Monster Beverage Corporation (MNST) Q3 2011 Earnings Report, Transcript and Summary

Good day, ladies and gentlemen, and welcome to Hansen Natural Corporation Third Quarter 2011 Financial Results Call. [Operator Instructions] As a reminder, this conference call is being recorded. And now, I'll turn the call over to Chairman and CEO, Rodney Sacks. Please begin.

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 caution 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, 2011, 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 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 consolidated -- Condensed Consolidated Statements of Income and Other Information attached to the earnings release dated November 3, 2011. A copy of this information is also available on our website, www.hansens.com, in the Investor Relations Section. We are pleased to report yet again another record third quarter with record gross sales up 25% to $548.1 million, record net sales up 24.4% to $474.7 million and with diluted earnings per share increasing 23.3% to $0.88 per share from $0.72 in the same quarter of last year. Although the macro consumer environment in our major markets, particularly the United States and Europe, continues to remain under pressure, it is encouraging that both Coca-Cola and Coca-Cola Enterprises reported improved revenues for the third quarter in the United States and European markets. Even more encouraging is the continued growth that we have seen in the Energy Drink category for the third quarter, which, according to Nielsen, continues to grow in the mid-teens with sales of Monster Energy continuing to outperform the growth of the category. We believe our ability to achieve continued growth this quarter demonstrates our ability to leverage the significant opportunities available to the Monster brand, including innovation, improved distribution and execution. We continue to focus on innovation and introducing new products to the marketplace. Initial response to the introduction of Monster M3, which is a super-concentrated Monster Energy drink in 5-ounce glass bottles, has been positive, and we are encouraged about the future for this product. We are currently shipping out 3 new line extensions to Monster Rehab, which have been well received by consumers and distributors in the United States. These line extensions comprised of Rojo Tea + Energy, Green Tea + Energy and ProTEAn, a non-carbonated protein drink with 15 grams of protein per can. At the recent -- the National Association of Convenience Stores show in Chicago, the Rehab line extensions received a positive reception from many retailers and distributors. At the next show, we also unveiled our new uber Monster Energy drink, which is an ultra-premium, nonalcoholic, brewed energy drink, crafted with a fermented malt base, which we are planning to launch in 2012 in 16.9-ounce glass bottles with a huge pry-off crown closure. According to the Nielsen reports for the 13 weeks through September 24, 2011, for all outlets combined, namely convenience, grocery, drug and mass merchandisers, excluding Wal-Mart, sales in dollars in the Energy Drink category, including Shots, increased 15.1% versus the same period a year ago. Sales of Monster grew 22.4% in the 13-week period, while sales of Red Bull increased by 14.8%, sales of Rockstar increased by 20.6%, sales of 5-Hour increased by 18.5%, sales of Amp decreased 8.1%, sales of NOS increased 7.9% and sales of Full Throttle decreased 11.2%. According to the Nielsen reports, for the 5 weeks ended September 24, 2011, sales of energy drinks in the convenience and gas channel, in dollars, increased by 14.1% over the comparable 5-week period in 2010. Sales of Monster increased by 24.1% over last year, while sales of Red Bull increased by 13.3% over last year. Rockstar was up 18.6%, while 5-Hour was up 9.6%. Amp was down 3.9%. NOS was up 6.7%, and Full Throttle was down 9.2%. According to Nielsen, for the 5 weeks ended September 24, 2011, Monster's market share of the Energy Drink category in the convenience and gas channel, including energy shots, in dollars improved to 30.4% against Red Bull share of 31.8%, Rockstar share of 9.9% and 5-Hour share of 10%. Based on the Nielsen reports, Monster is continuing to close the gap with Red Bull in dollars, while in units Monster is continuing to increase its lead over Red Bull. According to Nielsen, in the 13 weeks ended September 24, 2011, all outlets combined, sales of energy plus coffee drinks in dollars increased 10.5% over the same period last year. Java Monster was 13.5% higher than last year, and Starbucks Double Shot Energy was up 16.2%. However, our net sales of the Java Monster line to our customers in the third quarter were approximately 23.3% higher than in the comparable quarter of 2010. Java Monster sales and market share continues to show improvement. Sales of our new non-carbonated Monster Rehab energy drink with electrolytes and additional supplements, which we launched in the first quarter, continues to accelerate, and Rehab has become one of our top-selling Monster products. Based on Nielsen data for the 13 weeks ended September 24, 2011, it appears that sales of Rehab have increased, such that Rehab sales are nearly double those of the main competitive non-carbonated energy drink. As indicated above, we are in the process of launching 3 line extensions to our Monster Rehab line, and we are also planning to introduce a fourth line extension to the Monster Rehab line in 2012. The company is continuing with its strategy to expand the Monster Energy brand into new international