Monster Beverage Corporation (MNST) Q4 2010 Earnings Report, Transcript and Summary

Good afternoon, ladies and gentlemen. Thank you for standing by. Welcome to the Hansen Natural Corporation Fourth Quarter and Year End 2010 Financial Results Conference call. [Operator Instructions] I will now turn the conference over to Mr. Rodney Sacks, Chairman and CEO. Please go ahead, sir.

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 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 management's 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 herein. Please refer to our filings with the Securities and Exchange Commission, including our most recent Annual Report on Form 10-K filed on March 1, 2010, and our most recent quarterly report 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 measures 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 February 24, 2011. A copy of this information is also available on our website at www.hansens.com in the Investor Relations section. The improved trend in the beverage market in general in North America and certain countries internationally to which I referred in our recent communications to stockholders, although choppy, appears to be continuing. In particular, the energy category appears to be continuing to gain momentum with increased growth principally in the important convenience and gas store channel and to a lesser degree, in the grocery and growth channels. The macro environment continues to be challenging as we continue to face economic uncertainty and high unemployment levels in the United States and many of the other countries in which we are selling our product. A consumer-led recovery continues to be kept at bay in many regions, particularly in developed markets such as United States and Europe including United Kingdom. Despite these conditions, we were able to continue to grow the Monster brand during the fourth quarter. During the third quarter of last year, we launched Monster Absolutely Zero to address increasing consumer demand for low- or 0-calorie beverage products. Early indications are that Absolute Zero has been well received by distributors, retail customers and consumers and has resulted in limited cannibalization of Monster lo-carb. The other new product launched by us during the third quarter of last year continued to be well received. Worx Energy shots packed in 2-oz PET plastic bottles have achieved reasonable distribution through CCR. We intend to support the launch of Worx Energy through traditional television advertising, which commenced a few days ago. The repositioning of our Java Monster line and the introduction of the new X-Presso Monster SKUs is progressing, although it is still too early to evaluate the success of such repositioning. The rollout of our super concentrated energy drink, Monster M3, which is packed in 5-oz glass bottles has been slow, but we are taking steps to secure increased distribution of M3. Trends are proceeding well for the launch of our new non-carbonated Monster Rehab energy drink, with electrolytes and additional supplements in March 2011. Sales of Peace Tea continue to meet our expectations, and we are about to launch a line extension named Peace Tea Caddyshack, which is a combination of tea and lemonade. Turning to some reported sales numbers. According to Nielsen, for the 13 weeks ended January 22, 2011, all outlets combined, namely, convenience, grocery, drug and mass merchandisers excluding Wal-Mart, sales in the energy drink category including shots increased 14.8% versus the same period a year ago. Sales of Monster grew 18.3% in the 13-week period concerned, while sales of Red Bull increased by 12.1%. Sales of Rockstar increased by 15.2%. Sales of 5-Hour Energy increased 63.7%, while sales of Amp dropped 1%. Sales of NOS increased 11.2%. Sales of Full Throttle dropped 21.9%, and No Fear was down 46%. According to the Nielsen report for the four weeks ended January 22, 2011, sales of energy drinks in the convenience and gas channel, as defined by us, increased 16.9% over the comparable four-week period in 2010. Over this four-week period, sales of Monster increased by 19.6% over last year, while sales of Red Bull increased by 15.9% and Rockstar was up 19.4%. Amp was up 3.5%, while NOS was up 12.9% and Full Throttle was down 24.8%. 