10-QPeriod: Q3 FY2012

Monster Beverage Corp Quarterly Report for Q3 Ended Sep 30, 2012

Filed November 9, 2012For Securities:MNST

Summary

Monster Beverage Corporation reported strong net sales growth for the third quarter and first nine months of 2012, driven primarily by its core Monster Energy® brand. Net sales increased by 14.2% in the third quarter and 22.9% year-to-date, demonstrating continued consumer demand and successful international expansion. Despite increased operating expenses and a higher effective tax rate, the company achieved net income growth of 4.6% in the third quarter and 22.7% year-to-date. The company also continued its share repurchase program, demonstrating a commitment to returning value to shareholders. However, investors should note ongoing litigation and potential regulatory scrutiny, particularly concerning the marketing and health impacts of energy drinks, which represent potential risks.

Financial Highlights

44 data points
Beta

Revenue

$541.94M

50.5% Gross Margin

Net Income

$86.14M

15.9% Net Margin

Total Assets

$1.32B

Cash & Equivalents

$283.05M

Free Cash Flow

$102.05M

Financial Statements
Beta
Revenue$541.94M
Cost of Revenue$268.35M
Gross Profit$273.59M
Operating Expenses$132.91M
Operating Income$140.69M
Net Income$86.14M
Shares Outstanding (Basic)1.05B
Shares Outstanding (Diluted)1.10B

Key Highlights

  • 1Net sales for the third quarter of 2012 increased by 14.2% to $541.9 million, with the Monster Energy® brand driving growth.
  • 2For the nine months ended September 30, 2012, net sales rose by 22.9% to $1.59 billion, also led by the Monster Energy® brand.
  • 3Gross profit increased by 9.3% in Q3 2012 and 20.8% year-to-date, though gross profit margin slightly decreased due to higher promotional allowances and geographic mix.
  • 4Operating expenses increased by 12.4% in Q3 and 17.7% year-to-date, driven by higher payroll, sponsorships, and marketing costs.
  • 5Net income grew by 4.6% in Q3 2012 to $86.1 million and by 22.7% year-to-date to $272.0 million.
  • 6The company repurchased approximately $397.5 million of its common stock during the first nine months of 2012 as part of its share repurchase program.
  • 7The company faces several ongoing legal proceedings, including product liability claims and securities litigation, which are being vigorously defended.

Frequently Asked Questions

The primary driver of Monster Beverage's sales growth was the strong performance of its core Monster Energy® brand. This brand accounted for the vast majority of the increase in both gross and net sales for the third quarter and the first nine months of 2012, driven by increased domestic and international consumer demand and expansion into new international markets.

As of September 30, 2012, Monster Beverage held $283.1 million in cash and cash equivalents and an additional $327.5 million in short-term and long-term investments. The company believes its operating cash flow and existing credit facility are sufficient to cover its working capital needs, capital expenditures, and share repurchase plans for at least the next 12 months.

Yes, Monster Beverage is involved in several significant legal matters. These include product liability litigation (such as the wrongful death lawsuit related to the Anais Fournier case), securities litigation, and an inquiry from a state attorney general regarding the marketing and sale of its energy drinks. While the company believes these matters are without merit and plans to defend them vigorously, they represent potential financial and reputational risks.

During the first nine months of 2012, Monster Beverage purchased approximately $397.5 million of its common stock under its 2011-2012 Repurchase Plan. Subsequent to the quarter end, an additional $1.9 million in shares were purchased, exhausting the availability under the plan. This demonstrates the company's ongoing commitment to returning capital to shareholders.