markets, with additional launches in South America, Central and Eastern Europe and Asia planned for the near future. Monster continues to perform well in Canada. According to Nielsen, in the convenience and gas channel in Canada for the 12 weeks ended September 24, 2011, the Energy Drink category grew 6%. Monster sales increased 5%, but its market share decreased by 0.2 points from 25.5% in the same period last year, due primarily to an aggressive "buy 1 get 1 free" promotion and a sweepstakes promotion by certain major retailers in the comparable quarter last year, which were not repeated this quarter. Red Bull sales increased 9%, and its market share increased by 1.2 points to 38.7%, while Rockstar sales increased 3%. It's market share decreased by 0.4 points to 13.5%. According to Nielsen, sales in the Energy Drink category in Mexico grew 14.6% in August 2011 over last year. Sales of Monster Energy in Mexico in August 2011 grew 37.4% over last year, while sales of Red Bull were 13.9% lower. Monster's market share in Mexico in August 2011 increased by 6.2 points to 37.3% over the same period last year, excluding Java Monster, resulting in Monster being the leading energy brand in Mexico. Red Bull's market share in Mexico dropped 11.8 points to 35.5% over the same period. Sales continued to progress satisfactorily in the United Kingdom and continental Europe. Net sales in Europe in the third quarter of 2011, in dollars, were approximately 89.6% higher than in the same period last year. Both cost of goods and general and administrative expenses in Europe were lower in the third quarter than the comparable quarter of 2010, on a per-case basis in local currencies, while filling expenses were higher on a per-case basis. While Western Europe is now operating profitably, we still incurred operating losses in Central and Eastern Europe, where our brand is continuing to get established in those markets. We have been satisfied with our recent launches at Monster Energy in Greece, Cyprus and the Baltic States, as well as in Colombia in South America. As previously reported, both gross and net sales for the comparative first 9-month period of 2010 were negatively impacted by bonds purchases made by customers in the 2009 fourth quarter, due to our announcement of a new per-case marketing contribution program for Monster Energy distributors, which commenced on January 1, 2010, as well as to avoid potential interruptions in product supply due to our announcement to transition to the SAP enterprise resource planning system in January 2010. If sales attributable to the 2009 fourth quarter buy-in had been included in the 2010 first quarter, with the company previously estimated at approximately 4% to 6% of 2009 fourth quarter sales, such sales would have moderated the percentage increase in net sales that we achieved in the first 9 months of 2011, from 31.3% to 28.8%. The buy-in had no effect on the results for the 2011 third quarter on which we are now reporting. During the quarter, our distributor in Hungary purchased increased volumes of Monster in anticipation of the introduction of a new tax in Hungary. We estimate that the advanced buy-in at the end of the quarter was not material. During the third quarter, on a consolidated basis, we incurred higher selling expenses as a percentage of net sales, primarily due to increased sponsorships, advertising, merchandise displays and premiums, as well as, largely in Europe, increased trade development costs and sampling programs. During the third quarter of 2011, we continued to add TV advertising to promote our Worx Energy brand, but with a new TV advertisement. Such advertising increased selling expenses as a percentage of net sales by approximately 0.6% of a percent in the quarter. While we are seeing improved consumer response to our Worx Energy brand, sales are still not meeting our expectations. We've now received confirmation of listings for Worx in certain of the largest convenience store chains in the United States, which are anticipated to commence sales during the fourth quarter. While Worx distribution levels have improved, they remained at unacceptably low levels. Gross sales in October 2011 are approximately 31.1% higher than in October 2010. We cautioned again that sales in a single month are often disproportionately impacted by various factors, such as, for example, selling days, days of the week in which holidays fall and the timing of promotions in retail stores and should not necessarily be imputed to or regarded as indicative of results for the full quarter or any future period. For the 3 months ended September 30, 2011, sales to retail grocery, specialty chains and wholesalers represented 4% of gross sales, down from 5% last year. Sales to club stores, drug chains and mass merchandisers represented 11% of sales, down from 13% last year. Sales to full-service distributors represented 62% of sales, down from 63% last year. Sales outside the United States increased to 21% from 16% in the same period last year. Other sales were 2% compared with 3% last year. Peace Tea ready-to-drink ice tea has continued to improve. Gross sales of Peace Tea increased 19.9% over the comparable quarter last year. Gross sales in the warehouse division were marginally lower by 1.3%, from $32 million to $31.5 million, but net sales in this division increased by 11.6%, from $24.7 million to $27.6 million. Gross sales to customers outside the United States in the third quarter of 2011 amounted to $116.8 million compared to $69.8 million in the same quarter last year, increasing 67.4% over the same