5-Hour Energy increased 56.7%. According to Nielsen, for the four weeks ended January 22, 2011, Monster's market share of the convenience and gas channel of the energy drink category, including energy shots, was 27.9% against Red Bull's share of 32%, 5-Hour Energy's share of 11.3%, and Rockstar's share of 9.6%. According to Nielsen in the 13-week period ended January 22, Monster continued to make good progress in the grocery channel, in which sales of energy drinks increased by 13.4% over the same period last year. Sales of Red Bull increased by 11.7% while sales of Monster increased by 18.6%. In the same period, sales of Rockstar increased by 8.8%. According to Nielsen, sales of Java Monster represented approximately 10.5% of the sales of the Monster brand for the 13 weeks to January 22, 2011, which is a decrease of 2.3 percentage points from 12.8% in the same period last year. In the 13 weeks ended January 22, 2011, for all outlets combined, sales of ready-to-drink energy plus coffee drinks increased by 1.7% over the same period last year. Sales of Starbucks Double Shot energy increased 21.4% in the current period, while sales of Monster were at similar levels to last year. Sales of Rockstar Roasted were 26.5% lower than last year, and sales of Full Throttle Coffee were 53.2% lower than last year. In Canada, we are continuing to see improvements in both sales and market share for Monster. According to Nielsen, in the convenience and gas channel in Canada for the 12 weeks ended December 18, 2010, the energy drink category grew 19%, while sales of Monster grew 35% over last year. Monster's market share increased 2.5 points over the same period last year to 21.7%, while Red Bull share increased one point to 35.8%. Rockstar's market share decreased by 1.3 points to 16.2%. According to Nielsen, sales of Monster Energy in Mexico in December 2010 grew 35.1% over last year, while sales of Red Bull declined 8.6%. Sales of Monster's nearest other competitor, the lower-priced Gladiator energy drink, was 16.9% lower than last year. Monster's market share in Mexico in December 2010 increased by seven points to 31.1%, which excludes Java Monster. In the 12 months ended December 31, 2010, our sales of Monster Energy products to Mexico were lower than in the same period of 2009, primarily due to our having experienced a disruption in Mexico during the year following the termination of our distributor in Baja and Sonora. I previously mentioned the proposed introduction of a 25% tax on energy drinks in Mexico, which was in fact implemented from January 1. In December 2010, our distributor in Mexico increased its purchases of Monster Energy drinks in anticipation of the introduction of such tax. We have adjusted the caffeine levels in Monster Energy drinks sold to Mexico in an effort to address such legislation. Sales of Monster Energy drink in United Kingdom and Europe continue to make good progress. Sales in Hungary, Czech Republic and Slovakia continue to perform satisfactorily. And in the fourth quarter of 2010, we launched Monster in three additional countries in Europe, namely, Austria, Switzerland and Bulgaria. As an update, I confirm that during the first quarter of 2011, CCE commenced the distribution of our Monster Energy drinks in Sweden in place of our previous distributor. In the fourth quarter of 2010, net sales in Europe in U.S. dollars were 142% higher than the comparable quarter in 2009. In 2010, we continue to leverage the increase in sales in Europe to reduce our operating expenses, sponsorship expenses, sampling and point-of-sale costs, as well as our payroll cost in Europe on a per case basis. In the fourth quarter of 2010, we achieved a breakeven position in Europe on a currency-neutral basis. Sales of Monster are continuing to make progress in Central America, Caribbean, Brazil, Australia and New Zealand, Tahiti and South Africa. We believe that we have overcome the majority of the importation and production issues that we faced in Brazil last year and look forward to further establishing the Monster Energy brand in Brazil in 2011. We are continuing to work with our distribution partner in Australia to improve Monster's market share in that country. We plan to pursue our strategy to introduce Monster Energy into new markets in Asia, South America, the Middle East and Africa in 2011, in addition to Central and Eastern Europe. Monster Energy drinks continue to achieve record sales during the fourth quarter. We are pleased to report that the steps we've taken to reverse the lower sales trend that we saw in Java Monster in the first nine months of 2010 appears to be working as the net sales volumes of the Java Monster product line in the fourth quarter were comparable to the fourth quarter of last year. Net sales of our new Peace Tea brand continue to gain strength. The increase in sales of Monster Energy drinks was partially offset by decreased sales of Nitrous Monster in the quarter, which has since been repositioned as Monster Energy Extra Strength with nitrous technology and Monster Hitman energy shots, which are all being discontinued. As previously advised, advanced purchases were made by our customers in the fourth quarter of 2009 due to our announcement of the new per case marketing contribution program for Monster Energy distributors commencing January 1, 2010, as well as to avoid potential interruptions