--Fourth Quarter Net Sales Rise 16.8
percent to $753.8 million----Fourth Quarter Net
Income Increases 24.7 percent to $172.9
million----Profitability negatively affected by
$46.3 million of distribution termination expenses--
Monster Beverage Corporation (NASDAQ:MNST) today reported financial
results for the fourth quarter and fiscal year ended December 31,
2016.
2016 Fourth Quarter
Net sales for the 2016 fourth quarter increased
16.8 percent to $753.8 million, from $645.4 million in the same
period last year. Gross sales for the 2016 fourth quarter increased
14.2 percent to $848.8 million, from $743.2 million in the same
period last year. Comparative net and gross sales amounts for
the 2015 fourth quarter were negatively impacted by advance
purchases made by the Company’s customers due to a pre-announced
price increase, effective August 31, 2015 (“Advance Purchases”), on
certain of the Company’s Monster Energy® brand energy drinks.
The Company estimates that net and gross sales for the 2015 fourth
quarter were reduced by approximately $11.0 million and $12.0
million, respectively, as a result of such Advance Purchases. Net
and gross sales for the 2016 fourth quarter, after adjusting the
2015 fourth quarter comparatives for Advance Purchases, increased
by 14.8 percent and 12.4 percent, respectively. Unfavorable
currency exchange rates reduced net sales by approximately $3.3
million and gross sales by approximately $5.9 million in the 2016
fourth quarter.
Net sales for the Company’s Monster Energy® Drinks
segment, which is comprised of the Company’s Monster Energy®
drinks, as well as Mutant® Super Soda drinks, increased 17.0
percent to $684.4 million for the 2016 fourth quarter, from $585.1
million for the same period last year. Net sales for the
Company’s Strategic Brands segment, which includes the various
energy drink brands acquired from The Coca-Cola Company, increased
6.9 percent to $64.5 million for the 2016 fourth quarter, from
$60.4 million in the comparable 2015 quarter. Net sales for
the Company’s Other segment, which includes certain products of
American Fruits & Flavors sold to independent third parties,
were $4.7 million for the 2016 fourth quarter. There were no net
sales for the Other segment for the 2015 fourth quarter.
Net sales to customers outside the United States
rose to $193.5 million in the 2016 fourth quarter, from $145.3
million in the corresponding quarter in 2015.
Gross profit, as a percentage of net sales, for the
2016 fourth quarter, increased to 66.1 percent from 62.5 percent
for the comparable 2015 fourth quarter.
Operating expenses for the 2016 fourth quarter were
$246.4 million, compared with $174.9 million in the 2015 fourth
quarter. Included in operating expenses were distributor
termination expenses of $46.3 million and $3.3 million for the 2016
and 2015 fourth quarters, respectively.
Distribution costs as a percentage of net sales
were 3.2 percent for the 2016 fourth quarter, the same as in the
2015 fourth quarter.
Selling expenses as a percentage of net sales for
the 2016 fourth quarter were 12.0 percent, compared with 12.9
percent in the 2015 fourth quarter.
General and administrative expenses for the 2016
fourth quarter were $132.2 million or 17.5 percent of net sales,
compared with $70.9 million, or 11.0 percent of net sales, for the
comparable 2015 fourth quarter. General and administrative
expenses, excluding distributor termination expenses, were 11.4
percent of net sales for the 2016 fourth quarter compared with 10.5
percent of net sales for the comparable 2015 fourth quarter.
Stock-based compensation (a non-cash item) was $12.1 million for
the fourth quarter of 2016, compared with $9.0 million in the 2015
fourth quarter.
Operating income for the 2016 fourth quarter
increased 10.2 percent to $251.7 million, from $228.4 million in
the 2015 fourth quarter.
The effective tax rate for the 2016 fourth quarter
was 29.9 percent, compared with 39.5 percent in the same period
last year. The decrease in the effective tax rate was due in part
to an increase in the domestic production deduction as well as an
increase in the stock compensation deduction due to the adoption of
new accounting guidance effective January 1, 2016, under which
excess tax benefits are recorded in net income. These excess tax
benefits were previously recorded in additional
paid-in-capital. The amount of excess tax benefits recorded
in income for the 2016 fourth quarter was $13.7 million.