period last year. Included in such sales are sales for the company's military customers, which are delivered in the U.S. and then shipped to the military and their customers overseas. Gross profit margin achieved in the third quarter was 52.7% this quarter versus 51.9% in the same quarter last year. We managed to improve gross profit margin in the third quarter due primarily to product mix. We do not believe that at current levels, raw material cost increases will have a material negative effect on our margins. As previously indicated, our sugar and apple juice concentrate costs have largely been covered for this year. Distribution expenses as a percentage of net sales in the third quarter were lower than the same period last year. We're continuing to benefit from increased efficiencies in this area. Selling expenses, as a percentage of net sales, increased to 12.6% from 11% in the same quarter last year for the reasons described earlier. We have increased the number of trade development sales personnel and sampling staff in Europe generally, and in Australia and elsewhere, to merchandise and call on small independent stores in countries in which our distribution partners do not operate complete full-service direct store delivery system. While we expect such activities to increase operating costs, primarily in Europe and Australia, we continue to believe that such programs, which contributed to our success in the United States, will enable us to reach small independent stores and increase awareness for the brand. As we continue to believe that these activities are an important component to the long-term development of the brand, the associated costs are allocated to selling expenses as opposed to payroll costs. General and administrative cost for the third quarter, as a percentage of net sales, decreased to 7.9% from 8.1% in the same period last year, primarily due to lower payroll costs as a percentage of net sales. Operating losses in the third quarter of 2011 in Europe, Middle East, Africa, Australia and Brazil, combined, were higher than in the comparable quarter in 2010, primarily due to a substantial increased operating losses incurred by us in the newer launched markets in Central and Eastern Europe, specifically Austria and Switzerland, where sales were lower than had been anticipated, in large part, due to various operational issues on the part of our distributor and the introduction in Austria of a very cheap, private-label energy drinks. We are working together with our distributor to address the operational issues, but continued with planned expenditures during the quarter to build awareness for the Monster brand in those key countries. Operating results for Western Europe in the third quarter of 2011 improved moderately over the comparable quarter in 2010. Our effective tax rate for the quarter ended September 30, 2011, was 37.2%, compared to 38.1% for the third quarter of 2010 and 39.3% for the year ended December 31, 2010. The decrease in the effective tax rate for the third quarter 2011 compared to the third quarter of 2010 was primarily the result of a lower, effective, combined state tax rate. The decrease in the effective tax rate for the third quarter of 2011 as compared to the year-end 2010 rate was attributable to an increase in the tax benefits from the establishment of a full valuation allowance against the deferred tax assets of a foreign subsidiary established during the second fiscal quarter of 2010. Turning to the balance sheet. Cash and cash equivalents amounted to $287.2 million, compared to $354.8 million at December 31, 2010. Short-term investments, however, were $412.3 million, compared to $244.6 million at December 31, 2010. Trade account receivable net increased to $139 million from $101.2 million at December 31, 2010. Day sales outstanding for receivables were 25.6 days at September 30, 2011, compared to 29.7 days at September 30, 2010, and 27.7 days at December 31, 2010. As sales outside the United States continue to increase as a proportion of our overall sales, days outstanding for receivables are expected to increase due to the different terms generally granted to customers internationally, in accordance with local practices in their respective countries. Inventories increased to $164.5 million from a $153.2 million at December 31, 2010. Average days of inventory were 66 days at September 30, 2011, which is lower than the 89.4 days of inventory at December 31, 2010. At September 30, 2011, the company have auction rate securities with a face value of $48.6 million, with $79.6 million at December 31, 2010, with an amortized cost bases of $39.4 million. During the third quarter, the company exercised its put option to sell $13.6 million of its auction rate securities. For the 3 months ended September 30, 2011, the company had a net expense of approximately $0.8 million in respect to the company's auction rate securities and related put options. During the 2011 third quarter, the company purchased 1.4 million shares of its common stock at an average purchase price of $77.4 per share under the share purchase -- repurchase program authorized by the Board of Directors in 2010. Subsequent to the end of the quarter, the company purchased an additional 0.3 million shares at an average purchase price of $79.56 per share, which exhausted the availability under the 2010 share repurchase program. In October 2011, the Board of Directors authorized a new share repurchase program to purchase up to $250 million of the company's outstanding common stock. I would like to open the floor to questions. Thank you.

