Item 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

​

MONSTER BEVERAGE CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

AS OF SEPTEMBER 30, 2022 AND DECEMBER 31, 2021

(In Thousands, Except Par Value) (Unaudited)

​

​	​	​	​	​	​	​
​	​	September 30,		​	December 31,
​		2022			2021
ASSETS	​	​	​	​	​	​
CURRENT ASSETS:	​	​	​	​	​	​
Cash and cash equivalents	​	$	1,303,048	​	$	1,326,462
Short-term investments	​		1,346,781			1,749,727
Accounts receivable, net	​		1,051,642			896,658
Inventories	​		862,977			593,357
Prepaid expenses and other current assets	​		112,294			82,668
Prepaid income taxes	​		19,949			33,238
Total current assets	​		4,696,691			4,682,110
​	​	​	​	​	​	​
INVESTMENTS	​		72,373			99,419
PROPERTY AND EQUIPMENT, net	​		485,550			313,753
DEFERRED INCOME TAXES, net	​		195,511			225,221
GOODWILL	​		1,412,941			1,331,643
OTHER INTANGIBLE ASSETS, net	​		1,225,826			1,072,386
OTHER ASSETS	​		115,913			80,252
Total Assets	​	$	8,204,805		$	7,804,784
​	​	​	​	​	​	​
LIABILITIES AND STOCKHOLDERS’ EQUITY	​	​	​	​	​	​
CURRENT LIABILITIES:	​	​	​	​	​	​
Accounts payable	​	$	520,198		$	404,263
Accrued liabilities	​		198,692			210,964
Accrued promotional allowances	​		281,650			211,461
Deferred revenue	​		42,608			42,530
Accrued compensation	​		61,426			65,459
Income taxes payable	​		17,143			30,399
Total current liabilities	​		1,121,717			965,076
​	​	​	​	​	​	​
DEFERRED REVENUE	​		226,294			243,249
​	​	​	​	​	​	​
OTHER LIABILITIES	​	​	41,034	​	​	29,508
​	​	​	​	​	​	​
COMMITMENTS AND CONTINGENCIES (Note 12)	​	​	​	​	​	​
​	​	​	​	​	​	​
STOCKHOLDERS’ EQUITY:	​	​	​	​	​	​
Common stock - $0.005 par value; 1,250,000 shares authorized; 641,245 shares issued and 523,965 shares outstanding as of September 30, 2022; 640,043 shares issued and 529,323 shares outstanding as of December 31, 2021	​	​	3,206	​	​	3,200
Additional paid-in capital	​		4,736,141			4,652,620
Retained earnings	​		8,699,499			7,809,549
Accumulated other comprehensive loss	​		(224,455)			(69,165)
Common stock in treasury, at cost; 117,280 shares and 110,720 shares as of September 30, 2022 and December 31, 2021, respectively	​		(6,398,631)			(5,829,253)
Total stockholders’ equity	​		6,815,760			6,566,951
Total Liabilities and Stockholders’ Equity	​	$	8,204,805		$	7,804,784

​

See accompanying notes to condensed consolidated financial statements.

​

MONSTER BEVERAGE CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

FOR THE THREE- AND NINE- MONTHS ENDED SEPTEMBER 30, 2022 AND 2021

(In Thousands, Except Per Share Amounts) (Unaudited)

​

​	​	​	​	​	​	​	​	​	​	​	​	​
​	​	Three-Months Ended					​	Nine-Months Ended
​	​	September 30,					​	September 30,
​		2022			2021			2022			2021
​	​	​	​	​	​	​	​	​	​	​	​	​
NET SALES	​	$	1,624,286	​	$	1,410,557	​	$	4,798,119	​	$	4,116,308
​	​	​	​	​	​	​	​	​	​	​	​	​
COST OF SALES	​		790,561	​		621,399	​		2,407,867	​		1,775,375
​	​	​	​	​	​	​	​	​	​	​	​	​
GROSS PROFIT	​		833,725	​		789,158	​		2,390,252	​		2,340,933
​	​	​	​	​	​	​	​	​	​	​	​	​
OPERATING EXPENSES	​		415,795	​		344,694	​		1,199,883	​		956,346
​	​	​	​	​	​	​	​	​	​	​	​	​
OPERATING INCOME	​		417,930	​		444,464	​	​	1,190,369	​		1,384,587
​	​	​	​	​	​	​	​	​	​	​	​	​
INTEREST and OTHER INCOME (EXPENSE), net	​		2,149	​		(2,290)	​		(11,932)	​		(2,179)
​	​	​	​	​	​	​	​	​	​	​	​	​
INCOME BEFORE PROVISION FOR INCOME TAXES	​		420,079	​		442,174	​	​	1,178,437	​		1,382,408
​	​	​	​	​	​	​	​	​	​	​	​	​
PROVISION FOR INCOME TAXES	​	​	97,692	​	​	104,969	​	​	288,487	​	​	326,247
​	​	​	​	​	​	​	​	​	​	​	​	​
NET INCOME	​	$	322,387	​	$	337,205	​	$	889,950	​	$	1,056,161
​	​	​	​	​	​	​	​	​	​	​	​	​
NET INCOME PER COMMON SHARE:	​	​	​	​	​	​	​	​	​	​	​	​
Basic	​	$	0.61	​	$	0.64	​	$	1.68	​	$	2.00
Diluted	​	$	0.60	​	$	0.63	​	$	1.66	​	$	1.97
​	​	​	​	​	​	​	​	​	​	​	​	​
WEIGHTED AVERAGE NUMBER OF SHARES OF COMMON STOCK AND COMMON STOCK EQUIVALENTS:	​	​	​	​	​	​	​	​	​	​	​	​
Basic	​		526,797	​		528,997	​		528,263	​		528,618
Diluted	​		533,300	​		535,915	​		534,599	​		535,554

