May 7, 2020 – Monster Beverage Corporation (NASDAQ: MNST) today
reported financial results for the three-months ended March 31,
2020 and provided an update on the impact of the COVID-19 pandemic.
COVID-19 Pandemic
From the beginning of the COVID-19 pandemic, the Company’s top
priority has been the health, safety and well-being of its
employees. Early in March 2020, the Company implemented
global travel restrictions and work-from-home policies for
employees who are able to work remotely. For those employees who
are unable to work remotely, safety precautions have been
instituted, which were developed and adopted in line with guidance
from public health authorities and professional consultants. The
Company is incredibly proud of the teamwork exhibited by its
employees, co-packers and bottlers/distributors around the world
who are ensuring the integrity of its supply chain. The Company’s
flavor manufacturing facilities, its co-packers, warehouses and
shipment facilities, are all operating. Certain of the
Company’s bottlers/distributors have implemented modifications to
their call points and service levels, but generally the Company’s
products remain available to consumers. In limited countries,
which are smaller markets for the Company, the operations of its
bottlers/distributors have been more affected.The impact of the
COVID-19 pandemic on the Company’s net and gross sales for the 2020
first quarter was not material. The Company’s April sales were
materially adversely impacted by the COVID-19 pandemic, however
bottler/distributor sales of the Company’s products to retail in
the United States were markedly less adversely impacted. Since
mid-March 2020, the Company has seen a shift in consumer channel
preferences and package configurations, including an increase in
at-home consumption and a decrease in immediate consumption.
To date, the Company’s sales in the second quarter have been
adversely affected as a result of a decrease in foot traffic in the
convenience and gas channel (which is the Company’s largest
channel) and food service on-premise, while the Company’s
e-commerce, club store, mass merchandiser, and grocery and related
business remain stable.Currently, the Company does not foresee a
material impact on the ability of its co-packers to manufacture and
its bottlers/distributors to distribute its products as a result of
the COVID-19 pandemic. In addition, the Company is not experiencing
raw material or finished product shortages in its supply chain.As
of March 31, 2020, the Company had $701.8 million in cash and cash
equivalents, $233.5 million in short-term investments and $13.9
million in long-term investments. Based on currently available
information, the Company does not expect the COVID-19 pandemic to
have a material impact on its liquidity.
First Quarter Results
Net sales for the 2020 first quarter increased 12.3 percent to
$1.06 billion from $946.0 million in the same period last year.
Gross sales for the 2020 first quarter increased 13.4 percent to
$1.24 billion from $1.09 billion in the same period last year. Net
changes in foreign currency exchange rates had an unfavorable
impact on net and gross sales for the 2020 first quarter of $10.4
million and $11.2 million, respectively.Net sales for the Company’s
Monster Energy® Drinks segment, which primarily includes the
Company’s Monster Energy® drinks and Reign Total Body Fuel® high
performance energy drinks, increased 14.0 percent to $992.5 million
for the 2020 first quarter, from $870.4 million for the 2019 first
quarter. Net changes in foreign currency exchange rates had
an unfavorable impact on net sales for the Monster Energy® Drinks
segment of approximately $10.0 million for the 2020 first quarter.
Net sales for the Company’s Strategic Brands segment, which
primarily includes the various energy drink brands acquired from
The Coca-Cola Company, as well as the Company’s affordable energy
brands, decreased 8.2 percent to $64.5 million for the 2020 first
quarter, from $70.3 million in the 2019 first quarter. Net
changes in foreign currency exchange rates had an unfavorable
impact on net sales for the Strategic Brands segment of $0.4
million for the 2020 first quarter.Net sales for the Company’s
Other segment, which includes certain products of American Fruits
and Flavors, LLC, a wholly-owned subsidiary of the Company, sold to
independent third party customers (the “AFF Third-Party Products”),
were $5.1 million for the 2020 first quarter, compared with $5.3
million in the 2019 first quarter.Net sales to customers outside
the United States increased 25.6 percent to $356.8 million in the
2020 first quarter, from $284.1 million in the 2019 first quarter.