Net income for the 2016 fourth quarter increased
24.7 percent to $172.9 million, from $138.7 million in the same
period last year. Net income per diluted share for the 2016
fourth quarter increased 32.6 percent to $0.30, from $0.22 in the
fourth quarter of 2015. The Company estimates that
distributor termination expenses in the 2016 fourth quarter of
$46.3 million reduced reported diluted earnings per share by
approximately $0.05 per share, after tax. There was no
diluted earnings per share impact of distributor termination
expenses, after tax, in the comparable 2015 fourth quarter.
Rodney C. Sacks, Chairman and Chief Executive
Officer, said: “We are pleased to report continued progress on the
strategic alignment of our distribution system with Coca-Cola
bottlers, both domestically and internationally. In the United
States, we continue to see improvements in the quality of our
distribution, particularly in the food service channel, and we
transitioned distribution of Monster Energy® drinks to the
Coca-Cola bottlers in Wisconsin early in January 2017. We
transitioned distribution of Monster Energy® drinks to the
Coca-Cola bottlers in Brazil, Costa Rica and Panama, as well as in
certain other countries during the 2016 fourth quarter. In
China, we continued with launches in Shanghai, Hunan Province,
Shenzhen, Guangzhou, Zhanjiang and Hainan in the quarter.
Further launches are planned throughout 2017 in China. We
also launched Monster Energy® drinks in Nigeria early in 2017 and
are planning further launches of Monster Energy® drinks in other
countries in 2017, including a relaunch in India. We launched
Mutant®, our new Super Soda drinks, in certain convenience store
chains in late September 2016 and continue to see encouraging early
results. We are planning for additional distribution of
Mutant® in 2017. Our 2016 fourth quarter results were impacted by
distributor terminations and the strength of the United States
dollar,” Sacks added.
2016 Fiscal Year
Net sales for the year ended December 31, 2016 rose
12.0 percent to $3.0 billion, from $2.7 billion for the year ended
December 31, 2015. Gross sales for the year ended December 31, 2016
increased 12.2 percent to $3.5 billion, from $3.1 billion for the
year ended December 31, 2015. Unfavorable currency exchange
rates reduced gross sales by approximately $31.0 million and net
sales by approximately $22.3 million for the year ended December
31, 2016.
Gross profit as a percentage of net sales was 63.7
percent for the year ended December 31, 2016, compared with 60.0
percent for the year ended December 31, 2015.
Operating expenses for the year ended December 31,
2016 were $856.7 million, compared with $900.1 million for the year
ended December 31, 2015.
Operating income for the year ended December 31,
2016 was $1.1 billion, compared with $893.7 million for the year
ended December 31, 2015.
The effective tax rate for the year ended December
31, 2016 was 34.0 percent, compared with 38.7 percent for the year
ended December 31, 2015.
Net income for the year ended December 31, 2016
rose to $712.7 million, from $546.7 million for the year ended
December 31, 2015. Net income per diluted share for the year
ended December 31, 2016 increased to $1.19, based on 599.8 million
shares outstanding, from $0.95 based on 577.8 million shares
outstanding for the year ended December 31, 2015.
