Monster Beverage Management Discusses Q2 2012 Results - Earnings Call Transcript

Monster Beverage (MNST)

Q2 2012 Earnings Call

August 08, 2012 5:00 pm ET

Executives

Rodney C. Sacks - Chairman, Chief Executive Officer, Member of Executive Committee and Chairman of Hansen Beverage Company

Analysts

Philip Terpolilli - Longbow Research LLC

Mark S. Astrachan - Stifel, Nicolaus & Co., Inc., Research Division

Judy E. Hong - Goldman Sachs Group Inc., Research Division

Kaumil S. Gajrawala - UBS Investment Bank, Research Division

Alec Patterson

Presentation

Operator

Good day, ladies and gentlemen, and welcome to the Monster Beverage Corporation Second Quarter 2012 Financial Results Call. [Operator Instructions] As a reminder, this conference call is being recorded. I would now like to introduce your host for today's conference, Mr. Rodney Sacks, Chairman and CEO. Sir, you may begin.

Rodney C. Sacks

Thanks. Good afternoon, ladies and gentlemen. Thank you for attending this call. I'm Rodney Sacks. Hilton Schlosberg, our Vice Chairman and President is with me today. As is Tom Kelly, our Senior Vice President of Finance. Before we begin, I would like to remind listeners that certain statements made during this call may constitute forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 as amended and Section 21E of the Securities Exchange Act of 1934 as amended, and which are based on currently available information regarding the expectations of management with respect to revenues, profitability, future business, future events, financial performance and trends. Management cautions that these statements are based on our current knowledge and expectations and are subject to certain risks and uncertainties, many of which are outside the control of the company, that may cause actual results to differ materially from the forward-looking statements made during this call. Please refer to our filings with the Securities and Exchange Commission, including our most recent annual report on Form 10-K filed on February 29, 2012, and our most recent quarterly reports on Form 10-Q, including the sections contained therein entitled, Risk Factors and Forward-looking Statements for a discussion on specific risks and uncertainties that may affect our performance. The company assumes no obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise.

An explanation of the non-GAAP measure of gross sales and certain expenditures, which may be mentioned during the course of this call, is provided in the notes designated with asterisks in the condensed consolidated statements of income and other information attached to the earnings release dated August 8, 2012. A copy of this information is also available on our website, at www.monsterbevcorp.com, in the Financial Information section.

While the beverage industry, in general, experienced softness in second quarter sales volumes in North America and Europe, the energy category in our principal markets in the United States grew in the high teens in the second quarter, slightly lower than the growth rate of the energy category in the United States in the first quarter.

Overall, the company had a good second quarter with record gross sales up 28.7% to $678.9 million. Net sales up 28.2% to $592.6 million and operating income up 28.1% to $169.8 million. Diluted earnings per share increased 31% from $0.45 per share in the second quarter of 2011 to $0.59 per share.

We also recently commenced reporting sales information for the United States market based on an expanded sample of outlets, which now includes Walmart; dollar stores, such as Family Dollar, Dollar General and Fred's; DeCA military stores and club stores namely Sam's and BJ's, but excluding Costco. On this call and in the future, when we discuss the Nielsen reports for the United States for all outlets combined, the reports and information contained therein will be based on this expanded sample. This will not affect the reports and information covering sales in the convenience and gas channel, the grocery and or drug channels which may, from time to time, be referred to individually. As this will be the first time that we referred to reports based on the expanded sample, we will provide figures on both basis.

According to the Nielsen reports for the 13 weeks through July 21, 2012, for all outlets combined, namely convenience, grocery, drug and mass merchandisers, on an expanded basis I just described, including Wal-Mart, dollar stores, DeCA military stores and club stores, but excluding Costco, sales in dollars in the energy drink category, including shots, increased 16.5% versus the same period a year ago. Sales of Monster grew 24.9% in the 13-week period, while sales of Red Bull increased by 19.3%. Sales of Rockstar increased by 7.2%, and sales of 5-Hour increased by 4.2%. Sales of Amp put down 2.4%, NOS increased 13.8% off a low base and sales of Full Throttle increased 6.5%.

For comparative purposes, according to the Nielsen reports, for the 13-week through July 21, 2012, on the previously reported basis for all outlets combined, namely convenience, grocery, drug and mass merchandisers, excluding Walmart, sales in dollars in the energy drink category including shots increased 16.4% versus the same period a year ago. Sales in Monster grew 23.6% in the 13-week period, while sales of Red Bull increased by 19.8%. Sales of Rockstar increased by 7.6% and sales of 5-Hour increased by 6.2%. Sales of Amp were down 2.2%, NOS increased 13.2% off a low base, and sales of Full Throttle increased 6%.

According to the Nielsen reports for the 4 weeks ended July 21, 2012, sales of energy drink in the convenience and gas channel in dollars increased by 12.5% over the comparable 4-week period in 2011. Sales of Monster increased by 20.2% over the comparable period last year, while sales of Red Bull increased by 16.2% over the comparable period last year. Rockstar was up 5.9%, while 5-Hour was up 0.7%.

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