Such sales were approximately 33.6 percent of total net sales in
the 2020 first quarter, compared with 30.0 percent in the 2019
first quarter.Gross profit, as a percentage of net sales, for the
2020 first quarter was 60.0 percent, compared with 60.6 percent in
the 2019 first quarter.Operating expenses for the 2020 first
quarter were $272.2 million, compared with $262.1 million in the
2019 first quarter. Operating expenses included distributor
termination expenses of $0.04 million for the 2020 first quarter,
compared with $10.7 million in the 2019 first quarter.Distribution
costs as a percentage of net sales were 3.7 percent for the 2020
first quarter, compared with 3.8 percent in the 2019 first
quarter.Selling expenses as a percentage of net sales for the 2020
first quarter were 10.3 percent, compared with 11.0 percent in the
2019 first quarter.General and administrative expenses for the 2020
first quarter were $124.1 million, or 11.7 percent of net sales,
compared with $122.1 million, or 12.9 percent of net sales, for the
2019 first quarter. Stock-based compensation (a non-cash item) was
$17.1 million for the first quarter of 2020, compared with $15.3
million in the 2019 first quarter. Operating income for the 2020
first quarter increased to $365.0 million from $311.5 million in
the 2019 first quarter.The effective tax rate for the 2020 first
quarter was 23.8 percent, compared with 16.8 percent in the 2019
first quarter. The increase in the effective tax rate for the 2020
first quarter was primarily attributable to a decrease in the
equity compensation deduction.Net income for the 2020 first quarter
increased 6.6 percent to $278.8 million from $261.5 million in the
2019 first quarter. Net income per diluted share for the 2020 first
quarter increased 8.2 percent to $0.52 from $0.48 in the first
quarter of 2019.Rodney C. Sacks, Chairman and Chief Executive
Officer, said: “Growth from our Monster Energy® brand energy drinks
internationally, as well as from our Reign Total Body Fuel® high
performance energy drinks, contributed to record gross and net
sales for the 2020 first quarter.“During the 2020 first quarter in
the United States, we launched a number of new exciting products,
including a line of Reign Inferno® Thermogenic Fuel, two new energy
drinks in the Monster® Ultra line, a line of Java Monster® 300, and
a line of Monster Hydro® Super Sport, as well as NOS® Turbo.
Internationally, we added various Monster Energy® brand energy
drinks, and Reign Total Body Fuel® high performance energy drinks
to our portfolio in certain countries. Monster Energy® Dragon
Tea was launched in Brazil in the first quarter and in China in
April 2020. Burn® Dark Energy was launched in Russia, a new Nalu®
energy tea line was launched in Belgium, and Mother® Epic Swell was
launched nationally in Australia after a limited launch last
year.“We also launched Predator®, our affordable energy brand, in
additional international markets during the first quarter,
including in Mexico, with plans for further launches of Predator®
this year.“In January 2020, we launched our Monster Energy® brand
energy drinks in Israel, with further country launches and
transitions planned for later this year.“Our thoughts and prayers
are with all who have been impacted by this terrible virus,” Sacks
added.
Share Repurchase Program
During the 2020 first quarter, the Company
purchased approximately 10.5 million shares of its common stock at
an average purchase price of $55.22 per share, for a total amount
of $579.3 million (excluding broker commissions).As of May 7, 2020,
approximately $441.5 million remained available for repurchase
under the previously authorized repurchase program.
Investor Conference Call
The Company will host an investor conference call
today, May 7, 2020, at 2:00 p.m. Pacific Time (5:00 p.m. Eastern
Time). The conference call will be open to all interested investors
through an 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
broadcast, the call will be archived for approximately one year on
the website.
Monster Beverage Corporation
Based 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 Ultra® energy drinks, Monster MAXX® maximum strength
energy drinks, Java Monster® non-carbonated coffee + energy drinks,
Espresso Monster® non-carbonated espresso + energy drinks, Caffé
Monster® non-carbonated energy coffee drinks, Monster Rehab®
non-carbonated tea + energy drinks, Muscle Monster® non-carbonated
energy shakes, Monster Hydro® non-carbonated refreshment + energy
drinks, Monster HydroSport Super Fuel® non-carbonated advanced
hydration + energy drinks, Monster Dragon Tea® non-carbonated
energy teas, Reign Total Body Fuel® high performance energy drinks,
Reign Inferno® thermogenic fuel high performance energy drinks,
NOS® energy drinks, Full Throttle® energy drinks, Burn® energy
drinks, Samurai® energy drinks, Relentless® energy drinks, Mother®
energy drinks, Play® and Power Play® (stylized) energy drinks, BU®
energy drinks, Nalu® energy drinks, BPM® energy drinks, Gladiator®
energy drinks, Ultra Energy® energy drinks, Live+® energy drinks
and Predator® energy drinks. For more information, visit
www.monsterbevcorp.com.
Note Regarding Use of Non-GAAP
Measures
Gross 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.