Factors Impacting
Profitability
The following table summarizes the impact of
certain items on net sales and operating income for the three- and
twelve-months ended December 31, 2016 and 2015:
(In Thousands) |
Three-Months Ended |
|
Twelve-Months Ended |
|
December 31, |
|
December 31, |
|
|
2016 |
|
|
|
2015 |
|
|
|
2016 |
|
|
|
2015 |
|
|
|
|
|
|
|
|
|
Included in Net
Sales: |
|
|
|
|
|
|
|
Accelerated recognition of deferred revenue |
$ |
750 |
|
|
$ |
- |
|
|
$ |
5,713 |
|
|
$ |
39,761 |
|
|
|
|
|
|
|
|
|
Included in Operating
Expenses: |
|
|
|
|
|
|
|
- “modified Dutch
auction” stock repurchase expenses |
$ |
- |
|
|
$ |
- |
|
|
$ |
(1,556) |
|
|
$ |
- |
|
- American Fruits &
Flavors transaction expenses |
|
- |
|
|
|
- |
|
|
|
(4,483) |
|
|
|
- |
|
- The Coca-Cola Company
transaction expenses |
|
- |
|
|
|
(70) |
|
|
|
- |
|
|
|
(15,496) |
|
- Distributor
termination expenses |
|
(46,337) |
|
|
|
(3,342) |
|
|
|
(79,751) |
|
|
|
(224,000) |
|
- Expenditures related
to regulatory matters and |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
litigation concerning the advertising, marketing,promotion,
ingredients, usage, safety and sale of theCompany’s Monster Energy®
brand energy drinks |
|
(5,092) |
|
|
|
(5,961) |
|
|
|
(19,206) |
|
|
|
(17,789) |
|
Gain on sale of the
non-energy business |
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
161,470 |
|
|
|
|
|
|
|
|
|
Net Impact on Operating
Income |
$ |
(50,679) |
|
|
$ |
(9,373) |
|
|
$ |
(99,283) |
|
|
$ |
(56,054) |
|
Share Repurchase ProgramOn
February 28, 2017, the Company’s Board of Directors authorized a
new repurchase program for the repurchase of up to $500.0 million
of the Company’s outstanding common stock. No availability
remained under the previously-authorized share repurchase
programs. The Company expects to make the share repurchases
from time to time in the open market or through
privately-negotiated transactions, or otherwise, subject to
applicable laws, regulations and approvals. The timing of the share
repurchases will depend on a variety of factors, including market
conditions, and the share repurchases may be suspended or
discontinued at any time.
Investor Conference CallThe
Company will host an investor conference call today, March 1, 2017,
at 2:00 p.m. Pacific Time (5:00 p.m. Eastern Time). The
conference call will be open to all interested investors through a
live audio web broadcast via the internet at www.monsterbevcorp.com
in the “Events & Presentations” section. For those who
are not able to listen to the live broadcast, the call will be
archived for approximately one year on the website.
Monster Beverage CorporationBased
in Corona, California, Monster Beverage Corporation is a holding
company and conducts no operating business except through its
consolidated subsidiaries. The Company’s subsidiaries develop
and market energy drinks, including Monster Energy® energy drinks,
Monster Energy Extra Strength Nitrous Technology® energy drinks,
Java Monster® non-carbonated coffee + energy drinks, Monster Rehab®
non-carbonated energy drinks with electrolytes, Muscle Monster®
Energy Shakes, Übermonster® energy drinks, NOS® energy drinks, Full
Throttle® energy drinks, Burn® energy drinks, Samurai® energy
drinks, Relentless® energy drinks, Mother® energy drinks, Power
Play® energy drinks, BU® energy drinks, Nalu® energy drinks, BPM®
energy drinks, Gladiator® energy drinks, and Ultra® energy
drinks. The Company’s subsidiaries also develop and market
Mutant® Super Soda drinks. For more information, visit
www.monsterbevcorp.com.
Note Regarding Use of Non-GAAP
MeasuresGross sales is used internally by management as an
indicator of and to monitor operating performance, including sales
performance of particular products, salesperson performance,
product growth or declines and overall Company performance. The use
of gross sales allows evaluation of sales performance before the
effect of any promotional items, which can mask certain performance
issues. We therefore believe that the presentation of gross sales
provides a useful measure of our operating performance. Gross sales
is not a measure that is recognized under accounting principles
generally accepted in the United States of America (“GAAP”) and
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, as gross sales has been defined
by our internal reporting practices. In addition, gross sales may
not be realized in the form of cash receipts as promotional
payments and allowances may be deducted from payments received from
certain customers.