[Operator Instructions] Our first question is from Bill Chappell of SunTrust.

This is actually Mike Swartz filling in for Bill. Yes, first question, I just wanted to touch on the selling expense, came in a lot higher than we expected and significant increase year-over-year. You touched on some of the drivers of that, but could you dig into that a little more? What was the largest driver on a year-to-year basis? And was there any kind of -- or anything pulled forward?

I'm not sure what you mean by pulled forward. I mean, interests were incurred in the correct periods. But the largest -- it just depends on when we signed contracts. When the contracts are -- when they run in, we obviously expense the amount we incur under sponsorship agreements when the contracts are due to be performed. And sometimes the contracts run year round, sometimes the contracts run over shorter periods of time. The largest driver of the increase was the increase in sponsorships and endorsements. The next largest in dollar terms was advertising, which was attributable to basically to Worx, the advertising for Worx, which obviously, last year, was very low because it hadn't really kicked in and went up during this year. If you add the math program and trade development -- allocated trade development costs together, they will probably come in between the sponsorship and advertising. So it depends how you break it down. If you allocate them separately, therefore, lower down them. But if you allocate them as a joint thing -- and that was a -- primarily attributable to those costs, which were -- the increase in those cost were primarily incurred in Europe, wherein in developing markets we have basically increased our T.D.M. program and having -- and have met teams in each of these countries. And initially, the issue is that when you start up with a single MAT team, it's a truck, with a MAT leader and a number of stuff. And you go out in the country and in these -- some of the smaller countries, you really need some presence. So you have a MAT team and the cost of being incurred to run and operate that team. But for a while, until your sales start kicking in, the cost of that MAT team becomes obviously high per case, and then starts lowering as you go forward, as it's now starting to lower in many of the countries in Western Europe, where the sales are much higher. But you start off and then you have that, sort of that, out of balance cost. And then also because of the number of countries that we've launched in, in Europe, you have MAT teams -- because of distances that really has to be in each countries. So you'll have a MAT teams in Prague. You'll have a MAT team in Slovakia. You have a MAT team in Hungary. But because they can't keep driving these trucks, even if though couple of hundred miles every day or every week, to attend different events. So you've got 3 MAT teams, for example, in those basically 3 small -- reasonably small countries. So that was the next expense. And then other expenses that were higher were merchandise display premiums, merchandise displays -- those sort of costs that we incurred.

