CORONA, Calif., May 08, 2018 -- Monster Beverage Corporation reported financial results for the first quarter ended March 31, 2018.
Net sales for the 2018 first quarter increased 14.7 percent to $850.9 million from $742.1 million in the same period last year. Gross sales for the 2018 first quarter increased 17.2 percent to $990.6 million from $845.5 million in the same period last year. Net sales for the 2018 first quarter were negatively impacted by $9.9 million, due to the adoption of Accounting Standards Codification (“ASC”) 606. Under ASC 606, commissions paid to The Coca-Cola Company (“TCCC”), based on sales to certain of the Company’s customers which TCCC accounts for under the equity method (the “TCCC Related Parties”), or consolidates, are included as a reduction to net sales. Prior to January 1, 2018, commissions based on sales to the TCCC Related Parties were included in operating expenses. Net changes in foreign currency exchange rates had a favorable impact on net and gross sales for the 2018 first quarter of $17.7 million and $22.2 million, respectively.
Net sales for the Company’s Monster Energy® Drinks segment, which includes the Company’s Monster Energy® drinks, Monster Hydro® energy drinks and Mutant® Super Soda drinks, increased 16.7 percent to $780.5 million for the 2018 first quarter, from $668.6 million for the same period last year. Net sales for the Company’s Monster Energy® Drinks segment for the 2018 first quarter were negatively impacted by $3.9 million, due to the adoption of ASC 606. Net sales for the Company’s Strategic Brands segment, which includes the various energy drink brands acquired from The Coca-Cola Company, decreased 3.3 percent to $65.8 million for the 2018 first quarter, from $68.0 million in the comparable 2017 quarter. Net sales for the Company’s Strategic Brands segment for the 2018 first quarter were negatively impacted by $6.0 million, due to the adoption of ASC 606. Net sales for the Company’s Other segment, which includes certain products of American Fruits & Flavors sold to independent third parties, were $4.7 million for the 2018 first quarter, compared with $5.5 million in the 2017 first quarter.
Net sales to customers outside the United States increased 26.8 percent to $242.1 million in the 2018 first quarter, from $190.9 million in the corresponding quarter in 2017.
Gross profit, as a percentage of net sales, for the 2018 first quarter was 60.6 percent, compared with 64.8 percent in the 2017 first quarter. The decrease in gross profit as a percentage of net sales was primarily attributable to (i) an increase in promotional allowances as a percentage of gross sales; (ii) the $9.9 million of commissions accounted for as a reduction to net sales due to the adoption of ASC 606; (iii) geographical sales mix; (iv) domestic product sales mix; and (v) certain increases in other costs.
Operating expenses for the 2018 first quarter were $235.3 million, compared with $216.6 million in the 2017 first quarter. Operating expenses included distributor termination expenses of $7.0 million for the 2018 first quarter, compared with $19.9 million in the 2017 first quarter. As a result of the adoption of ASC 606, commissions included in operating expenses decreased.
