Item 16. FORM 10-K SUMMARY

None

​

INDEX TO EXHIBITS

The following designated exhibits, as indicated below, are either filed or furnished, as applicable herewith or have heretofore been filed or furnished with the Securities and Exchange Commission under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended.

2.1	Transaction Agreement, dated as of August 14, 2014, by and among Monster Beverage Corporation, New Laser Corporation, New Laser Merger Corp, The Coca-Cola Company and European Refreshments (incorporated by reference to Exhibit 2.1 to our Form 8-K dated August 18, 2014).
2.1.1	Amendment to Transaction Agreement, dated as of March 16, 2018, by and among Monster Beverage Corporation, New Laser Corporation, New Laser Merger Corp., The Coca-Cola Company and European Refreshments (incorporated by reference to Exhibit 2.1 to our Form 8-K dated March 20, 2018).
2.2	Asset Transfer Agreement, dated as of August 14, 2014, by and among Monster Beverage Corporation, New Laser Corporation and The Coca-Cola Company (incorporated by reference to Exhibit 2.2 to our Form 8-K dated August 18, 2014).
3.1	Certificate of Incorporation of the Company, as amended (incorporated by reference to Exhibit 3.1 to our Form 10-K dated November 7, 2016).
3.2	Second Amended and Restated By-laws of the Company (incorporated by reference to Exhibit 3.2 to our Form 8-K dated April 16, 2018).
4.1	Description of Common Stock (incorporated by reference to Exhibit 4.1 to our Form 10-K dated February 28, 2020).
10.1	Amended and Restated Distribution Coordination Agreement, dated as of June 12, 2015, between Monster Energy Company and The Coca-Cola Company (incorporated by reference to Exhibit 10.1 to our Form 10-Q dated August 10, 2015).
10.2	Amended and Restated International Distribution Coordination Agreement, dated as of June 12, 2015, between Monster Energy Ltd. and Monster Energy Company and The Coca-Cola Company (incorporated by reference to Exhibit 10.2 to our Form 10-Q dated August 10, 2015).
10.3	Form of Indemnification Agreement (to be provided by Monster Beverage Corporation to its directors and officers) (incorporated by reference to Exhibit 10.1 to our Form 8-K dated June 11, 2019).
10.4+	Form of Restricted Stock Unit Agreement pursuant to the Monster Beverage Corporation 2017 Compensation Plan for Non-Employee Directors (incorporated by reference to Exhibit 10.4 to our Form 10-K dated March 1, 2021).
10.5+	Form of Restricted Stock Agreement (incorporated by reference to Exhibit 10.1 to our Form 10-Q dated August 9, 2011).
10.6+	Monster Beverage Corporation 2011 Omnibus Incentive Plan (incorporated by reference to Exhibit 10.1 to our Form 8-K dated May 24, 2011).
10.7+	Employment Agreement between Monster Beverage Corporation and Rodney C. Sacks (incorporated by reference to Exhibit 10.1 to our Form 8-K dated March 19, 2014).
10.8+	Employment Agreement between Monster Beverage Corporation and Hilton H. Schlosberg (incorporated by reference to Exhibit 10.2 to our Form 8-K dated March 19, 2014).
10.9+	Form of Stock Option Agreement for grants under the Monster Beverage Corporation 2011 Omnibus Incentive Plan (incorporated by reference to Exhibit 10.10 to our Form 10-K dated March 1, 2018).
10.10+	Form of Stock Option Agreement of Co-Chief Executive Officers for grants under the Monster Beverage Corporation 2011 Omnibus Incentive Plan (incorporated by reference to Exhibit 10.11 to our Form 10-K dated March 1, 2018).
10.11+	Form of 2020 Annual Incentive Award Agreement for grants under the Monster Beverage Corporation 2011 Omnibus Incentive Plan (incorporated by reference to Exhibit 10.1 to our Form 10-Q dated May 11, 2020).
10.12+	Form of Performance Share Unit Award Agreement for grants under the Monster Beverage Corporation 2011 Omnibus Incentive Plan (incorporated by reference to Exhibit 10.2 to our Form 10-Q dated May 11, 2020).

10.13+	Form of Restricted Stock Unit Agreement for grants under the Monster Beverage Corporation 2011 Omnibus Incentive Plan (incorporated by reference to Exhibit 10.13 to our Form 10-K dated March 1, 2021).
10.14+	Form of Restricted Stock Unit Agreement of Co-Chief Executive Officers for grants under the Monster Beverage Corporation 2011 Omnibus Incentive Plan (incorporated by reference to Exhibit 10.14 to our Form 10-K dated March 1, 2021).
10.15+	Monster Beverage Corporation 2020 Omnibus Incentive Plan (incorporated by reference to Appendix A to our Definitive Proxy Statement on Schedule 14A, filed April 21, 2020).
10.16+	Monster Beverage Corporation 2017 Compensation Plan for Non-Employee Directors (incorporated by reference to Exhibit 4.1 to our Form S-8 dated June 21, 2017).
10.17+	Monster Beverage Corporation Deferred Compensation Plan for Non-Employee Directors (incorporated by reference to Exhibit 4.2 to our Form S-8 dated June 21, 2017).
10.18+	Amended and Restated Monster Beverage Corporation Deferred Compensation Plan (incorporated by reference to Exhibit 10.14 to our Form 10-K dated March 1, 2018).
10.19+	Form of Stock Option Award Agreement for grants under the Monster Beverage Corporation 2020 Omnibus Incentive Plan (incorporated by reference to Exhibit 10.1 to our Form 10-Q dated May 7, 2021).
10.20+	Form of Annual Incentive Award Agreement for grants under the Monster Beverage Corporation 2020 Omnibus Incentive Plan (incorporated by reference to Exhibit 10.2 to our Form 10-Q dated May 7, 2021).
10.21+	Form of Performance Share Unit Award Agreement for grants under the Monster Beverage Corporation 2020 Omnibus Incentive Plan (incorporated by reference to Exhibit 10.3 to our Form 10-Q dated May 7, 2021).
10.22+	Form of Restricted Stock Unit Award Agreement for grants under the Monster Beverage Corporation 2020 Omnibus Incentive Plan (incorporated by reference to Exhibit 10.4 to our Form 10-Q dated May 7, 2021).
21*	Subsidiaries
23*	Consent of Independent Registered Public Accounting Firm
31.1*	Certification by Co-Chief Executive Officer pursuant to Rule 13A-14(a) or 15D-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2*	Certification by Co-Chief Executive Officer pursuant to Rule 13A-14(a) or 15D-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.3*	Certification by Chief Financial Officer pursuant to Rule 13A-14(a) or 15D-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1*	Certification by Co-Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2*	Certification by Co-Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.3*	Certification by Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101*	The following materials from Monster Beverage Corporation’s Annual Report on Form 10-K for the fiscal year ended December 31, 2021 are furnished herewith, formatted in iXBRL (Inline eXtensible Business Reporting Language): (i) Consolidated Balance Sheets as of December 31, 2021 and 2020, (ii) Consolidated Statements of Income for the years ended December 31, 2021, 2020 and 2019, (iii) Consolidated Statements of Comprehensive Income for the years ended December 31, 2021, 2020 and 2019, (iv) Consolidated Statements of Stockholders’ Equity for the years ended December 31, 2021, 2020 and 2019, (v) Consolidated Statements of Cash Flows for the years ended December 31, 2021, 2020 and 2019, and (vi) Notes to Consolidated Financial Statements.
104*	The cover page from Monster Beverage Corporation’s Annual Report on Form 10-K for the fiscal year ended December 31, 2021, formatted in iXBRL (Inline eXtensible Business Reporting Language) and contained in Exhibit 101.

​

*	Filed herewith.

+	Management contract or compensatory plans or arrangements.

​

SIGNATURES

Pursuant to the requirements of Sections 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

MONSTER BEVERAGE CORPORATION

/s/ RODNEY C. SACKS		Rodney C. Sacks		Date: February 28, 2022
​	​	Chairman of the Board of	​	​
​	​	Directors and Co-Chief	​	​
​	​	Executive Officer	​	​
​	​	​	​	​
/s/ HILTON H. SCHLOSBERG	​	Hilton H. Schlosberg	​	Date: February 28, 2022
​	​	Vice Chairman of the Board of	​	​
​	​	Directors and Co-Chief	​	​
​	​	Executive Officer	​	​

​

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant in the capacities and on the dates indicated.

Signature		Title		Date
​	​	​	​	​
/s/ RODNEY C. SACKS	​	Chairman of the Board of	​	February 28, 2022
Rodney C. Sacks	​	Directors and Co-Chief Executive	​	​
​	​	Officer (principal executive officer)	​	​
​	​	​	​	​
/s/ HILTON H. SCHLOSBERG	​	Vice Chairman of the Board of Directors	​	February 28, 2022
Hilton H. Schlosberg	​	and Co-Chief Executive Officer (principal	​	​
​	​	executive officer)	​	​
​	​	​	​	​
/s/ THOMAS J. KELLY	​	Chief Financial Officer (principal financial	​	February 28, 2022
Thomas J. Kelly	​	officer, principal accounting officer)	​	​
​	​	​	​	​
/s/ ANA DEMEL	​	Director	​	February 28, 2022
Ana Demel	​	​	​	​
​	​	​	​	​
/s/ JAMES L. DINKINS	​	Director	​	February 28, 2022
James L. Dinkins	​	​	​	​
​	​	​	​	​
/s/ GARY P. FAYARD	​	Director	​	February 28, 2022
Gary P. Fayard	​	​	​	​
​	​	​	​	​
/s/ MARK J. HALL	​	Director	​	February 28, 2022
Mark J. Hall	​	​	​	​
​	​	​	​	​
/s/ TIFFANY M. HALL	​	Director	​	February 28, 2022
Tiffany M. Hall	​	​	​	​
​	​	​	​	​
/s/ JEANNE P. JACKSON	​	Director	​	February 28, 2022
Jeanne P. Jackson	​	​	​	​
​	​	​	​	​
/s/ STEVEN G. PIZULA	​	Director	​	February 28, 2022
Steven G. Pizula	​	​	​	​
​	​	​	​	​
/s/ BENJAMIN M. POLK	​	Director	​	February 28, 2022
Benjamin M. Polk	​	​	​	​
​	​	​	​	​
/s/ MARK S. VIDERGAUZ	​	Director	​	February 28, 2022
Mark S. Vidergauz	​	​	​	​

​

​

​

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULE

​

​
​	Page
MONSTER BEVERAGE CORPORATION AND SUBSIDIARIES	​
​	​
Report of Independent Registered Public Accounting Firm	77
​	​
Consolidated Balance Sheets as of December 31, 2021 and 2020	80
​	​
Consolidated Statements of Income for the years ended December 31, 2021, 2020 and 2019	81
​	​
Consolidated Statements of Comprehensive Income for the years ended December 31, 2021, 2020 and 2019	82
​	​
Consolidated Statements of Stockholders’ Equity for the years ended December 31, 2021, 2020 and 2019	83
​	​
Consolidated Statements of Cash Flows for the years ended December 31, 2021, 2020 and 2019	84
​	​
Notes to Consolidated Financial Statements	86
​	​
Financial Statement Schedule – Valuation and Qualifying Accounts for the years ended December 31, 2021, 2020 and 2019	122

​

​

​

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

​

To the Board of Directors and Stockholders of

Monster Beverage Corporation

Corona, California

​

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Monster Beverage Corporation and subsidiaries (the “Company”) as of December 31, 2021 and 2020, the related consolidated statements of income, comprehensive income, stockholders’ equity and cash flows, for each of the three years in the period ended December 31, 2021, and the related notes and the schedule listed in the Index at Item 15(a) (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2021 and 2020, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2021, in conformity with accounting principles generally accepted in the United States of America.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the Company’s internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control–Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 28, 2022, expressed an unqualified opinion on the Company’s internal control over financial reporting.

Basis for Opinion

These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was communicated or required to be communicated to the Audit Committee and that (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Accrued Promotional Allowances — Refer to Note 2 to the financial statements

Critical Audit Matter Description

The Company’s promotional and other allowances are calculated based on various programs with its bottlers/distributors and retail customers, and accruals are established at the time of the initial product sale for the Company’s anticipated liabilities. These accruals are based on agreed-upon terms as well as the Company’s historical experience with similar programs and require management’s judgment with respect to estimating consumer participation and/or bottler/distributor and retail customer performance levels. Promotional and other allowances primarily include consideration given to bottlers/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 bottlers/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) agreed share of fees given to bottlers/distributors and/or directly to retailers for advertising, in-store marketing, and promotional activities; (iv) agreed share of slotting, shelf space allowances, and other fees given directly to retailers, club stores and/or wholesalers; (v) incentives given to bottlers/distributors and/or retailers for achieving or exceeding certain predetermined sales goals; (vi) discounted or free products; (vii) contractual fees given to bottlers/distributors related to sales made by the Company directly to certain customers that fall within the bottlers’/distributors’ sales territories; and (viii) certain commissions paid based on sales to bottlers/distributors. The promotional programs are of varying durations, typically ranging from one week to one year based on the agreed-upon terms. The nature of such programs is determined on a per retail customer basis, and in certain instances, the same program is set for multiple retail customers. The promotional expenditures are recorded as a reduction to net sales in the period the underlying sale occurs. Total promotional expenditures included as a reduction to net sales were $924.7 million for the year ended December 31, 2021, and accrued promotional allowances were $211.5 million as of December 31, 2021.

We identified accrued promotional allowances as a critical audit matter because of the extent and subjective nature of management judgment required with respect to estimating consumer participation and/or distributor and retail customer performance levels and future promotional claims.

How the Critical Audit Matter Was Addressed in the Audit

Our audit procedures over accrued promotional allowances, with respect to management’s judgment regarding levels of consumer participation and/or distributor and retail customer performance levels and future promotional claims, included the following, among others:

	●	We tested the effectiveness of controls over accrued promotional allowances, including those controls pertaining to management’s estimation of future promotional claims.

	●	We selected a sample of accrued promotional allowances recorded for specific distributors and retail customers and sent confirmation requests of the accrual recorded and key terms of the agreement directly to the distributor or retail customer. We compared the confirmation response to the accrued amount recorded by the Company. In instances of nonreplies to our confirmation request from the distributor or retail customer, we performed alternative procedures as follows: (1) developing an expectation of the accrual using current-year claim and payment data, and/or (2) vouching known claim submissions, unpaid as of period-end, to underlying supporting documentation.

	●	We tested the promotional expenditure amount recorded as a reduction to net sales and assessed the reasonableness of management’s estimate by developing an expectation of the amount, based on historical promotional expenditure amounts recorded as a percentage of sales, and compared our expectation to the recorded promotional expenditure amount.

	●	We performed inquiries with the Company’s sales and marketing personnel to corroborate our understanding of new and existing promotional programs that may alter the relationship between gross billings and promotional allowances, as such programs are considered by management when estimating future promotional claims.

	●	We evaluated management’s ability to estimate promotional allowances by comparing the actual promotional allowances subsequently paid to the original estimates of management.

/s/ DELOITTE & TOUCHE LLP

Costa Mesa, California

February 28, 2022

We have served as the Company’s auditor since 1991.