Caution Concerning Forward-Looking
StatementsCertain statements made in this announcement may
constitute “forward-looking statements” within the meaning of the
U.S. federal securities laws, as amended, regarding the
expectations of management with respect to our future operating
results and other future events including revenues and
profitability. The Company 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 of the control of the Company, that could cause actual
results and events to differ materially from the statements made
herein. Such risks and uncertainties include, but are not
limited to, the following: our ability to recognize benefits from
The Coca-Cola Company transaction and the American Fruits &
Flavors transaction; our ability to introduce and increase sales of
both existing and new products; our ability to implement the share
repurchase program; unanticipated litigation concerning the
Company’s products; the current uncertainty and volatility in the
national and global economy; changes in consumer preferences;
changes in demand due to both domestic and international economic
conditions; activities and strategies of competitors, including the
introduction of new products and competitive pricing and/or
marketing of similar products; actual performance of the parties
under the new distribution agreements; potential disruptions
arising out of the transition of certain territories to new
distributors; changes in sales levels by existing distributors;
unanticipated costs incurred in connection with the termination of
existing distribution agreements or the transition to new
distributors; changes in the price and/or availability of raw
materials; other supply issues, including the availability of
products and/or suitable production facilities including
limitations on co-packing availability and retort production;
product distribution and placement decisions by retailers; changes
in governmental regulation; the imposition of new and/or increased
excise sales and/or other taxes on our products; criticism of
energy drinks and/or the energy drink market generally; our ability
to satisfy all criteria set forth in any U.S. model energy drink
guidelines; the impact of proposals to limit or restrict the sale
of energy drinks to minors and/or persons below a specified age
and/or restrict the venues and/or the size of containers in which
energy drinks can be sold; or political, legislative or other
governmental actions or events, including the outcome of any state
attorney general, government and/or quasi-government agency
inquiries, in one or more regions in which we operate. For a
more detailed discussion of these and other risks that could affect
our operating results, see the Company’s reports filed with the
Securities and Exchange Commission. The Company’s actual results
could differ materially from those contained in the forward-looking
statements. The Company assumes no obligation to update any
forward-looking statements, whether as a result of new information,
future events or otherwise.
MONSTER BEVERAGE CORPORATION AND
SUBSIDIARIES |
CONSOLIDATED STATEMENTS OF INCOME AND OTHER
INFORMATION |
FOR THE THREE- AND TWELVE-MONTHS ENDED DECEMBER 31,
2016 AND 2015 |
(In Thousands, Except Per Share Amounts)
(Unaudited) |
|
|
Three-Months Ended |
|
Twelve-Months Ended |
|
December 31, |
|
December 31, |
|
|
2016 |
|
|
|
2015 |
|
|
|
2016 |
|
|
|
2015 |
|
|
|
|
|
|
|
|
|
Net sales1 |
$ |
753,765 |
|
|
$ |
645,432 |
|
|
$ |
3,049,393 |
|
|
$ |
2,722,564 |
|
|
|
|
|
|
|
|
|
Cost of sales |
|
255,652 |
|
|
|
242,072 |
|
|
|
1,107,393 |
|
|
|
1,090,263 |
|
|
|
|
|
|
|
|
|
Gross profit1 |
|
498,113 |
|
|
|
403,360 |
|
|
|
1,942,000 |
|
|
|
1,632,301 |
|
Gross profit as a
percentage of net sales |
|
66.1% |
|
|
|
62.5% |
|
|
|
63.7% |
|
|
|
60.0% |
|
|
|
|
|
|
|
|
|
Operating