The following table reconciles the non-GAAP financial measure of
gross sales with the most directly comparable GAAP financial
measure of net sales (in thousands):
|
|
Three-Months Ended March 31, |
|
|
|
|
2020 |
|
|
2019 |
|
Gross sales, net of discounts
and returns |
|
$ |
1,236,060 |
|
$ |
1,090,426 |
|
Less: Promotional and other
allowances |
|
|
173,963 |
|
|
144,435 |
|
Net Sales |
|
$ |
1,062,097 |
|
$ |
945,991 |
|
Caution Concerning Forward-Looking
Statements
Certain 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: the
direct and indirect impacts of the human and economic consequences
of the COVID-19 pandemic as well as measures being taken by
governments, and as a result businesses (including the Company and
its suppliers, bottlers/distributors, co-packers and other service
providers), and the public at large to limit the COVID-19 pandemic;
the global slowing of growth and/or decline in sales of energy
drinks including the convenience and gas channel (which is our
largest channel), resulting from deteriorating economic conditions
and financial uncertainties due to the COVID-19 pandemic; our
ability to recognize benefits from The Coca-Cola Company (TCCC)
transaction; our extensive commercial arrangements with TCCC and,
as a result, our future performance’s substantial dependence on the
success of our relationship with TCCC; the impact of TCCC
bottlers/distributors distributing Coca-Cola brand energy drinks;
the impact on our business of trademark and trade dress
infringement proceedings brought against us relating to our Reign
Total Body Fuel® high performance energy drinks; exposure to
significant liabilities due to litigation, legal or regulatory
proceedings; intellectual property injunctions; our ability to
introduce and increase sales of both existing and new products, and
the impact of the COVID-19 pandemic on our innovation plans; our
ability to implement the share repurchase programs; unanticipated
litigation concerning the Company’s products; the current
uncertainty and volatility in the national and global economy;
changes in consumer preferences; adverse publicity surrounding
obesity and health concerns related to our products, water usage,
environmental impact, human rights and labor and workplace laws;
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; the
effects of retailer consolidation on our business and our ability
to successfully adapt to the rapidly changing retail landscape; our
ability to successfully adapt to the changing landscape of
advertising, marketing, promotional, sponsorship and endorsement
opportunities created by the COVID-19 pandemic; 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, including our annual report on
Form 10-K for the year ended December 31, 2019. 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.
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 |
|
|
|
MONSTER BEVERAGE CORPORATION AND
SUBSIDIARIESCONDENSED CONSOLIDATED STATEMENTS OF
INCOME AND OTHER INFORMATIONFOR THE THREE-MONTHS
ENDED MARCH 31, 2020 AND 2019(In Thousands, Except
Per Share Amounts)
(Unaudited)
|
|
|
Three-Months
Ended |
|
March 31, |
|
2020 |
|
2019 |
|
|
|
|
Net
sales¹ |
$ |
1,062,097 |
|
|
$ |
945,991 |
|
|
|
|
|
Cost of sales |
|
424,901 |
|
|
|
372,459 |
|
|
|
|
|
Gross profit¹ |
|
637,196 |
|
|
|
573,532 |
|
Gross profit as a percentage of net sales |
|
60.0 |
% |
|
|
60.6 |
% |
|
|
|
|
Operating expenses² |
|
272,208 |
|
|
|
262,071 |
|
Operating expenses as a percentage of net sales |
|
25.6 |
% |
|
|
27.7 |
% |
|
|
|
|
Operating income¹,² |
|
364,988 |
|
|
|
311,461 |
|
Operating income as a percentage of net sales |
|
34.4 |
% |
|
|
32.9 |
% |
|
|
|
|
|
|
|
|
Interest and other income, net |
|
872 |
|
|
|
2,742 |
|
|
|
|
|
Income before provision for income taxes¹,² |
