles, other containers, ingredients and packaging materials.  As the Company contracts the manufacture of
its products out to independent third parties, such co-packing fees are
included in cost of sales.  The Company’s
own

5

manufacturing overhead included in cost of sales is immaterial.   Certain quality control costs are included
in cost of sales whereas quality control costs based on internal staff costs
are captured in selling, general and administrative expenses. Distribution
costs to our customers are included in selling costs.

Subject to the above, we will make the appropriate disclosures in our
future filings.  Additionally, we will
disclose in our MD&A that our gross margins may not be comparable to those
of other entities, since some entities include all of the costs related to
their distribution network in cost of sales while others exclude a portion
thereof from gross margin, including them instead within selling, general and
administrative expenses.  Please see our
proposed disclosure in Exhibit ”B”.

7.              We note that you sell several
types of products based on your discussion in Item l.

Business and the product line
references on your website. Please disclose the product line revenue
disclosures required by paragraph 37 of SFAS 131. In particular, we assume that
would require revenue disclosures for each period presented for the following
product categories:

•              Energy

•              Juices and Non Carbonated

•              Sodas

•              Specialty and Nutrition

If you believe that other product categories are
more appropriate, please show us what your future disclosures will look like.

Hansen’s Response:

Please
refer to our response to Comment number 12.
After reassessing the criteria of SFAS 131, we now consider that we may
have two reportable segments, based on the different methods by which certain
product groupings (including package format) are managed and are sold and
delivered to customers, namely Direct Store Delivery (“DSD”) products
(primarily energy drinks) and Warehouse delivery (“Warehouse”) products
(primarily juice based and soda beverages). Specialty and Nutrition products
have, for practical purposes, been discontinued. The last sentence of paragraph
36 states “Information required by paragraphs 37-39 need be provided only if it
is not provided as part of the reportable operating segment information
provided by this statement”.  As we will
be providing revenues by DSD and Warehouse products respectively, in our future
financial statements, we believe we will meet the requirements of the revenue
disclosures required by paragraph 37.

Should the Commission, following our representations to Comment number
12 below, permit us to continue reporting on the basis of one segment in line
with all of our competitors, we will in such event nevertheless provide revenue
disclosures by DSD and Warehouse respectively.

6

8.              Please disclose
separately the trademarks you license from third parties from the trademarks
you own, to the extent material. See paragraph 45 of SFAS 142.

Hansen’s Response:

The trademarks and trademark licenses listed in the balance sheet and
in the footnotes to the financial statements are wholly owned and/or controlled
by the Company and/or entities wholly-owned or controlled by the Company.  There are no trademarks or trademark licenses
that are capitalized that are owned by a third party.

The Company does license certain trademarks from third parties, none of
which are capitalized and the royalty expense is not material.

9.              Please disclose the
amount of advertising costs reported as assets in each balance sheet presented.
See paragraph 49 of SOP 93-7.

Hansen’s Response:

Currently, there are no advertising costs included in the balance
sheets presented.

10.       If material, please quantify
the volume of business transacted with individual suppliers for comp