in product supply due to our announcement to transition our North American operation to the SAP enterprise resource planning system, which commenced January 1, 2010. It is previously estimated that such advanced purchases resulted in an increase of approximately 4% to 6% of sales in the fourth quarter of 2009 and a similar decrease in sales in the first quarter of 2010. Such advanced purchases should be taken into account in evaluating our results. Despite the buy-in in the fourth quarter of 2009, gross sales in the fourth quarter of 2010 are higher than in the fourth quarter of 2009. In the fourth quarter of 2010, gross sales were $364.1 million as compared to $329.6 million in the fourth quarter of 2009, an increase of 10.5%. We believe that the buy-in in the 2010 fourth quarter for Mexico was not material. Sales of Peace Tea and Worx Energy also contributed to the increase in sales in the fourth quarter of 2010. We continue to grow for the Monster Energy brand in the United States in 2010 over the prior year despite lower sales in 2010 of Monster Hitman energy shots and Java Monster, X-Presso Monster speaks to the strength of the Monster Energy brand. Net sales for the company's DSD segment increased 16% to $1.213 billion for the 2010 year from $1.045 billion for the same period in 2009. Net sales for the company's Warehouse segment decreased 7% to $91.3 million for the three months ended December 31, 2010. These are the year figures for the year ended December 31, 2010, compared with $98.2 million for the same period in 2009. So these are annual figures that I just referred to between DSD and Warehouse. In the 12 months ended December 31, 2010, gross sales to retail grocery, specialty chains and wholesalers represent 5.7% of gross sales, down from 6.5% last year. Gross sales to club stores, drug chains and mass merchandisers represent 11.9% of sales, up from 11.8% last year. Gross sales to full-service distributors represent 63.8% of sales, down from 66.3% in the same period last year. Other sales were 2.5% for the period compared to 2.7% last year. Gross sales outside the United States increased to 16.1% from 12.8% in the same period last year. Gross sales to customers outside of the United States in the fourth quarter of 2010 amounts to $66.4 million, compared to $43.3 million in the same quarter last year and $69.8 million in the third quarter of 2010. Gross sales to customers outside the United States in the 12 months ended December 31, 2010, amounted to $240.6 million compared to $168 million in 2009. Included in such sales are sales to the company's military customers, which are delivered in the U.S. and then transshipped to the military and their customers overseas. Gross profit margin achieved in the fourth quarter of 2010 was 51.6% versus 53.4% in the comparable quarter last year, and 51.9% in the third quarter of 2010. The reduction in our overall gross margin was partly due to sales within the DSD segment of products, which have lower gross profit margins, particularly Peace Tea and geographic mix particularly of sales internationally, including Europe and Australia, achieved lower gross margin than in North America. The reduction in overall gross margin was also partly attributable to higher off-invoice and promotional allowances, as well as increased cost of goods including raw materials in both the DSD and Warehouse divisions and production variances. Off-invoice, MDF and chain CMAs, as a percentage of net sales, were higher in the fourth quarter of 2010 than in the same period last year. We have adequate inventory of apple juice concentrate for 2011 and have covered a limited portion of our anticipated requirements for aluminum cans for 2011, as well as a large portion of our anticipated requirements for sugar. In light of the volatility in both commodities in world markets and the unrest in North Africa and the Middle East that we have seen recently, we do anticipate increases in the cost of raw materials in 2011. Distribution expenses, as a percentage of net sales, were slightly higher than in the same period last year. Selling expenses, as a percentage of net sales, increased to 12.2% in the quarter compared to 10.4% in the same period last year. Sponsorship and endorsement costs incurred by us in the fourth quarter were approximately $3.1 million higher than in the comparable period last year, and were also higher as a percentage of net sales. Costs of promotional coupons, merchandise displays, point-of-sale and premiums were also considerably higher in the quarter than in the comparable quarter last year. Increased cost for our sampling teams, as well as our trade development sales personnel particularly in Europe, also contributed to the increase in such costs. We have a unique opportunity to establish and develop the Monster Energy brand internationally, and