​

See accompanying notes to condensed consolidated financial statements.

​

MONSTER BEVERAGE CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

FOR THE THREE- AND NINE- MONTHS ENDED SEPTEMBER 30, 2022 AND 2021

(In Thousands) (Unaudited)

​

​	​	​	​	​	​	​	​	​	​	​	​	​
​	​	Three-Months Ended						Nine-Months Ended
​	​	September 30,					​	September 30,
​		2022			2021			2022			2021
Net income, as reported	​	$	322,387	​	$	337,205	​	$	889,950	​	$	1,056,161
Other comprehensive income (loss):	​	​	​	​	​	​	​	​	​	​	​	​
Change in foreign currency translation adjustment	​		(68,822)	​		(26,716)	​		(147,450)	​		(46,412)
Available-for-sale investments:	​	​	​	​	​	​	​	​	​	​	​	​
Change in net unrealized (losses) gains	​		(2,675)	​		43	​		(7,840)	​		(117)
Reclassification adjustment for net gains included in net income	​		—	​		—	​		—	​		—
Net change in available-for-sale investments	​		(2,675)	​		43	​		(7,840)	​		(117)
Other comprehensive income (loss)	​		(71,497)	​		(26,673)	​		(155,290)	​		(46,529)
Comprehensive income	​	$	250,890	​	$	310,532	​	$	734,660	​	$	1,009,632

​

See accompanying notes to condensed consolidated financial statements.

​

​

MONSTER BEVERAGE CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

FOR THE THREE- AND NINE-MONTHS ENDED SEPTEMBER 30, 2022 AND 2021

(In Thousands) (Unaudited)

​

​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
​	​	​	​	​	​	​	​	​	​	​	​	​	Accumulated Other		​	​	​	​	​	​	Total
​	​	Common stock				​	Additional		​	Retained		​	Comprehensive (Loss)		​	Treasury stock				​	Stockholders’
​		Shares		Amount			Paid-in Capital			Earnings			Income			Shares		Amount			Equity
Balance, December 31, 2021		640,043		$	3,200		$	4,652,620		$	7,809,549		$	(69,165)	​	(110,720)		$	(5,829,253)		$	6,566,951
Stock-based compensation		—	​	​	—	​	​	16,175	​	​	—	​	​	—	​	—	​	​	—	​	​	16,175
Exercise of stock options		485	​	​	3	​	​	4,507	​	​	—	​	​	—	​	—	​	​	—	​	​	4,510
Unrealized loss, net on available-for-sale securities		—	​	​	—	​	​	—	​	​	—	​	​	(4,059)	​	—	​	​	—	​	​	(4,059)
Repurchase of common stock		—	​	​	—	​	​	—	​	​	—	​	​	—	​	(166)	​	​	(12,187)	​	​	(12,187)
Foreign currency translation		—	​	​	—	​	​	—	​	​	—	​	​	1,079	​	—	​	​	—	​	​	1,079
Net income	​	—	​	​	—	​	​	—	​	​	294,203	​	​	—	​	—	​	​	—	​	​	294,203
Balance, March 31, 2022	​	640,528	​	​	3,203	​	​	4,673,302	​	​	8,103,752	​	​	(72,145)	​	(110,886)	​	​	(5,841,440)	​	​	6,866,672
Stock-based compensation	​	—	​	​	—	​	​	16,157	​	​	—	​	​	—	​	—	​	​	—	​	​	16,157
Exercise of stock options	​	416	​	​	2	​	​	18,110	​	​	—	​	​	—	​	—	​	​	—	​	​	18,112
Unrealized loss, net on available-for-sale securities	​	—	​	​	—	​	​	—	​	​	—	​	​	(1,106)	​	—	​	​	—	​	​	(1,106)
Repurchase of common stock	​	—	​	​	—	​	​	—	​	​	—	​	​	—	​	(3,286)	​	​	(284,311)	​	​	(284,311)
Foreign currency translation	​	—	​	​	—	​	​	—	​	​	—	​	​	(79,707)	​	—	​	​	—	​	​	(79,707)
Net income		—	​	​	—	​	​	—	​	​	273,360	​	​	—	​	—	​	​	—	​	​	273,360
Balance, June 30, 2022		640,944	​	​	3,205	​	​	4,707,569	​	​	8,377,112	​	​	(152,958)	​	(114,172)	​	​	(6,125,751)	​	​	6,809,177
Stock-based compensation	​	—	​	​	—	​	​	16,436	​	​	—	​	​	—	​	—	​	​	—	​	​	16,436
Exercise of stock options	​	301	​	​	1	​	​	12,136	​	​	—	​	​	—	​	—	​	​	—	​	​	12,137
Unrealized loss, net on available-for-sale securities	​	—	​	​	—	​	​	—	​	​	—	​	​	(2,675)	​	—	​	​	—	​	​	(2,675)
Repurchase of common stock	​	—	​	​	—	​	​	—	​	​	—	​	​	—	​	(3,108)	​	​	(272,880)	​	​	(272,880)
Foreign currency translation	​	—	​	​	—	​	​	—	​	​	—	​	​	(68,822)	​	—	​	​	—	​	​	(68,822)
Net income	​	—	​	​	—	​	​	—	​	​	322,387	​	​	—	​	—	​	​	—	​	​	322,387
Balance, September 30, 2022	​	641,245	​	$	3,206	​	$	4,736,141	​	$	8,699,499	​	$	(224,455)	​	(117,280)	​	$	(6,398,631)	​	$	6,815,760