Yes, that's great. That helps a lot. And then second question. I mean, any kind of update on the Asian expansion? I think we had anticipated hearing something sooner rather than later on that front. And when should we actually...

We are working towards launching. Probably the first market that we're going to be launching in is in Korea, and then we're planning to launch in Japan. Japan has been -- in South Korea. But Japan has been a -- was part of this -- we started planning a lot before Korea, but it's just taking a lot more planning with our distribution partner there. They're just very much more cautious about everything, about inspecting the -- every production site, every -- getting every ingredient analyzed, and say, it just -- it's a long process. But we will be getting -- moving, if we -- we're sort of moving these balls down the line again. Getting products improved, even in Korea, has been a challenge, because until now, they have not really permitted any energy drinks containing caffeine in Korea and South Korea. So we've had some relaxation on how to get products approved in Korea that still have efficacy, which we've done now and -- but there have been some hiccups. Red Bull just recently launched in Korea, got some shipments in, then had shipments placed on hold and had empty shelves and then had to have debates with the authorities about formulations and reformulations. And we have had an approval for our products, and we're now in the course of planning the actual launch. We're also looking at some other markets and are having some discussions with potential distribution partners. We did have discussions with one group, and that has eventually didn't move forward. And we are sort of making other plans and moving forward in Asia, but really, it'll be a much more visible in 2012.

Our next question is from Jeff Farmer of Jefferies. Jeffrey D. Farmer - Jefferies & Company, Inc., Research Division: I was just looking for some more color on your domestic volumes. Are you driving growth for same-store sales or distribution gains still playing a big role for you?

I think there have been some distribution gains, and particularly, in sort of some of the extended product, deeper product lines, but same-store sales have also -- and sales to a point, have also increased. For example are sales per point of our very original Green Monster energy drink in the convenience channel are up 10.7% year-on-year for the same product. So we are seeing some gains in distribution and some gains in the actual selling rates of the individual products. Jeffrey D. Farmer - Jefferies & Company, Inc., Research Division: So that 10.7% number would include Monster Rehab, so it's sort of a brand extension of Monster...

No, no. I'm just giving you one SKU, Monster Green 16-ounce. Jeffrey D. Farmer - Jefferies & Company, Inc., Research Division: Got you. Okay, that's helpful. And then just following up on the distribution point. As it relates to additional white space in the country, are there pockets of low STV [ph]? Is there still a lot of distribution opportunity out there for the brand?

We think, there is. If you take the distribution metrics, we basically -- if you take it across the 3 main channels, which is convenience and gas, grocery and drug, the biggest one is convenience. But pretty much if you take all 3, our distribution level for Monster Green 16 ounce is 91%. It's 88% for local of Monster 16-ounce, then drops to 69% for Absolutely Zero, 58% for Rehab. Those are the 2 of the newer ones that have -- got production -- sorry, got distribution over the last year to 18 months. And then many of the other ones of our products are sort of -- are down at 50%. So we believe we -- if we improve our distribution as we continue to strive for that in many of the markets where distribution is obviously better than the others, we do have opportunity in the U.S. -- just continue to fill out. If you take the, basically, the convenience market, and you look at those numbers, it goes 97%, 90%, 76%, 73%. So there is a clear depth, which we believe we could improve on, on some of the supporting SKUs, which are still very good SKUs. And that's in 16 ounce. We still have a lot of, again, also distribution opportunities in products like our 24-ounce, which is pretty much the #2 or 3 best-selling product store. And the #2 -- that's at 71%, the 24-ounce Green Monster. SO we believe we do have a lot of opportunity still in the U.S.

