-- Third Quarter Net Sales rise 11.7
percent; 13.0 percent without the adoption of ASC 606
---- Third Quarter Net Income increases 22.4
percent to $267.7 million ---- Third Quarter Net
Income per diluted share, excluding Distributor Termination
Expenses, increases 25.6 percent to $0.50 per
share --
Monster Beverage Corporation (NASDAQ: MNST) today reported
financial results for the three- and nine-months ended September
30, 2018.
Third Quarter ResultsNet sales for the 2018
third quarter increased 11.7 percent to $1.02 billion from $909.5
million in the same period last year. Gross sales for the
2018 third quarter increased 13.7 percent to $1.18 billion from
$1.04 billion in the same period last year. Net sales for the
2018 third quarter were negatively impacted by $11.6 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 and gross
sales for the three-months ended September 30, 2018 were impacted
by advance purchases made by our customers due to a pre-announced
price increase effective November 1, 2018 on certain of our Monster
Energy® brand energy drinks. The Company estimates that net
and gross sales for the three-months ended September 30, 2018 were
increased by approximately $16.0 million and $18.0 million
respectively, as a result of such advance purchases. Net
changes in foreign currency exchange rates had an unfavorable
impact on net and gross sales for the 2018 third quarter of $5.3
million and $5.6 million, respectively.
Net sales for the Company’s Monster Energy® Drinks segment,
which primarily includes the Company’s Monster Energy® drinks,
increased 13.0 percent to $935.1 million for the 2018 third
quarter, from $827.7 million for the 2017 third quarter. Net
sales for the Company’s Monster Energy® Drinks segment for the 2018
third quarter were negatively impacted by $5.3 million, due to the
adoption of ASC 606. Net changes in foreign currency exchange
rates had an unfavorable impact on net sales for the Monster
Energy® Drinks segment of approximately $3.9 million for the
three-months ended September 30, 2018.
Net sales for the Company’s Strategic Brands segment, which
includes the various energy drink brands acquired from TCCC,
decreased 2.8 percent to $74.4 million for the 2018 third quarter,
from $76.6 million in the 2017 third quarter. Net sales for
the Company’s Strategic Brands segment for the 2018 third quarter
were negatively impacted by $6.3 million, due to the adoption of
ASC 606. Net changes in foreign currency exchange rates had
an unfavorable impact on net sales for the Strategic Brands segment
of approximately $1.4 million for the three-months ended September
30, 2018.
Net sales for the Company’s Other segment, which includes
certain products of American Fruits & Flavors sold to
independent third parties (the “AFF Third-Party Products”), were
$6.6 million for the 2018 third quarter, compared with $5.2 million
in the 2017 third quarter.Net sales to customers outside the United
States increased 8.8 percent to $283.0 million in the 2018 third
quarter, from $260.1 million in the 2017 third quarter.
Gross profit, as a percentage of net sales, for the 2018 third
quarter was 59.8 percent, compared with 62.6 percent in the 2017
third quarter. Gross profit as a percentage of net sales, excluding
the impact of ASC 606, was 60.3 percent for the three-months ended
September 30, 2018. The decrease in gross profit as a percentage of
net sales was primarily attributable to (i) increases in certain
input costs such as aluminum cans, freight in and other input
costs; (ii) the $11.6 million of commissions accounted for as
a reduction to net sales due to the adoption of ASC 606; (iii) an
increase in promotional allowances as a percentage of gross sales;
(iv) domestic product sales mix; and (v) geographical gross profit
mix.
Operating expenses for the 2018 third quarter were $268.1
million, compared with $252.3 million in the 2017 third quarter.
Operating expenses included distributor termination expenses
of $14.1 million for the 2018 third quarter, compared with $15.9
million in the 2017 third 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 4.1 percent
for the 2018 third quarter, compared with 3.2 percent in the 2017
third quarter.
Selling expenses as a percentage of net sales for the 2018 third
quarter were 11.2 percent, compared with 12.7 percent in the 2017
third quarter.
General and administrative expenses for the 2018 third quarter
were $112.7 million, or 11.1 percent of net sales, compared with
$107.5 million, or 11.8 percent of net sales, for the 2017 third
quarter. Stock-based compensation (a non-cash item) was $14.1
million for the third quarter of 2018, compared with $13.3 million
in the 2017 third quarter.
Operating income for the 2018 third quarter increased to $339.6
million from $317.4 million in the 2017 third quarter.
The effective tax rate for the 2018 third quarter was 21.8
percent, compared with 31.9 percent in the 2017 third quarter. The
decrease in the effective tax rate was primarily due to the Tax
Cuts and Jobs Act signed into law on December 22, 2017, and to a
reduction in certain foreign income that is subject to U.S.
taxation.
