--
Record Quarterly Net Sales exceed $1.0 billion threshold
-- -- Second Quarter Net Sales rise
12.0 percent; 13.3 percent without the adoption of ASC 606
---- Second Quarter Net Income increases 21.3
percent to $270.1 million ---- Second Quarter Net
Income per diluted share increases 23.8 percent to $0.48 per share
---- Second Quarter Distributor Termination
Expenses were $5.5 million ---- Board Authorizes
new $500.0 million share repurchase program--
Monster Beverage Corporation (NASDAQ: MNST) today reported
financial results for the three- and six-months ended June 30,
2018.
Second Quarter ResultsNet sales for the 2018
second quarter increased 12.0 percent to $1.02 billion from $907.1
million in the same period last year. Gross sales for the
2018 second quarter increased 14.7 percent to $1.19 billion from
$1.04 billion in the same period last year. Net sales for the
2018 second quarter were negatively impacted by $12.2 million, due
to the adoption of Accounting Standards Codification (“ASC”) 606.
Under ASC 606, commissions paid to The Coca-Cola Company (“TCCC”),
based on sales to certain of the Company’s customers which TCCC
accounts for under the equity method (the “TCCC Related Parties”),
or consolidates, are included as a reduction to net sales. Prior to
January 1, 2018, commissions based on sales to the TCCC Related
Parties were included in operating expenses. Net changes in foreign
currency exchange rates had a favorable impact on net and gross
sales for the 2018 second quarter of $16.8 million and $21.4
million, respectively.
Net sales for the Company’s Monster Energy® Drinks segment,
which includes the Company’s Monster Energy® drinks and Mutant®
Super Soda drinks, increased 14.0 percent to $929.4 million for the
2018 second quarter, from $815.3 million for the same period last
year. Net sales for the Company’s Monster Energy® Drinks
segment for the 2018 second quarter were negatively impacted by
$5.1 million, due to the adoption of ASC 606. Net sales for the
Company’s Strategic Brands segment, which includes the various
energy drink brands acquired from TCCC, decreased 6.8 percent to
$79.8 million for the 2018 second quarter, from $85.6 million in
the comparable 2017 quarter. Net sales for the Company’s
Strategic Brands segment for the 2018 second quarter were
negatively impacted by $7.1 million, due to the adoption of ASC
606. Net sales for the Company’s Other segment, which
includes certain products of American Fruits & Flavors sold to
independent third parties, were $6.6 million for the 2018 second
quarter, compared with $6.2 million in the 2017 second quarter.
Net sales to customers outside the United States increased 18.5
percent to $293.8 million in the 2018 second quarter, from $247.9
million in the corresponding quarter in 2017.
Gross profit, as a percentage of net sales, for the 2018 second
quarter was 61.1 percent, compared with 64.3 percent in the 2017
second quarter. The decrease in gross profit as a percentage of net
sales was primarily attributable to (i) an increase in promotional
allowances as a percentage of gross sales; (ii) the $12.2 million
of commissions accounted for as a reduction to net sales due to the
adoption of ASC 606; (iii) increases in certain input costs such as
aluminum cans and other costs; (iv) domestic product sales mix; and
(v) geographical sales mix.
Operating expenses for the 2018 second quarter were $262.6
million, compared with $233.5 million in the 2017 second quarter.
Operating expenses included distributor termination expenses of
$5.5 million for the 2018 second quarter, compared with $0.2
million in the 2017 second quarter. As a result of the
adoption of ASC 606, commissions included in operating expenses
decreased.
The impact to net sales, gross profit and operating expenses
from the adoption of ASC 606 is included in the table below.
Distribution costs as a percentage of net sales were 3.7 percent
for the 2018 second quarter, compared with 3.0 percent in the
second quarter last year.
Selling expenses as a percentage of net sales for the 2018
second quarter were 11.4 percent, compared with 12.6 percent in the
second quarter last year.
General and administrative expenses for the 2018 second quarter
were $108.4 million, or 10.7 percent of net sales, compared with
$91.4 million, or 10.1 percent of net sales, for the comparable
2017 second quarter. Stock-based compensation (a non-cash
item) was $14.9 million for the second quarter of 2018, compared
with $12.8 million in the second quarter last year.