Our next question is from Mark Astrachan of Stifel, Nicolaus. Mark S. Astrachan - Stifel, Nicolaus & Co., Inc., Research Division: I guess, couple questions. One, on the share repurchase. So that was obviously a pretty big number. Is it fair to assume that there's a bit of a shift now in strategy in terms of your cash use? Meaning that you haven't done a whole lot with it over the years, and this may now be a better option on a going-forward basis to use that cash. I mean, I guess like -- give us a bit of color in terms of what you think you're going to do with the cash going forward. If this is basically it or if there's other opportunities.

No. I mean, we just keep an open mind. We believe we've always kept an open mind and simply it’s been a factor of looking at opportunities, just considering our use of cash. We -- the amount of cash we have has continued to increase, and so we’ve just probably been highered to sort of the levels at which we've purchased shares. We may be -- may have been a little more conservative, just in the way we implemented the program historically, whereas now we probably gave more leeway to the buyers in implementing our programs. And they were able to obviously secure more. So in many cases, we did implement programs and perhaps were too tight in the way we manage them. And the amounts we bought were smaller and just -- we've just loosened it up a little bit. But I don't think there's been a fundamental change. All agree, we're still -- we'd look at opportunities, and we have the power to do so if the right opportunities came along or continue to buy shares. We’ve just felt that with the focus on Monster, and still seeing the growth we have been able to achieve, as you've seen for many years now. With Monster in the U.S., domestically and internationally, we just feel that probably we're comfortable just growing those brands. At the same time, we do look at other opportunities that we, ourselves, can develop without paying big -- premiums for them, like Peace Tea. We think that we've managed to successfully create a great brand in Peace Tea. It's not showing on the bottom line yet, but the fact is that the brand is selling nicely. It's up on last year. We are expanding the -- into a larger-size containers now, in plastic. And we believe that will continue to do well for us, both as an asset that we've created as a brand and also able to start contributing to profits, and we believe that's a more sensible way to go about creating value. And with the combination of the buybacks that has been our --- we are looking at that a little more focused now. But otherwise, it's pretty much the same theory. Mark S. Astrachan - Stifel, Nicolaus & Co., Inc., Research Division: Okay, great. And then just from a housekeeping standpoint. So G&A expenses continue to creep up, and I'm not talking the sampling merchandising, advertising piece of it. Is -- at some point, are these going to sort of normalize? I know there have been some legal expenses in there. I know they've got the option expenses in there. But like at some point, like do they stop growing, or do they start growing less than sales? And then sort of related to that, like from a Worx expense standpoint, I know that was a big number, the 0.6% of sales in the third quarter. Is that going to be a smaller number in the fourth quarter and into 2012, given that you have had limited success with the brand?

I think that it's going to balance out. As a company, overall, our G&A really was lower as a percentage of sales than our -- than last year. So that did improve. Probably that was partially offset by some high-end G&A costs in Europe again, particularly Central and Eastern Europe where it got a little bit skewed, costs of travel and things of that nature, especially when we're establishing bands in so many small countries. We're disproportionately high. We've look at that, and there were things I can't -- obviously, I mentioned travel, because that is very high in Europe. It's hard to fly around from country to country. It's hard to travel. And those costs -- it was something we now just and took -- have obviously dealt with, with our guys out there. But those are costs that are incurring. We believe those will eventually normalize as we continue to basically fill in the European territory, and sales start growing in Central, Eastern Europe, just as they have done in Western Europe. And then it will become a smaller proportion of our G&A as we go to newer countries, obviously that once we've obviously, I think, normalize the Europe and America, because those are your 2 main basis, we think, for energy drinks.

Our next question is from Alton Stump of Longbow Research.

If you could just talk about the profitability situation in overseas, in Europe mainly. As looking at the next year, have you any plans for the region, as a whole, as -- if we'll see any meaningful profitability show up?

I just didn't -- I just couldn't hear the last part of your question. Sorry, you weren't very clear.

Sure. If you think that the region of Europe will be profitable next year or not.