Net income for the 2018 third quarter increased 22.4 percent to
$267.7 million from $218.7 million in the 2017 third quarter.
Net income per diluted share for the 2018 third quarter
increased 26.4 percent to $0.48 from $0.38 in the third quarter of
2017. Net income per diluted share for the 2018 third quarter,
excluding distributor termination expenses, increased 25.6 percent
to $0.50 from $0.40 in the 2017 third quarter.
The following table illustrates the impact of
the adoption of ASC 606 for the 2018 third quarter as described
above (in thousands):
|
Three-Months Ended September 30, 2018, as Reported |
|
Percent Change 2018 vs 2017 |
|
Three-Months Ended September 30, 2018, Without the
Adoption of ASC 606 |
|
Percent Change 2018 vs 2017 |
Net Sales by
Segment: |
|
|
|
|
|
|
|
Monster Energy®
Drinks |
$ |
935,146 |
|
|
13.0 |
% |
|
$ |
940,409 |
|
|
13.6 |
% |
Strategic
Brands |
|
74,441 |
|
|
(2.8 |
%) |
|
|
80,776 |
|
|
5.5 |
% |
Other |
|
6,573 |
|
|
26.4 |
% |
|
|
6,573 |
|
|
26.4 |
% |
Total Net Sales |
$ |
1,016,160 |
|
|
11.7 |
% |
|
$ |
1,027,758 |
|
|
13.0 |
% |
Cost of Sales |
|
408,501 |
|
|
20.2 |
% |
|
|
408,501 |
|
|
20.2 |
% |
Gross Profit |
$ |
607,659 |
|
|
6.7 |
% |
|
$ |
619,257 |
|
|
8.7 |
% |
Gross Profit as a
percentage of net sales |
|
59.8 |
% |
|
|
|
|
60.3 |
% |
|
|
Operating Expenses |
$ |
268,086 |
|
|
6.2 |
% |
|
$ |
279,684 |
|
|
10.8 |
% |
Average Net Sales Per
Case |
$ |
9.09 |
|
|
(3.3 |
%) |
|
$ |
9.20 |
|
|
(2.2 |
)% |
Rodney C. Sacks, Chairman and Chief Executive Officer, said: “We
are pleased to report record third quarter net sales of more than
$1.0 billion, further demonstrating the strength of our brands.
“We continue to make progress in our strategic alignment with
Coca-Cola system bottlers and have now fully transitioned Monster
Energy® from our former Anheuser-Busch distributors to Coca-Cola
bottlers in the United States. In the third quarter of 2018,
we transitioned Monster Energy® in the remainder of Arkansas.
“We have expanded the distribution of Monster Energy® to 40 of
the largest cities in India. Our products are now distributed
in 75 percent of the country, and we anticipate national
distribution by 2018 year-end.
“Monster Energy® was launched in Ecuador and Ukraine in the
third quarter and we are planning further international launches
later this year and in 2019. Mutant® energy, one of our
affordable energy brands, was launched in Myanmar and Vietnam in
the third quarter,” Sacks added. “We recently launched Predator®,
our strategically preferred affordable energy brand, in South
Africa and are planning launches of Predator® in selected
additional markets in Eastern Europe and Africa.”
2018 Nine-MonthsNet sales for the nine-months
ended September 30, 2018 increased 12.7 percent to $2.88 billion
from $2.56 billion in the comparable period last year. Gross
sales for the nine-months ended September 30, 2018 increased 15.0
percent to $3.37 billion from $2.93 billion in the comparable
period last year.
Net sales for the nine-months ended September 30, 2018 were
negatively impacted by $33.8 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 nine-months ended
September 30, 2018 of $29.2 million and $38.0 million,
respectively.
Gross profit, as a percentage of net sales, for the nine-months
ended September 30, 2018 was 60.5 percent, compared with 63.9
percent in the comparable period last year.
Operating expenses for the nine-months ended September 30, 2018
were $766.1 million, compared with $702.4 million in the comparable
period last year.
Operating income for the nine-months ended September 30, 2018
increased to $977.1 million from $931.7 million in the comparable
period last year.
Net income for the nine-months ended September 30, 2018
increased 21.7 percent to $753.9 million from $619.4 million in the
comparable period last year. Net income per diluted share for
the nine-months ended September 30, 2018 increased 24.1 percent to
$1.33 from $1.07 in the comparable period last year. The effective
tax rate was 23.3 percent for the nine-months ended September 30,
2018, versus 33.7 percent for the comparable period last year.