​

​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
​	​	​	​	​	​	​	​	​	​	​	​	​	​		​	​	​	​	​	​	​	​
​	​	​	​	​	​	​	​	​	​	​	​	​	Accumulated Other		​	​	​	​	​	​	Total
​	​	Common stock				​	Additional		​	Retained		​	Comprehensive (Loss)		​	Treasury stock				​	Stockholders’
​		Shares		Amount			Paid-in Capital			Earnings			Income			Shares		Amount			Equity
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		—	​	​	—	​	​	17,949	​	​	—	​	​	—	​	—	​	​	—	​	​	17,949
Exercise of stock options		492	​	​	3	​	​	6,758	​	​	—	​	​	—	​	—	​	​	—	​	​	6,761
Unrealized gain, net on available-for-sale securities		—	​		—	​		—	​		—	​		24		—	​		—	​		24
Repurchase of common stock		—	​	​	—	​	​	—	​	​	—	​	​	—	​	(150)	​	​	(13,419)	​	​	(13,419)
Foreign currency translation		—	​	​	—	​	​	—	​	​	—	​	​	(27,932)	​	—	​	​	—	​	​	(27,932)
Net income		—	​	​	—	​	​	—	​	​	315,194	​	​	—	​	—	​	​	—	​	​	315,194
Balance, March 31, 2021		639,154		​	3,196		​	4,562,689		​	6,747,268		​	(24,874)	​	(110,715)		​	(5,828,842)		​	5,459,437
Stock-based compensation		—	​	​	—	​	​	16,921	​	​	—	​	​	—	​	—	​	​	—	​	​	16,921
Exercise of stock options		422	​	​	2	​	​	17,723	​	​	—	​	​	—	​	—	​	​	—	​	​	17,725
Unrealized loss, net on available-for-sale securities		—	​		—	​		—	​		—	​		(183)		—	​		—	​		(183)
Repurchase of common stock		—	​	​	—	​	​	—	​	​	—	​	​	—	​	(4)	​	​	(399)	​	​	(399)
Foreign currency translation	​	—	​	​	—	​	​	—	​	​	—	​	​	8,235	​	—	​	​	—	​	​	8,235
Net income	​	—	​	​	—	​	​	—	​	​	403,762	​	​	—	​	—	​	​	—	​	​	403,762
Balance, June 30, 2021		639,576		​	3,198		​	4,597,333		​	7,151,030		​	(16,822)	​	(110,719)		​	(5,829,241)		​	5,905,498
Stock-based compensation		—	​	​	—	​	​	16,293	​	​	—	​	​	—	​	—	​	​	—	​	​	16,293
Exercise of stock options		275	​	​	1	​	​	12,673	​	​	—	​	​	—	​	—	​	​	—	​	​	12,674
Unrealized gain, net on available-for-sale securities		—	​		—	​		—	​		—	​		43		—	​		—	​		43
Foreign currency translation		—	​	​	—	​	​	—	​	​	—	​	​	(26,716)	​	—	​	​	—	​	​	(26,716)
Net income	​	—	​	​	—	​	​	—	​	​	337,205	​	​	—	​	—	​	​	—	​	​	337,205
Balance, September 30, 2021		639,851	​	$	3,199	​	$	4,626,299	​	$	7,488,235	​	$	(43,495)	​	(110,719)	​	$	(5,829,241)	​	$	6,244,997

​

See accompanying notes to condensed consolidated financial statements.