|
365,860 |
|
|
|
314,203 |
|
|
|
|
|
Provision for income taxes |
|
87,025 |
|
|
|
52,718 |
|
Income taxes as a percentage of income before taxes |
|
23.8 |
% |
|
|
16.8 |
% |
|
|
|
|
Net income¹,² |
$ |
278,835 |
|
|
$ |
261,485 |
|
Net income as a percentage of net sales |
|
26.3 |
% |
|
|
27.6 |
% |
|
|
|
|
Net income per common share: |
|
|
|
Basic |
$ |
0.52 |
|
|
$ |
0.48 |
|
Diluted |
$ |
0.52 |
|
|
$ |
0.48 |
|
|
|
|
|
Weighted average number of shares of common stock and common
stock equivalents: |
|
|
|
Basic |
|
536,061 |
|
|
|
542,768 |
|
Diluted |
|
540,518 |
|
|
|
548,273 |
|
|
|
|
|
Case sales (in thousands) (in 192-ounce case equivalents) |
|
115,599 |
|
|
|
101,284 |
|
Average net sales per case3 |
$ |
9.14 |
|
|
$ |
9.29 |
|
|
|
|
|
¹Includes $10.6
million and $14.2 million for the three-months ended March 31, 2020
and 2019, respectively, related to the recognition of deferred
revenue. |
|
²Includes $0.04
million and $10.7 million for the three-months ended March 31, 2020
and 2019, respectively, related to distributor termination
costs. |
|
3Excludes Other
segment net sales of $5.1 million and $5.3 million for the
three-months ended March 31, 2020 and 2019, respectively, comprised
of net sales of the AFF Third-Party Products to independent
third-party customers, as these sales do not have unit case
equivalents. |
|
MONSTER BEVERAGE CORPORATION AND
SUBSIDIARIESCONDENSED CONSOLIDATED BALANCE
SHEETSAS OF MARCH 31, 2020 AND DECEMBER 31,
2019(In Thousands, Except Par Value)
(Unaudited)
|
|
|
|
|
March 31,2020 |
|
December 31,2019 |
ASSETS |
|
|
|
CURRENT ASSETS: |
|
|
|
Cash and cash equivalents |
$ |
701,836 |
|
|
$ |
797,957 |
|
Short-term investments |
|
233,513 |
|
|
|
533,063 |
|
Accounts receivable, net |
|
670,570 |
|
|
|
540,330 |
|
Inventories |
|
352,305 |
|
|
|
360,731 |
|
Prepaid expenses and other
current assets |
|
71,865 |
|
|
|
54,868 |
|
Prepaid income taxes |
|
18,633 |
|
|
|
29,360 |
|
Total current assets |
|
2,048,722 |
|
|
|
2,316,309 |
|
|
|
|
|
INVESTMENTS |
|
13,922 |
|
|
|
12,905 |
|
PROPERTY AND EQUIPMENT,
net |
|
295,570 |
|
|
|
298,640 |
|
DEFERRED INCOME TAXES |
|
84,777 |
|
|
|
84,777 |
|
GOODWILL |
|
1,331,643 |
|
|
|
1,331,643 |
|
OTHER INTANGIBLE ASSETS,
net |
|
1,053,107 |
|
|
|
1,052,105 |
|
OTHER ASSETS |
|
53,756 |
|
|
|
53,973 |
|
Total
Assets |
$ |
4,881,497 |
|
|
$ |
5,150,352 |
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS’ EQUITY |
|
|
|
CURRENT LIABILITIES: |
|
|
|
Accounts payable |
$ |
305,529 |
|
|
$ |
274,045 |
|
Accrued liabilities |
|
145,224 |
|
|
|
114,075 |
|
Accrued promotional
allowances |
|
171,406 |
|
|
|
166,761 |
|
Deferred revenue |
|
44,844 |
|
|
|
44,237 |
|
Accrued compensation |
|
21,827 |
|
|
|
47,262 |
|
Income taxes payable |
|
12,711 |
|
|
|
14,717 |
|
Total current liabilities |
|
701,541 |
|
|
|
661,097 |
|
|
|
|
|
DEFERRED REVENUE |
|
278,393 |
|
|
|
287,469 |
|
|
|
|
|
OTHER LIABILITIES |
|
30,617 |
|
|
|
30,505 |
|
|
|
|
|
STOCKHOLDERS’ EQUITY: |
|
|
|
Common stock - $0.005 par
value; 1,250,000 shares authorized;637,104 shares issued and
526,839 shares outstanding as of March 31, 2020;636,460 shares
issued and 536,698 shares outstanding as of December 31, 2019 |
|
3,186 |
|
|
|
3,182 |
|
Additional paid-in
capital |
|
4,428,580 |
|
|
|
4,397,511 |
|
Retained earnings |
|
5,301,315 |
|
|
|
5,022,480 |
|
Accumulated other
comprehensive loss |
|
(62,682 |
) |
|
|
(32,387 |
) |
Common stock in treasury, at
cost; 110,265 and 99,762 shares as of March 31, 2020 and
December 31, 2019, respectively |
|
(5,799,453 |
) |
|
|
(5,219,505 |
) |
Total stockholders’
equity |
|
3,870,946 |
|
|
|
4,171,281 |
|
Total Liabilities and Stockholders’ Equity |
$ |
4,881,497 |
|
|
$ |
5,150,352 |
|
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