Operating income for the 2018 second quarter increased to $357.6
million from $350.0 million in the comparable 2017 quarter.
The effective tax rate for the 2018 second quarter was 24.6
percent, compared with 35.9 percent in the same period last year.
The decrease in the effective tax rate was primarily due to the Tax
Cuts and Jobs Act signed into law on December 22, 2017.
Net income for the 2018 second quarter increased 21.3 percent to
$270.1 million from $222.6 million in the comparable quarter last
year. Net income per diluted share for the 2018 second
quarter increased 23.8 percent to $0.48 from $0.39 in the second
quarter of 2017.
The following table illustrates the impact of
the adoption of ASC 606 for the 2018 second quarter as described
above (in thousands):
|
|
|
|
|
|
|
|
|
|
Three-MonthsEnded June 30,2018, asReported |
|
PercentChange2018 vs2017 |
|
Three-MonthsEnded June 30,2018, Without theAdoption of
ASC606 |
|
PercentChange2018 vs2017 |
|
Net Sales by
Segment: |
|
|
|
|
|
|
|
|
Monster
Energy® Drinks |
$ |
929,439 |
|
|
14.0 |
% |
|
$ |
934,519 |
|
|
14.6 |
% |
|
Strategic
Brands |
|
79,811 |
|
|
(6.8 |
%) |
|
|
86,943 |
|
|
1.5 |
% |
|
Other |
|
6,623 |
|
|
7.3 |
% |
|
|
6,623 |
|
|
7.3 |
% |
|
Total Net Sales |
$ |
1,015,873 |
|
|
12.0 |
% |
|
$ |
1,028,085 |
|
|
13.3 |
% |
|
Cost of Sales |
|
395,615 |
|
|
22.3 |
% |
|
|
395,615 |
|
|
22.3 |
% |
|
Gross Profit |
$ |
620,258 |
|
|
6.3 |
% |
|
$ |
632,470 |
|
|
8.4 |
% |
|
Gross Profit as a
percentage of net sales |
|
61.1 |
% |
|
|
|
|
61.5 |
% |
|
|
|
Operating Expenses |
$ |
262,637 |
|
|
12.5 |
% |
|
$ |
274,849 |
|
|
17.7 |
% |
|
Average Net Sales Per
Case |
$ |
9.17 |
|
|
(1.0 |
%) |
|
$ |
9.28 |
|
|
0.2 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Rodney C. Sacks, Chairman and Chief Executive Officer, said: “We
are pleased to report record quarterly net sales of more than $1.0
billion, a first in our Company’s history.
“We continue to progress our strategic alignment with the
Coca-Cola system bottlers. We have reached agreements to
transition Monster Energy® to Coca-Cola bottlers in Arkansas.
In the second quarter of 2018, we transitioned parts of Arkansas
and are planning on transitioning the remainder of Arkansas in the
third quarter of 2018.“In the second quarter of 2018, we
successfully launched our Monster Energy® brand with the Coca-Cola
bottlers in Belarus, Tanzania and Uruguay and commenced the
relaunch of Monster Energy® with a Coca-Cola bottler in select
cities in India. We launched Monster Energy® in Ecuador in
July 2018 and are planning further international launches later
this year,” Sacks added.
2018 Six-MonthsNet sales for the six-months
ended June 30, 2018 increased 13.2 percent to $1.87 billion from
$1.65 billion in the same period last year. Gross sales for
the six-months ended June 30, 2018 increased 15.8 percent to $2.18
billion from $1.88 billion in the same period last year. Net
sales for the six-months ended June 30, 2018 were negatively
impacted by $22.2 million due to the adoption of ASC 606. Net
changes in foreign currency exchange rates had a favorable impact
on net and gross sales for the six-months ended June 30, 2018 of
$34.5 million and $43.6 million, respectively.Gross profit, as a
percentage of net sales, for the six-months ended June 30, 2018 was
60.8 percent, compared with 64.5 percent in the comparable period
last year. Operating expenses for the six-months ended June 30,
2018 were $498.0 million, compared with $450.1 million in the
comparable period last year. Operating income for
the six-months ended June 30, 2018 increased to $637.5 million from
$614.3 million in the comparable period last year.Net income for
the six-months ended June 30, 2018 increased 21.4 percent to $486.2
million from $400.6 million in the comparable period last
year. Net income per diluted share for the six-months ended
June 30, 2018 increased 22.9 percent to $0.85 from $0.69 in the
comparable period last year. The effective tax rate was 24.0
percent for the six-months ended June 30, 2018, versus 34.6 percent
for the comparable period last year.
