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Monster Beverage Reports 2014 Fourth Quarter and Full Year Financial Results

CORONA, Calif., Feb. 26, 2015 (GLOBE NEWSWIRE) -- Monster Beverage Corporation (Nasdaq:MNST) today reported financial results for the three- and twelve-months ended December 31, 2014.

2014 Fourth Quarter

Gross sales for the 2014 fourth quarter increased 12.1 percent to $696.3 million from $621.1 million in the same period last year. Net sales for the three-months ended December 31, 2014 increased 12.0 percent to $605.6 million from $540.8 million in the same quarter a year ago.

Gross profit, as a percentage of net sales, for the 2014 fourth quarter was 54.8 percent, compared with 51.2 percent for the comparable 2013 quarter. Operating expenses for the 2014 fourth quarter decreased to $138.9 million from $142.4 million in the same quarter last year.

Distribution costs as a percentage of net sales were 4.1 percent for the 2014 fourth quarter, compared with 4.5 percent in the same quarter last year.

Selling expenses as a percentage of net sales were 9.3 percent for the 2014 fourth quarter, compared with 10.8 percent in the same quarter a year ago.

General and administrative expenses for the 2014 fourth quarter were $57.6 million, or 9.5 percent of net sales, compared with $59.6 million, or 11.0 percent of net sales, for the corresponding quarter last year. Stock-based compensation (a non-cash item) was $6.0 million in the fourth quarter of 2014, compared with $7.2 million for the fourth quarter of 2013.

Operating income for the 2014 fourth quarter increased 43.2 percent to $192.9 million from $134.8 million in the comparable 2013 quarter.

The effective tax rate for the 2014 fourth quarter was 34.7 percent, compared with 42.2 percent in the same quarter last year. The decrease in the effective tax rate primarily reflected 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 fourth quarter increased 64.7 percent to $125.3 million from $76.1 million in the same quarter last year. Net income per diluted share increased 63.2 percent to $0.72 from $0.44 per diluted share in the 2013 comparable quarter.

Net sales for the Company's DSD segment for the 2014 fourth quarter increased 12.6 percent to $584.8 million from $519.4 million for the same period in 2013.

Gross sales to customers outside the United States rose to $160.1 million in the 2014 fourth quarter from $137.9 million in the corresponding quarter in 2013.

Factors Impacting Profitability

Results for the 2014 fourth 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 $2.9 million for the 2014 fourth quarter, versus $4.7 million for the 2013 fourth quarter, and $20.6 million for the 2014 fiscal year, versus $17.9 million for the 2013 fiscal year.

2014 Fiscal Year

For the year ended December 31, 2014, gross sales increased 9.3 percent to $2.8 billion from $2.6 billion a year earlier. Net sales for the year ended December 31, 2014 increased 9.7 percent to $2.5 billion from $2.2 billion in the prior year.

Gross profit as a percentage of net sales was 54.4 percent for the year ended December 31, 2014, compared with 52.2 percent a year earlier.

Operating expenses for the year ended December 31, 2014 decreased 1.3 percent to $592.3 million from $600.0 million in the prior year. Operating income for the year ended December 31, 2014 increased 30.5 percent to $747.5 million from $572.9 million last year.

Distribution costs as a percentage of net sales were 4.4 percent for the year ended December 31, 2014, compared with 4.5 percent in the prior year.

Selling expenses as a percentage of net sales were 10.2 percent for the year ended December 31, 2014, compared with 11.9 percent in the prior year.

General and administrative expenses for the year ended December 31, 2014 were $232.1 million, or 9.4 percent of net sales, compared with $230.2 million, or 10.2 percent of net sales, for last year. Stock-based compensation (a non-cash item) was $28.6 million for the year ended December 31, 2014, compared with $28.8 million for last year.

Net income for the year ended December 31, 2014 rose to $483.2 million from $338.7 million in the prior year. Net income per diluted share for the year ended December 31, 2014 increased to $2.77 from $1.95 per diluted share for the prior year.