​

MONSTER BEVERAGE CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

AS OF DECEMBER 31, 2021 AND 2020 (In Thousands, Except Par Value)

​	​	​	​	​	​	​
​	​	December 31,		​	December 31,
​		2021			2020
ASSETS	​	​	​	​	​	​
CURRENT ASSETS:	​	​	​	​	​	​
Cash and cash equivalents	​	$	1,326,462	​	$	1,180,413
Short-term investments	​		1,749,727			881,354
Accounts receivable, net	​		896,658			666,012
Inventories	​		593,357			333,085
Prepaid expenses and other current assets	​		82,668			55,358
Prepaid income taxes	​		33,238			24,733
Total current assets	​		4,682,110			3,140,955
​	​	​	​	​	​	​
INVESTMENTS	​		99,419			44,291
PROPERTY AND EQUIPMENT, net	​		313,753			314,656
DEFERRED INCOME TAXES	​		225,221			241,650
GOODWILL	​		1,331,643			1,331,643
OTHER INTANGIBLE ASSETS, net	​		1,072,386			1,059,046
OTHER ASSETS	​		80,252			70,475
Total Assets	​	$	7,804,784		$	6,202,716
​	​	​	​	​	​	​
LIABILITIES AND STOCKHOLDERS’ EQUITY	​	​	​	​	​	​
CURRENT LIABILITIES:	​	​	​	​	​	​
Accounts payable	​	$	404,263		$	296,800
Accrued liabilities	​		210,964			142,653
Accrued promotional allowances	​		211,461			186,658
Deferred revenue	​		42,530			45,429
Accrued compensation	​		65,459			55,015
Income taxes payable	​		30,399			23,433
Total current liabilities	​		965,076			749,988
​	​	​	​	​	​	​
DEFERRED REVENUE	​		243,249			264,436
​	​	​	​	​	​	​
OTHER LIABILITIES	​	​	29,508	​	​	27,432
​	​	​	​	​	​	​
COMMITMENTS AND CONTINGENCIES (Note 12)	​	​	​	​	​	​
​	​	​	​	​	​	​
STOCKHOLDERS’ EQUITY:	​	​	​	​	​	​
Common stock - $0.005 par value; 1,250,000 shares authorized; 640,043 shares issued and 529,323 shares outstanding as of December 31, 2021; 638,662 shares issued and 528,097 shares outstanding as of December 31, 2020	​	​	3,200	​	​	3,193
Additional paid-in capital	​		4,652,620			4,537,982
Retained earnings	​		7,809,549			6,432,074
Accumulated other comprehensive (loss) income	​		(69,165)			3,034
Common stock in treasury, at cost; 110,720 shares and 110,565 shares as of December 31, 2021 and December 31, 2020, respectively	​		(5,829,253)			(5,815,423)
Total stockholders’ equity	​		6,566,951			5,160,860
Total Liabilities and Stockholders’ Equity	​	$	7,804,784		$	6,202,716

​

See accompanying notes to consolidated financial statements.

​

MONSTER BEVERAGE CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

FOR THE YEARS ENDED DECEMBER 31, 2021, 2020 AND 2019

(In Thousands, Except Per Share Amounts)

​	​	​	​	​	​	​	​	​	​
​		2021			2020			2019
NET SALES	​	$	5,541,352	​	$	4,598,638	​	$	4,200,819
​	​	​	​	​	​	​	​	​	​
COST OF SALES	​		2,432,839	​		1,874,758	​		1,682,234
​	​	​	​	​	​	​	​	​	​
GROSS PROFIT	​		3,108,513	​		2,723,880	​		2,518,585
​	​	​	​	​	​	​	​	​	​
OPERATING EXPENSES	​		1,311,046	​		1,090,727	​		1,115,646
​	​	​	​	​	​	​	​	​	​
OPERATING INCOME	​		1,797,467	​		1,633,153	​		1,402,939
​	​	​	​	​	​	​	​	​	​
OTHER INCOME (EXPENSE), NET	​		3,952	​		(6,996)	​		13,023
​	​	​	​	​	​	​	​	​	​
INCOME BEFORE PROVISION FOR INCOME TAXES	​		1,801,419	​		1,626,157	​		1,415,962
​	​	​	​	​	​	​	​	​	​
PROVISION FOR INCOME TAXES	​		423,944	​		216,563	​		308,127
​	​	​	​	​	​	​	​	​	​
NET INCOME	​	$	1,377,475	​	$	1,409,594	​	$	1,107,835
​	​	​	​	​	​	​	​	​	​
NET INCOME PER COMMON SHARE:	​	​	​	​	​	​	​	​	​
Basic	​	$	2.61	​	$	2.66	​	$	2.04
Diluted	​	$	2.57	​	$	2.64	​	$	2.03
​	​	​	​	​	​	​	​	​	​
WEIGHTED AVERAGE NUMBER OF SHARES OF COMMON STOCK AND COMMON STOCK EQUIVALENTS:	​	​	​	​	​	​	​	​	​
Basic	​		528,763	​		529,639	​		542,191
Diluted	​		535,639	​		534,807	​		546,608

​

See accompanying notes to consolidated financial statements.

​

MONSTER BEVERAGE CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

FOR THE YEARS ENDED DECEMBER 31, 2021, 2020 AND 2019 (In Thousands)

​	​	​	​	​	​	​	​	​	​
​	​	2021			2020			2019
Net income, as reported	​	$	1,377,475	​	$	1,409,594	​	$	1,107,835
Other comprehensive (loss) income:	​	​	​	​	​	​	​	​	​
Change in foreign currency translation adjustment, net of tax	​		(71,158)	​		35,531	​		194
Available-for-sale investments:	​	​	​	​	​	​	​	​	​
Change in net unrealized gains (losses)	​		(1,041)	​		(110)	​		283
Reclassification adjustment for net gains included in net income	​		—	​		—	​		—
Net change in available-for-sale investments	​		(1,041)	​		(110)	​		283
Other comprehensive (loss) income	​		(72,199)	​		35,421	​		477
Comprehensive income	​	$	1,305,276	​	$	1,445,015	​	$	1,108,312

​

See accompanying notes to consolidated financial statements.

​

MONSTER BEVERAGE CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

FOR THE YEARS ENDED DECEMBER 31, 2021, 2020 AND 2019 (In Thousands)

​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
​	​	​	​	​	​	​	​	​	​	​	​	​	Accumulated		​	​	​	​	​	​	​	​
​	​	​	​	​	​	​	​	​	​	​	​	​	Other		​	​	​	​	​	​	Total
​	​	Common Stock				​	Additional		​	Retained		​	Comprehensive		​	Treasury Stock				​	Stockholders'
​		Shares		Amount			Paid-in Capital			Earnings			Loss			Shares		Amount			Equity
Balance, January 1, 2019		630,970		$	3,155		$	4,238,170		$	3,914,645		$	(32,864)		(87,294)		$	(4,512,205)		$	3,610,901
Stock-based compensation		—	​	​	—	​	​	63,356	​	​	—	​	​	—	​	—	​	​	—	​	​	63,356
Exercise of stock options		5,490	​	​	27	​	​	92,336	​	​	—	​	​	—	​	—	​	​	—	​	​	92,363
Unrealized gain on available-for-sale securities		—	​		—	​		—	​		—	​		283		—	​		—	​		283
Adjustment to excess tax benefits from prior periods	​	—	​	​	—	​	​	3,649	​	​	—	​	​	—	​	—	​	​	—	​	​	3,649
Repurchase of common stock		—	​	​	—	​	​	—	​	​	—	​	​	—	​	(12,468)	​	​	(707,300)	​	​	(707,300)
Foreign currency translation		—	​	​	—	​	​	—	​	​	—	​	​	194	​	—	​	​	—	​	​	194
Net income		—	​	​	—	​	​	—	​	​	1,107,835	​	​	—	​	—	​	​	—	​	​	1,107,835
Balance, December 31, 2019	​	636,460	​	$	3,182	​	$	4,397,511	​	$	5,022,480	​	$	(32,387)	​	(99,762)	​	$	(5,219,505)	​	$	4,171,281
Stock-based compensation		—	​	​	—	​	​	67,546	​	​	—	​	​	—	​	—	​	​	—	​	​	67,546
Exercise of stock options		2,202	​	​	11	​	​	72,925	​	​	—	​	​	—	​	—	​	​	—	​	​	72,936
Unrealized loss on available-for-sale securities		—	​	​	—	​	​	—	​	​	—	​	​	(110)	​	—	​	​	—	​	​	(110)
Repurchase of common stock		—	​	​	—	​	​	—	​	​	—	​	​	—	​	(10,803)	​	​	(595,918)	​	​	(595,918)
Foreign currency translation		—	​	​	—	​	​	—	​	​	—	​	​	35,531	​	—	​	​	—	​	​	35,531
Net income		—	​	​	—	​	​	—	​	​	1,409,594	​	​	—	​	—	​	​	—	​	​	1,409,594
Balance, December 31, 2020		638,662		$	3,193		$	4,537,982		$	6,432,074		$	3,034	​	(110,565)		$	(5,815,423)		$	5,160,860
Stock-based compensation		—	​	​	—	​	​	68,922	​	​	—	​	​	—	​	—	​	​	—	​	​	68,922
Exercise of stock options		1,381	​	​	7	​	​	45,716	​	​	—	​	​	—	​	—	​	​	—	​	​	45,723
Unrealized loss on available-for-sale securities		—	​	​	—	​	​	—	​	​	—	​	​	(1,041)	​	—	​	​	—	​	​	(1,041)
Repurchase of common stock		—	​	​	—	​	​	—	​	​	—	​	​	—	​	(155)	​	​	(13,830)	​	​	(13,830)
Foreign currency translation		—	​	​	—	​	​	—	​	​	—	​	​	(71,158)	​	—	​	​	—	​	​	(71,158)
Net income	​	—	​	​	—	​	​	—	​	​	1,377,475	​	​	—	​	—	​	​	—	​	​	1,377,475
Balance, December 31, 2021	​	640,043	​	$	3,200	​	$	4,652,620	​	$	7,809,549	​	$	(69,165)	​	(110,720)	​	$	(5,829,253)	​	$	6,566,951

​

See accompanying notes to consolidated financial statements.

​

MONSTER BEVERAGE CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE YEARS ENDED DECEMBER 31, 2021, 2020 AND 2019 (In Thousands)

​	​	​	​	​	​	​	​	​	​
​		2021			2020			2019
CASH FLOWS FROM OPERATING ACTIVITIES:	​	​	​	​	​	​	​	​	​
Net income	​	$	1,377,475	​	$	1,409,594	​	$	1,107,835
Adjustments to reconcile net income to net cash provided by operating activities:	​	​	​	​	​	​	​	​	​
Depreciation and amortization	​		50,155	​		57,030	​		60,727
Non-cash lease expense	​	​	4,107	​	​	3,943	​	​	4,087
Gain on disposal of property and equipment	​		(1,013)	​	​	(350)	​	​	(252)
Loss on impairment of intangibles	​	​	—	​	​	8,700	​	​	—
Stock-based compensation	​		70,483	​		70,289	​		63,356
Deferred income taxes	​		16,429	​	​	(156,873)	​	​	1,263
Effect on cash of changes in operating assets and liabilities:	​	​	​	​	​	​	​	​	​
Accounts receivable	​		(254,228)	​		(119,672)	​		(59,941)
Inventories	​		(277,793)	​		30,304	​		(85,222)
Prepaid expenses and other assets	​		(29,341)	​		1,024	​		(13,774)
Prepaid income taxes	​		(10,919)	​		5,516	​		9,481
Accounts payable	​		114,297	​		18,696	​		28,832
Accrued liabilities	​		71,586	​		26,113	​		(14,018)
Accrued promotional allowances	​		31,498	​		13,762	​		21,943
Accrued compensation	​		7,950	​		7,501	​		7,228
Income taxes payable	​		7,221	​		10,422	​		8,105
Other liabilities	​	​	492	​	​	(356)	​	​	(1,030)
Deferred revenue	​		(22,658)	​		(21,480)	​		(24,858)
Net cash provided by operating activities	​		1,155,741	​		1,364,163	​		1,113,762
​	​	​	​	​	​	​	​	​	​
CASH FLOWS FROM INVESTING ACTIVITIES:	​	​	​	​	​	​	​	​	​
Sales of available-for-sale investments	​		1,488,599	​		920,196	​		851,436
Proceeds from sale of property and equipment	​	​	1,328	​	​	993	​	​	1,239
Purchases of available-for-sale investments	​		(2,413,143)	​		(1,299,981)	​		(1,067,736)
Purchases of property and equipment	​		(43,868)	​		(48,722)	​		(101,661)
Additions to intangibles	​		(13,585)	​		(18,550)	​		(8,737)
Increase in other assets	​		(11,353)	​		(26,423)	​		(1,265)
Net cash used in investing activities	​		(992,022)	​		(472,487)	​		(326,724)
​	​	​	​	​	​	​	​	​	​
CASH FLOWS FROM FINANCING ACTIVITIES:	​	​	​	​	​	​	​	​	​
Borrowings (payments) on debt	​		2,928	​		(3,086)	​		(13,569)
Issuance of common stock	​		45,723	​		72,936	​		92,363
Purchases of common stock held in treasury	​		(13,830)	​		(595,918)	​		(707,300)
Net cash provided by (used in) financing activities	​		34,821	​		(526,068)	​		(628,506)
​	​	​	​	​	​	​	​	​	​
Effect of exchange rate changes on cash and cash equivalents	​		(52,491)	​		16,848	​		1,912
​	​	​	​	​	​	​	​	​	​
NET INCREASE IN CASH AND CASH EQUIVALENTS	​		146,049	​		382,456	​		160,444
CASH AND CASH EQUIVALENTS, beginning of year	​		1,180,413	​		797,957	​		637,513
CASH AND CASH EQUIVALENTS, end of year	​	$	1,326,462	​	$	1,180,413	​	$	797,957
​	​	​	​	​	​	​	​	​	​
SUPPLEMENTAL INFORMATION:	​	​	​	​	​	​	​	​	​
Cash paid during the year for:	​	​	​	​	​	​	​	​	​
Interest	​	$	134	​	$	44	​	$	320
Income taxes	​	$	420,521	​	$	355,509	​	$	293,810

​

See accompanying notes to consolidated financial statements.

​

MONSTER BEVERAGE CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)

FOR THE YEARS ENDED DECEMBER 31, 2021, 2020 AND 2019

​

SUPPLEMENTAL DISCLOSURE OF NON-CASH ITEMS:

​

Included in accrued liabilities as of December 31, 2021, 2020 and 2019 were $14.0 million, $9.8 million and $12.8 million, respectively, related to net additions to other intangible assets.

Accounts payable included purchases of available-for-sale short-term investments of $8.7 million as of December 31, 2019. No purchases of available-for-sale investments were included in accounts payable as of December 31, 2021 and December 31, 2020.

See accompanying notes to consolidated financial statements.

​

​

MONSTER BEVERAGE CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Tabular Dollars in Thousands, Except Per Share Amounts)

​

1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Organization – Monster Beverage Corporation (the “Company”) was incorporated in the state of Delaware. The Company is a holding company and has no operating business except through its consolidated subsidiaries.

Nature of Operations – The Company develops, markets, sells and distributes energy drink beverages and concentrates for energy drink beverages, primarily under the following brand names: Monster Energy®, Monster Energy Ultra®, Rehab® Monster, Java Monster®, Muscle Monster®, Espresso Monster®, Punch Monster®, Juice Monster®, Monster Hydro® Energy Water, Monster Hydro® Super Sport, Monster HydroSport Super Fuel®, Monster Super Fuel®, Monster Dragon Tea®, Reign Total Body Fuel®, Reign Inferno® Thermogenic Fuel, NOS®, Full Throttle®, Burn®, Mother®, Nalu®, Ultra Energy®, Play® and Power Play® (stylized), Relentless®, BPM®, BU®, Gladiator®, Samurai®, Live+®, Predator®, Fury® and True North®.

Basis of Presentation – The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and include the accounts of the Company and its consolidated subsidiaries.

Principles of Consolidation – The Company consolidates all entities that it controls by ownership of a majority voting interest. All intercompany balances and transactions have been eliminated in consolidation.

Business Combinations – Business acquisitions are accounted for in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 805 “Business Combinations”. FASB ASC 805 requires the reporting entity to identify the acquirer, determine the acquisition date, recognize and measure the identifiable tangible and intangible assets acquired, the liabilities assumed and any non-controlling interest in the acquired entity, and recognize and measure goodwill or a gain from the purchase. The acquiree’s results are included in the Company’s consolidated financial statements from the date of acquisition. Assets acquired and liabilities assumed are recorded at their fair values and the excess of the purchase price over the amounts assigned is recorded as goodwill. Adjustments to fair value assessments are recorded to goodwill over the measurement period (not longer than twelve months). The acquisition method also requires that acquisition-related transaction and post-acquisition restructuring costs be charged to expense and requires the Company to recognize and measure certain assets and liabilities including those arising from contingencies and contingent consideration in a business combination.