Share Repurchase ProgramDuring the
2018 second quarter, the Company purchased approximately 10.6
million shares of its common stock at an average purchase price of
$52.42 per share, for a total amount of $553.2 million (excluding
broker commissions). The following table summarizes the
Company’s share repurchase activity during the 2018 second quarter
(dollars in thousands):
|
SharesPurchased |
|
Avg.PurchasePrice |
|
Amount |
|
AuthorizationRemaining |
February 2018
Repurchase Program |
5,017,554 |
|
$ |
49.81 |
|
$ |
249,925 |
|
$ |
- |
May 2018 Repurchase
Program |
5,535,936 |
|
$ |
54.78 |
|
$ |
303,247 |
|
$ |
196,670 |
Total |
10,553,490 |
|
$ |
52.42 |
|
$ |
553,172 |
|
|
|
|
|
|
|
|
|
|
|
|
As of August 7, 2018, approximately $196.7 million
remained available for repurchase under the May 2018 repurchase
program. On August 7, 2018, the Company’s Board of Directors
authorized a new repurchase program for the repurchase of up to an
additional $500.0 million of the Company’s outstanding common
stock. 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, August 8,
2018, 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 Ultra® energy drinks, Monster MAXX™ maximum strength
energy drinks, Java Monster® non-carbonated coffee + energy drinks,
Espresso Monster™ espresso + energy drinks, Caffé Monster®
non-carbonated energy coffee drinks, Monster Rehab® non-carbonated
energy drinks with electrolytes, Muscle Monster® energy shakes,
Übermonster® energy drinks, Monster Hydro® 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, Ultra Energy®
energy drinks and Mutant® 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
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 disclosure 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):
(In thousands) |
|
Three-Months Ended June 30, |
|
Six-Months Ended June 30, |
|
|
|
2018 |
|
|
2017 |
|
|
2018 |
|
|
2017 |
Gross sales, net of
discounts and returns |
|
$ |
1,191,251 |
|
$ |
1,038,970 |
|
$ |
2,181,890 |
|
$ |
1,884,518 |
Less: Promotional and
other allowances |
|
|
175,378 |
|
|
131,902 |
|
|
315,097 |
|
|
235,304 |
Net Sales |
|
$ |
1,015,873 |
|
$ |
907,068 |
|
$ |
1,866,793 |
|
$ |
1,649,214 |
|
|
|
|
|
|
|
|
|
|
|
|
|
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: 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 programs;
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, including our annual report on Form 10-K for the year
ended December 31, 2017 and our subsequent filed quarterly report
on Form 10-Q. 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.