expenses2 |
|
246,385 |
|
|
|
174,913 |
|
|
|
856,662 |
|
|
|
900,118 |
|
Operating expenses as a
percentage of net sales |
|
32.7% |
|
|
|
27.1% |
|
|
|
28.1% |
|
|
|
33.1% |
|
|
|
|
|
|
|
|
|
Gain on sale of the
non-energy business |
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
161,470 |
|
|
|
|
|
|
|
|
|
Operating
income1,2 |
|
251,728 |
|
|
|
228,447 |
|
|
|
1,085,338 |
|
|
|
893,653 |
|
Operating income as a
percentage of net sales |
|
33.4% |
|
|
|
35.4% |
|
|
|
35.6% |
|
|
|
32.8% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other (expense) income,
net |
|
(5,002) |
|
|
|
1,039 |
|
|
|
(5,653) |
|
|
|
(2,105) |
|
|
|
|
|
|
|
|
|
Income before provision
for income taxes1,2 |
|
246,726 |
|
|
|
229,486 |
|
|
|
1,079,685 |
|
|
|
891,548 |
|
|
|
|
|
|
|
|
|
Provision for income
taxes |
|
73,780 |
|
|
|
90,745 |
|
|
|
367,000 |
|
|
|
344,815 |
|
Income taxes as a
percentage of income before taxes |
|
29.9% |
|
|
|
39.5% |
|
|
|
34.0% |
|
|
|
38.7% |
|
|
|
|
|
|
|
|
|
Net income1,2 |
$ |
172,946 |
|
|
$ |
138,741 |
|
|
$ |
712,685 |
|
|
$ |
546,733 |
|
Net income as a
percentage of net sales |
|
22.9% |
|
|
|
21.5% |
|
|
|
23.4% |
|
|
|
20.1% |
|
|
|
|
|
|
|
|
|
Net income
per common share:* |
|
|
|
|
|
|
Basic |
$ |
0.30 |
|
|
$ |
0.23 |
|
|
$ |
1.21 |
|
|
$ |
0.97 |
|
Diluted |
$ |
0.30 |
|
|
$ |
0.22 |
|
|
$ |
1.19 |
|
|
$ |
0.95 |
|
|
|
|
|
|
|
|
|
Weighted average number
of shares of common stock and common stock equivalents:* |
|
|
|
|
|
|
|
Basic |
|
568,975 |
|
|
|
608,448 |
|
|
|
587,874 |
|
|
|
566,448 |
|
Diluted |
|
580,519 |
|
|
|
617,394 |
|
|
|
599,819 |
|
|
|
577,758 |
|
|
|
|
|
|
|
|
|
Case sales (in
thousands) (in 192-ounce case equivalents) |
|
77,966 |
|
|
|
67,531 |
|
|
|
320,960 |
|
|
|
274,621 |
|
Average net sales per
case3 |
$ |
9.61 |
|
|
$ |
9.56 |
|
|
$ |
9.45 |
|
|
$ |
9.91 |
|
¹ Includes $11.7 million and $8.1 million for the three-months
ended December 31, 2016 and 2015, respectively, related to the
recognition of deferred revenue. Included in the $11.7 million
recognition of deferred revenue for the three-months ended December
31, 2016 is $0.7 million related to the accelerated amortization of
the deferred revenue balances associated with certain of the
Company’s prior distributors who were sent notices of termination
during the relevant periods. There was no accelerated amortization
of the deferred revenue balances for the three-months ended
December 31, 2015. Includes $40.3 million and $62.8 million
for the twelve-months ended December 31, 2016 and 2015,
respectively, related to the recognition of deferred revenue.
Included in the $40.3 million and the $62.8 million recognition of
deferred revenue for the twelve-months ended December 31, 2016 and
2015, respectively, is $5.7 million and $39.8 million related to
the accelerated amortization of the deferred revenue balances
associated with certain of the Company’s prior distributors who
were sent notices of termination during the relevant periods.
2 Includes $46.3 million and $3.3 million for the three-months
ended December 31, 2016 and 2015, respectively, related to
distributor termination expenses. Includes $79.8 million and $224.0
million for the twelve-months ended December 31, 2016 and 2015,
respectively, related to distributor termination expenses.
3Excludes Other segment net sales of $4.7 million and $17.0
million for the three- and twelve-months ended December 31, 2016
representing third-party sales of American Fruits & Flavors as
these sales do not have unit case equivalents.
*On October 14, 2016, the Company announced a three-for-one
stock split of its common stock to be effected in the form of a 200
percent stock dividend. The stock dividend was issued on
November 9, 2016. The accompanying consolidated financial
statements have been updated to reflect the stock split.