to this end, believe that it’s necessary for us to continue to invest in the brand internationally. For example, in the United Kingdom and in certain overseas countries, our distribution partners do not operate a full-service direct store delivery system to stores in all channels, particularly small independent stores like our full-service distribution partners do in United States. Consequently, to ensure that our product get to the small independent stores, which is an important channel for us, it is necessary for us to supplement our distribution partners' sales forces with our own trade development sales personnel to call on service and merchandise such selected [ph] stores. Even though we incurred increased cost in consequent to this program, we believe that it is in the best interest of the brand based on the positive results achieved by us to date, not only to continue, but in fact, to extend that program in United Kingdom and selected countries in Europe and elsewhere and are currently doing so. Similarly, to increase awareness of our products in new international markets, we have undertaken extensive sampling activities as compared to the United States, again, at increased cost. However, we similarly believe that such activities will play an important role in the development and establishment of our brand in those countries. The cost of product sampling teams and trade development personnel are included by us as part of selling expenses and do not fall part of our payroll costs. General and administrative costs, as a percentage of net sales, increased to 10.2% from 9.4% in the same period last year. The increase in general and administrative costs was primarily attributable to increased payroll expenses of $3.1 million and increased expenditures of $2.5 million for professional service fees, including legal and accounting costs. In the fourth quarter, Europe, Australia and Brazil combined incurred a much-reduced operating loss. Such combined losses were a marked improvement over the combined operating losses that were incurred in the comparable quarter in 2009 as well as the prior quarter in 2010. As indicated earlier, Europe achieved a fairly breakeven position on a currency-neutral basis. For the 12 months ended December 31, 2010, sponsorship and endorsement costs were approximately $11.2 million higher this year than in 2009, and they're also higher as a percentage of net sales. Operating income for the 12 months ended December 31, 2010, was also negatively affected by increased expenditures of $13.4 million for professional service fees, including legal and accounting costs, and increased cost of point-of-sale materials of $6.2 million, and product sampling teams and trade development sales personnel of $4.5 million. Included in the legal and accounting costs in the 2009 comparable period, was a $4.7 million credit related to reimbursements to the company of legal expenses previously paid by the company. Our effective tax rate in the 2010 fourth quarter was 38.7% compared to 38.3% in the 2009 fourth quarter. Our effective tax rate for the year ended December 31, 2010, was 39.3% compared to 37.8% for the year ended December 31, 2009. The increase in tax rates as compared to the comparable fourth quarter and 12 months last year, as the case may be, was primarily attributable to the increase in tax rates from a one-time, noncash charge that was incurred in the second quarter to establish a full valuation allowance against the deferred tax asset related to the foreign subsidiary, its related impact on the company's overall tax rate, lower state tax benefits and their release of a FIN 48 liability in the 2009 fourth quarter. The increase in tax rate was partially offset by the increase in tax benefits from the domestic production deduction. Turning to the balance sheet. Cash and cash equivalents amounted to $354.8 million compared to $328.3 million at December 31, 2009. Short-term investments were $244.6 million as compared to $18.5 million at December 31, 2009. Long-term investments decreased from $80.8 million at December 31, 2009, to $44.2 million. Included in the short-term and long-term investments are Auction Rate Securities of $68.3 million. Trade accounts receivables, net, decreased to $101.2 million from $104.2 million at December 31, 2009. Days outstanding for receivables were 27.3 days at December 31, 2010, compared to 31.4 days at December 31, 2009. Inventories increased to $153.2 million from $108.1 million at December 31, 2009. Inventories at the end of 2009 were lower due to our transition to the SAP enterprise resource planning system the beginning of January 2010. Average days of inventory were 89.4 days at December 31, 2010, which is higher than the 71.8 days of inventory at December 31, 2009. I would now like to open the floor to questions. Thank you.