(tables below)
|
MONSTER BEVERAGE CORPORATION AND
SUBSIDIARIESCONDENSED CONSOLIDATED STATEMENTS OF
INCOME AND OTHER INFORMATIONFOR THE THREE- AND
SIX-MONTHS ENDED JUNE 30, 2018 AND 2017(In
Thousands, Except Per Share Amounts) (Unaudited) |
|
|
|
|
|
Three-Months Ended |
|
Six-Months Ended |
|
June 30, |
|
June 30, |
|
|
2018 |
|
|
2017 |
|
|
2018 |
|
|
2017 |
|
|
|
|
|
|
|
|
Net sales¹ |
$ |
1,015,873 |
|
$ |
907,068 |
|
$ |
1,866,793 |
|
$ |
1,649,214 |
|
|
|
|
|
|
|
|
Cost of sales |
|
395,615 |
|
|
323,571 |
|
|
731,279 |
|
|
584,843 |
|
|
|
|
|
|
|
|
Gross profit¹ |
|
620,258 |
|
|
583,497 |
|
|
1,135,514 |
|
|
1,064,371 |
Gross profit as a
percentage of net sales |
|
61.1% |
|
|
64.3% |
|
|
60.8% |
|
|
64.5% |
|
|
|
|
|
|
|
|
Operating
expenses² |
|
262,637 |
|
|
233,456 |
|
|
497,979 |
|
|
450,068 |
Operating expenses as a
percentage of net sales |
|
25.9% |
|
|
25.7% |
|
|
26.7% |
|
|
27.3% |
|
|
|
|
|
|
|
|
Operating
income¹,² |
|
357,621 |
|
|
350,041 |
|
|
637,535 |
|
|
614,303 |
Operating income as a
percentage of net sales |
|
35.2% |
|
|
38.6% |
|
|
34.2% |
|
|
37.2) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest and other
income (expense), net |
|
476 |
|
|
(2,551) |
|
|
2,281 |
|
|
(1,893) |
|
|
|
|
|
|
|
|
Income before provision
for income taxes¹,² |
|
358,097 |
|
|
347,490 |
|
|
639,816 |
|
|
612,410 |
|
|
|
|
|
|
|
|
Provision for income
taxes |
|
87,981 |
|
|
124,857 |
|
|
153,651 |
|
|
211,797 |
Income taxes as a
percentage of income before taxes |
|
24.6% |
|
|
35.9% |
|
|
24.0% |
|
|
34.6% |
|
|
|
|
|
|
|
|
Net income¹,² |
$ |
270,116 |
|
$ |
222,633 |
|
$ |
486,165 |
|
$ |
400,613 |
Net income as a
percentage of net sales |
|
26.6% |
|
|
24.5% |
|
|
26.0% |
|
|
24.3% |
|
|
|
|
|
|
|
|
Net income per common
share: |
|
|
|
|
|
|
|
Basic |
$ |
0.48 |
|
$ |
0.39 |
|
$ |
0.86 |
|
$ |
0.71 |
Diluted |
$ |
0.48 |
|
$ |
0.39 |
|
$ |
0.85 |
|
$ |
0.69 |
|
|
|
|
|
|
|
|
Weighted average number
of shares of common stock and common stock equivalents: |
|
|
|
|
|
|
|
Basic |
|
559,867 |
|
|
567,910 |
|
|
562,917 |
|
|
567,384 |
Diluted |
|
566,352 |
|
|
578,020 |
|
|
570,231 |
|
|
577,719 |
|
|
|
|
|
|
|
|
Case sales (in
thousands) (in 192-ounce case equivalents) |
|
110,057 |
|
|
97,233 |
|
|
202,372 |
|
|
177,225 |
Average net sales per
case3 |
$ |
9.17 |
|
$ |
9.27 |
|
$ |
9.17 |
|
$ |
9.24 |
|
|
|
|
|
|
|
|
¹Includes $11.0 million and $10.2 million for
the three-months ended June 30, 2018 and 2017, respectively,
related to the recognition of deferred revenue. Includes $22.2
million and $20.1 million for the six-months ended June 30, 2018
and 2017, respectively, related to the recognition of deferred
revenue.
²Includes $5.5 million and $0.2 million for the three-months
ended June 30, 2018 and 2017, respectively, related to distributor
termination costs. Includes $12.5 million and $20.1 million for the
six-months ended June 30, 2018 and 2017, respectively, related to
distributor termination costs.
