10-QPeriod: Q3 FY2002

Monster Beverage Corp Quarterly Report for Q3 Ended Sep 30, 2002

Filed November 14, 2002For Securities:MNST

Summary

Hansen Natural Corporation (now Monster Beverage Corp.) reported solid growth for the third quarter and the first nine months of 2002, driven by the successful launch and sales of its new Monster™ energy drink. Gross sales increased by 21.8% year-over-year for the third quarter and 17.6% for the nine-month period, indicating strong market reception for new products. While net sales also showed healthy increases (16.8% for Q3, 14.9% for nine months), gross profit margins experienced a slight decrease due to a shift in product and customer mix. Operating expenses rose, primarily due to increased selling, general, and administrative costs associated with new product introductions and marketing efforts. Despite these pressures, net income saw a modest increase, demonstrating the company's ability to manage costs while expanding its product portfolio. The company also adopted new accounting standards, SFAS 142, which ceased the amortization of certain intangible assets and positively impacted net income.

Key Highlights

  • 1Gross sales increased by 21.8% to $34.5 million for the three months ended September 30, 2002, compared to $28.3 million in the prior year, driven by new product launches like the Monster™ energy drink.
  • 2Net sales for the third quarter rose 16.8% to $27.0 million, indicating successful revenue generation from increased gross sales, though partially offset by higher discounts and promotional payments.
  • 3Gross profit increased by 14.2% for the quarter, but the gross profit margin decreased to 35.9% from 36.7% year-over-year, attributed to changes in product and customer mix.
  • 4Operating expenses increased by 19.2% for the quarter, largely due to higher selling, general, and administrative expenses supporting new product launches and marketing initiatives.
  • 5Net income for the three months ended September 30, 2002, was $1.3 million, a slight increase of $11,000 from the prior year, reflecting a balance between sales growth and increased operating costs.
  • 6Adoption of SFAS No. 142 in early 2002 ceased amortization of indefinite-lived intangible assets, increasing net income by $209,073 (or $0.02 per share) for the nine-month period.
  • 7The company's cash position strengthened significantly, with cash and cash equivalents growing from $247,657 at year-end 2001 to $2.9 million by September 30, 2002, supported by operating activities.

Frequently Asked Questions

Revenue growth was primarily driven by the introduction and strong sales of the new Monster™ energy drink, launched in April 2002. Increased sales of other products like Natural Sodas, E2O Energy Water, and Energade also contributed significantly.

The adoption of SFAS No. 142, which discontinued amortization for indefinite-lived intangible assets (like certain trademarks), positively impacted net income. For the nine-month period ended September 30, 2002, this change increased net income by $209,073, or $0.02 per share, by eliminating previously recognized amortization expense.

Management believes that cash generated from operations, along with its revolving line of credit, will be sufficient to meet its working capital needs, debt servicing, expansion plans, and potential capital asset purchases over the current year. The company had $15.2 million in working capital as of September 30, 2002, up from $13.0 million at year-end 2001.

Key changes include a substantial increase in cash and cash equivalents, from $247,657 to $2,912,236, reflecting improved cash flow from operations. Accounts receivable also increased, while inventories remained relatively stable. Long-term debt decreased, indicating ongoing debt repayment.