​

MONSTER BEVERAGE CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE NINE-MONTHS ENDED SEPTEMBER 30, 2022 AND 2021

(In Thousands) (Unaudited)

​

​	​	​	​	​	​	​
​	​	Nine-Months Ended
​	​	September 30,
​		2022			2021
CASH FLOWS FROM OPERATING ACTIVITIES:	​	​	​	​	​	​
Net income	​	$	889,950	​	$	1,056,161
Adjustments to reconcile net income to net cash provided by operating activities:	​	​	​	​	​	​
Depreciation and amortization	​	​	46,040	​	​	37,854
Non-cash lease expense	​	​	5,180	​	​	2,862
Gain on disposal of property and equipment	​	​	(253)	​	​	(984)
Stock-based compensation	​	​	49,167	​	​	52,391
Deferred income taxes	​	​	29,710	​	​	353
Effect on cash of changes in operating assets and liabilities net of acquisition:	​	​	​	​	​	​
Accounts receivable	​	​	(202,447)	​	​	(199,481)
Inventories	​	​	(297,140)	​	​	(149,414)
Prepaid expenses and other assets	​	​	(39,204)	​	​	(41,162)
Prepaid income taxes	​	​	7,867	​	​	(7,365)
Accounts payable	​	​	52,663	​	​	106,570
Accrued liabilities	​	​	(2,572)	​	​	39,387
Accrued promotional allowances	​	​	89,236	​	​	51,022
Accrued compensation	​	​	(6,636)	​	​	(2,888)
Income taxes payable	​	​	(12,823)	​	​	(114)
Other liabilities	​	​	(3,492)	​	​	574
Deferred revenue	​	​	(16,060)	​	​	(17,784)
Net cash provided by operating activities	​	​	589,186	​	​	927,982
​	​	​	​	​	​	​
CASH FLOWS FROM INVESTING ACTIVITIES:	​	​	​	​	​	​
Sales of available-for-sale investments	​	​	1,823,943	​	​	1,016,556
Purchases of available-for-sale investments	​	​	(1,393,910)	​	​	(1,343,351)
Acquisition of CANarchy, net of cash	​	​	(329,472)	​	​	—
Purchases of property and equipment	​	​	(136,158)	​	​	(28,131)
Proceeds from sale of property and equipment	​	​	603	​	​	1,246
Additions to intangibles	​	​	(3,578)	​	​	(5,211)
Increase in other assets	​	​	(19,171)	​	​	(22,809)
Net cash used in investing activities	​	​	(57,743)	​	​	(381,700)
​	​	​	​	​	​	​
CASH FLOWS FROM FINANCING ACTIVITIES:	​	​	​	​	​	​
Payments on debt	​	​	(719)	​	​	(1,814)
Issuance of common stock	​	​	34,759	​	​	37,160
Purchases of common stock held in treasury	​	​	(493,315)	​	​	(13,818)
Net cash (used in) provided by financing activities	​	​	(459,275)	​	​	21,528
​	​	​	​	​	​	​
Effect of exchange rate changes on cash and cash equivalents	​	​	(95,582)	​	​	(35,552)
​	​	​	​	​	​	​
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS	​	​	(23,414)	​	​	532,258
CASH AND CASH EQUIVALENTS, beginning of period	​	​	1,326,462	​	​	1,180,413
CASH AND CASH EQUIVALENTS, end of period	​	$	1,303,048	​	$	1,712,671
​	​	​	​	​	​	​
SUPPLEMENTAL INFORMATION:	​	​	​	​	​	​
Cash paid during the period for:	​	​	​	​	​	​
Interest	​	$	359	​	$	99
Income taxes	​	$	297,526	​	$	338,584

​

See accompanying notes to condensed consolidated financial statements.

​

MONSTER BEVERAGE CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE NINE-MONTHS ENDED SEPTEMBER 30, 2022 AND 2021

(In Thousands) (Unaudited) (Continued)

SUPPLEMENTAL DISCLOSURE OF NON-CASH ITEMS

Included in accrued liabilities as of September 30, 2022 and 2021 were $14.4 million and $13.0 million, respectively, related to net additions to other intangible assets.

Included in accounts payable as of September 30, 2022 and 2021 were $2.6 million and $0.5 million, respectively, related to equipment purchases.

Included in accounts payable as of September 30, 2021 were $2.0 million related to additions to other intangible assets.

Included in accounts payable as of September 30, 2022 were available-for-sale short-term investment purchases of $7.9 million.

Included in accounts payable as of September 30, 2022 were purchases of common stock held in treasury of $76.1 million.

See accompanying notes to condensed consolidated financial statements.

​

​

MONSTER BEVERAGE CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Tabular Dollars in Thousands, Except Per Share Amounts) (Unaudited)

​

1.	BASIS OF PRESENTATION

Reference is made to the Notes to Consolidated Financial Statements, in Monster Beverage Corporation and Subsidiaries (the “Company”) Annual Report on Form 10-K for the year ended December 31, 2021 for a summary of significant accounting policies utilized by the Company and its consolidated subsidiaries and other disclosures, which should be read in conjunction with this Quarterly Report on Form 10-Q (“Form 10-Q”).