Long-Term Strategic Partnership with The Coca-Cola Company

In August 2014, Monster Beverage and The Coca-Cola Company entered into definitive agreements for a long-term strategic partnership to accelerate growth for both companies in the global energy drink category. Under the agreements, The Coca-Cola Company will acquire an approximate 16.7 percent ownership interest in Monster (post issuance) and will transfer ownership of its worldwide energy business to Monster, which, in turn, will transfer its non-energy business to The Coca-Cola Company. Monster and The Coca-Cola Company will amend their current distribution coordination agreements to expand distribution with Coca-Cola bottlers into additional territories. Upon closing, The Coca-Cola Company will become Monster's preferred distribution partner globally, and Monster will become The Coca-Cola Company's exclusive energy play. The transaction, which is subject to customary closing conditions, is expected to close in the second quarter of 2015.

Rodney C. Sacks, Chairman and Chief Executive Officer, said: "We are pleased to report another quarter and year of continuing sales growth, in both our domestic and international markets. In particular, we continued to achieve solid sales growth in Japan, which is becoming one of our largest international markets. In addition to launching Monster Energy® Unleaded, as well as Monster Energy® Ultra Sunrise™ in the United States during the second half of 2014, we are currently launching Monster Energy® Ultra Citron™ and Monster Rehab® Peach Tea + Energy. We believe that these products will play an important part in our business plan in 2015.

"The Coca-Cola transaction continues to present a unique opportunity for us. Our Company will be bolstered by The Coca-Cola Company's energy brands in a number of geographies, providing us with complementary product offerings in many countries, access to new geographies, as well as access to new channels, including vending and specialty accounts. We are making good progress in working through transitional issues and anticipate that the transaction will close during the second quarter of 2015," Sacks added.

Investor Conference Call

The Company will host an investor conference call today, February 26, 2015, at 2:00 p.m. Pacific Time (5:00 p.m. Eastern Time). The conference call will be open to all interested investors through a live audio web broadcast via the internet at www.monsterbevcorp.com in the "Events & Presentations" section. For those who are not able to listen to the live broadcast, the call will be archived for approximately one year on the website.

Monster Beverage Corporation

Based in Corona, California, Monster Beverage Corporation is a holding company and conducts no operating business except through its consolidated subsidiaries. The Company's subsidiaries market and distribute energy drinks and alternative beverages including Monster Energy® energy drinks, Monster Energy Extra Strength Nitrous Technology® energy drinks, Java Monster® non-carbonated coffee + energy drinks, M3® Monster Energy® Super Concentrate energy drinks, Monster Rehab® non-carbonated energy drinks with electrolytes, Muscle Monster® Energy Shakes, Übermonster® energy drinks, and Peace Tea® iced teas, as well as Hansen's® natural sodas, apple juice and juice blends, multi-vitamin juices, Junior Juice® beverages, Blue Sky® beverages, Hubert's® Lemonades and PRE® Probiotic drinks. For more information, visit www.monsterbevcorp.com.

Note Regarding Use of Non-GAAP Measures

Gross sales is used internally by management as an indicator of and to monitor operating performance, including sales performance of particular products, salesperson performance, product growth or declines and overall Company performance. The use of gross sales allows evaluation of sales performance before the effect of any promotional items, which can mask certain performance issues. We therefore believe that the presentation of gross sales provides a useful measure of our operating performance. Gross sales is not a measure that is recognized under accounting principles generally accepted in the United States of America ("GAAP") and should not be considered as an alternative to net sales, which is determined in accordance with GAAP, and should not be used alone as an indicator of operating performance in place of net sales. Additionally, gross sales may not be comparable to similarly titled measures used by other companies, as gross sales has been defined by our internal reporting practices. In addition, gross sales may not be realized in the form of cash receipts as promotional payments and allowances may be deducted from payments received from certain customers.