Investor Conference CallThe
Company will host an investor conference call today, November 7,
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, Mutant® 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 September 30, |
|
Nine-Months Ended September 30, |
|
|
2018 |
|
2017 |
|
2018 |
|
2017 |
Gross sales, net of
discounts and returns |
|
$ |
1,184,444 |
|
$ |
1,042,046 |
|
$ |
3,366,334 |
|
$ |
2,926,564 |
Less: Promotional and
other allowances |
|
|
168,284 |
|
|
132,570 |
|
|
483,381 |
|
|
367,874 |
Net Sales |
|
$ |
1,016,160 |
|
$ |
909,476 |
|
$ |
2,882,953 |
|
$ |
2,558,690 |
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;
effects of our arbitration with TCCC regarding energy products
developed by TCCC; 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
NINE-MONTHS ENDED SEPTEMBER 30, 2018 AND 2017(In
Thousands, Except Per Share Amounts)
(Unaudited)
|
|
|
|
|
Three-Months Ended |
|
Nine-Months Ended |
|
September 30, |
|
September 30, |
|
2018 |
|
2017 |
|
2018 |
|
2017 |
|
|
|
|
|
|
|
|
Net sales¹ |
$ |
1,016,160 |
|
|
$ |
909,476 |
|
|
$ |
2,882,953 |
|
|
$ |
2,558,690 |
|
|
|
|
|
|
|
|
|
Cost of sales |
|
408,501 |
|
|
|
339,767 |
|
|
|
1,139,780 |
|
|
|
924,610 |
|
|
|
|
|
|
|
|
|
Gross profit¹ |
|
607,659 |
|
|
|
569,709 |
|
|
|
1,743,173 |
|
|
|
1,634,080 |
|
Gross profit as a
percentage of net sales |
|
59.8 |
% |
|
|
62.6 |
% |
|
|
60.5 |
% |
|
|
63.9 |
% |
|
|
|
|
|
|
|
|
Operating
expenses² |
|
268,086 |
|
|
|
252,337 |
|
|
|
766,065 |
|
|
|
702,405 |
|
Operating expenses as a
percentage of net sales |
|
26.4 |
% |
|
|
27.7 |
% |
|
|
26.6 |
% |
|
|
27.5 |
% |
|
|
|
|
|
|
|
|
Operating
income¹,² |
|
339,573 |
|
|
|
317,372 |
|
|
|
977,108 |
|
|
|
931,675 |
|
Operating income as a
percentage of net sales |
|
33.4 |
% |
|
|
34.9 |
% |
|
|
33.9 |
% |
|
|
36.4 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest and other
income, net |
|
2,988 |
|
|
|
3,996 |
|
|
|
5,269 |
|
|
|
2,103 |
|
|
|
|
|
|
|
|
|
Income before provision
for income taxes¹,² |
|
342,561 |
|
|
|
321,368 |
|
|
|
982,377 |
|
|
|
933,778 |
|
|
|
|
|
|
|
|
|
Provision for income
taxes |
|
74,828 |
|
|
|
102,624 |
|
|
|
228,480 |
|
|
|
314,422 |
|
Income taxes as a
percentage of income before taxes |
|
21.8 |
% |
|
|
31.9 |
% |
|
|
23.3 |
% |
|
|
33.7 |
% |
|
|
|
|
|
|
|
|
Net income¹,² |
$ |
267,733 |
|
|
$ |
218,744 |
|
|
$ |
753,897 |
|
|
$ |
619,356 |
|
Net income as a
percentage of net sales |
|
26.3 |
% |
|
|
24.1 |
% |
|
|
26.2 |
% |
|
|
24.2 |
% |
|
|
|
|
|
|
|
|
Net income per common
share: |
|
|
|
|
|
|
|
Basic |
$ |
0.48 |
|
|
$ |
0.39 |
|
|
$ |
1.35 |
|
|
$ |
1.09 |
|
Diluted |
$ |
0.48 |
|
|
$ |
0.38 |
|
|
$ |
1.33 |
|
|
$ |
1.07 |
|
|
|
|
|
|
|
|
|
Weighted average number
of shares of common stock and common stock equivalents: |
|
|
|
|
|
|
|
Basic |
|
552,694 |
|
|
|
567,878 |
|
|
|
559,472 |
|
|
|
567,550 |
|
Diluted |
|
559,955 |
|
|
|
578,368 |
|
|
|
566,791 |
|
|
|
577,964 |
|
|
|
|
|
|
|
|
|
Case sales (in
thousands) (in 192-ounce case equivalents) |
|
111,038 |
|
|
|
96,184 |
|
|
|
313,410 |
|
|
|
273,409 |
|
Average net sales per
case3 |
$ |
9.09 |
|
|
$ |
9.40 |
|
|
$ |
9.14 |
|
|
$ |
9.30 |
|
|
|
|
|
|
|
|
|
1Includes $11.1 million and $11.4 million for
the three-months ended September 30, 2018 and 2017, respectively,
related to the recognition of deferred revenue. Includes $33.3
million and $31.6 million for the nine-months ended September 30,
2018 and 2017, respectively, related to the recognition of deferred
revenue.