Cash and Cash Equivalents – The Company considers all highly liquid investments with an original maturity of three months or less from date of purchase to be cash equivalents. Throughout the year, the Company has had amounts on deposit at financial institutions that exceed the federally insured limits. The Company has not experienced any loss as a result of these deposits and does not expect to incur any losses in the future.

MONSTER BEVERAGE CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Tabular Dollars in Thousands, Except Per Share Amounts)

​

Investments – The Company’s investments in debt securities are classified as either held-to-maturity, available-for-sale or trading, in accordance with FASB ASC 320. Held-to-maturity securities are those securities that the Company has the positive intent and ability to hold until maturity. Trading securities are those securities that the Company intends to sell in the near term. All other securities not included in the held-to-maturity or trading category are classified as available-for-sale. Held-to-maturity securities are recorded at amortized cost which approximates fair market value. Trading securities are carried at fair value with unrealized gains and losses charged to earnings. Available-for-sale securities are carried at fair value with unrealized gains and losses recorded within accumulated other comprehensive income (loss) as a separate component of stockholders’ equity. FASB ASC 820 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. FASB ASC 820 also establishes a fair value hierarchy which requires an entity to maximize the use of observable inputs, where available. Under FASB ASC 326-30-35, a security is considered to be impaired if the fair value of the security is less than its amortized cost basis. Where the decline in fair value below the amortized cost basis has resulted from a credit loss, the Company will record an impairment relating to credit losses through an allowance for credit losses. The allowance is limited by the amount that the fair value is less than the amortized cost basis. Impairment that has not been recorded through an allowance for credit losses is recorded through other comprehensive income (loss), net of applicable taxes. The Company evaluates whether the decline in fair value of its investments has resulted from credit loss or other factors at each quarter-end. This evaluation consists of a review by management, and includes market pricing information and maturity dates for the securities held, market and economic trends in the industry and information on the issuer’s financial condition and, if applicable, information on the guarantors’ financial condition. Factors considered in determining whether an impairment has resulted from credit loss or other factors include the length of time and extent to which the investment’s fair value has been less than its cost basis, the financial condition and near-term prospects of the issuer and guarantors, including any specific events which may influence the operations of the issuer and the Company’s intent and ability to retain the investment for a reasonable period of time sufficient to allow for any anticipated recovery of fair value.

Accounts Receivable – The Company evaluates the collectability of its trade accounts receivable based on a number of factors. In circumstances where the Company becomes aware of a specific customer’s inability to meet its financial obligations to the Company, a specific reserve for bad debts is estimated and recorded, which reduces the recognized receivable to the estimated amount the Company believes will ultimately be collected. In addition to specific customer identification of potential bad debts, bad debt charges are recorded based on the Company’s recent loss history and an overall assessment of past due trade accounts receivable outstanding. In accordance with FASB ASC 210-20-45, in its consolidated balance sheets, the Company has presented accounts receivable, net of promotional allowances, only for those customers that it allows net settlement. All other accounts receivable and related promotional allowances are shown on a gross basis.

Inventories – Inventories are valued at the lower of first-in, first-out, cost or market value (net realizable value).

Property and Equipment – Property and equipment are stated at cost. Depreciation of furniture and fixtures, office and computer equipment, computer software, equipment, real property and vehicles is based on their estimated useful lives (three to thirty years) and is calculated using the straight-line method. Amortization of leasehold improvements is based on the lesser of their estimated useful lives or the terms of the related leases and is calculated using the straight-line method. Normal repairs and maintenance costs are expensed as incurred. Expenditures that materially increase values or extend useful lives are capitalized. The related costs and accumulated depreciation of disposed assets are eliminated and any resulting gain or loss on disposition is included in net income.

MONSTER BEVERAGE CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Tabular Dollars in Thousands, Except Per Share Amounts)

​

Goodwill – The Company records goodwill when the consideration paid for an acquisition exceeds the fair value of net tangible and intangible assets acquired, including related tax effects. Goodwill is not amortized; instead, goodwill is tested for impairment on an annual basis, or more frequently if the Company believes indicators of impairment exist. The Company first assesses qualitative factors to determine whether it is more-likely-than-not that the fair value of a reporting unit is less than its carrying value. If the Company reasonably determines that it is more-likely-than-not that the fair value is less than the carrying value, the Company performs its annual, or interim, goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount. The Company will recognize an impairment for the amount by which the carrying amount exceeds a reporting unit’s fair value. For the years ended December 31, 2021, 2020 and 2019 there were no impairments recorded and there are no accumulated impairment balances.

Other Intangibles – Other Intangibles are comprised primarily of trademarks that represent the Company’s exclusive ownership of the Monster Energy®, ®, Monster Energy Ultra®, Monster Dragon Tea®, Unleash the Beast!®, Rehab® Monster, Java Monster®, Muscle Monster®, Espresso Monster®, Punch Monster®, Juice Monster®, Monster Hydro®, Monster HydroSport Super Fuel®, Monster Super Fuel®, Reign Total Body Fuel®, Reign Inferno®, Predator®, Fury®, True North®, NOS®, Full Throttle®, Burn®, Mother®, Nalu®, Ultra Energy®, Play® and Power Play® (stylized), Relentless®, BPM®, BU®, Gladiator®, and Samurai® trademarks, all used in connection with the manufacture, sale and distribution of beverages. The Company also owns a number of other trademarks, flavors and formulas in the United States, as well as in a number of countries around the world. In accordance with FASB ASC 350, intangible assets with indefinite lives are not amortized but instead are measured for impairment at least annually, or when events indicate that an impairment exists. The Company calculates impairment as the excess of the carrying value of its indefinite-lived assets over their estimated fair value. If the carrying value exceeds the estimate of fair value a write-down is recorded. The Company amortizes its trademarks with finite useful lives over their respective useful lives. For the years ended December 31, 2021 and 2019 no impairments were recorded. For the year ended December 31, 2020, an impairment charge of $8.7 million was recorded to intangibles.

Leases – See Note 3.

Long-Lived Assets – Management regularly reviews property and equipment and other long-lived assets, including certain definite-lived intangible assets, for possible impairment. This review occurs annually, or more frequently if events or changes in circumstances indicate the carrying amount of the asset may not be recoverable. If there is indication of impairment, management then prepares an estimate of future cash flows (undiscounted and without interest charges) expected to result from the use of the asset and its eventual disposition. If these cash flows are less than the carrying amount of the asset, an impairment loss is recognized to write down the asset to its estimated fair value. The fair value is estimated using the present value of the future cash flows discounted at a rate commensurate with management’s estimates of the business risks. Preparation of estimated expected future cash flows is inherently subjective and is based on management’s best estimate of assumptions concerning expected future conditions. For the years ended December 31, 2021, 2020 and 2019, there were no impairment indicators identified. Long-lived assets held for sale are recorded at the lower of their carrying amount or fair value less cost to sell.

MONSTER BEVERAGE CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Tabular Dollars in Thousands, Except Per Share Amounts)

​

Foreign Currency Translation and Transactions – The accounts of the Company’s foreign subsidiaries are translated in accordance with FASB ASC 830. Foreign currency transaction gains and losses are recognized in other expense, net, at the time they occur. Net foreign currency exchange gains or losses resulting from the translation of assets and liabilities of foreign subsidiaries whose functional currency is not the U.S. dollar are recorded as a part of accumulated other comprehensive income (loss) in stockholders’ equity. Unrealized foreign currency exchange gains and losses on certain intercompany transactions that are of a long-term investment nature (i.e., settlement is not planned or anticipated in the foreseeable future) are also recorded in accumulated other comprehensive income (loss) in stockholders’ equity. During the years ended December 31, 2021, 2020 and 2019, the Company entered into forward currency exchange contracts with financial institutions to create an economic hedge to specifically manage a portion of the foreign exchange risk exposure associated with certain consolidated subsidiaries non-functional currency denominated assets and liabilities. All foreign currency exchange contracts outstanding as of December 31, 2021 have terms of three months or less. The Company does not enter into forward currency exchange contracts for speculation or trading purposes.

The Company has not designated its foreign currency exchange contracts as hedge transactions under FASB ASC 815. Therefore, gains and losses on the Company’s foreign currency exchange contracts are recognized in other income, net, in the consolidated statements of income, and are largely offset by the changes in the fair value of the underlying economically hedged item. For the years ended December 31, 2021, 2020 and 2019, aggregate foreign currency transaction gains (losses), including the gains or losses on forward currency exchange contracts, amounted to $0.3 million, ($11.2) million and ($4.1) million, respectively, and have been recorded in other income, net, in the accompanying consolidated statements of income.

Revenue Recognition – See Note 2.

Cost of Sales – Cost of sales consists of the costs of flavors, concentrates, supplement ingredients and/or beverage bases, the costs of raw materials utilized in the manufacture of beverages, co-packing fees, repacking fees, in-bound freight charges, as well as internal transfer costs, warehouse expenses incurred prior to the manufacture of the Company’s finished products and certain quality control costs. In addition, the Company includes in costs of sales certain costs such as depreciation, amortization and payroll costs that relate to the direct manufacture by the Company of certain flavors and concentrates. Raw materials account for the largest portion of cost of sales. Raw materials include cans, bottles, other containers, flavors, ingredients and packaging materials.

Operating Expenses – Operating expenses include selling expenses such as distribution expenses to transport products to customers and warehousing expenses after manufacture, as well as expenses for advertising, sampling and in-store demonstration costs, costs for merchandise displays, point-of-sale materials and premium items, sponsorship expenses, other marketing expenses and design expenses. Operating expenses also include such costs as payroll costs, travel costs, professional service fees including legal fees, termination payments made to certain of the Company’s prior distributors, depreciation and other general and administrative costs.

Freight-Out Costs – For the years ended December 31, 2021, 2020 and 2019, freight-out costs amounted to $213.9 million, $134.1 million and $122.5 million, respectively, and have been recorded in operating expenses in the accompanying consolidated statements of income.

MONSTER BEVERAGE CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Tabular Dollars in Thousands, Except Per Share Amounts)

​

Advertising and Promotional Expenses – The Company accounts for advertising production costs by expensing such production costs the first time the related advertising takes place. A significant amount of the Company’s promotional expenses result from payments under endorsement and sponsorship contracts. Accounting for endorsement and sponsorship payments is based upon specific contract provisions. Generally, endorsement and sponsorship payments are expensed on a straight-line basis over the term of the contract after giving recognition to the periodic performance compliance provisions of the contracts. Advertising and promotional expenses, including, but not limited to, production costs amounted to $417.6 million, $345.7 million and $391.6 million for the years ended December 31, 2021, 2020 and 2019, respectively. Advertising and promotional expenses are included in operating expenses in the accompanying consolidated statements of income.

Income Taxes – The Company utilizes the liability method of accounting for income taxes as set forth in FASB ASC 740. Under the liability method, deferred taxes are determined based on the temporary differences between the financial statement and tax basis of assets and liabilities using tax rates expected to be in effect during the years in which the basis differences reverse. A valuation allowance is recorded when it is more likely than not that some of the deferred tax assets will not be realized. In determining the need for valuation allowances the Company considers projected future taxable income and the availability of tax planning strategies. If in the future the Company determines that it would not be able to realize its recorded deferred tax assets, an increase in the valuation allowance would be recorded, decreasing earnings in the period in which such determination is made.

The Company assesses its income tax positions and records tax benefits for all years subject to examination based upon the Company’s evaluation of the facts, circumstances and information available at the reporting date. For those tax positions where there is a greater than 50% likelihood that a tax benefit will be sustained, the Company has recorded the largest amount of tax benefit that may potentially be realized upon ultimate settlement with a taxing authority that has full knowledge of all relevant information. For those income tax positions where there is less than 50% likelihood that a tax benefit will be sustained, no tax benefit has been recognized in the financial statements.

Stock-Based Compensation – The Company accounts for stock-based compensation under the provisions of FASB ASC 718. The Company records compensation expense for employee stock options based on the estimated fair value of the options on the date of grant using the Black-Scholes-Merton option pricing formula. The Company records compensation expense for non-employee stock options based on the estimated fair value of the options as of the earlier of (1) the date at which a commitment for performance by the non-employee to earn the stock option is reached or (2) the date at which the non-employee’s performance is complete, using the Black-Scholes-Merton option pricing formula. Stock-based compensation cost for restricted stock units and performance share units is measured based on the closing fair market value of the Company’s common stock at the date of grant. In the event that the Company has the option and intent to settle a restricted stock unit or performance share unit in cash, the award is classified as a liability and revalued at each balance sheet date. See Note 15.

Net Income Per Common Share – In accordance with FASB ASC 260, net income per common share, on a basic and diluted basis, is presented for all periods. Basic net income per share is computed by dividing net income by the weighted average number of common shares outstanding during each period. Diluted net income per share is computed by dividing net income by the weighted average number of common and dilutive common equivalent shares outstanding. The calculation of common equivalent shares assumes the exercise of dilutive stock options, net of assumed treasury share repurchases at average market prices, as applicable.

MONSTER BEVERAGE CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Tabular Dollars in Thousands, Except Per Share Amounts)

​

Concentration of Risk – Certain of the Company’s products utilize components (raw materials and/or co-packing services) from a limited number of sources. A disruption in the supply of such components could significantly affect the Company’s revenues from those products, as alternative sources of such components may not be available at commercially reasonable rates or within a reasonably short time period. The Company continues to endeavor to secure the availability of alternative sources for such components and minimize the risk of any disruption in production.

The Coca-Cola Company (“TCCC”), through certain wholly-owned subsidiaries (the “TCCC Subsidiaries”), accounted for approximately 2%of the Company’s net sales for the years ended December 31, 2021, 2020 and 2019.

Coca-Cola Consolidated, Inc. accounted for approximately 12%, 12% and 13% of the Company’s net sales for the years ended December 31, 2021, 2020 and 2019, respectively.

Reyes Coca-Cola Bottling, LLC accounted for approximately 10%, 11% and 11% of the Company’s net sales for the years ended December 31, 2021, 2020 and 2019, respectively.

Coca-Cola Europacific Partners accounted for approximately 12%, 10% and 10% of the Company’s net sales for the years ended December 31, 2021, 2020 and 2019, respectively.

Credit Risk – The Company sells its products nationally and internationally, primarily to bottlers and full service beverage distributors, retail grocery and specialty chains, wholesalers, club stores, mass merchandisers, convenience chains, drug stores, foodservice customers, value stores, e-commerce retailers and the military. The Company performs ongoing credit evaluations of its customers and generally does not require collateral. The Company maintains reserves for estimated credit losses, and historically, such losses have been within management’s expectations.

Fair Value of Financial Instruments – The carrying value of the Company’s financial instruments, including cash and cash equivalents, accounts receivable, accounts payable and accrued liabilities, approximate fair value due to the relatively short maturity of the respective instruments.

Use of Estimates – The preparation of the consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Recent Accounting Pronouncements – In October 2021, the FASB issued Accounting Standards Update (“ASU”) No. 2021-08, “Accounting for Contract Assets and Contract Liabilities from Contracts with Customers (Topic 805)”. ASU No. 2021-08 requires an acquirer in a business combination to recognize and measure contract assets and contract liabilities (deferred revenue) from acquired contracts using the revenue recognition guidance in Topic 606. At the acquisition date, the acquirer applies the revenue model as if it had originated the acquired contracts. The ASU is effective for annual periods beginning after December 15, 2022, including interim periods within those fiscal years. Adoption of the ASU should be applied prospectively. Early adoption is also permitted, including adoption in an interim period. If early adopted, the amendments are applied retrospectively to all business combinations for which the acquisition date occurred during the fiscal year of adoption. The Company is currently evaluating the impact of ASU No. 2021-08 on its financial position, results of operations and liquidity.