Caution Concerning Forward-Looking Statements

Certain statements made in this announcement may constitute "forward-looking statements" within the meaning of the U.S. federal securities laws, as amended, regarding the expectations of management with respect to our future operating results and other future events including revenues and profitability. The Company cautions that these statements are based on management's current knowledge and expectations and are subject to certain risks and uncertainties, many of which are outside of the control of the Company, that could cause actual results and events to differ materially from the statements made herein. Such risks and uncertainties include, but are not limited to, the following: whether and when The Coca-Cola Company transactions are completed, and results expected from them; unanticipated litigation concerning the Company's products; the current uncertainty and volatility in the national and global economy; changes in consumer preferences; changes in demand due to both domestic and international economic conditions; activities and strategies of competitors, including the introduction of new products and competitive pricing and/or marketing of similar products; actual performance of the parties under the new distribution agreements; potential disruptions arising out of the transition of certain territories to new distributors; changes in sales levels by existing distributors; unanticipated costs incurred in connection with the termination of existing distribution agreements or the transition to new distributors; changes in the price and/or availability of raw materials; other supply issues, including the availability of products and/or suitable production facilities; product distribution and placement decisions by retailers; changes in governmental regulation; the imposition of new and/or increased excise and/or sales or other taxes on our products; criticism of energy drinks and/or the energy drink market generally; our ability to satisfy all criteria set forth in any U.S. model energy drink guidelines; the impact of proposals to limit or restrict the sale of energy drinks to minors and/or persons below a specified age and/or restrict the venues and/or the size of containers in which energy drinks can be sold; political, legislative or other governmental actions or events, including the outcome of any state attorney general and/or government or quasi-government agency inquiries, in one or more regions in which we operate. For a more detailed discussion of these and other risks that could affect our operating results, see Monster's reports filed with the Securities and Exchange Commission. The Company's actual results could differ materially from those contained in the forward-looking statements. The Company assumes no obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise.

(tables below)

MONSTER BEVERAGE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME AND OTHER INFORMATION
FOR THE THREE-AND TWELVE-MONTHS ENDED DECEMBER 31, 2014 AND 2013
(In Thousands, Except Per Share Amounts) (Unaudited)
Three-Months Ended Twelve-Months Ended
December 31, December 31,
2014 2013 2014 2013
Gross sales, net of discounts and returns* $ 696,290 $ 621,070 $ 2,827,092 $ 2,586,531
Less: Promotional and other allowances** 90,723 80,221 362,225 340,103
Net sales 605,567 540,849 2,464,867 2,246,428
Cost of sales 273,783 263,689 1,125,057 1,073,497
Gross profit 331,784 277,160 1,339,810 1,172,931
Gross profit as a percentage of net sales 54.8% 51.2% 54.4% 52.2%
Operating expenses 138,862 142,405 592,305 600,015
Operating expenses as a percentage of net sales 22.9% 26.3% 24.0% 26.7%
Operating income 192,922 134,755 747,505 572,916
Operating income as a percentage of net sales 31.9% 24.9% 30.3% 25.5%
Other (expense) income:
Interest and other (expense) income, net (1,008) (3,047) (1,676) (11,737)
(Loss) gain on investment and put option, net (2) 34 (41) 2,715
Total other (expense) income (1,010) (3,013) (1,717) (9,022)
Income before provision for income taxes 191,912 131,742 745,788 563,894
Provision for income taxes 66,580 55,637 262,603 225,233
Net income $ 125,332 $ 76,105 $ 483,185 $ 338,661
Net income as a percentage of net sales 20.7% 14.1% 19.6% 15.1%
Net income per common share:
Basic $ 0.75 $ 0.46 $ 2.89 $ 2.03
Diluted $ 0.72 $ 0.44 $ 2.77 $ 1.95
Weighted average number of shares of common stock and common stock equivalents:
Basic 167,675 167,262 167,257 166,679
Diluted 174,932 173,368 174,285 173,387
Case sales (in thousands)
(in 192-ounce case equivalents) 58,563 52,780 238,280 221,348
Average net sales per case $ 10.34 $ 10.25 $ 10.34 $ 10.15

* Gross sales is used internally by management as an indicator of and to monitor operating performance, including sales performance of particular products, salesperson performance, product growth or declines and overall Company performance. The use of gross sales allows evaluation of sales performance before the effect of any promotional items, which can mask certain performance issues. We therefore believe that the presentation of gross sales provides a useful measure of our operating performance. Gross sales is not a measure that is recognized under GAAP and should not be considered as an alternative to net sales, which is determined in accordance with GAAP, and should not be used alone as an indicator of operating performance in place of net sales. Additionally, gross sales may not be comparable to similarly titled measures used by other companies, as gross sales has been defined by our internal reporting practices. In addition, gross sales may not be realized in the form of cash receipts as promotional payments and allowances may be deducted from payments received from certain customers.