3Excludes Other segment net sales of $6.6 million and $6.2
million for the three-months ended June 30, 2018 and 2017,
respectively, comprised of net sales of AFF Third-Party Products to
independent third-party customers, as these sales do not have unit
case equivalents. Excludes Other segment net sales of $11.3 million
and $11.7 million for the six-months ended June 30, 2018 and 2017,
respectively, comprised of net sales of 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 JUNE 30, 2018 AND DECEMBER 31,
2017(In Thousands, Except Par Value)
(Unaudited) |
|
|
|
|
|
|
|
June 30,2018 |
|
December 31,2017 |
ASSETS |
|
|
|
|
CURRENT ASSETS: |
|
|
|
|
Cash and cash
equivalents |
|
$ |
659,687 |
|
|
$ |
528,622 |
|
Short-term
investments |
|
|
211,093 |
|
|
|
672,933 |
|
Accounts receivable,
net |
|
|
592,568 |
|
|
|
449,476 |
|
Inventories |
|
|
275,566 |
|
|
|
255,745 |
|
Prepaid expenses and
other current assets |
|
|
57,320 |
|
|
|
40,877 |
|
Prepaid income
taxes |
|
|
32,445 |
|
|
|
138,724 |
|
Total current
assets |
|
|
1,828,679 |
|
|
|
2,086,377 |
|
|
|
|
|
|
INVESTMENTS |
|
|
- |
|
|
|
2,366 |
|
PROPERTY AND EQUIPMENT,
net |
|
|
240,658 |
|
|
|
230,276 |
|
DEFERRED INCOME
TAXES |
|
|
85,253 |
|
|
|
92,333 |
|
GOODWILL |
|
|
1,331,643 |
|
|
|
1,331,643 |
|
OTHER INTANGIBLE
ASSETS, net |
|
|
1,039,401 |
|
|
|
1,034,085 |
|
OTHER ASSETS |
|
|
16,436 |
|
|
|
13,932 |
|
Total Assets |
|
$ |
4,542,070 |
|
|
$ |
4,791,012 |
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS' EQUITY |
|
|
|
|
CURRENT
LIABILITIES: |
|
|
|
|
Accounts payable |
|
$ |
267,117 |
|
|
$ |
245,910 |
|
Accrued
liabilities |
|
|
82,191 |
|
|
|
87,475 |
|
Accrued promotional
allowances |
|
|
178,193 |
|
|
|
137,998 |
|
Accrued distributor
terminations |
|
|
488 |
|
|
|
91 |
|
Deferred revenue |
|
|
43,888 |
|
|
|
43,236 |
|
Accrued
compensation |
|
|
26,357 |
|
|
|
34,996 |
|
Income taxes
payable |
|
|
15,978 |
|
|
|
10,645 |
|
Total current
liabilities |
|
|
614,212 |
|
|
|
560,351 |
|
|
|
|
|
|
DEFERRED REVENUE |
|
|
320,259 |
|
|
|
334,354 |
|
|
|
|
|
|
OTHER LIABILITIES |
|
|
2,439 |
|
|
|
1,095 |
|
|
|
|
|
|
STOCKHOLDERS'
EQUITY: |
|
|
|
|
Common
stock - $0.005 par value; 1,250,000 shares authorized;630,330
shares issued and 552,457 shares outstanding as of June 30,
2018;629,255 shares issued and 566,298 shares outstanding as of
December 31, 2017 |
|
3,152 |
|
|
|
3,146 |
|
Additional
paid-in-capital |
|
|
4,194,676 |
|
|
|
4,150,628 |
|
Retained earnings |
|
|
3,407,806 |
|
|
|
2,928,226 |
|
Accumulated other
comprehensive loss |
|
|
(25,196 |
) |
|
|
(16,659 |
) |
Common
stock in treasury, at cost; 77,873 and 62,957 shares as of
June 30, 2018 and December 31, 2017, respectively |
|
(3,975,278 |
) |
|
|
(3,170,129 |
) |
Total
stockholders' equity |
|
|
3,605,160 |
|
|
|
3,895,212 |
|
Total Liabilities and Stockholders’
Equity |
|
$ |
4,542,070 |
|
|
$ |
4,791,012 |
|
CONTACTS:
Rodney C. SacksChairman and Chief Executive Officer(951)
739-6200
Hilton H. SchlosbergVice Chairman(951) 739-6200
Roger S. Pondel / Judy Lin SfetcuPondelWilkinson Inc.(310)
279-5980
Monster Beverage (NASDAQ:MNST)
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