MONSTER BEVERAGE CORPORATION AND
SUBSIDIARIES |
CONSOLIDATED BALANCE SHEETS |
AS OF DECEMBER 31, 2016 AND DECEMBER 31,
2015 |
(In Thousands, Except Par Value)
(Unaudited) |
|
|
|
December 31,2016 |
|
December 31,2015 |
ASSETS |
|
|
|
|
CURRENT ASSETS: |
|
|
|
|
Cash and cash
equivalents |
|
$ |
377,582 |
|
|
$ |
2,175,417 |
|
Short-term
investments |
|
|
220,554 |
|
|
|
744,610 |
|
Accounts receivable,
net |
|
|
448,051 |
|
|
|
352,955 |
|
The Coca-Cola Company
transaction receivable |
|
|
125,000 |
|
|
|
125,000 |
|
Inventories |
|
|
161,971 |
|
|
|
156,121 |
|
Prepaid expenses and
other current assets |
|
|
32,562 |
|
|
|
26,967 |
|
Prepaid income
taxes |
|
|
66,550 |
|
|
|
18,462 |
|
Total
current assets |
|
|
1,432,270 |
|
|
|
3,599,532 |
|
|
|
|
|
|
INVESTMENTS |
|
|
2,394 |
|
|
|
15,348 |
|
PROPERTY AND EQUIPMENT,
net |
|
|
173,343 |
|
|
|
97,354 |
|
DEFERRED INCOME
TAXES |
|
|
159,556 |
|
|
|
140,468 |
|
GOODWILL |
|
|
1,331,643 |
|
|
|
1,279,715 |
|
OTHER INTANGIBLE
ASSETS, net |
|
|
1,032,635 |
|
|
|
427,986 |
|
OTHER ASSETS |
|
|
21,630 |
|
|
|
10,874 |
|
Total Assets |
|
$ |
4,153,471 |
|
|
$ |
5,571,277 |
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS' EQUITY |
|
|
|
|
CURRENT
LIABILITIES: |
|
|
|
|
Accounts payable |
|
$ |
193,270 |
|
|
$ |
144,763 |
|
Accrued
liabilities |
|
|
79,526 |
|
|
|
81,786 |
|
Accrued promotional
allowances |
|
|
110,237 |
|
|
|
115,530 |
|
Accrued distributor
terminations |
|
|
8,184 |
|
|
|
11,018 |
|
Deferred revenue |
|
|
41,672 |
|
|
|
32,271 |
|
Accrued
compensation |
|
|
30,043 |
|
|
|
22,159 |
|
Income taxes
payable |
|
|
7,657 |
|
|
|
2,750 |
|
Total
current liabilities |
|
|
470,589 |
|
|
|
410,277 |
|
|
|
|
|
|
DEFERRED REVENUE |
|
|
353,173 |
|
|
|
351,590 |
|
|
|
|
|
|
STOCKHOLDERS'
EQUITY:* |
|
|
|
|
Common
stock - $0.005 par value; 1,250,000 shares authorized; 623,201
shares issued and 566,566 outstanding as of December 31,
2016; 621,057 shares issued and 608,700 outstanding as of
December 31, 2015 |
|
3,116 |
|
|
|
3,105 |
|
Additional
paid-in-capital |
|
|
4,051,245 |
|
|
|
3,989,787 |
|
Retained earnings |
|
|
2,107,548 |
|
|
|
1,394,863 |
|
Accumulated other
comprehensive loss |
|
|
(23,249) |
|
|
|
(21,878) |
|
Common
stock in treasury, at cost; 56,635 and 12,357 shares as of
December 31, 2016 and December 31, 2015, respectively |
|
(2,808,951) |
|
|
|
(556,467) |
|
Total
stockholders' equity |
|
|
3,329,709 |
|
|
|
4,809,410 |
|
Total Liabilities and Stockholders’ Equity |
|
$ |
4,153,471 |
|
|
$ |
5,571,277 |
|
*On October 14, 2016, the Company announced a three-for-one
stock split of its common stock to be effected in the form of a 200
percent stock dividend. The stock dividend was issued on
November 9, 2016. The accompanying consolidated financial
statements have been updated to reflect the stock split.
CONTACTS:
Rodney C. Sacks
Chairman and Chief Executive Officer
(951) 739-6200
Hilton H. Schlosberg
Vice Chairman
(951) 739-6200
Roger S. Pondel / Judy Lin Sfetcu
PondelWilkinson Inc.
(310) 279-5980
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