The Company’s condensed consolidated financial statements included in this Form 10-Q have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and Securities and Exchange Commission (“SEC”) rules and regulations applicable to interim financial reporting. They do not include all the information and footnote disclosures normally included in annual financial statements prepared in accordance with GAAP. The information set forth in these interim condensed consolidated financial statements for the three- and nine-months ended September 30, 2022 and 2021, respectively, is unaudited and reflects all adjustments, which include only normal recurring adjustments and which in the opinion of management are necessary to make the interim condensed consolidated financial statements not misleading. Results of operations for periods covered by this report may not necessarily be indicative of results of operations for the full year.

The preparation of financial statements in conformity with GAAP necessarily 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 periods. Actual results could differ from these estimates.

Recent Accounting Pronouncements

There have been no changes in recently issued or adopted accounting pronouncements that would materially impact the Company from those disclosed in our Annual Report on Form 10-K for the fiscal year ended December 31, 2021.

​

2.	ACQUISITIONS

On February 17, 2022, the Company completed its acquisition of CANarchy Craft Brewery Collective LLC (“CANarchy”), a craft beer and hard seltzer company, for $330.4 million in cash, subject to adjustments (the “CANarchy Transaction”). The CANarchy Transaction facilitates the Company’s entry into the alcohol beverage sector and brings the Cigar CityTM family of brands including Jai Alai® IPA and Florida ManTM IPA, the Oskar BluesTM family of brands including Dale’s Pale Ale® and Wild BasinTM Hard Seltzers, the Deep EllumTM family of brands including Dallas Blonde® and Deep EllumTM IPA, the Perrin BrewingTM family of brands including Black Ale, the Squatters® family of brands including Hop Rising® Double IPA and Juicy IPA, the Wasatch® family of brands including Apricot Hefeweizen, as well as certain other brands (collectively the “CANarchy Brands”) to the Company’s beverage portfolio. The transaction did not include CANarchy’s stand-alone restaurants. The Company’s organizational structure for its existing energy beverage business remains unchanged. CANarchy is functioning independently, retaining its own organizational structure and team.

The Company accounted for the CANarchy Transaction in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 805 “Business Combinations”.

MONSTER BEVERAGE CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Tabular Dollars in Thousands, Except Per Share Amounts) (Unaudited)

​

The following table summarizes the fair value allocations of the CANarchy Transaction:

​

​	​	​	​	​	​	​
​	​	Identifiable		​	​	​
​	​	Assets Acquired		​	​	​
​	​	and Liabilities		​	Consideration
​	​	Assumed		​	Transferred
Intangibles - trademarks (non-amortizing)	​	$	94,500	​	$	—
Intangibles - customer relationships (amortizing)	​	​	54,500	​		—
Intangibles - permits (non-amortizing)	​	​	6,000	​		—
Property and equipment, net	​	​	81,285	​		—
Inventory	​	​	18,300	​		—
Right-of -use assets	​	​	12,836	​		—
Operating lease liabilities	​	​	(12,836)	​		—
Working capital (excluding inventory)	​	​	(5,640)	​		—
Other	​	​	(770)	​		—
Goodwill	​	​	81,298	​		—
Cash	​		3,248	​		332,721
Total	​	$	332,721	​	$	332,721

​

The Company determined the fair values as follows:

	●	Trademarks – relief-from-royalty method of the income approach

	●	Customer relationships – distributor method of the income approach

	●	Permits – with-and-without method of the income approach

	●	Property and equipment – cost approach

	●	Inventory – comparative sales method and replacement cost method

The book value of the working capital (excluding inventory) approximates fair value due to the short-term nature of the accounts.

The Company has determined goodwill in accordance with ASC 805, which requires the recognition of goodwill for the excess of the aggregate consideration over the net amounts of identifiable assets acquired and liabilities assumed as of the acquisition date.

For tax purposes, the CANarchy Transaction was recorded as an asset purchase. As such, the Company received a step-up in tax basis of the CANarchy assets, net, equal to the purchase price.

In accordance with Regulation S-X, pro forma unaudited condensed financial information for the CANarchy Transaction has not been provided as the impact of the transaction on the Company’s financial position, results of operations and liquidity was not material.

On May 5, 2022, the Company acquired certain real property and equipment in Norwalk, California for a purchase price of $62.5 million. The acquisition was treated as an asset acquisition for accounting purposes. The fair value allocations include $50.6 million for land, $10.0 million for building and $1.9 million for equipment. The Company intends to utilize the property as a manufacturing facility for certain of its products.

​

MONSTER BEVERAGE CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Tabular Dollars in Thousands, Except Per Share Amounts) (Unaudited)

​

3.	REVENUE RECOGNITION

The Company has four 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, (iii) Alcohol Brands segment (“Alcohol Brands”), which is primarily comprised of the various craft beers and hard seltzers purchased as part of the CANarchy Transaction on February 17, 2022 and (iv) 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 Company’s Alcohol Brands segment primarily generates operating revenues by selling kegged and canned beer as well as hard seltzers primarily to distributors in the United States.