​

MONSTER BEVERAGE CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Tabular Dollars in Thousands, Except Per Share Amounts)

​

2. REVENUE RECOGNITION

Revenues are accounted for in accordance with ASC 606 “Revenue from Contracts with Consumers”. The Company has three operating and reportable segments: (i) Monster Energy® Drinks segment (“Monster Energy® Drinks”), which is primarily comprised of the Company’s Monster Energy® drinks, Reign Total Body Fuel® high performance energy drinks and True North® Pure Energy Seltzers, (ii) Strategic Brands segment (“Strategic Brands”), which is primarily comprised of the various energy drink brands acquired from The Coca-Cola Company (“TCCC”) in 2015 as well as the Company’s affordable energy brands, and (iii) Other segment (“Other”), which is comprised of certain products sold by American Fruits and Flavors, LLC, a wholly-owned subsidiary of the Company, to independent third-party customers (the “AFF Third-Party Products”).

The Company’s Monster Energy® Drinks segment generates net operating revenues by selling ready-to-drink packaged energy drinks primarily to bottlers and full service beverage bottlers/distributors (“bottlers/distributors”). In some cases, the Company sells ready-to-drink packaged energy drinks directly to retail grocery and specialty chains, wholesalers, club stores, mass merchandisers, convenience chains, drug stores, foodservice customers, value stores, e-commerce retailers and the military.

The Company’s Strategic Brands segment primarily generates net operating revenues by selling “concentrates” and/or “beverage bases” to authorized bottling and canning operations. Such bottlers generally combine the concentrates and/or beverage bases with sweeteners, water and other ingredients to produce ready-to-drink packaged energy drinks. The ready-to-drink packaged energy drinks are then sold by such bottlers to other bottlers/distributors and to retail grocery and specialty chains, wholesalers, club stores, mass merchandisers, convenience chains, foodservice customers, drug stores, value stores, e-commerce retailers and the military. To a lesser extent, the Strategic Brands segment generates net operating revenues by selling certain ready-to-drink packaged energy drinks to bottlers/distributors.

The majority of the Company’s revenue is recognized when it satisfies a single performance obligation by transferring control of its products to a customer. Control is generally transferred when the Company’s products are either shipped or delivered based on the terms contained within the underlying contracts or agreements. Certain of the Company’s bottlers/distributors may also perform a separate function as a co-packer on the Company’s behalf. In such cases, control of the Company’s products passes to such bottlers/distributors when they notify the Company that they have taken possession or transferred the relevant portion of the Company’s finished goods. The Company’s general payment terms are short-term in duration. The Company does not have significant financing components or payment terms. The Company did not have any material unsatisfied performance obligations as of December 31, 2021 and December 31, 2020.

The Company excludes from revenues all taxes assessed by a governmental authority that are imposed on the sale of its products and collected from customers.

Distribution expenses to transport the Company’s products, where applicable, and warehousing expense after manufacture are accounted for within operating expenses in the consolidated statements of income.

Promotional and other allowances (variable consideration) recorded as a reduction to net sales, primarily include consideration given to the Company’s bottlers/distributors or retail customers including, but not limited to the following:

	●	discounts granted off list prices to support price promotions to end-consumers by retailers;

MONSTER BEVERAGE CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Tabular Dollars in Thousands, Except Per Share Amounts)

​

	●	reimbursements given to the Company’s bottlers/distributors for agreed portions of their promotional spend with retailers, including slotting, shelf space allowances and other fees for both new and existing products;

	●	the Company’s agreed share of fees given to bottlers/distributors and/or directly to retailers for advertising, in-store marketing and promotional activities;

	●	the Company’s agreed share of slotting, shelf space allowances and other fees given directly to retailers, club stores and/or wholesalers;

	●	incentives given to the Company’s bottlers/distributors and/or retailers for achieving or exceeding certain predetermined sales goals;

	●	discounted or free products;

	●	contractual fees given to the Company’s bottlers/distributors related to sales made directly by the Company to certain customers that fall within the bottlers’/distributors’ sales territories; and

	●	commissions to TCCC based on the Company’s sales to wholly-owned subsidiaries of TCCC (the “TCCC Subsidiaries”) and/or to TCCC bottlers/distributors accounted for under the equity method by TCCC (the “TCCC Related Parties”).

The Company’s promotional allowance programs with its bottlers/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, typically ranging from one week to one year. The Company’s promotional and other allowances are calculated based on various programs with bottlers/distributors and retail customers, and accruals are established at the time of initial product sale for the Company’s anticipated liabilities. These accruals are based on agreed upon terms as well as the Company’s historical experience with similar programs and require management’s judgment with respect to estimating consumer participation and/or bottler/distributor and retail customer performance levels. Differences between such estimated expenses and actual expenses for promotional and other allowance costs have historically been insignificant and are recognized in earnings in the period such differences are determined.

Amounts received pursuant to new and/or amended distribution agreements entered into with certain bottlers/distributors relating to the costs associated with terminating the Company’s prior distributors, are accounted for as deferred revenue and recognized as revenue ratably over the anticipated life of the respective distribution agreements, generally over 20 years.

The Company also sells and/or enters into license agreements that generate revenues associated with third-party sales of non-beverage products bearing the Company’s trademarks including, but not limited to, clothing, backpacks, hats, t-shirts, jackets, helmets and automotive wheels.

Management believes that adequate provision has been made for cash discounts, returns and spoilage based on the Company’s historical experience.

MONSTER BEVERAGE CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Tabular Dollars in Thousands, Except Per Share Amounts)

​

Disaggregation of Revenue

The following table disaggregates the Company’s revenue by geographical markets and reportable segments:

​

​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
​	​	Year Ended December 31, 2021
​	​	​	​	​	​	​	​	​	​	​	Latin		​	​	​
​	​	​	​	​	​	​	​	​	​	​	America		​	​	​
​	​	U.S. and		​	​	​	​	​	​	​	and		​	​	​
Net Sales		Canada			EMEA1			Asia Pacific			Caribbean			Total
Monster Energy® Drinks	​	$	3,455,704	​	$	1,004,005	​	$	446,023	​	$	314,941	​	$	5,220,673
Strategic Brands	​		158,390	​		99,423	​		26,811	​		10,138	​		294,762
Other	​		25,917	​		—	​		—	​		—	​		25,917
Total Net Sales	​	$	3,640,011	​	$	1,103,428	​	$	472,834	​	$	325,079	​	$	5,541,352

​

​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
​	​	Year Ended December 31, 2020
​	​	​	​	​	​	​	​	​	​	​	Latin		​	​	​
​	​	​	​	​	​	​	​	​	​	​	America		​	​	​
​	​	U.S. and		​	​	​	​	​	​	​	and		​	​	​
Net Sales		Canada			EMEA1			Asia Pacific			Caribbean			Total
Monster Energy® Drinks	​	$	3,020,667	​	$	675,045	​	$	400,317	​	$	209,217	​	$	4,305,246
Strategic Brands	​		166,861	​		70,782	​		23,475	​		5,236	​		266,354
Other	​		27,038	​		—	​		—	​		—	​		27,038
Total Net Sales	​	$	3,214,566	​	$	745,827	​	$	423,792	​	$	214,453	​	$	4,598,638

​

​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
​	​	Year Ended December 31, 2019
​		​	​		​	​		​	​		Latin			​	​
​	​	​	​	​	​	​	​	​	​	​	America		​		​
​	​	U.S. and		​	​	​	​	​	​	​	and		​		​
Net Sales	​	Canada		​	EMEA1		​	Asia Pacific		​	Caribbean		​	Total
Monster Energy® Drinks	​	$	2,799,701	​	$	599,706	​	$	326,684	​	$	177,938	​	$	3,904,029
Strategic Brands	​	​	173,968	​	​	74,803	​	​	25,060	​	​	1,094	​	​	274,925
Other	​	​	21,865	​	​	—	​	​	—	​	​	—	​	​	21,865
Total Net Sales	​	$	2,995,534	​	$	674,509	​	$	351,744	​	$	179,032	​	$	4,200,819

1_Europe, Middle East and Africa (“EMEA”)_

Contract Liabilities

Amounts received from certain bottlers/distributors at inception of their distribution contracts or at the inception of certain sales/marketing programs are accounted for as deferred revenue. As of December 31, 2021 and 2020, the Company had $285.8 million and $309.9 million of deferred revenue, respectively, which is included in current and long-term deferred revenue in the Company’s consolidated balance sheet. During the years ended December 31, 2021, 2020 and 2019, $41.5 million, $42.1 million and $46.3 million, respectively, of deferred revenue, was recognized in net sales. See Note 10.

​

MONSTER BEVERAGE CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Tabular Dollars in Thousands, Except Per Share Amounts)

​

3. LEASES

The Company leases identified assets comprising real estate and equipment. Real estate leases consist primarily of office and warehouse space and equipment leases consist of vehicles and warehouse equipment. At the inception of a contract, the Company assesses whether the contract is, or contains, a lease. The Company’s assessment is based on: (1) whether the contract involves the use of a distinct identified asset, (2) whether the Company obtains the right to substantially all the economic benefit from the use of the asset throughout the term, and (3) whether the Company has the right to direct the use of the asset. At inception of a lease, the Company allocates the consideration in the contract to each lease and non-lease component based on the component’s relative stand-alone price to determine the lease payments. Lease and non-lease components are accounted for separately.

Leases are classified as either finance leases or operating leases based on criteria in ASC 842, “Leases”. The Company’s operating leases are comprised of real estate and warehouse equipment, and the Company’s finance leases are comprised of vehicles.

Right-of-use (“ROU”) assets and lease liabilities are recognized at the lease commencement date based on the present value of lease payments over the lease term. As the Company’s leases generally do not provide an implicit rate, the Company uses its incremental borrowing rate based on the estimated rate of interest for collateralized borrowing over a similar term of the lease payments at commencement date. ROU assets also include any lease payments made and exclude lease incentives. Lease terms include options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option.

Certain of the Company’s real estate leases contain variable lease payments, including payments based on an index or rate. Variable lease payments based on an index or rate are initially measured using the index or rate in effect at the lease commencement date. Additional payments based on the change in an index or rate, or payments based on a change in the Company’s portion of real estate taxes and insurance, are recorded as a period expense when incurred.

Lease expense for operating leases, consisting of lease payments, is recognized on a straight-line basis over the lease term and is included in operating expenses in the consolidated statement of income. Lease expense for finance leases consists of the amortization of the ROU asset on a straight-line basis over the asset’s estimated useful life and is included in operating expenses in the consolidated statement of income. Interest expense on finance leases is calculated using the amortized cost basis and is included in other income (expense), net in the consolidated statement of income.

The Company’s leases have remaining lease terms of less than one year to 12 years, some of which include options to extend the leases for up to five years, and some of which include options to terminate the leases within one year. The Company has elected not to recognize ROU assets and lease liabilities for short-term operating leases that have a term of 12 months or less.

MONSTER BEVERAGE CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Tabular Dollars in Thousands, Except Per Share Amounts)

​

The components of lease cost for the years ended December 31, 2021, 2020 and 2019 were as follows:

​

​	​	​	​	​	​	​	​	​	​
​		2021			2020			2019
Operating lease cost	​	$	4,614		$	4,637		$	4,899
​	​	​	​	​	​	​	​	​	​
Short-term lease cost	​		5,218	​		3,408	​		3,406
​	​	​	​	​	​	​	​	​	​
Variable lease cost	​		710	​		719	​		640
​	​	​	​	​	​	​	​	​	​
Finance leases:	​	​	​	​			​
Amortization of ROU assets	​		546	​		626	​		436
Interest on lease liabilities	​		19	​		39	​		56
Finance lease cost	​		565	​		665	​		492
​	​	​	​	​	​	​	​	​	​
Total lease cost	​	$	11,107	​	$	9,429	​	$	9,437

​

Supplemental cash flow information for leases for the years ended December 31, 2021, 2020 and 2019 were as follows:

​

​	​	​	​	​	​	​	​	​	​
​		2021			2020			2019
Cash paid for amounts included in the measurement of lease liabilities:	​	​	​		​		​	​
Operating cash flows from operating leases	​	$	4,123	​	$	3,982	​	$	4,077
Operating cash flows from finance leases	​	​	19	​		39	​		56
Financing cash flows from finance leases	​	​	2,698	​		3,086	​		2,223
​	​	​	​	​	​	​	​	​	​
ROU assets obtained in exchange for lease obligations:	​	​	​	​			​
Finance leases	​	​	2,878	​		2,417	​		2,866
Operating leases	​	​	4,313	​		3,003	​		34,931

​

ROU assets for operating and finance leases recognized in the consolidated balance sheets were comprised of the following at:

​

​	​	​	​	​	​	​	​	​	​	​	​
​	​	December 31, 2021
​	​	Real Estate			Equipment			Total			Balance Sheet Location
Operating leases	​	$	22,518	​	$	639	​	$	23,157		Other Assets
Finance leases	​		—	​		2,646	​		2,646		Property and Equipment, net

​

​	​	​	​	​	​	​	​	​	​	​	​
​	​	December 31, 2020
​	​	Real Estate			Equipment			Total			Balance Sheet Location
Operating leases	​	$	22,565	​	$	189	​	$	22,754		Other Assets
Finance leases	​		—	​		2,120	​		2,120		Property and Equipment, net

​

MONSTER BEVERAGE CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Tabular Dollars in Thousands, Except Per Share Amounts)

​

Operating and finance lease liabilities recognized in the consolidated balance sheets were as follows at:

​

​	​	​	​	​	​	​
​	​	December 31, 2021
​		Operating Leases			Finance Leases
Accrued liabilities		$	3,990	​	$	960
Other liabilities	​		17,389	​		41
Total	​	$	21,379	​	$	1,001

​

​	​	​	​	​	​	​
​	​	December 31, 2020
​		Operating Leases			Finance Leases
Accrued liabilities		$	3,171		$	799
Other liabilities	​		17,342	​		24
Total	​	$	20,513	​	$	823

​

The weighted-average remaining lease terms and weighted-average discount rates for operating and finance leases were as follows at:

​

​	​	​	​	​	​
​	​	December 31, 2021			​
​		Operating Leases		Finance Leases
Weighted-average remaining lease term (years)		8.1		0.7	​
Weighted-average discount rate		3.5	%	1.3	%

​

​	​	​	​	​	​
​	​	December 31, 2020			​
​		Operating Leases		Finance Leases	​
Weighted-average remaining lease term (years)		9.4	​	0.6	​
Weighted-average discount rate		3.6	%	1.9	%

​

The following table reconciles the undiscounted future lease payments for operating and finance leases to the operating and finance leases recorded in the consolidated balance sheet at December 31, 2021:

​

​	​	​	​	​	​	​
​		Undiscounted Future Lease Payments
​	​	Operating Leases			Finance Leases
2022	​	$	4,605	​	$	964
2023	​		3,821	​		21
2024	​		2,978	​		13
2025	​		1,669	​		8
2026	​	​	1,692	​	​	—
2027 and thereafter	​		9,949	​		—
Total lease payments	​		24,714	​		1,006
Less imputed interest	​		(3,335)	​		(5)
Total	​	$	21,379	​	$	1,001
​	​	​	​	​	​	​

​

As of December 31, 2021, the Company did not have any significant additional operating or finance leases that had not yet commenced.