2Includes $14.1 million and $15.9 million for the three-months
ended September 30, 2018 and 2017, respectively, related to
distributor termination costs. Includes $26.6 million and $35.9
million for the nine-months ended September 30, 2018 and 2017,
respectively, related to distributor termination costs.
3Excludes Other segment net sales of $6.6 million and $5.2
million for the three-months ended September 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 $17.9 million
and $16.9 million for the nine-months ended September 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 SEPTEMBER 30, 2018 AND DECEMBER 31,
2017(In Thousands, Except Par Value)
(Unaudited)
|
|
|
|
|
|
|
September
30,2018 |
|
December 31,2017 |
ASSETS |
|
|
|
|
CURRENT ASSETS: |
|
|
|
|
Cash and cash
equivalents |
|
$ |
713,714 |
|
|
$ |
528,622 |
|
Short-term
investments |
|
|
457,898 |
|
|
|
672,933 |
|
Accounts receivable,
net |
|
|
620,162 |
|
|
|
449,476 |
|
Inventories |
|
|
262,084 |
|
|
|
255,745 |
|
Prepaid expenses and
other current assets |
|
|
57,599 |
|
|
|
40,877 |
|
Prepaid income
taxes |
|
|
41,214 |
|
|
|
138,724 |
|
Total
current assets |
|
|
2,152,671 |
|
|
|
2,086,377 |
|
|
|
|
|
|
INVESTMENTS |
|
|
1,610 |
|
|
|
2,366 |
|
PROPERTY AND EQUIPMENT,
net |
|
|
242,854 |
|
|
|
230,276 |
|
DEFERRED INCOME
TAXES |
|
|
85,253 |
|
|
|
92,333 |
|
GOODWILL |
|
|
1,331,643 |
|
|
|
1,331,643 |
|
OTHER INTANGIBLE
ASSETS, net |
|
|
1,042,248 |
|
|
|
1,034,085 |
|
OTHER ASSETS |
|
|
15,080 |
|
|
|
13,932 |
|
Total Assets |
|
$ |
4,871,359 |
|
|
$ |
4,791,012 |
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS' EQUITY |
|
|
|
|
CURRENT
LIABILITIES: |
|
|
|
|
Accounts payable |
|
$ |
278,914 |
|
|
$ |
245,910 |
|
Accrued
liabilities |
|
|
112,436 |
|
|
|
87,475 |
|
Accrued promotional
allowances |
|
|
183,295 |
|
|
|
137,998 |
|
Accrued distributor
terminations |
|
|
795 |
|
|
|
91 |
|
Deferred revenue |
|
|
44,232 |
|
|
|
43,236 |
|
Accrued
compensation |
|
|
30,237 |
|
|
|
34,996 |
|
Income taxes
payable |
|
|
6,453 |
|
|
|
10,645 |
|
Total
current liabilities |
|
|
656,362 |
|
|
|
560,351 |
|
|
|
|
|
|
DEFERRED REVENUE |
|
|
319,007 |
|
|
|
334,354 |
|
|
|
|
|
|
OTHER LIABILITIES |
|
|
2,723 |
|
|
|
1,095 |
|
|
|
|
|
|
STOCKHOLDERS'
EQUITY: |
|
|
|
|
Common
stock - $0.005 par value; 1,250,000 shares authorized;630,825
shares issued and 552,952 shares outstanding as of September 30,
2018;629,255 shares issued and 566,298 shares outstanding as of
December 31, 2017 |
|
3,154 |
|
|
|
3,146 |
|
Additional
paid-in-capital |
|
|
4,219,630 |
|
|
|
4,150,628 |
|
Retained earnings |
|
|
3,675,538 |
|
|
|
2,928,226 |
|
Accumulated other
comprehensive loss |
|
|
(29,777 |
) |
|
|
(16,659 |
) |
Common
stock in treasury, at cost; 77,873 and 62,957 shares as of
September 30, 2018 and December 31, 2017, respectively |
|
(3,975,278 |
) |
|
|
(3,170,129 |
) |
Total
stockholders' equity |
|
|
3,893,267 |
|
|
|
3,895,212 |
|
Total Liabilities and Stockholders’ Equity |
|
$ |
4,871,359 |
|
|
$ |
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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