[Operator Instructions] Our first question comes from the line of Kaumil Gajrawala with UBS Investment Banking.

First question, would you say it's possible the combination of SAP pull forward and the impacts of the marketing change was greater than 4% to 6%?

We still think it's probably in the 6% area, but that's really where we are. That's as much as we've sort of focused on it.

But it's difficult to know for sure, correct?

Yes.

Second thing, on the selling expense. How fixed is that selling expense line? Is there a leverage story in there that will roughly run around the $80 million range or is that something that should fluctuate?

The revenue expense differential -- you're talking about the...

The SG&A.

Well, SG&A was I think around $84 million. That's really hard to say. Obviously, going forward, we are trying to keep our promotional and endorsement costs and that sort of marketing line level and to, obviously, leverage increased sales against that in the 2011 year. But it's just difficult for us to say. We’re obviously -- we're also relooking at our payroll in the light of the increased cost and just looking at how we deal with it. And we think that legal costs were probably extraordinarily high in 2010, and we think we may be able to see lower costs going forward again. But these are in the hands of lawyers and litigation and things that arise, which sometimes are out of our control. But we do have some extensive litigation regarding a trademark in a number of other areas in 2010.

For the Auction Rate Securities, are there any expenses in that SG&A line that are one-time as it relates to the ARS at all?

I don't think so.

And then just the last one is, how big was Hitman last year?

Hitman was about -- it was about $21 million in '09 and was about three launches. The variance was about $17.5 million.

Our next question comes from the line of Judy Hong with Goldman Sachs.

Just going back to the U.S. sales numbers, other than just maybe underestimating the pull-forward number, are there any other differences in terms of why Nielsen numbers would show 18% or so for Monster growth and you're reporting 4% number?

Nielsen is different to our number. We report our numbers to our customers. In some cases, we have some direct sales to stores. In most cases, our numbers are sales to basically our wholesalers and distributors. So there is a difference in timing, which we really just can't speak to. But if we make some allowance for the buy-in in 2009, and we've done sort of our own calculation. But again, it's not a fixed figure, which is what we were talking about just a couple of minutes ago. The increase is probably closer to where we estimate around the 12% level, which doesn't account for a large portion of that difference that you've referred to. But again, what we are seeing is a substantially improved position, which I'll refer to later in the call in my closing remarks regarding the sales in the first two months of this year, which do show an increased trend perhaps at/or above the Nielsen numbers. But I'll get to that a bit later when I sum up the results.

And then just internationally, can you help us just kind of think about -- if you look at 2010, your sales growth internationally, how much of that was just really new market expansion as opposed to existing markets that you've been in for more than a year?

I can tell you, for example, the U.K. market, we had a lot of good growth in the U.K. market, which is one of the larger markets that we're in for more than a year. Canada, we're up very much in Canada year-over-year. As I said, I indicated we had a bit of a disruption in Mexico. But I think that our actual sales in Mexico, which is different -- our customer sales in Mexico were higher in the year. So sales generally in this -- what I'd call the more established markets have continued to increase. There are a couple of markets in Europe where there were sales. The increases were a little lower than we would have liked, and we're taking steps to address those. But by and large, the established markets did increase sales. So it's not all being driven by new markets. In fact, the majority are being driven by the existing markets.

And then just on Mexico, the tax increases that you've talked about and then the caffeine change that you're making, so what would be the net impact in terms of -- are you able to then not have to have pass on [ph] any of the tax increases because you won't...

We feel that by making the adjustment, because we have the largest size, we still have efficacy in our product with that and the other ingredients. And we believe that by making the adjustment we did that our products are not subject to the 25% tax. So we believe that will be positive for the brand.

Got it. And then just finally, on the gross margin. So obviously, the combination of geographic and the product mix has been a drag to your gross margin. As you look out 2011, you've also talked about commodities. So is the level of gross margin pressure in 2011, would you say that would be greater just on the commodity side? And are there any plans to offset that with pricing going forward?

I think the key is regarding pricing. And at this time, we have taken out pricing in our Warehouse division. But on the energy side or the DSD side, we have no plans at this time to increase pricing.

So we've taken up marginal pricing in Europe.

Yes, generally. As regards to cost, Judy, there will be some impact on margin with regard to cost. And that's something that we, at this time, we just don't want to talk about frankly.