​

MONSTER BEVERAGE CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Tabular Dollars in Thousands, Except Per Share Amounts)

​

4. INVESTMENTS

The following table summarizes the Company’s investments at:

​

​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
​	​	​	​	​	​	​	​	​	​	​	​	​	​	Continuous		​	Continuous
​	​	​	​	​	Gross		​	Gross		​	​	​	​	Unrealized		​	Unrealized
​	​	​	​	​	Unrealized		​	Unrealized		​	​	​	​	Loss Position		​	Loss Position
​	​	Amortized		​	Holding		​	Holding		​	Fair		​	less than 12		​	greater than 12
December 31, 2021		Cost			Gains			Losses			Value			Months			Months
Available-for-sale	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
Short-term:	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
Commercial paper	​	$	334,077	​	$	—	​	$	—	​	$	334,077	​	$	—	​	$	—
Certificates of deposit	​	​	44,502	​	​	—	​	​	—	​	​	44,502	​	​	—	​	​	—
Municipal securities	​		666	​	​	—	​	​	—	​	​	666	​	​	—	​	​	—
U.S. government agency securities	​		62,687	​		—	​		26	​		62,661	​		26	​		—
U.S. treasuries	​	​	1,308,536	​		2	​		717	​		1,307,821	​		717	​		—
Long-term:	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
U.S. government agency securities	​	​	12,500	​	​	—	​	​	24	​	​	12,476	​	​	24	​	​	—
U.S. treasuries	​	​	87,133	​	​	—	​	​	190	​	​	86,943	​	​	190	​	​	—
Total	​	$	1,850,101	​	$	2	​	$	957	​	$	1,849,146	​	$	957	​	$	—

​

​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
​	​	​	​	​	​	​	​	​	​	​	​	​	​	Continuous		​	Continuous
​	​	​	​	​	Gross		​	Gross		​	​	​	​	Unrealized		​	Unrealized
​	​	​	​	​	Unrealized		​	Unrealized		​	​	​	​	Loss Position		​	Loss Position
​	​	Amortized		​	Holding		​	Holding		​	Fair		​	less than 12		​	greater than 12
December 31, 2020		Cost			Gains			Losses			Value			Months			Months
Available-for-sale	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
Short-term:	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
Commercial paper	​	$	119,886	​	$	—	​	$	—	​	$	119,886	​	$	—	​	$	—
Certificates of deposit	​	​	20,387	​	​	—	​	​	—	​	​	20,387	​	​	—	​	​	—
Municipal securities	​		9,083	​		—	​		—	​		9,083	​		—	​		—
U.S. government agency securities	​		81,521	​		13	​		3	​		81,531	​		3	​		—
U.S. treasuries	​	​	650,386	​	​	150	​	​	69	​	​	650,467	​	​	69	​	​	—
Long-term:	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
U.S. government agency securities	​	​	10,350	​	​	1	​	​	—	​	​	10,351	​	​	—	​	​	—
U.S. treasuries	​	​	33,946	​	​	1	​	​	7	​	​	33,940	​	​	7	​	​	—
Total	​	$	925,559	​	$	165	​	$	79	​	$	925,645	​	$	79	​	$	—

​

During the years ended December 31, 2021, 2020 and 2019, realized gains or losses recognized on the sale of investments were not significant.

The Company’s investments at December 31, 2021 and 2020 carried investment grade credit ratings.

MONSTER BEVERAGE CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Tabular Dollars in Thousands, Except Per Share Amounts)

​

The following table summarizes the underlying contractual maturities of the Company’s investments at:

​	​	​	​	​	​	​	​	​	​	​	​	​
​	​	December 31, 2021					​	December 31, 2020
​		Amortized Cost			Fair Value			Amortized Cost			Fair Value
Less than 1 year:	​	​	​	​	​	​	​	​	​	​	​	​
Commercial paper	​	$	334,077	​	$	334,077		$	119,886	​	$	119,886
Municipal securities	​		666	​		666			9,083	​		9,083
U.S. government agency securities	​		62,687	​		62,661			81,521	​		81,531
Certificates of deposit	​		44,502	​		44,502			20,387	​		20,387
U.S. treasuries	​	​	1,308,536	​	​	1,307,821	​	​	650,386	​	​	650,467
Due 1 - 10 years:	​	​	​	​	​	​	​	​	​	​	​	​
U.S. treasuries	​	​	87,133	​	​	86,943	​	​	33,946	​	​	33,940
U.S. government agency securities	​		12,500	​		12,476			10,350	​		10,351
Total	​	$	1,850,101	​	$	1,849,146		$	925,559	​	$	925,645

​

​

5. FAIR VALUE OF CERTAIN FINANCIAL ASSETS AND LIABILITIES

FASB ASC 820 provides a framework for measuring fair value and requires expanded disclosures regarding fair value measurements. FASB ASC 820 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. FASB ASC 820 also establishes a fair value hierarchy which requires an entity to maximize the use of observable inputs, where available. The three levels of inputs required by the standard that the Company uses to measure fair value are summarized below.

	●	Level 1: Quoted prices in active markets for identical assets or liabilities.

​

	●	Level 2: Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the related assets or liabilities.

​

	●	Level 3: Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

​

FASB ASC 820 requires the use of observable market inputs (quoted market prices) when measuring fair value and requires a Level 1 quoted price to be used to measure fair value whenever possible.

MONSTER BEVERAGE CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Tabular Dollars in Thousands, Except Per Share Amounts)

​

The following tables present the fair value of Company’s financial assets and liabilities that are recorded at fair value on a recurring basis, segregated among the appropriate levels within the fair value hierarchy at:

​

​	​	​	​	​	​	​	​	​	​	​	​	​
December 31, 2021		Level 1			Level 2			Level 3			Total
Cash	​	$	749,089	​	$	—	​	$	—	​	$	749,089
Money market funds	​		440,826	​		—	​		—	​		440,826
Certificates of deposit	​	​	—	​	​	44,502	​	​	—	​	​	44,502
Commercial paper	​		—	​		335,477	​		—	​		335,477
Municipal securities	​		—	​		2,428	​		—	​		2,428
U.S. government agency securities	​		—	​		75,137	​		—	​		75,137
U.S. treasuries	​	​	—	​	​	1,528,149	​	​	—	​	​	1,528,149
Foreign currency derivatives	​		—	​		(278)	​		—	​		(278)
Total	​	$	1,189,915	​	$	1,985,415	​	$	—	​	$	3,175,330
​	​	​	​	​	​	​	​	​	​	​	​	​
Amounts included in:	​	​	​	​	​	​	​	​	​	​	​	​
Cash and cash equivalents	​	$	1,189,915	​	$	136,547	​	$	—	​	$	1,326,462
Short-term investments	​		—	​		1,749,727	​		—	​		1,749,727
Accounts receivable, net	​		—	​		654	​		—	​		654
Investments	​		—	​		99,419	​		—	​		99,419
Accrued liabilities	​		—	​		(932)	​		—	​		(932)
Total	​	$	1,189,915	​	$	1,985,415	​	$	—	​	$	3,175,330

​

​	​	​	​	​	​	​	​	​	​	​	​	​
December 31, 2020		Level 1			Level 2			Level 3			Total
Cash	​	$	796,421	​	$	—	​	$	—	​	$	796,421
Money market funds	​		352,730	​		—	​		—	​		352,730
Certificates of deposit	​	​	—	​	​	23,137	​	​	—	​	​	23,137
Commercial paper	​		—	​		130,883	​		—	​		130,883
Municipal securities	​		—	​		9,083	​		—	​		9,083
U.S. government agency securities	​		—	​		91,882	​		—	​		91,882
U.S. treasuries	​	​	—	​	​	701,922	​	​	—	​	​	701,922
Foreign currency derivatives	​		—	​		(2,578)	​		—	​		(2,578)
Total	​	$	1,149,151	​	$	954,329	​	$	—	​	$	2,103,480
​	​	​	​	​	​	​	​	​	​	​	​	​
Amounts included in:	​	​	​	​	​	​	​	​	​	​	​	​
Cash and cash equivalents	​	$	1,149,151	​	$	31,262	​	$	—	​	$	1,180,413
Short-term investments	​		—	​		881,354	​		—	​		881,354
Accounts receivable, net	​		—	​		69	​		—	​		69
Investments	​		—	​		44,291	​		—	​		44,291
Accrued liabilities	​		—	​		(2,647)	​		—	​		(2,647)
Total	​	$	1,149,151	​	$	954,329	​	$	—	​	$	2,103,480

​

MONSTER BEVERAGE CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Tabular Dollars in Thousands, Except Per Share Amounts)

​

All of the Company’s short-term and long-term investments are classified within Level 1 or Level 2 of the fair value hierarchy. The Company’s valuation of its Level 1 investments is based on quoted market prices in active markets for identical securities. The Company’s valuation of its Level 2 investments is based on other observable inputs, specifically a market approach which utilizes valuation models, pricing systems, mathematical tools and other relevant information for the same or similar securities. The Company’s valuation of its Level 2 foreign currency exchange contracts is based on quoted market prices of the same or similar instruments, adjusted for counterparty risk. There were no transfers between Level 1 and Level 2 measurements during the years ended December 31, 2021 and 2020, and there were no changes in the Company’s valuation techniques.

​

6. DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES

The Company is exposed to foreign currency exchange rate risks related primarily to its foreign business operations. During the years ended December 31, 2021, 2020 and 2019, the Company entered into forward currency exchange contracts with financial institutions to create an economic hedge to specifically manage a portion of the foreign exchange risk exposure associated with certain consolidated subsidiaries’ non-functional currency denominated assets and liabilities. All foreign currency exchange contracts entered into by the Company that were outstanding as of December 31, 2021 have terms of three months or less. The Company does not enter into forward currency exchange contracts for speculation or trading purposes.

The Company has not designated its foreign currency exchange contracts as hedge transactions under FASB ASC 815. Therefore, gains and losses on the Company’s foreign currency exchange contracts are recognized in other income, net, in the consolidated statements of income, and are largely offset by the changes in the fair value of the underlying economically hedged item.

MONSTER BEVERAGE CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Tabular Dollars in Thousands, Except Per Share Amounts)

​

The notional amount and fair value of all outstanding foreign currency derivative instruments in the consolidated balance sheets consist of the following at:

​

​	​	​	​	​	​	​	​	​
December 31, 2021
Derivatives not designated as	​	​	​	​	​	​	​	​
hedging instruments under	​	Notional		​	Fair		​	​
FASB ASC 815-20		Amount			Value			Balance Sheet Location
Assets:	​	​	​	​	​	​	​	​
Foreign currency exchange contracts:	​	​	​	​	​	​	​	​
Receive SGD/pay USD	​	$	16,544	​	$	297		Accounts receivable, net
Receive USD/pay COP	​	​	9,754	​	​	296	​	Accounts receivable, net
Receive RSD/pay USD	​		9,837	​		46		Accounts receivable, net
Receive USD/pay RUB	​	​	7,175	​	​	15	​	Accounts receivable, net
​	​	​	​	​	​	​	​	​
Liabilities:	​	​	​	​	​	​	​	​
Foreign currency exchange contracts:	​	​	​	​	​	​	​	​
Receive USD/pay GBP	​	$	29,929	​	$	(666)		Accrued liabilities
Receive USD/pay AUD	​	​	2,602	​		(88)	​	Accrued liabilities
Receive USD/pay CNY	​	​	12,230	​		(74)		Accrued liabilities
Receive USD/pay NZD	​	​	2,693	​	​	(45)	​	Accrued liabilities
Receive USD/pay EUR	​	​	3,045	​		(29)		Accrued liabilities
Receive USD/pay ZAR	​	​	4,140	​		(21)		Accrued liabilities
Receive USD/pay DKK	​	​	1,461	​		(9)		Accrued liabilities

​

​	​	​	​	​	​	​	​	​
December 31, 2020
Derivatives not designated as	​	​	​	​	​	​	​	​
hedging instruments under	​	Notional		​	Fair		​	​
FASB ASC 815-20		Amount			Value			Balance Sheet Location
Assets:	​	​	​	​	​	​	​	​
Foreign currency exchange contracts:	​	​	​	​	​	​	​	​
Receive SGD/pay USD	​	$	18,713	​	$	41		Accounts receivable, net
Receive RSD/pay USD	​	​	10,127	​	​	28		Accounts receivable, net
​	​	​	​	​	​	​	​	​
Liabilities:	​	​	​	​	​	​	​	​
Foreign currency exchange contracts:	​	​	​	​	​	​	​	​
Receive EUR/pay USD	​	$	1,298,899	​	$	(1,768)	​	Accrued liabilities
Receive USD/pay GBP	​	​	35,256	​	​	(416)		Accrued liabilities
Receive USD/pay AUD	​	​	8,508	​		(130)		Accrued liabilities
Receive USD/pay ZAR	​	​	2,403	​	​	(106)	​	Accrued liabilities
Receive USD/pay COP	​	​	5,436	​	​	(93)	​	Accrued liabilities
Receive USD/pay CNY	​	​	12,344	​		(50)		Accrued liabilities
Receive USD/pay RUB	​	​	7,780	​		(40)		Accrued liabilities
Receive NOK/pay USD	​	​	4,411	​		(18)		Accrued liabilities
Receive USD/pay NZD	​	​	2,290	​	​	(13)	​	Accrued liabilities
Receive SEK/pay USD	​	​	2,275	​	​	(10)	​	Accrued liabilities
Receive USD/pay DKK	​	​	3,151	​		(3)		Accrued liabilities

​

MONSTER BEVERAGE CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Tabular Dollars in Thousands, Except Per Share Amounts)

​

The net gain (loss) on derivative instruments in the consolidated statements of income was as follows:

​

​	​	​	​	​	​	​	​	​	​	​	​
​	​	​	​	Amount of gain (loss)
​	​	​	​	recognized in income on
​	​	​	​	derivatives
Derivatives not designated as	​	Location of gain (loss)	​	Year ended
hedging instruments under	​	recognized in income on	​	December 31,		​	December 31,		​	December 31,
FASB ASC 815-20		derivatives		2021			2020			2019
Foreign currency exchange contracts		Other income (expense), net		$	(5,445)		$	(3,317)		$	(2,555)

​

​

​

7. INVENTORIES

Inventories consist of the following at December 31:

​

​	​	​	​	​	​	​
​		2021			2020
Raw materials	​	$	349,865	​	$	155,166
Finished goods	​		243,492	​		177,919
​	​	$	593,357	​	$	333,085

​

​

​

8. PROPERTY AND EQUIPMENT, Net

Property and equipment consist of the following at December 31:

​

​	​	​	​	​	​	​
​		2021			2020
Land	​	$	85,455	​	$	85,876
Leasehold improvements	​		11,845	​		11,524
Furniture and fixtures	​		8,274	​		8,271
Office and computer equipment	​		21,601	​		21,657
Computer software	​		8,383	​		6,945
Equipment	​		190,333	​		185,348
Buildings	​		167,243	​		156,616
Vehicles	​		45,404	​		43,173
​	​		538,538	​		519,410
Less: accumulated depreciation and amortization	​		(224,785)	​		(204,754)
​	​	$	313,753	​	$	314,656

​

Total depreciation and amortization expense recorded was $45.7 million, $49.3 million and $49.1 million for the years ended December 31, 2021, 2020 and 2019, respectively.

​

MONSTER BEVERAGE CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Tabular Dollars in Thousands, Except Per Share Amounts)

​

9. GOODWILL AND OTHER INTANGIBLE ASSETS

The following is a roll-forward of goodwill for the years ended December 31, 2021 and 2020 by reportable segment:

​

​	​	​	​	​	​	​	​	​	​	​	​	​
​	​	Monster		​	​	​	​	​	​	​	​	​
​	​	Energy®		​	Strategic		​	​	​	​	​	​
​		Drinks			Brands			Other			Total
Balance at December 31, 2020	​	$	693,644	​	$	637,999	​	$	—	​	$	1,331,643
Acquisitions	​		—	​		—	​		—	​		—
Balance at December 31, 2021	​	$	693,644	​	$	637,999	​	$	—	​	$	1,331,643

​

​	​	​	​	​	​	​	​	​	​	​	​	​
​	​	Monster		​	​	​	​	​	​	​	​	​
​	​	Energy®		​	Strategic		​	​	​	​	​	​
​		Drinks			Brands			Other			Total
Balance at December 31, 2019	​	$	693,644	​	$	637,999	​	$	—	​	$	1,331,643
Acquisitions	​		—	​		—	​		—	​		—
Balance at December 31, 2020	​	$	693,644	​	$	637,999	​	$	—	​	$	1,331,643

​

Intangible assets consist of the following at:

​

​	​	​	​	​	​	​
​		December 31,			December 31,
​	​	2021		​	2020
Amortizing intangibles	​	$	66,872	​	$	66,875
Accumulated amortization	​		(61,227)	​		(56,801)
​	​		5,645	​		10,074
Non-amortizing intangibles	​		1,066,741	​		1,048,972
​	​	$	1,072,386	​	$	1,059,046

​

Amortizing intangibles primarily consist of customer relationships. All amortizing intangibles have been assigned an estimated finite useful life and such intangibles are amortized on a straight-line basis over the number of years that approximate their respective useful lives, generally five to seven years. Total amortization expense recorded was $4.4 million, $7.7 million and $11.6 million for the years ended December 31, 2021, 2020 and 2019, respectively. No impairment was recorded for the years ended December 31, 2021 and 2019. Total impairment recorded was $8.7 million for the year ended December 31, 2020.