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 September 30, 2022 and December 31, 2021.

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.

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;

	●	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;

MONSTER BEVERAGE CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Tabular Dollars in Thousands, Except Per Share Amounts) (Unaudited)

​

	●	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 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, 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 CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Tabular Dollars in Thousands, Except Per Share Amounts) (Unaudited)

​

Disaggregation of Revenue

The following tables disaggregate the Company’s revenue by geographical markets and reportable segments:

​

​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
​	​	Three-Months Ended September 30, 2022
​	​	​	​		​	​		​	​		Latin			​	​
​	​	​	​	​	​	​	​	​	​	​	America		​		​
​	​	U.S. and		​	​	​	​	​	​	​	and		​		​
Net Sales		Canada			EMEA1			Asia Pacific			Caribbean			Total
Monster Energy® Drinks	​	$	982,952	​	$	288,077	​	$	100,288	​	$	130,902	​	$	1,502,219
Strategic Brands	​		44,025	​		32,565	​		8,805	​		3,407	​		88,802
Alcohol Brands	​	​	26,818	​	​	—	​	​	—	​	​	—	​	​	26,818
Other	​		6,447	​		—	​		—	​		—	​		6,447
Total Net Sales	​	$	1,060,242	​	$	320,642	​	$	109,093	​	$	134,309	​	$	1,624,286

​

​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
​	​	Three-Months Ended September 30, 2021
​	​	​	​		​	​		​	​		Latin		​		​
​	​	​	​	​	​	​	​	​	​	​	America		​	​	​
​	​	U.S. and		​	​	​	​	​		​	and		​	​	​
Net Sales		Canada			EMEA1			Asia Pacific			Caribbean			Total
Monster Energy® Drinks	​	$	880,012	​	$	252,101	​	$	120,864	​	$	76,816	​	$	1,329,793
Strategic Brands	​	​	35,417	​		28,450	​		5,603	​		4,979	​		74,449
Alcohol Brands	​	​	—	​	​	—	​	​	—	​	​	—	​	​	—
Other	​	​	6,315	​		—	​		—	​		—	​		6,315
Total Net Sales	​	$	921,744	​	$	280,551	​	$	126,467	​	$	81,795	​	$	1,410,557

​

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

​

​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
​	​	Nine-Months Ended September 30, 2022
​	​	​	​		​	​		​	​		Latin			​	​
​	​	​	​	​	​	​	​	​	​	​	America		​	​	​
​	​	U.S. and		​	​	​	​			​	and		​	​	​
Net Sales		Canada			EMEA1			Asia Pacific			Caribbean			Total
Monster Energy® Drinks	​	$	2,882,306	​	$	857,805	​	$	327,632	​	$	377,012	​	$	4,444,755
Strategic Brands	​		135,445	​		91,912	​		22,943	​		10,236	​		260,536
Alcohol Brands2	​		74,472	​		—	​		—	​		—	​		74,472
Other	​		18,356	​		—	​		—	​		—	​		18,356
Total Net Sales	​	$	3,110,579	​	$	949,717	​	$	350,575	​	$	387,248	​	$	4,798,119

​

​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
​	​	Nine-Months Ended September 30, 2021
​		​	​		​	​		​	​		Latin			​	​
​	​	​	​	​	​	​	​	​	​	​	America		​	​	​
​	​	U.S. and		​	​	​	​			​	and		​	​	​
Net Sales		Canada			EMEA1			Asia Pacific			Caribbean			Total
Monster Energy® Drinks	​	$	2,548,873	​	$	741,208	​	$	346,545	​	$	230,536	​	$	3,867,162
Strategic Brands	​		122,487	​		76,234	​		21,047	​		9,425	​		229,193
Alcohol Brands	​		—	​		—	​		—	​		—	​		—
Other	​		19,953	​		—	​		—	​		—	​		19,953
Total Net Sales	​	$	2,691,313	​	$	817,442	​	$	367,592	​	$	239,961	​	$	4,116,308

​

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

2_Effectively from February 17, 2022 to September 30, 2022_

MONSTER BEVERAGE CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Tabular Dollars in Thousands, Except Per Share Amounts) (Unaudited)

​

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 September 30, 2022, the Company had $268.9 million of deferred revenue, which is included in current and long-term deferred revenue in the Company’s condensed consolidated balance sheet. As of December 31, 2021, the Company had $285.8 million of deferred revenue, which is included in current and long-term deferred revenue in the Company’s condensed consolidated balance sheet. During the three-months ended September 30, 2022 and 2021, $10.0 million and $10.4 million, respectively, of deferred revenue was recognized in net sales. See Note 11. During the nine-months ended September 30, 2022 and 2021, $30.0 million and $31.3 million, respectively, of deferred revenue was recognized in net sales. See Note 11.