We will see what the rest of the industry does as we go through the year, as we leave ourselves flexible to reevaluate that as we go forward. So it's not as though whatever decision we make, we're going stay with right through the year.

Our next question comes from the line of Alton Stump with Longbow Research.

This is actually [indiscernible] calling in for Alton. I just had two quick questions. Kind of going off of Judy's question just with aluminum. If you could talk a little bit about what percentage you exactly have covered? Or if aluminum does move from here, is there going to be a need to take, kind of, more pricing than maybe you implied?

We've covered a very small proportion of aluminum for 2011. What happened was that aluminum was about the $115 level. And after the turmoil in the Middle East, it increased to $120 level. But as you know, it may go back. It may not go back. We understand that there are hedge funds with substantial inventories sitting in warehouses. And we took a decision late last year that we will just see what happens with aluminum pricing, and we are continuing to monitor that situation. In Europe, our pricing is fixed. We fixed our pricing for aluminum cans in Europe.

Our next question comes from the line of Mark Astrachan with Stifel, Nicolaus. Mark Astrachan - Stifel, Nicolaus & Co., Inc.: So I'm going to just make a statement, and I'm just curious whether you would agree with it. It sounds like to me that you guys reinvested back into the business at a rate, I think, greater than we have seen in the past. And it sounds like to me, you would do that basically because you got a better visibility than what you printed in terms of the top line and your outlook for sales going forward. Do you think that's a fair statement?

Reasonably accurate, yes. Mark Astrachan - Stifel, Nicolaus & Co., Inc.: And then shifting a bit to the cash position, it's just piling up. I'm curious given that you're going to have a nice opportunity to be in the market buying stock over the next few days here. Is that something that you're looking to do at an increasing rate basically compared to what we've seen in the past couple of years, where I think you've been in the market a little bit but you clearly have a lot of opportunities to be in there buying more if you wanted to?

I think that we have indicated that we are clearly going to go into the market. We are looking at buying back, but we also just want to see what happens. And we'll make a decision as we -- virtually from day-to-day. Because we need to see where the market is, where the share price is and we'll just, obviously, try to make a prudent decision. But we acknowledge that we do have a lot of cash, and we do want to actually use it to buy back stock. Mark Astrachan - Stifel, Nicolaus & Co., Inc.: But that remains the primary use of cash, right?

Correct. Correct. Mark Astrachan - Stifel, Nicolaus & Co., Inc.: And just finally, what was the contribution from Worx and Peace Tea in the fourth quarter?

It's somewhere in the -- about the $7 million mark.

You're talking about sales, or you're talking about distribution [ph]? Mark Astrachan - Stifel, Nicolaus & Co., Inc.: [indiscernible] Say that again?

It's about $7 million. Mark Astrachan - Stifel, Nicolaus & Co., Inc.: And that was Peace Tea or Worx?

Both. Mark Astrachan - Stifel, Nicolaus & Co., Inc.: Both were $7 million or total of $7 million?

Total for the two. Mark Astrachan - Stifel, Nicolaus & Co., Inc.: Got it. Actually, just finally, I know you don't give guidance, but in terms of the spend level in the first quarter, how are you thinking about that? It sounds like I guess a read between the lines in terms of the support for the international business is that you're going to have the selling and distribution expenses remain sort of in line at least in terms of an absolute dollar amount in the first quarter. Does that seem about right?

It's about right. We started to, obviously, spend in particularly in a lot of the countries where we launched late last year. In Europe, we had, obviously, we have to get point-of-sale and other things -- incur other costs pretty much in advance. Similarly, [ph] you have to advance of launching new products, whether it be Worx and Rehab, et cetera. So obviously, we have made quite a lot of investment in coolers and a lot of these point-of-sale. We, obviously, are trying to keep that down. And hopefully, we'll be able to keep that reasonably flat going forward in the first quarter.

I think in our cost, other than coolers, we expense in the year in which the product is purchased.

Period, yes. So a lot of that was written off in the fourth quarter.

That's correct.