MONSTER BEVERAGE CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Tabular Dollars in Thousands, Except Per Share Amounts)

​

The following is the future estimated amortization expense related to amortizing intangibles as of December 31, 2021:

​

​	​	​	​
Year Ending December 31:		​	​
​	​	​	​
2022	​	$	4,405
2023	​	​	1,112
2024	​	​	14
2025	​	​	13
2026	​	​	13
2027 and thereafter	​	​	88
​	​	$	5,645

​

At December 31, 2021, non-amortizing intangibles primarily consist of indefinite-lived tradenames, flavors and formulas.

​

10. DISTRIBUTION AGREEMENTS

In accordance with FASB ASC 420 “Exit or Disposal Cost Obligations”, the Company expenses distributor termination costs in the period in which the written notification of termination occurs. As a result, the Company incurred termination costs of $5.3 million, $0.2 million and $11.3 million for the years ended December 31, 2021, 2020 and 2019, respectively. Such termination costs have been expensed in full and are included in operating expenses in the consolidated statements of income for the years ended December 31, 2021, 2020 and 2019.

In the normal course of business, amounts received pursuant to new and/or amended distribution agreements entered into with certain bottlers/distributors, relating to the costs associated with terminating agreements with the Company’s prior distributors, are accounted for as deferred revenue and are recognized as revenue ratably over the anticipated life of the respective distribution agreement, generally 20 years. Revenue recognized was $21.5 million, $21.4 million and $25.0 million for the years ended December 31, 2021, 2020 and 2019, respectively.

​

11. DEBT

The Company entered into a credit facility with Comerica Bank (“Comerica”) consisting of a revolving line of credit, which was amended in April 2020, under which the Company may borrow up to $10.0 million of non-collateralized debt. The revolving line of credit is effective through June 1, 2025. Interest on borrowings under the line of credit is based on Comerica’s base (prime) rate minus 1.00% to 1.50%, or London Interbank Offered Rates plus an additional percentage of 1.25% to 1.75%, depending upon certain financial ratios maintained by the Company. The Company had no outstanding borrowings on this line of credit at December 31, 2021. Under this revolving line of credit, the Company may also issue standby Letters of Credit with an aggregate amount of up to $4.0 million. The fee on the standby Letters of Credit ranges from 1.00% to 1.50% depending upon certain financial ratios maintained by the Company. The Company had no outstanding standby Letters of Credit at December 31, 2021.

The Company has a credit facility with HSBC Bank (China) Company Limited, Shanghai Branch, of $15.0 million. At December 31, 2021, the interest rate on borrowings under the line of credit was 5.5%. As of December 31, 2021, $5.8 million was outstanding on this line of credit.

​

MONSTER BEVERAGE CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Tabular Dollars in Thousands, Except Per Share Amounts)

​

12. COMMITMENTS AND CONTINGENCIES

Contractual Obligations – The Company had the following contractual obligations related primarily to sponsorships, other marketing activities and AFF new production facility construction costs as of December 31, 2021:

​

​	​	​	​
Year Ending December 31:		​
​	​	​	​
2022		$	236,698
2023	​	​	57,848
2024	​	​	10,497
2025	​	​	10
2026	​	​	—
2027 and thereafter	​	​	—
​		$	305,053

​

Purchase Commitments – The Company had purchase commitments aggregating approximately $273.4 million at December 31, 2021, which represent commitments made by the Company and its subsidiaries to various suppliers of raw materials for the production of its products. These obligations vary in terms, but are generally satisfied within one year.

The Company purchases various raw material items, including, but not limited to, flavors, ingredients, supplement ingredients, containers, milk, glucose, sucralose, cream and protein, from a limited number of suppliers. An interruption in supply from any of such resources could result in the Company’s inability to produce certain products for limited or possibly extended periods of time. The aggregate value of purchases from suppliers of such limited resources described above for the years ended December 31, 2021, 2020 and 2019 was $698.0 million, $401.8 million and $335.3 million, respectively.

Guarantees – The Company from time to time enters into certain types of contracts that contingently require the Company to indemnify parties against third-party claims. These contracts primarily relate to: (i) certain agreements with the Company’s officers, directors and employees under which the Company may be required to indemnify such persons for liabilities arising out of their employment relationship, (ii) certain distribution or purchase agreements under which the Company may have to indemnify the Company’s customers from any claim, liability or loss arising out of any actual or alleged injury or damages suffered in connection with the consumption or purchase of the Company’s products or the use of Company trademarks, and (iii) certain real estate leases, under which the Company may be required to indemnify property owners for liabilities and other claims arising from the Company’s use of the applicable premises. The terms of such obligations vary and typically, a maximum obligation is not explicitly stated. Generally, the Company believes that its insurance coverage is adequate to cover any resulting liabilities or claims.

Litigation – From time to time in the normal course of business, the Company is named in litigation, including labor and employment matters, personal injury matters, consumer class actions, intellectual property matters and claims from prior distributors. Although it is not possible to predict the ultimate outcome of such litigation, based on the facts known to the Company, management believes that such litigation in aggregate will likely not have a material adverse effect on the Company’s financial position or results of operations.

The Company evaluates, on a quarterly basis, developments in legal proceedings and other matters that could cause an increase or decrease in the amount of the liability that is accrued, if any, and any related insurance reimbursements. As of December 31, 2021, no loss contingencies were included in the Company’s consolidated balance sheet.

​

MONSTER BEVERAGE CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Tabular Dollars in Thousands, Except Per Share Amounts)

​

13. ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

The components of accumulated other comprehensive income (loss) are as follows at December 31:

​

​	​	​	​	​	​	​
​		2021			2020
Accumulated net unrealized (loss) gain on available-for-sale securities		$	(956)		$	84
Foreign currency translation adjustments, net of tax	​	​	(68,209)	​	​	2,950
Total accumulated other comprehensive (loss) income		$	(69,165)		$	3,034

​

​

14. TREASURY STOCK PURCHASE

On March 13, 2020, the Company’s Board of Directors authorized a new share repurchase program for the purchase of up to $500.0 million of the Company’s outstanding common stock (the “March 2020 Repurchase Plan”). During the year ended December 31, 2021, no shares were purchased under the March 2020 Repurchase Plan. As of February 28, 2022, $441.5 million remained available for repurchase under the March 2020 Repurchase Plan.

During the year ended December 31, 2021, 0.2 million shares of common stock were purchased from employees in lieu of cash payments for options exercised or withholding taxes due for a total amount of $13.8 million. While such purchases are considered common stock repurchases, they are not counted as purchases against the Company’s authorized share repurchase programs. Such shares are included in common stock in treasury in the accompanying consolidated balance sheet at December 31, 2021.

​

15. STOCK-BASED COMPENSATION

The Company has two stock-based compensation plans under which shares were available for grant at December 31, 2021: (i) the Monster Beverage Corporation 2020 Omnibus Incentive Plan (the “2020 Omnibus Incentive Plan”), which includes the Monster Beverage Corporation Deferred Compensation Plan as a sub plan thereunder, and (ii) the Monster Beverage Corporation 2017 Compensation Plan for Non-Employee Directors, which includes the Monster Beverage Corporation Deferred Compensation Plan for Non-Employee Directors as a sub plan thereunder. The 2020 Omnibus Incentive Plan was approved by the Board of Directors on April 14, 2020 and approved by the stockholders of the Company at the annual meeting of the Company’s stockholders held on June 3, 2020 (the “Effective Date”). The 2020 Omnibus Incentive Plan replaced the Monster Beverage Corporation 2011 Omnibus Incentive Plan (the “2011 Omnibus Incentive Plan”).

MONSTER BEVERAGE CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Tabular Dollars in Thousands, Except Per Share Amounts)

​

The 2020 Omnibus Incentive Plan provides for the granting of stock options, stock appreciation rights, restricted stock, restricted stock units, performance awards, and other share-based awards up to an aggregate of 46,169,367 shares of the Company’s common stock, comprised of 32,000,000 new shares of common stock reserved under the 2020 Omnibus Incentive Plan, which were authorized on the Effective Date, and 14,169,367 shares of common stock that were available for grant under the 2011 Omnibus Incentive Plan as of December 31, 2019 and prior to the Effective Date. Shares authorized under the 2020 Omnibus Incentive Plan are reduced by one (1) share for options or stock appreciation rights granted under the 2020 Omnibus Incentive Plan and for any grants after December 31, 2019 under the 2011 Omnibus Incentive Plan, and by 2.6 shares for each share granted or issued with respect to a Full Value Award under either the 2020 Omnibus Incentive Plan or for any shares granted after December 31, 2019 under the 2011 Omnibus Incentive Plan. A “Full Value Award” is an award other than an incentive stock option, a non-qualified stock option, or a stock appreciation right, which is settled by the issuance of shares. Options granted under the 2020 Omnibus Incentive Plan may be incentive stock options under Section 422 of the Internal Revenue Code, as amended (the “Code”), or non-qualified stock options.

Shares previously granted under the 2011 Omnibus Incentive Plan after December 31, 2019 and prior to the Effective Date of the 2020 Omnibus Incentive Plan reduced the number of shares available for grant under the 2020 Omnibus Incentive Plan. As of December 31, 2021, 2,755,257 shares of the Company’s common stock have been granted, net of cancellations, and 42,513,457 shares (as adjusted for Full Value Awards) of the Company’s common stock remain available for grant under the 2020 Omnibus Incentive Plan.

The Compensation Committee of the Board of Directors (the “Compensation Committee”) has sole and exclusive authority to grant stock awards to all employees who are not new hires and to all new hires who are subject to Section 16 of the Exchange Act (“Section 16”). Each of the Compensation Committee and the Executive Committee of the Board of Directors (the “Executive Committee”) independently has the authority to grant stock awards to (i) new hires and (ii) employees receiving a promotion, in each case, who are not Section 16 employees. Awards granted by the Executive Committee are not subject to approval or ratification by the Board of Directors or the Compensation Committee. Options granted under the 2020 Omnibus Incentive Plan generally vest over a three- to five-year period from the grant date and are generally exercisable up to 10 years after the grant date. Restricted stock units granted under the 2020 Omnibus Incentive Plan generally vest over a three- or five-year period from the grant date. Performance share units will generally vest based on the achievement of performance goals specified for the applicable award.

In 2016, the Company adopted the Deferred Compensation Plan (as a sub plan to the 2011 Omnibus Incentive Plan), pursuant to which eligible employees may elect to defer cash and/or equity based compensation and to receive the deferred amounts, together with an investment return (positive or negative), either at a pre-determined time in the future or upon termination of their employment with the Company or its subsidiaries or affiliates that are participating employers under the Deferred Compensation Plan, as provided under the Deferred Compensation Plan and in relevant deferral elections. Deferrals under the Deferred Compensation Plan are unfunded and unsecured. As of December 31, 2021 deferrals under the Deferred Compensation Plan are solely comprised of cash compensation and equity compensation and are not material in the aggregate.

In 2017, the Company adopted the 2017 Directors Plan, a successor plan to the 2009 Monster Beverage Corporation Stock Incentive Plan for Non-Employee Directors. The 2017 Directors Plan permits the granting of stock options, stock appreciation rights, restricted shares or restricted stock units, deferred awards, dividend equivalents, and other share based-awards up to an aggregate of 1,250,000 shares of common stock of the Company to non-employee directors of the Company.

MONSTER BEVERAGE CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Tabular Dollars in Thousands, Except Per Share Amounts)

​

Each calendar year, a non-employee director will receive an annual retainer and annual equity award, as provided for in the 2017 Directors Plan, which may be modified from time to time. Currently, with respect to equity awards, each non-employee director receives an award of restricted stock units at each annual meeting of the Company’s stockholders or promptly thereafter. A non-employee director’s annual award of restricted stock units will generally vest on the earliest to occur of: (a) the last business day immediately preceding the annual meeting of the Company’s stockholders in the calendar year following the calendar year in which the grant date occurs, (b) a Change of Control (as defined in the 2017 Directors Plan), (c) the non-employee director’s death, or (d) the date of the non-employee director’s separation from service due to disability, so long as the non-employee director remains a non-employee director through such date. The Board of Directors may in its discretion award non-employee directors stock options, stock appreciation rights, restricted stock and other share-based awards in lieu of or in addition to restricted stock units. The Board of Directors may amend or terminate the 2017 Directors Plan at any time, subject to certain limitations set forth in the 2017 Directors Plan. As of December 31, 2021, 98,901 shares of the Company’s common stock had been granted under the 2017 Directors Plan, and 1,151,099 shares of the Company’s common stock remain available for grant.

In 2017, the Company adopted the Deferred Compensation Plan for Non-Employee Directors (as a sub plan to the 2017 Directors Plan), pursuant to which the Board of Directors may permit non-employee directors to elect, at such times and in accordance with rules and procedures (or sub-plan) adopted by the Board of Directors (which are intended to comply with Section 409A of the Code, as applicable), to receive all or any portion of such non-employee director’s compensation, whether payable in cash or in equity, on a deferred basis. Deferrals under the Deferred Compensation Plan for Non-Employee Directors are unfunded and unsecured. As of December 31, 2021, deferrals under the Deferred Compensation Plan for Non-Employee Directors are solely comprised of cash compensation and equity compensation and are not material in the aggregate. The 2017 Directors Plan was adopted to effectuate any such deferrals. The 2017 Directors Plan is administered by the Board of Directors. Each award granted under the 2017 Directors Plan will be evidenced by a written agreement and will contain the terms and conditions that the Board of Directors deems appropriate.

In February 2022, the Board of Directors amended and restated the 2017 Directors Plan to require each non-employee director to satisfy the share ownership guidelines set forth below, as may be modified by the Board of Directors from time to time. The current share ownership guidelines provide that non-employee directors of the Company must:

	●	Hold shares of Company common stock having a total value of five times the annual retainer payable to a non-employee director (excluding any portion of the annual retainer attributable to a non-employee director’s service as a member of a subcommittee, as a chair of a subcommittee or as the lead independent director, as applicable). For this purpose, deferred shares or deferred restricted stock units will be deemed held, to the extent vested.

	●	The minimum stock ownership level must be achieved by each non-employee director by the fifth anniversary of such non-employee director’s initial appointment to the Board of Directors.

	●	Once achieved, ownership of the guideline amount should be maintained for so long as the non-employee director retains his or her seat on the Board of Directors.

	●	There may be rare instances where these guidelines would place a hardship on a non-employee director. In these cases or in similar circumstances, the Board of Directors will make the final decision as to developing an alternative stock ownership guideline for a non-employee director that reflects the intention of these guidelines and his or her personal circumstances.

The Company recorded $70.5 million, $70.3 million and $63.4 million of compensation expense relating to outstanding options, restricted stock units, performance share units and other share-based awards during the years ended December 31, 2021, 2020 and 2019, respectively.

MONSTER BEVERAGE CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Tabular Dollars in Thousands, Except Per Share Amounts)

​

The tax benefit for tax deductions from non-qualified stock option exercises, disqualifying dispositions of incentive stock options and vesting of restricted stock units and performance share units for the years ended December 31, 2021, 2020 and 2019 was $6.8 million, $10.5 million and $25.9 million, respectively.

Stock Options

Under the Company’s stock-based compensation plans, all stock options granted through December 31, 2021 were granted at prices based on the fair value of the Company’s common stock on the date of grant. The Company records compensation expense for employee stock options based on the estimated fair value of the options on the date of grant using the Black-Scholes-Merton option pricing formula with the assumptions included in the table below. The Company records compensation expense for non-employee stock options based on the estimated fair value of the options as of the earlier of (1) the date at which a commitment for performance by the non-employee to earn the stock option is reached or (2) the date at which the non-employee’s performance is complete, using the Black-Scholes-Merton option pricing formula with the assumptions included in the table below. The Company uses historical data to determine the exercise behavior, volatility and forfeiture rate of the options.