​

4.	LEASES

The Company leases identified assets comprising of 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 the 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 condensed 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 condensed consolidated statement of income. Interest expense on finance leases is calculated using the amortized cost basis and is included in interest and other income (expense), net in the condensed 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 CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Tabular Dollars in Thousands, Except Per Share Amounts) (Unaudited)

​

The components of lease cost were comprised of the following:

​

​	​	​	​	​	​	​	​	​	​	​	​	​
​	​	Three-Months		​	Three-Months		​	Nine-Months		​	Nine-Months
​	​	Ended		​	Ended		​	Ended		​	Ended
​	​	September 30,		​	September 30,		​	September 30,		​	September 30,
​		2022			2021			2022			2021
Operating lease cost	​	$	2,306	​	$	1,103	​	$	6,238	​	$	3,348
​	​	​	​	​	​	​	​	​	​	​	​	​
Short-term lease cost	​		1,001	​		1,235	​		2,870	​		3,370
​	​	​	​	​	​	​	​	​	​	​	​	​
Variable lease cost	​		189	​		185	​		567	​		532
​	​	​	​	​	​	​	​	​	​	​	​	​
Finance leases:	​	​	​	​	​	​	​	​	​	​	​	​
Amortization of ROU assets	​		140	​		138	​		415	​		394
Interest on lease liabilities	​		8	​		6	​		18	​		15
Finance lease cost	​		148	​		144	​		433	​		409
​	​	​	​	​	​	​	​	​	​	​	​	​
Total lease cost	​	$	3,644	​	$	2,667	​	$	10,108	​	$	7,659

​

Supplemental cash flow information for the following periods:

​

​	​	​	​	​	​	​
​	​	Nine-Months		​	Nine-Months
​	​	Ended September 30,		​	Ended September 30,
​		2022			2021
Cash paid for amounts included in the measurement of lease liabilities:	​	​	​	​	​	​
Operating cash outflows from operating leases	​	$	5,859	​	$	3,057
Operating cash outflows from finance leases	​	​	18	​	​	15
Financing cash outflows from finance leases	​	​	1,678	​	​	1,970
​	​	​	​	​	​	​
ROU assets obtained in exchange for lease obligations:	​	​	​	​	​	​
Finance leases	​	​	1,654	​	​	2,767
Operating leases	​	​	20,093	​	​	251

​

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

​

​	​	​	​	​	​	​	​	​	​	​	​
​	​	September 30, 2022								​	​
​		Real Estate			Equipment			Total			Balance Sheet Location
Operating leases	​	$	36,681	​	$	404	​	$	37,085	​	Other Assets
Finance leases	​		—	​		1,753	​		1,753	​	Property and Equipment, net

​

​	​	​	​	​	​	​	​	​	​	​	​
​	​	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

​

MONSTER BEVERAGE CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Tabular Dollars in Thousands, Except Per Share Amounts) (Unaudited)

​

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

​

​	​	​	​	​	​	​
​	​	September 30, 2022
​		Operating Leases			Finance Leases
Accrued liabilities	​	$	7,028	​	$	917
Other liabilities	​		29,265	​		48
Total	​	$	36,293	​	$	965

​

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

​

The weighted-average remaining lease terms and weighted-average discount rates for operating and finance leases at September 30, 2022 and December 31, 2021 were as follows:

​

​	​	​	​	​	​
​	​	September 30, 2022			​
​		Operating Leases		Finance Leases
Weighted-average remaining lease term (years)	​	7.1		0.8	​
Weighted-average discount rate	​	3.4	%	2.7	%

​

​	​	​	​	​	​
​	​	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	%

​

The following table reconciles the undiscounted future lease payments for operating and finance leases to the operating and finance leases recorded in the Company’s condensed consolidated balance sheet at September 30, 2022:

​

​	​	​	​	​	​	​
​		Undiscounted Future Lease Payments
​		Operating Leases			Finance Leases
2022 (from October 1, 2022 to December 31, 2022)	​	$	2,038	​	$	410
2023	​		7,829	​		525
2024	​		6,473	​		23
2025	​		4,808	​		17
2026	​	​	3,895	​	​	2
2027 and thereafter	​		15,974	​		—
Total lease payments	​		41,017	​		977
Less imputed interest	​		(4,724)	​		(12)
Total	​	$	36,293	​	$	965

​

As of September 30, 2022, the Company did not have any significant additional operating or finance leases that have not yet commenced.

