A Look At Monster's Quarter

Monster Beverage Corporation (Nasdaq:MNST) today reported financial results for the second quarter ended June 30, 2014.

2014 Second Quarter

Gross sales for the 2014 second quarter increased 7.6 percent to $779.0 million from $723.9 million in the same period last year. Net sales for the three-months ended June 30, 2014 increased 8.9 percent to $687.2 million from $630.9 million in the same quarter a year ago.

Gross profit, as a percentage of net sales, for the 2014 second quarter was 55.2 percent, compared with 53.3 percent for the 2013 second quarter. Operating expenses for the 2014 second quarter increased to $163.5 million from $156.8 million in the same quarter last year. Operating expenses as a percentage of net sales decreased to 23.8 percent from 24.9 percent in the same quarter last year.

Distribution costs as a percentage of net sales were 4.4 percent for the 2014 second quarter, compared with 4.5 percent in the same quarter last year.

Selling expenses as a percentage of net sales for the 2014 second quarter were 10.5 percent, compared with 11.6 percent in the same quarter a year ago.

General and administrative expenses as a percentage of net sales were 8.8 percent for both the 2014 and 2013 second quarters. Stock-based compensation (a non-cash item) was $8.1 million in the second quarter of 2014, compared with $7.4 million for the same period in 2013.

Operating income for the 2014 second quarter increased 20.3 percent to $215.8 million from $179.4 million in the 2013 comparable quarter.

The effective tax rate for the 2014 second quarter was 34.7 percent, compared with 39.3 percent in the same quarter last year. The decrease in the effective tax rate was primarily the result of profits earned in certain foreign subsidiaries that have no related income tax expense as the result of the prior establishment of valuation allowances on their deferred tax assets.

Net income for the 2014 second quarter increased 31.9 percent to $141.0 million from $106.9 million in the same quarter last year. Net income per diluted share increased 31.5 percent to $0.81, from $0.62 per diluted share in the 2013 comparable quarter.

Net sales for the Company's DSD segment for the 2014 second quarter increased 9.8 percent to $660.1 million from $601.0 million for the same period in 2013.

Gross sales to customers outside the United States rose to $180.2 million in the 2014 second quarter from $160.4 million in the corresponding quarter in 2013.

Factors Impacting Profitability

Results for the 2014 second quarter continue to be impacted by expenses related to regulatory matters and litigation concerning the advertising, marketing, promotion, ingredients, usage, safety and sale of the Company's Monster Energy® brand energy drinks. Such expenses were $7.9 million for the 2014 second quarter, compared to $4.2 million for the 2013 second quarter.

2014 Six Months

For the first six months of 2014, gross sales rose to $1.39 billion from $1.28 billion for the comparable period a year earlier. Net sales for the first six months of 2014 increased to $1.22 billion from $1.12 billion in the same period in 2013.

Gross profit as a percentage of net sales was 54.5 percent for the first six months of 2014, compared with 52.8 percent for the same period in 2013.

Operating expenses for the six-months ended June 30, 2014, decreased to $301.4 million from $301.6 million in the same period last year. Operating income increased to $364.7 million, from $286.7 million in the first six months of 2013.

Net income for the first six months of 2014 was $236.3 million, or $1.36 per diluted share, compared with $170.4 million, or $0.98 per diluted share, for the same period last year.

Rodney C. Sacks, Chairman and Chief Executive Officer, said: "We are pleased to report another quarter of continuing sales growth, in both our domestic and international markets. In the quarter, sales of our original green Monster Energy® drink continued to grow in excess of reported growth for the energy category over that period. We launched a new Monster Energy® Valentino Rossi energy drink that was positioned as a summer promotion in selected countries in Europe and South Africa, which has been well received by both retail buyers and consumers. We also are proceeding with our plans to introduce Monster Energy® brand energy drinks in additional international markets.

"We reiterate that our energy drinks are safe, based on both our and the industry's long track record and the scientific evidence supporting the safety of our ingredients. More than 50 billion cans of energy drinks have been sold and safely consumed worldwide over the past 25 years, including more than 12 billion Monster Energy® brand energy drinks over the past 12 years," Sacks added.