If you take Europe, as a whole, I'd don't know. Because we aren’t -- they're really at very, very immature, early stages in some of these countries. We have a number of a reasonably large countries that we're about to launch, and we may well be able to pick up some volumes and leverage the overhead we have already established across those volumes. And hopefully, we -- the issues we face in Austria and Switzerland will start sort of disappearing as we continue to slowly get out, spending in line more and our sales go up. So I hope that Europe, as a whole, will possibly be positive and contribute. I think we're more comfortable with Western Europe continuing to improve their profitability and their contribution, but I'm not sure exactly what effect Eastern Europe will have. And one of those reasons is we're not sure exactly which country we'll be launching in and when that will affect those numbers ultimately. We are going through our planning now for launching in different countries, newer countries in Eastern Europe, and a lot of that will be taken once we finalized those results. I just can't give you a more definite answer on that.

Okay, that's helpful. And then just one quick follow-up on the metal can cost front. Any ideas, at this point, as to whether we'll see any meaningful cost decline for cans next year?

We may -- this is Hilton, Alton. We may -- we're evaluating the aluminum situation, and we'll decide when it will make sense to cover or not to cover this year. We've recovered a portion in the early part of the year and left ourselves open, which actually proved to be quite beneficial to the company. What happens in 2012, I don't know. But at current aluminum levels, we should show some improvement in 2012 on 2011, assuming we do decide to cover at these levels.

Our next question is from John Faucher of JPMorgan. John A. Faucher - JP Morgan Chase & Co, Research Division: Coke and CCE, you talked a little bit about some trade down with an energy, I think more on Western Europe, particularly maybe volume moving out of the small can businesses into the larger can businesses, which obviously would help you guys. Can you talk a little bit about whether you're seeing any of that, and sort of what plans you have in place to take advantage if we continue to see some trade down like that in Europe?

I'm not sure I understand the trade down term you're using, John. But one of the reasons you're seeing some switching in Europe to the larger can size is because we're actually selling more. We're becoming a more -- a larger portion of the energy drink business landscape. Now Red Bull has some -- some business have gone in countries to some of the larger sizes as well. Rockstar is doing some business there. There often are some local brands, where they may be in a mixture between 25 and 50. Most of the private-label products are -- or are in 25, 250 ml, 25 cc, where they are very, very cheap. The biggest challenge we have in Europe is the private-label brand, which are sort of taking the share of the bottom end part of the market. And the retailers there are pretty powerful, so they really do promote their own store brands. But the switch to larger sizes is really, I think, being fueled by our own products and the Rockstar there and a little bit in the U.K. by Relentless. John A. Faucher - JP Morgan Chase & Co, Research Division: Okay. So you don't see it as any sort of economic issue. You see it similar to what we saw in the U.S., let's say, 4 or 5 years ago, when consumers just simply started making that choice to go to brands that came in larger cans?

Larger cans and -- there are 2 reasons for that. It's not just because there's a larger can. I think what we've done is, I think, what you do with a larger can is provide consumers with the -- with value, with premium products. So they don't necessarily go into the cheap products. So you're giving them a premium product, which makes them feels good about the purchase, but you're giving them better value, which is I -- we think, an advantage. But also, what we've been able to do is we are expanding our product line. It's not as broad, for example, in Europe as in the U.S. But we're also giving consumers a bigger choice, and that's something they really never had before. And that, I think, is also fueling some of the switch to our product and to the larger sized. So we just don't offer our product in a smaller size. So if somebody wants a juice-based energy drink, which they've really not had the opportunity to have until now, they have to buy the larger size because that's all that's really available.

Our next question is from Judy Hong of Goldman Sachs.

Rodney, I know the month-to-month sales trends can be pretty volatile. But just the 31% growth that you saw in October, if there's any color just in terms of U.S. versus international, or any timing factor that you could call out at this point?

