Monster Beverage Reports 2018 Fourth Quarter And Full Year Financial Results
Source Monster Beverage Corporation
CORONA, Calif., Feb. 27, 2019 (GLOBE NEWSWIRE) -- Monster Beverage Corporation (NASDAQ: MNST) today reported financial results for the three- and twelve-months ended December 31, 2018.
Fourth Quarter Results
Net sales for the 2018 fourth quarter increased 14.1 percent to $924.2 million from $810.4 million in the same period last year. Gross sales for the 2018 fourth quarter increased 13.7 percent to $1.06 billion from $934.8 million in the same period last year. Net sales for the 2018 fourth quarter were negatively impacted by $8.5 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 December 31, 2018 were negatively impacted by advance purchases made by customers in the third quarter of 2018, due to a pre-announced price increase effective November 1, 2018 on certain Monster Energy® brand energy drinks. The Company estimates that net and gross sales for the three-months ended December 31, 2018 decreased 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 fourth quarter of $14.4 million and $16.2 million, respectively.
Net sales for the Company’s Monster Energy® Drinks segment, which primarily includes the Company’s Monster Energy® drinks, increased 15.9 percent to $853.3 million for the 2018 fourth quarter, from $736.1 million for the 2017 fourth quarter. Net sales for the Company’s Monster Energy® Drinks segment for the 2018 fourth quarter were negatively impacted by $3.2 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 $12.4 million for the 2018 fourth quarter.
Net sales for the Company’s Strategic Brands segment, which includes the various energy drink brands acquired from TCCC, decreased 5.4 percent to $65.8 million for the 2018 fourth quarter, from $69.6 million in the 2017 fourth quarter. Net sales for the Company’s Strategic Brands segment for the 2018 fourth 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 Strategic Brands segment of $2.0 million for the three-months ended December 31, 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 $5.1 million for the 2018 fourth quarter, compared with $4.7 million in the 2017 fourth quarter.
Net sales to customers outside the United States increased 30.4 percent to $274.3 million in the 2018 fourth quarter, from $210.4 million in the 2017 fourth quarter.
Gross profit, as a percentage of net sales, for the 2018 fourth quarter was 59.7 percent, compared with 62.1 percent in the 2017 fourth quarter. Gross profit as a percentage of net sales, excluding the impact of ASC 606, was 60.1 percent for the 2018 fourth quarter. 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) geographical mix; (iii) domestic product sales mix; and (iv) the $8.5 million of commissions accounted for as a reduction to net sales due to the adoption of ASC 606. The decrease in gross profit as a percentage of net sales was partially offset by increases in domestic sales prices, as well as the decrease of promotional allowances as a percentage of gross sales.
Operating expenses for the 2018 fourth quarter were $245.7 million, compared with $236.5 million in the 2017 fourth 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 fourth quarter, compared with 3.6 percent in the 2017 fourth quarter.
Selling expenses as a percentage of net sales for the 2018 fourth quarter were 11.3 percent, compared with 13.6 percent in the 2017 fourth quarter.
General and administrative expenses for the 2018 fourth quarter were $106.6 million, or 11.5 percent of net sales, compared with $96.7 million, or 11.9 percent of net sales, for the 2017 fourth quarter. Stock-based compensation (a non-cash item) was $14.7 million for the fourth quarter of 2018, compared with $13.0 million in the 2017 fourth quarter.
Operating income for the 2018 fourth quarter increased to $306.5 million from $267.1 million in the 2017 fourth quarter.
The effective tax rate for the 2018 fourth quarter was 23.1 percent, compared with 24.8 percent in the 2017 fourth quarter. The decrease in the effective tax rate was primarily due to the reduction in the U.S. federal statutory tax rate as a result of the Tax Cuts and Jobs Act (the “Tax Reform Act”) signed into law on December 22, 2017, as well as a reduction in certain foreign income that is subject to U.S. taxation. In addition, the comparative 2017 fourth quarter effective tax rate included a one-time provisional charge related to the revaluation of the Company’s deferred tax assets at December 31, 2017, and a one-time charge for the deemed mandatory repatriation of post-1986 earnings and profits, as a result of the Tax Reform Act. The decrease in the provision for income taxes was partially offset by a decrease in the stock-based compensation tax deduction.
Net income for the 2018 fourth quarter increased 18.8 percent to $239.1 million from $201.3 million in the 2017 fourth quarter. Net income per diluted share for the 2018 fourth quarter increased 22.7 percent to $0.43 from $0.35 in the fourth quarter of 2017.
Rodney C. Sacks, Chairman and Chief Executive Officer, said: “We are pleased to report record net sales for both our 2018 fiscal fourth quarter and 2018 full year, driven by growth in our Monster Energy® brand energy drinks and new energy drink introductions.
“Our strategic alignment with the Coca-Cola system bottlers worldwide continues to progress well.
“In the United States, we are in the process of launching nationally Monster Energy Ultra Paradise® and Java Monster® Swiss Chocolate. In March, we plan to launch our Reign Total Body Fuel™ line of performance energy drinks as well as our Monster Dragon TeaTM line.
“We successfully launched additional Monster Energy® and Strategic Brands energy drinks in a number of our existing geographies in the fourth quarter of 2018. One or more of our energy drinks are now distributed in approximately 155 countries and territories worldwide.
“During 2019, we will continue to launch our Monster Energy® brand of energy drinks in new geographical markets, and plan to launch Predator®, our strategically preferred affordable energy brand, in additional markets internationally,” Sacks added.
2018 Twelve-Months
Net sales for the year ended December 31, 2018 increased 13.0 percent to $3.81 billion from $3.37 billion in the comparable period last year. Gross sales for the year ended December 31, 2018 increased 14.7 percent to $4.43 billion from $3.86 billion in the comparable period last year.
Net sales for the year ended December 31, 2018 were negatively impacted by $42.2 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 year ended December 31, 2018 of $14.8 million and $21.8 million, respectively.
Gross profit, as a percentage of net sales, for the year ended December 31, 2018 was 60.3 percent, compared with 63.5 percent in the comparable period last year.
Operating expenses for the year ended December 31, 2018 were $1.01 billion, compared with $938.9 million in the comparable period last year.
Operating income for the year ended December 31, 2018 increased to $1.28 billion from $1.20 billion in the comparable period last year.
Net income for the year ended December 31, 2018 increased 21.0 percent to $993.0 million from $820.7 million in the comparable period last year. Net income per diluted share for the year ended December 31, 2018 increased 23.8 percent to $1.76 from $1.42 in the comparable period last year. The effective tax rate was 23.2 percent for the year ended December 31, 2018, versus 31.7 percent for the comparable period last year.