**Although the expenditures described in this line item are determined in accordance with GAAP and meet GAAP requirements, the disclosure thereof does not conform with GAAP presentation requirements. Additionally, our definition of promotional and other allowances may not be comparable to similar items presented by other companies. Promotional and other allowances primarily include consideration given to the Company's distributors or retail customers including, but not limited to the following: (i) discounts granted off list prices to support price promotions to end-consumers by retailers; (ii) reimbursements given to the Company's distributors for agreed portions of their promotional spend with retailers, including slotting, shelf space allowances and other fees for both new and existing products; (iii) the Company's agreed share of fees given to distributors and/or directly to retailers for advertising, in-store marketing and promotional activities; (iv) the Company's agreed share of slotting, shelf space allowances and other fees given directly to retailers; (v) incentives given to the Company's distributors and/or retailers for achieving or exceeding certain predetermined sales goals; (vi) discounted or free products; (vii) contractual fees given to the Company's distributors related to sales made by the Company direct to certain customers that fall within the distributors' sales territories; and (viii) commissions paid to our customers. The presentation of promotional and other allowances facilitates an evaluation of their impact on the determination of net sales and the spending levels incurred or correlated with such sales. Promotional and other allowances constitute a material portion of our marketing activities. The Company's promotional allowance programs with its numerous distributors and/or retailers are executed through separate agreements in the ordinary course of business. These agreements generally provide for one or more of the arrangements described above and are of varying durations, ranging from one week to one year.

MONSTER BEVERAGE CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
AS OF DECEMBER 31, 2014 AND 2013
(In Thousands, Except Par Value) (Unaudited)
2014 2013
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 370,323 $ 211,349
Short-term investments 781,134 402,247
Accounts receivable, net 280,203 291,638
Distributor receivables 552 4,542
Inventories 174,573 221,449
Prepaid expenses and other current assets 19,673 21,376
Intangibles held-for-sale 18,079 --
Prepaid income taxes 8,617 9,518
Deferred income taxes 40,275 20,924
Total current assets 1,693,429 1,183,043
INVESTMENTS 42,940 9,792
PROPERTY AND EQUIPMENT, net 90,156 88,143
DEFERRED INCOME TAXES 54,106 63,611
INTANGIBLES, net 50,748 65,774
OTHER ASSETS 7,496 10,146
Total Assets $ 1,938,875 $ 1,420,509
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 127,641 $ 119,376
Accrued liabilities 40,271 59,113
Accrued promotional allowances 114,047 99,470
Deferred revenue 49,926 13,832
Accrued compensation 17,983 14,864
Income taxes payable 5,848 9,359
Total current liabilities 355,716 316,014
DEFERRED REVENUE 68,009 112,216
STOCKHOLDERS' EQUITY:
Common stock - $0.005 par value; 240,000 shares authorized; 207,004 shares issued and 167,722 outstanding as of December 31, 2014; 206,014 shares issued and 166,822 outstanding as of December 31, 2013 1,035 1,030
Additional paid-in capital 426,145 368,069
Retained earnings 2,330,510 1,847,325
Accumulated other comprehensive loss (11,453) (1,233)
Common stock in treasury, at cost; 39,282 and 39,192 shares as of December 31, 2014 and 2013, respectively (1,231,087) (1,222,912)
Total stockholders' equity 1,515,150 992,279
Total Liabilities and Stockholders' Equity $ 1,938,875 $ 1,420,509

CONTACT: Rodney C. Sacks Chairman and Chief Executive Officer (951) 739-6200 Hilton H. Schlosberg Vice Chairman (951) 739-6200 Roger S. Pondel / Judy Lin Sfetcu PondelWilkinson Inc. (310) 279-5980

Source:Monster Beverage Corporation