No. I think international is still continuing to perform pretty nicely, in line with the last quarter where they -- their results were -- we believe in sales were very good. We obviously had the cost issues in Eastern Europe, but on a sales level they’ve continuing -- we're continuing to see the same trends. And overall, the -- just the market was decent in the U.S. But again, either upwards or sometimes when it's a little lower, we caution it's a single month. It just depends on where -- when buying comes in, when deliveries are made, when holiday's fall. There are many factors, and we don't have that color. It's -- for us, the fact that it's 5% above or 6% above the average for the third quarter is not sufficiently noticeable to make -- to us, to really see that it's attributable to any one or more specific things that we can put our finger on. It's just generally across the board -- good volume. Things like Rehab are continuing to get traction. That part of the business, which I referred to in my earlier part on my call, is clearly getting a lot of good traction. And so we're very -- obviously, we're positive about the line extensions that we're going to start introducing into the fourth quarter and going forward.

And then just in terms of Java Monster, you talked about the improvement that you're seeing on that brand. And if I look at the Nielsen, that I clearly show that the brands now back to growing, I don't know, 20%-plus kind of level. We've been -- the c-stores that we track. So can you maybe help us understand some of the things that you've sort of tweaked around with that's driving that improvement? Is there more ACB growth opportunities there? Maybe just a little bit more update on the Java trends?

I think there actually is some distribution opportunities. It's a question of finding the right position for Java Monster. We think that some of our strategy going forward with regard to where we placed the Rehab line, which is really a key line, will perhaps give us some extra weight to put both the Java Monster line and the tea line maybe in the juice, tea, coffee door as opposed to the energy doors, which give us, we hope, increased shelf space. And -- but we know -- we just think that there'd be no -- for it has been a better focus on coffee. It's sort of probably lost a little bit of focus. We've introduced some new SKUs. We changed some flavors. We know we've struggled a little bit with our original one. We just -- we had sort of a -- originally it was named Big Black, and then we changed it to Original. And so it sort of didn't really have a real sexy appeal for our consumer, so we actually reformulated that and relaunched it and sort of replaced it with the Kona Blend. We changed the flavor, and we think we actually made quite a lot of improvement in the flavor for that one. We changed the flavor of our Light product. We also think that has made a big difference. In Vanilla, instead of just being Light, it's Vanilla Light. And we think that's -- and that started to do quite nicely when we look at some of the individual SKUs. So those are 2 of the main things on the flavor in the actual product side. And we've also sort of focused -- we have sort of appointed a separate brand manager, and she's really focused on this product line. This is now her baby. So we think that it's just getting a little more TLC from her, which is, again, motivating the individual, divisional teams and sales guys to obviously look after and not forget about the brand. And everybody gets excited with the main lines and the new launches, and sometimes you get lost in the wash. So we think that's really contributing to the brand, and we'll support her. We think it's a good niche, and we think it'll continue to grow and be a part of our -- the Monster lineup.

Ladies and gentlemen, this concludes the Q&A portion of today's conference. I'd like to turn the call over to Mr. Rodney Sacks for any closing remarks.

Thanks very much. As you can see from the results of my earlier remarks, we really think that the company is continuing to perform very nicely. The brand is continuing to grow. I mean, we've actually -- for the first time, actually achieved a 30% market share in the convenience channel, which is for Monster as a brand, which is the first time ever, we've got to the 30% level. So we're doing very nicely. Particularly, Great Britain is really doing very, very well in Europe. And so, all in all, we just are -- we're positive about the continued momentum for the brand. As again, also, as I've indicated, as you must have heard number of times in my remarks, we are very happy with the results for Rehab. We think that's opening a whole new demographic fold and broadening the consumer demographic for Monster, being non-carbonated, being more of a chuggable, sort of drinkable product. And we -- so we're very hopeful for the line extensions, which we believe will bring a whole lot of key consumers into the energy category and continue to broaden our appeal. So until the, probably the interim update, which we're going to have in mid-December, I'd like to thank you for your support. And we'll fill you in on any further updates at that meeting. Thank you very much.

Ladies and gentlemen, thank you for your participation in today's conference. This concludes the program. You may now disconnect, and have a wonderful day.