The following weighted-average assumptions were used to estimate the fair value of options granted during:

​

​	​	​	​	​	​	​	​	​
​	​	​	​	​	​	​	​	​
​			2021		2020		2019
Dividend yield	​	​	0.0	%	0.0	%	0.0	%
Expected volatility	​	​	28.9	%	30.4	%	30.2	%
Risk-free interest rate	​	​	0.85	%	0.70	%	2.37	%
Expected term	​	​	5.8 Years	​	5.8 Years	​	6.0 Years	​

​

Expected Volatility: The Company uses historical volatility as it provides a reasonable estimate of the expected volatility. Historical volatility is based on the most recent volatility of the stock price over a period of time equivalent to the expected term of the option.

Risk-Free Interest Rate: The risk-free interest rate is based on the U.S. treasury zero coupon yield curve in effect at the time of grant for the expected term of the option.

Expected Term: The Company’s expected term represents the weighted-average period that the Company’s stock options are expected to be outstanding. The expected term is based on expected time to post-vesting exercise of options by employees. The Company uses historical exercise patterns of previously granted options to derive employee behavioral patterns used to forecast expected exercise patterns.

MONSTER BEVERAGE CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Tabular Dollars in Thousands, Except Per Share Amounts)

​

The following table summarizes the Company’s activities with respect to its stock option plans as follows:

​

​	​	​	​	​	​	​	​	​	​	​
​	​	​	​	​	​	​	Weighted-	​	​	​
​	​	​	​	Weighted-		​	Average	​	​	​
​	​	​	​	Average		​	Remaining	​	​	​
​	​	Number of	​	Exercise		​	Contractual	​	Aggregate
​	​	Shares	​	Price Per		​	Term (in	​	Intrinsic
Options		(in thousands)		Share			years)		Value
Outstanding at January 1, 2021		13,973	​	$	44.93		5.7	​	$	664,432
Granted 01/01/21 - 03/31/21		1,015	​	$	88.95	​	​	​	​	​
Granted 04/01/21 - 06/30/21		13	​	$	91.36	​	​	​	​	​
Granted 07/01/21 - 09/30/21		23	​	$	95.33	​	​	​	​	​
Granted 10/01/21 - 12/31/21		12	​	$	87.00	​	​	​	​	​
Exercised		(1,037)	​	$	44.10	​	​	​	​	​
Cancelled or forfeited		(139)	​	$	63.05	​	​	​	​	​
Outstanding at December 31, 2021		13,860	​	$	48.19		5.1	​	$	663,148
Vested and expected to vest in the future at December 31, 2021	​	13,633	​	$	47.80	​	5.0	​	$	657,633
Exercisable at December 31, 2021		9,644	​	$	40.33		4.0	​	$	537,261

​

The following table summarizes information about stock options outstanding and exercisable at December 31, 2021:

​

​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
​	​	​	​	​	​	Options Outstanding						​	Options Exercisable
​	​	​	​	​	​	​	​	Weighted Average	​	​	​	​	​	​	​
​	​	​	​	​	​	​	​	Remaining	​	Weighted		​	Number	​	Weighted
​	​	​	​	​	​	Number	​	Contractual	​	Average		​	Exercisable	​	Average
Range of Exercise					​	Outstanding	​	Term	​	Exercise		​	(In	​	Exercise
Prices ($)						(In Thousands)		(Years)		Price ($)			Thousands)		Price ($)
$	15.71	-	$	17.99		1,395		1.4		$	17.77		1,395		$	17.77
$	18.64	-	$	23.35		1,562		2.1		$	23.08		1,562		$	23.08
$	36.05	-	$	36.05		9		3.0		$	36.05		9		$	36.05
$	37.10	-	$	43.99		2,280		4.3		$	43.47		2,272		$	43.47
$	44.73	-	$	45.16		1,410		3.4		$	45.10		1,410		$	45.10
$	45.55	-	$	54.45		1,491		5.5		$	48.21		1,058		$	47.43
$	55.14	-	$	57.95		153		7.1		$	56.90		36		$	56.57
$	58.73	-	$	58.73		2,054		6.2		$	58.73		1,084		$	58.73
$	58.77	-	$	58.77		4		6.6		$	58.77		2		$	58.77
$	59.67	-	$	97.80		3,502		8.1		$	69.29		816		$	60.56
​	​	​	​	​		13,860		5.1		$	48.19		9,644		$	40.33

​

The weighted-average grant-date fair value of options granted during the years ended December 31, 2021, 2020 and 2019 was $25.80 per share, $18.82 per share and $20.17 per share, respectively. The total intrinsic value of options exercised during the years ended December 31, 2021, 2020 and 2019 was $51.2 million, $68.8 million and $220.2 million, respectively.

Cash received from option exercises under all plans for the years ended December 31, 2021, 2020 and 2019 was $45.7 million, $72.9 million and $92.4 million, respectively.

MONSTER BEVERAGE CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Tabular Dollars in Thousands, Except Per Share Amounts)

​

At December 31, 2021, there was $51.3 million of total unrecognized compensation expense related to non-vested options granted to employees under the Company’s share-based payment plans. That cost is expected to be recognized over a weighted-average period of 2.1 years.

Restricted Stock Units and Performance Share Units

The cost of stock-based compensation for restricted stock units and performance share units is measured based on the closing fair market value of the Company’s common stock at the date of grant. In the event that the Company has the option and intent to settle a restricted stock unit or performance share unit in cash, the award is classified as a liability and revalued at each balance sheet date.

The following table summarizes the Company’s activities with respect to non-vested restricted stock units and performance share units as follows:

​

​	​	​	​	​	​
​	​	​	​	Weighted
​	​	Number of	​	Average
​	​	Shares (in	​	Grant-Date
​		thousands)		Fair Value
Non-vested at January 1, 2021	​	947	​	$	60.52
Granted 01/01/21 - 03/31/211	​	304	​	$	86.28
Granted 04/01/21 - 06/30/21	​	14	​	$	92.14
Granted 07/01/21 - 09/30/21	​	1	​	$	89.84
Granted 10/01/21 - 12/31/21	​	1	​	$	89.95
Vested	​	(344)	​	$	62.29
Forfeited/cancelled	​	(13)	​	$	60.41
Non-vested at December 31, 2021	​	910	​	$	69.02

​

1_The grant activity for performance share units is recorded based on the target performance level earning_ 100% of target performance share units. The actual number of performance share units earned could range from 0% to 200% of target dependent on the pre-established performance goals.

The weighted-average grant-date fair value of restricted stock units and/or performance share units granted during the years ended December 31, 2021, 2020 and 2019 was $89.12, $62.97 and $59.79 per share, respectively. As of December 31, 2021, 0.8 million of restricted stock units and performance share units are expected to vest.

At December 31, 2021, total unrecognized compensation expense relating to non-vested restricted stock units and performance share units was $34.8 million, which is expected to be recognized over a weighted-average period of 1.9 years.

Other Share-Based Awards

The Company has granted other share-based awards to certain employees that are payable in cash. These awards are classified as liabilities and are valued based on the fair value of the award at the grant date and are remeasured at each reporting date until settlement with compensation expense being recognized in proportion to the completed requisite service period up until date of settlement. At December 31, 2021, other share-based awards outstanding included grants that vest over three years payable in the first quarters of 2022, 2023 and 2024.

MONSTER BEVERAGE CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Tabular Dollars in Thousands, Except Per Share Amounts)

​

At December 31, 2021, there was $0.7 million of total unrecognized compensation expense related to nonvested other share-based awards granted to employees under the Company’s stock-based compensation plans. That cost is expected to be recognized over a weighted-average period of 1.0 years.

Employee and Non-Employee Share-Based Compensation Expense

The table below shows the amounts recognized in the consolidated financial statements for the years ended December 31, 2021, 2020 and 2019 for share-based compensation related to employees and non-employees. Employee and non-employee share-based compensation expense of $70.5 million for the year ended December 31, 2021 is comprised of $8.3 million relating to incentive stock options, $1.6 million relating to other share-based awards and $60.6 million relating to non-qualified stock options, restricted units and performance units. Employee and non-employee share-based compensation expense of $70.3 million for the year ended December 31, 2020 is comprised of $9.4 million relating to incentive stock options, $2.7 million relating to other share-based awards and $58.2 million relating to non-qualified stock options, restricted units and performance units. Employee and non-employee share-based compensation expense of $63.4 million for the year ended December 31, 2019 is comprised of $10.0 million relating to incentive stock options and $53.4 million relating to non-qualified stock options and restricted units.

​

​	​	​	​	​	​	​	​	​	​
​		2021			2020			2019
Operating expenses		$	70,483		$	70,289		$	63,356
Total employee and non-employee share-based compensation expense included in income, before income tax	​	​	70,483	​	​	70,289	​	​	63,356
Less: Amount of income tax benefit recognized in earnings	​	​	(14,228)	​	​	(15,499)	​	​	(36,326)
Amount charged against net income		$	56,255		$	54,790		$	27,030

​

​

16. INCOME TAXES

The Company evaluated the various provisions of the Tax Reform Act, including, the global intangible low-taxed income (“GILTI”) and the foreign derived intangible income provisions. The Company will treat any U.S. tax on foreign earnings under GILTI as a current period expense when incurred.

The Company currently considers the earnings of its foreign entities (excluding Japan) to be permanently reinvested outside the United States based on estimates that future domestic cash generation will be sufficient to meet future domestic cash needs. Accordingly, deferred income taxes have not been recorded for the undistributed earnings of the Company’s foreign subsidiaries excluding Japan. Deferred income taxes have not been recorded for Japan, as any federal, state, or foreign withholding taxes associated with the repatriation of those earnings would be immaterial.

The domestic and foreign components of the Company’s income before provision for income taxes are as follows:

​

​	​	​	​	​	​	​	​	​	​
​	​	Year Ended December 31,
​		2021			2020			2019
Domestic*		$	1,431,797		$	1,374,402		$	1,196,883
Foreign*	​	​	369,622	​	​	251,755	​	​	219,079
Income before provision for income taxes		$	1,801,419		$	1,626,157		$	1,415,962

​

*After intercompany royalties, management fees and interest charges from the Company’s domestic to foreign entities of $61.1 million, $54.2 million and $51.2 million for the years ended December 31, 2021, 2020 and 2019, respectively.

MONSTER BEVERAGE CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Tabular Dollars in Thousands, Except Per Share Amounts)

​

Components of the provision for income taxes are as follows:

​

​	​	​	​	​	​	​	​	​	​
​	​	Year Ended December 31,
​		2021			2020			2019
Current:	​	​	​	​	​	​	​	​	​
Federal		$	273,115		$	259,073		$	212,068
State	​	​	44,990	​	​	43,704	​	​	39,982
Foreign	​	​	89,410	​	​	70,658	​	​	55,167
​	​	​	407,515	​	​	373,435	​	​	307,217
​	​	​	​	​	​	​	​	​	​
Deferred:	​	​	​	​	​	​	​	​	​
Federal	​	​	14,750	​	​	11,401	​	​	8,320
State	​	​	4,689	​	​	4,709	​	​	(6,878)
Foreign	​	​	5,092	​	​	(167,595)	​	​	(4,219)
​	​	​	24,531	​	​	(151,485)	​	​	(2,777)
​	​	​	​	​	​	​	​	​	​
Valuation allowance	​	​	(8,102)	​	​	(5,387)	​	​	3,687
​		$	423,944		$	216,563		$	308,127

​

A reconciliation of the total provision for income taxes after applying the U.S. federal statutory rate of 21% to income before provision for income taxes to the reported provision for income taxes are as follows for the years ended:

​

​	​	​	​	​	​	​	​	​	​
​	​	Year Ended December 31,
​		2021			2020			2019
U.S. Federal tax expense at statutory rates		$	378,298		$	341,493		$	297,352
State income taxes, net of federal tax benefit	​	​	38,894	​	​	37,478	​	​	30,098
Permanent differences	​	​	(4,168)	​	​	(1,064)	​	​	(2,128)
Stock based compensation	​	​	2,790	​	​	1,097	​	​	(13,473)
Intra-company transfer benefit	​	​	—	​	​	(165,075)	​	​	—
Other	​	​	(649)	​	​	(7,388)	​	​	(12,423)
Foreign rate differential	​	​	16,881	​	​	15,409	​	​	5,014
Valuation allowance	​	​	(8,102)	​	​	(5,387)	​	​	3,687
​		$	423,944		$	216,563		$	308,127

​

MONSTER BEVERAGE CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Tabular Dollars in Thousands, Except Per Share Amounts)

​

Major components of the Company’s deferred tax assets (liabilities) at December 31, 2021 and 2020 are as follows:

​

​	​	​	​	​	​	​
​		2021			2020
Deferred Tax Assets:	​	​	​	​	​	​
Reserve for sales returns		$	889		$	275
Reserve for inventory obsolescence	​	​	3,643	​	​	2,366
Reserve for marketing development fund	​	​	8,951	​	​	9,629
Capitalization of inventory costs	​	​	2,533	​	​	3,365
State franchise tax - current	​	​	2,493	​	​	4,229
Accrued compensation	​	​	2,854	​	​	1,284
Accrued other liabilities	​	​	4,634	​	​	7,464
Deferred revenue	​	​	68,557	​	​	75,592
Stock-based compensation	​	​	24,635	​	​	23,370
Foreign net operating loss carryforward	​	​	14,507	​	​	21,626
Prepaid supplies	​	​	6,317	​	​	5,551
Termination payments	​	​	58,042	​	​	63,009
Operating lease liabilities	​	​	4,711	​	​	4,434
Intangibles	​	​	72,666	​	​	87,687
Impairment-trademarks and others	​	​	2,047	​	​	2,055
Other deferred tax assets	​	​	33,013	​	​	27,164
Total gross deferred tax assets		$	310,492		$	339,100
​	​	​	​	​	​	​
Deferred Tax Liabilities:	​	​	​	​	​	​
Amortization of trademarks		$	(41,517)		$	(42,161)
State franchise tax - deferred	​	​	(5,505)	​	​	(6,318)
Operating lease ROU assets	​	​	(4,711)	​	​	(4,434)
Other deferred tax liabilities	​	​	(618)	​	​	(58)
Depreciation	​	​	(5,907)	​	​	(9,363)
Total gross deferred tax liabilities	​	​	(58,258)	​	​	(62,334)
​	​	​	​	​	​	​
Valuation Allowance	​	​	(27,013)	​	​	(35,116)
​	​	​	​	​	​	​
Net deferred tax assets		$	225,221		$	241,650

​

During the years ended December 31, 2021, 2020 and 2019, the Company established full valuation allowances against certain deferred tax assets, resulting from cumulative net operating losses incurred by certain foreign subsidiaries of the Company. The effect of the valuation allowances and the subsequent related impact on the Company’s overall tax rate was to decrease the Company’s provision for income taxes by $8.1 million and $5.4 million for the years ended December 31, 2021 and 2020, respectively, and increase the Company’s provision for income taxes $3.7 million for the year ended December 31, 2019. At December 31, 2021, the Company had net operating loss carryforwards of approximately $60.5 million. Of this amount, $35.2 million may be carried forward indefinitely. The remaining $25.3 million of net operating loss carryforwards will begin to expire in 2022.

MONSTER BEVERAGE CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Tabular Dollars in Thousands, Except Per Share Amounts)

​

In October 2020, the Company completed an intra-entity transfer of intangible assets between certain of the Company’s foreign subsidiaries to better align its international structure with its expanding operations. The transfer resulted in a step-up of the tax-deductible basis in the transferred assets in a foreign jurisdiction, and created a temporary difference between the tax basis and book basis for such intangible assets. The Company recognized deferred tax assets of approximately $165.1 million, with a corresponding reduction to the provision for income taxes during the fourth quarter of 2020 in its consolidated financial statements. The tax deductions for the amortization of the deferred tax assets will be recognized in the future and any amortization not deducted for tax purposes will be carried forward indefinitely. The tax impact on the foreign subsidiary transferor was not material.