Our last question comes from the line of Michael Lavery with CLSA. Michael Lavery - Sidoti & Company: Just wondering, I know you've talked about this a little bit, so is it something like you've got a de-load that you've already seen coming back the other way in the first quarter in the U.S.? And how do we think about where that sits versus Nielsen? Is it useful to compare with that in mind as we think about the scanner data?

Perhaps you're right. I was going to probably -- it will give you some sort of indication. Although we haven't yet closed the -- obviously, we still got some days and we got deliveries still to work out exactly what we deliver to the end of February. But pretty much, our sales in the company for the first two months of 2011 over 2010 are up in excess -- or expected to be close the month in excess of 50% higher than last year. If you do an adjustment for the buy-in and just using rough figure of about $20 million, it still leaves us well up over 35%, in excess of 35% higher than in 2010 after that adjustment for allowing for that. And that's what I referred earlier to in response to Judy, where I said that in fact, the timing is not exactly something we can account for. But certainly, we are seeing the increased momentum, and we are seeing the increased sales, which we're obviously pleased to see coming in -- in the first quarter of this year. And we're just now really starting the advertising for Worx, and we're hoping to see some response to that. And then obviously, we feel quite good about the new Monster Rehab brand, which we are launching in March. Michael Lavery - Sidoti & Company: And up about 35% would be for just the U.S. or on a total company basis?

That's on the company basis, in excess of 35%. So that's our estimate at this time. Michael Lavery - Sidoti & Company: On then on the margin side, I understand the way that the international expansion is margin dilutive with investments ahead of the sales. But how do we think about when that turns? Is there a lot of that in place already? Or as far as some of the investment going, is it midstream or just getting started? Or how did the timing compare to when the sales should be expected to come in?

It's hard. It also depends on the timing of where we launch in different countries, particularly in Central and Eastern Europe this year. But we launched in a number of countries late last year, which was Switzerland, Austria, Bulgaria. We are planning to launch a number of countries going forward in Central and Eastern Europe this year, the first part of the year. And it's necessary for us to, obviously, incur costs in advance of that, whether it's payroll cost, setting up. There are a number of costs that go in advance. So it’ll all depend on where we end up. And if we end up doing most of the new launches in the beginning of the year, you'll end up with those costs now. They're not repeatable. But if we start and we find it opportune and appropriate to get into some of the bigger Eastern European countries that we are looking at later in the year, then we may have that investment going forward. But I think that as we continue to increase our sales in Europe and internationally, the effect of those sort of proprietary expenditures will start having a smaller effect as our base continues to increase, which is what we are seeing now. Because we're starting to see some nice numbers coming out of Europe, which is really starting to level off the cost of these sort of anomalies that we have seen in the last year to 18 months. Again, I just wanted to reiterate again, so the numbers I'm saying refer to the adjusted sales on a company-wide basis, and that we are saying that we anticipate the first months being in excess of 35%, that is after making basically an allowance of a figure of approximately $20 million for the buy-in in '09 to try and normalize that.

And there are no further audio questions at this time. I'll turn the call back to management for any closing remarks.

In closing, again, we basically -- the indications I gave you of the two months should not be taken as indicative of where we're going to end up in the quarter. I mean, we just don't know. We're obviously trying, and to some extent, even see how we're going to end up the second month of the year, which is February. But obviously, we are pleased with the results to date and the direction that we seem to be heading. And the general market has been doing quite nicely in the energy drink market. So all round, we are positive going forward. As we indicated in the call, again, I reiterate we have done some advance spending. And obviously, we'd like to try and get that, manage it more carefully, which we are proposing to do going forward. But the principle focus for us is to make sure the brand is healthy and it continues to grow. And that for us is important as a company, looking at the long-term health of the brand. Thank you, once again, for your support. And hopefully, it's not a long time. And hopefully, we'll be reporting our results the beginning of May for the first quarter. Thank you very much.

Thank you, sir. Ladies and gentlemen, that does conclude that Hansen Natural Corporation Fourth quarter and Year End 2010 Financial Results Conference Call. We thank you for your participation, and you may now disconnect.