By Mike Esterl
Monster Beverage Corp.'s profit tumbled in the first quarter,
weighed down by $206 million in termination payments as it
transfers distribution to Coca-Cola Co.
The energy drink maker Thursday also reported
lower-than-expected revenue growth as rival Red Bull GmbH gained
U.S. market share and overseas results were hurt by weakening
foreign currencies.
Monster, based in Corona, Calif., said it expects to close its
broader deal with Coke in early June. Coke said last August it
would pay $2.15 billion for a 16.7% stake in Monster as part of an
asset swap and become Monster's preferred distributor.
Net income at Monster fell to $4.4 million, or three cents a
share, in the first quarter, from $95.3 million, or 55 cents a
share, in the year-earlier period.
Net revenue rose 17% to $626.8 million, from $536.1 million,
over the same period, boosted by $39.8 million in accelerated
deferred revenue tied to distributor terminations.
Monster's shares fell 4.8% to $136.63 in recent after-hours
trading.
Excluding termination fees, adjusted earnings per share were 62
cents, six cents below the estimate of analysts as calculated by
Thomson Reuters. Adjusted revenue of $587 million also came in
below the $601.2 million analyst estimate.
Monster said it has transferred about 84% of targeted
distribution rights in the U.S. to Coke, which previously shared
distribution with brewer Anheuser-Busch InBev NV. In a conference
call with analysts, Chief Executive Rodney Sacks said the U.S.
transition has gone "relatively smoothly" but acknowledged "minor
disruptions."
Mr. Sacks said Monster plans to begin transferring overseas
distribution to Coke later this year. He acknowledged that some
existing distributors appeared to have pulled back in efforts to
sell the energy drinks ahead of the handover, hurting sales in the
most recent quarter.
But he reiterated Monster should benefit from joining Coke's
massive global distribution system. Atlanta-based Coke, the world's
largest maker of nonalcoholic beverages by revenue, sells its
drinks in every country except Cuba and North Korea.
Monster's revenue outside the U.S. dipped to $113 million, from
$115.8 million in the year-earlier quarter. Monster said the
strengthening dollar had a negative impact of $12 million on
foreign sales.
Write to Mike Esterl at mike.esterl@wsj.com
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