The following is a roll-forward of the Company’s total gross unrecognized tax benefits, not including interest and penalties, for the years ended December 31, 2021, 2020 and 2019:

​

​	​	​	​
​		Gross Unrecognized Tax
​	​	Benefits
Balance at December 31, 2018	​	$	5,035
Additions for tax positions related to the current year	​		—
Additions for tax positions related to the prior year	​		1,833
Decreases for tax positions related to prior years	​		(3,875)
Balance at December 31, 2019	​	$	2,993
Additions for tax positions related to the current year	​	​	—
Additions for tax positions related to the prior year	​	​	—
Decreases for tax positions related to prior years	​	​	(2,251)
Balance at December 31, 2020	​	$	742
Additions for tax positions related to the current year	​	​	—
Additions for tax positions related to the prior year	​	​	—
Decreases for tax positions related to prior years	​		(742)
Balance at December 31, 2021	​	$	—

​

The Company recognizes accrued interest and penalties related to unrecognized tax benefits in the provision for income taxes in the Company’s consolidated financial statements. As of December 31, 2021, the Company had no unrecognized tax benefits.

It is expected that any change in the amount of unrecognized tax benefit change within the next 12 months will not be significant.

The Company is subject to U.S. federal income tax as well as to income tax in multiple state and foreign jurisdictions.

The Company is in various stages of examination with certain states and certain foreign jurisdictions, including the United Kingdom and Ireland. The Company’s 2018 through 2020 U.S. federal income tax returns are subject to examination by the IRS. The Company’s state income tax returns are subject to examination for the 2017 through 2020 tax years.

MONSTER BEVERAGE CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Tabular Dollars in Thousands, Except Per Share Amounts)

​

17. EARNINGS PER SHARE

A reconciliation of the weighted average shares used in the basic and diluted earnings per common share computations for the years ended December 31, 2021, 2020 and 2019 is presented below (in thousands):

​

​	​	​	​	​	​	​
​	​	​	​	​	​	​
​	​	​	​	​	​	​
​		2021		2020		2019
Weighted-average shares outstanding:	​	​	​	​	​	​
Basic	​	528,763	​	529,639	​	542,191
Dilutive securities	​	6,876	​	5,168	​	4,417
Diluted	​	535,639	​	534,807	​	546,608

​

For the years ended December 31, 2021, 2020 and 2019, options and awards outstanding totaling 0.8 million shares, 1.8 million shares and 4.4 million shares, respectively, were excluded from the calculations as their effect would have been antidilutive.

​

18. EMPLOYEE BENEFIT PLAN

Employees of the Company may participate in the Monster Beverage Corporation 401(k) Plan, a defined contribution plan, which qualifies under Section 401(k) of the Internal Revenue Code. Participating employees may contribute into a traditional plan with pretax salary or into a Roth plan with after tax salary up to statutory limits. The Company contributes 50% of the employee contribution, up to 8% of each employee’s earnings, which vest over four years (2 years of service = 50%, 3 years of service = 75%, 4 years of service = 100%). Matching contributions were $5.5 million, $4.7 million and $3.4 million for the years ended December 31, 2021, 2020 and 2019, respectively.

​

19. SEGMENT INFORMATION

The Company has three operating and reportable segments: (i) Monster Energy® Drinks segment, which is primarily comprised of the Company’s Monster Energy® drinks, Reign Total Body Fuel® high performance energy drinks and True North® Pure Energy Seltzers, (ii) Strategic Brands segment, which is primarily comprised of the various energy drink brands acquired from TCCC in 2015 as well as the Company’s affordable energy brands, and (iii) Other segment, which is comprised of the AFF Third-Party Products.

The Company’s Monster Energy® Drinks segment primarily generates net operating revenues by selling ready-to-drink packaged drinks primarily to bottlers/distributors. In some cases, the Company sells ready-to-drink packaged drinks directly to retail grocery and specialty chains, wholesalers, club stores, mass merchandisers, convenience chains, drug stores, foodservice customers, value stores, e-commerce retailers and the military.

The Company’s Strategic Brands segment primarily generates net operating revenues by selling “concentrates” and/or “beverage bases” to authorized bottling and canning operations. Such bottlers generally combine the concentrates and/or beverage bases with sweeteners, water and other ingredients to produce ready-to-drink packaged energy drinks. The ready-to-drink packaged energy drinks are then sold by such bottlers to other bottlers/distributors and to retail grocery and specialty chains, wholesalers, club stores, mass merchandisers, convenience chains, foodservice customers, drug stores, value stores, e-commerce retailers and the military. To a lesser extent, the Strategic Brands segment generates net operating revenues by selling certain ready-to-drink packaged energy drinks to bottlers/distributors.

MONSTER BEVERAGE CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Tabular Dollars in Thousands, Except Per Share Amounts)

​

Generally, the Monster Energy® Drinks segment generates higher per case net operating revenues, but lower per case gross profit margin percentages than the Strategic Brands segment.

Corporate and unallocated amounts that do not relate to a reportable segment have been allocated to “Corporate & Unallocated.” No asset information, other than goodwill and other intangible assets, has been provided in the Company’s reportable segments, as management does not measure or allocate such assets on a segment basis.

The net revenues derived from the Company’s reportable segments and other financial information related thereto for the years ended December 31 are as follows:

​

​	​	​	​	​	​	​	​	​	​
​	​	​	​	​	​	​	​	​	​
​	​	​	​	​	​	​	​	​	​
​		2021			2020			2019
Net sales:	​	​	​	​	​	​	​	​	​
Monster Energy® Drinks⁽¹⁾	​	$	5,220,673	​	$	4,305,246	​	$	3,904,029
Strategic Brands	​		294,762	​		266,354	​		274,925
Other	​		25,917	​		27,038	​		21,865
Corporate and unallocated	​		—	​		—	​		—
​	​	$	5,541,352	​	$	4,598,638	​	$	4,200,819

​

​	​	​	​	​	​	​	​	​	​
​	​	​	​	​	​	​	​	​	​
​	​	​	​	​	​	​	​	​	​
​		2021			2020			2019
Operating Income:	​	​	​	​	​	​	​	​	​
Monster Energy® Drinks⁽¹⁾	​	$	1,990,785	​	$	1,820,346	​	$	1,565,977
Strategic Brands	​		173,660	​		155,047	​		164,053
Other	​		6,935	​		5,930	​		3,650
Corporate and unallocated	​		(373,913)	​		(348,170)	​		(330,741)
​	​	$	1,797,467	​	$	1,633,153	​	$	1,402,939

​

​	​	​	​	​	​	​	​	​	​
​	​	​	​	​	​	​	​	​	​
​	​	​	​	​	​	​	​	​	​
​		2021			2020			2019
Income before tax:	​	​	​	​	​	​	​	​	​
Monster Energy® Drinks⁽¹⁾	​	$	1,992,185	​	$	1,820,625	​	$	1,567,022
Strategic Brands	​		173,739	​		155,047	​		164,049
Other	​		6,935	​		5,933	​		3,655
Corporate and unallocated	​		(371,440)	​		(355,448)	​		(318,764)
​	​	$	1,801,419	​	$	1,626,157	​	$	1,415,962

​

	(1)	Includes $41.5 million, $42.1 million and $46.3 million for the years ended December 31, 2021, 2020 and 2019, respectively, related to the recognition of deferred revenue.

​

​	​	​	​	​	​	​	​	​	​
​	​	​	​	​	​	​	​	​	​
​	​	​	​	​	​	​	​	​	​
​		2021			2020			2019
Depreciation and amortization:	​	​	​	​	​	​	​	​	​
Monster Energy® Drinks	​	$	34,532	​	$	38,277	​	$	39,397
Strategic Brands	​		1,085	​		4,178	​		7,935
Other	​		4,485	​		4,631	​		4,637
Corporate and unallocated	​		10,053	​		9,944	​		8,758
​	​	$	50,155	​	$	57,030	​	$	60,727

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MONSTER BEVERAGE CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Tabular Dollars in Thousands, Except Per Share Amounts)

​

Corporate and unallocated expenses were $373.9 million for the year ended December 31, 2021 and included $258.6 million of payroll costs, of which $70.3 million was attributable to stock-based compensation expense (See Note 15, “Stock-Based Compensation”), $77.9 million of professional service expenses, including accounting and legal costs, $9.3 million of insurance costs and $28.1 million of other operating expenses.

Corporate and unallocated expenses were $348.2 million for the year ended December 31, 2020 and included $234.1 million of payroll costs, of which $69.9 million was attributable to stock-based compensation expense (See Note 15, “Stock-Based Compensation”), $67.6 million of professional service expenses, including accounting and legal costs, $7.5 million of insurance costs and $39.0 million of other operating expenses.

Corporate and unallocated expenses were $330.7 million for the year ended December 31, 2019 and included $203.3 million of payroll costs, of which $63.4 million was attributable to stock-based compensation expense (See Note 15, “Stock-Based Compensation”), $78.5 million of professional service expenses, including accounting and legal costs, $6.1 million of insurance costs and $42.8 million of other operating expenses.

Coca-Cola Consolidated, Inc. accounted for approximately 12%, 12% and 13% of the Company’s net sales for the years ended December 31, 2021, 2020 and 2019, respectively.

Reyes Coca-Cola Bottling, LLC accounted for approximately 10%, 11% and 11% of the Company’s net sales for the years ended December 31, 2021, 2020 and 2019, respectively.

Coca-Cola Europacific Partners accounted for approximately 12%, 10% and 10% of the Company’s net sales for the years ended December 31, 2021, 2020 and 2019, respectively.

Net sales to customers outside the United States amounted to $2.04 billion, $1.51 billion and $1.33 billion for the years ended December 31, 2021, 2020 and 2019, respectively. Such sales were approximately 37%, 33% and 32% of net sales for the years ended December 31, 2021, 2020 and 2019, respectively.

Goodwill and other intangible assets for the Company’s reportable segments as of December 31, 2021 and 2020 are as follows:

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​	​	​	​	​	​	​
​		2021			2020
Goodwill and other intangible assets:	​	​	​	​	​	​
Monster Energy® Drinks	​	$	1,420,503	​	$	1,406,646
Strategic Brands	​		978,032	​		974,132
Other	​		5,494	​		9,911
Corporate and unallocated	​		—	​		—
​	​	$	2,404,029	​	$	2,390,689

​

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20. RELATED PARTY TRANSACTIONS

TCCC controls approximately 19.3% of the voting interests of the Company. The TCCC Subsidiaries, the TCCC Related Parties and certain TCCC independent bottlers, purchase and distribute the Company’s products in domestic and certain international markets. The Company also pays TCCC a commission based on certain sales within the TCCC distribution network.

MONSTER BEVERAGE CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Tabular Dollars in Thousands, Except Per Share Amounts)

​

TCCC commissions, based on sales to the TCCC Subsidiaries and the TCCC Related Parties, for the year ended December 31, 2021 were $77.5 million, and are included as a reduction to net sales. TCCC commissions, based on sales to the TCCC Independent Bottlers for the year ended December 31, 2021 were $28.7 million, and are included in operating expenses in the consolidated statements of income.

TCCC commissions, based on sales to the TCCC Subsidiaries and the TCCC Related Parties, for the year ended December 31, 2020 were $56.5 million, and are included as a reduction to net sales. TCCC commissions, based on sales to the TCCC Independent Bottlers for the year ended December 31, 2020 were $21.4 million, and are included in operating expenses in the consolidated statements of income.

TCCC commissions, based on sales to the TCCC Subsidiaries and the TCCC Related Parties, for the year ended December 31, 2019 were $50.1 million, and are included as a reduction to net sales. TCCC commissions, based on sales to the TCCC Independent Bottlers for the year ended December 31, 2019 were $17.7 million, and are included in operating expenses in the consolidated statements of income.

Net sales to the TCCC Subsidiaries for the years ended December 31, 2021, 2020 and 2019 were $120.4 million, $83.3 million and $79.5 million, respectively.

The Company also purchases concentrates from TCCC which are then sold to certain of the Company’s bottlers/distributors. Concentrate purchases from TCCC were $27.2 million, $23.9 million and $25.4 million for the years ended December 31, 2021, 2020 and 2019, respectively.

Certain TCCC Subsidiaries also contract manufacture certain of the Company’s energy drinks. Such contract manufacturing expenses were $31.5 million, $17.2 million and $17.1 million for the years ended December 31, 2021, 2020 and 2019, respectively.

Accounts receivable, accounts payable and accrued promotional allowances related to the TCCC Subsidiaries are as follows at:

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​	​	​	​	​	​	​
​	​	December 31,		​	December 31,
​		2021			2020
Accounts receivable, net	​	$	94,647	​	$	44,925
Accounts payable	​	$	(35,248)	​	$	(30,792)
Accrued promotional allowances	​	$	(4,536)	​	$	(5,834)
Accrued liabilities	​	$	(26,616)	​	$	(15,446)

​

In 2021, TCCC exercised its contract rights and began an examination in accordance with those rights for the years ended December 31, 2015 through December 31,2020.

​

One director of the Company through certain trusts, and a family member of one director are principal owners of a company that provides promotional materials to the Company. Expenses incurred with such company in connection with promotional materials purchased during the years ended December 31, 2021, 2020 and 2019 were $3.6 million, $2.1 million and $1.5 million, respectively.

MONSTER BEVERAGE CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Tabular Dollars in Thousands, Except Per Share Amounts)

​

In December 2018, the Company and a director of the Company entered into a 50-50 partnership that purchased land, and real property thereon, in Kona, Hawaii for the purpose of producing coffee products. The Company’s initial 50% contribution of $1.9 million was accounted for as an equity investment. During the year ended December 31, 2021, the Company recorded an equity loss of $0.2 million. As of December 31, 2021, the Company’s equity investment is $1.4 million and is included in other assets (non-current) in the accompanying consolidated balance sheet at December 31, 2021.

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21. SUBSEQUENT EVENTS

​

On February 17, 2022, the Company completed its acquisition of CANarchy Craft Brewery Collective LLC (“CANarchy”), a craft beer and hard seltzer company, for $330.0 million in cash, subject to adjustments. The transaction allows us to enter the alcohol beverage sector and brings the Cigar City family of brands including Jai Alai IPA and Florida Man IPA, the Oskar Blues family of brands including Dale’s Pale Ale and Wild Basin Hard Seltzers, the Deep Ellum family of brands including Dallas Blonde and Deep Ellum IPA, the Perrin Brewing family of brands including Black Ale, the Squatters family of brands including Hop Rising Double IPA and Juicy IPA and the Wasatch family of brands including Apricot Hefeweizen to our beverage portfolio. The transaction does not include CANarchy’s stand-alone restaurants. The Company’s organizational structure for its existing energy beverage business will remain unchanged. CANarchy will function independently, retaining its own organizational structure and team.

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MONSTER BEVERAGE CORPORATION AND SUBSIDIARIES

SCHEDULE II – VALUATION AND QUALIFYING ACCOUNTS

FOR THE YEARS ENDED DECEMBER 31, 2021, 2020 AND 2019 (Dollars in Thousands)

​

​	​	​	​	​	​	​	​	​	​	​	​	​
​	​	Balance at		​	Charged to		​	​	​	​	Balance at
​	​	beginning		​	cost and		​	​	​	​	end of
Description		of period			expenses			Deductions			period
Allowance for doubtful accounts, sales returns and cash discounts:	​	​	​	​	​	​	​	​	​	​	​	​
​	​	​	​	​	​	​	​	​	​	​	​	​
2021	​	$	1,878	​	$	14,799	​	$	(12,001)	​	$	4,676
2020	​	$	2,045	​	$	9,664	​	$	(9,831)	​	$	1,878
2019	​	$	1,589	​	$	9,583	​	$	(9,127)	​	$	2,045
​	​	​	​	​	​	​	​	​	​	​	​	​
Allowance on Deferred Tax Assets and Unrecognized Tax Benefits:	​	​	​	​	​	​	​	​	​	​	​	​
​	​	​	​	​	​	​	​	​	​	​	​	​
2021	​	$	35,993	​	$	(8,980)	​	$	—	​	$	27,013
2020	​	$	43,853	​	$	(7,860)	​	$	—	​	$	35,993
2019	​	$	42,748	​	$	1,105	​	$	—	​	$	43,853

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