​

​

MONSTER BEVERAGE CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Tabular Dollars in Thousands, Except Per Share Amounts) (Unaudited)

​

5.	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
September 30, 2022		Cost			Gains			Losses			Value			Months			Months
Available-for-sale	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
Short-term:	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
Commercial paper	​	$	218,573	​	$	—	​	$	7	​	$	218,566	​	$	7	​	$	—
Certificates of deposit	​	​	20,035	​	​	—	​	​	—	​	​	20,035	​	​	—	​	​	—
Municipal securities	​		193,567	​	​	4	​	​	1,142	​	​	192,429	​	​	1,142	​	​	​
U.S. government agency securities	​		88,573	​		—	​		851	​		87,722	​		851	​		—
U.S. treasuries	​	​	834,249	​		—	​		6,220	​		828,029	​		6,220	​		—
Long-term:	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
U.S. treasuries	​	​	55,684	​	​	—	​	​	476	​	​	55,208	​	​	476	​	​	—
Municipal securities	​	​	5,562	​	​	—	​	​	35	​	​	5,527	​	​	35	​	​	​
U.S. government agency securities	​	​	11,711	​	​	1	​	​	74	​	​	11,638	​	​	74	​	​	—
Total	​	$	1,427,954	​	$	5	​	$	8,805	​	$	1,419,154	​	$	8,805	​	$	—

​

​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
​	​	​	​	​	​	​	​	​	​	​	​	​	​	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	​	$	—

​

During the three- and nine-months ended September 30, 2022 and 2021, realized gains or losses recognized on the sale of investments were not significant.

The Company’s investments at September 30, 2022 and December 31, 2021 carried investment grade credit ratings.

MONSTER BEVERAGE CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Tabular Dollars in Thousands, Except Per Share Amounts) (Unaudited)

​

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

​

​	​	​	​	​	​	​	​	​	​	​	​	​
​	​	September 30, 2022					​	December 31, 2021
​		Amortized Cost			Fair Value			Amortized Cost			Fair Value
Less than 1 year:	​	​	​	​	​	​	​	​	​	​	​	​
Commercial paper	​	$	218,573	​	$	218,566		$	334,077	​	$	334,077
Municipal securities	​		193,567	​		192,429			666	​		666
U.S. government agency securities	​		88,573	​		87,722			62,687	​		62,661
Certificates of deposit	​		20,035	​		20,035			44,502	​		44,502
U.S. treasuries	​	​	834,249	​	​	828,029	​	​	1,308,536	​	​	1,307,821
Due 1 -10 years:	​	​	​	​	​	​	​	​	​	​	​	​
Municipal securities	​		5,562	​		5,527			—	​		—
U.S. treasuries	​	​	55,684	​	​	55,208	​	​	87,133	​	​	86,943
U.S. government agency securities	​		11,711	​		11,638			12,500	​		12,476
Total	​	$	1,427,954	​	$	1,419,154		$	1,850,101	​	$	1,849,146

​

​

6.	FAIR VALUE OF CERTAIN FINANCIAL ASSETS AND LIABILITIES

ASC 820, “Fair Value Measurement”, provides a framework for measuring fair value and requires disclosures regarding fair value measurements. ASC 820 defines fair value as the price that would be received on the sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. ASC 820 also establishes a fair value hierarchy that 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.

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 CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Tabular Dollars in Thousands, Except Per Share Amounts) (Unaudited)

​

The following tables present the fair value of the 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:

​

​	​	​	​	​	​	​	​	​	​	​	​	​
September 30, 2022		Level 1			Level 2			Level 3			Total
Cash	​	$	1,113,207	​	$	—	​	$	—	​	$	1,113,207
Money market funds	​		116,952	​		—	​		—	​		116,952
Certificates of deposit	​	​	—	​	​	20,035	​	​	—	​	​	20,035
Commercial paper	​		—	​		234,310	​		—	​		234,310
Municipal securities	​		—	​		203,159	​		—	​		203,159
U.S. government agency securities	​		—	​		99,361	​		—	​		99,361
U.S. treasuries	​	​	—	​	​	935,178	​	​	—	​	​	935,178
Foreign currency derivatives	​		—	​		(204)	​		—	​		(204)
Total	​	$	1,230,159	​	$	1,491,839	​	$	—	​	$	2,721,998
​	​	​	​	​	​	​	​	​	​	​	​	​
Amounts included in:	​	​	​	​	​	​	​	​	​	​	​	​
Cash and cash equivalents	​	$	1,230,159	​	$	72,889	​	$	—	​	$	1,303,048
Short-term investments	​		—	​		1,346,781	​		—	​		1,346,781
Accounts receivable, net	​		—	​		694	​		—	​		694
Investments	​		—	​		72,373	​		—	​		72,373
Accrued liabilities	​		—	​		(898)	​		—	​		(898)
Total	​	$	1,230,159	​	$	1,491,839	​	$	—	​	$	2,721,998

​

​	​	​	​	​	​	​	​	​	​	​	​	​
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

​

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 nine-months ended September 30, 2022, or during the year-ended December 31, 2021, and there were no changes in the Company’s valuation techniques.

​

MONSTER BEVERAGE CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Tabular Dollars in Thousands, Except Per Share Amounts) (Unaudited)

​

7.	DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES

The Company is exposed to foreign currency exchange rate risks related primarily to its foreign business operations. During the nine-months ended September 30, 2022 and the year-ended December 31, 2021, 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 of the Company that were outstanding as of September 30, 2022 have terms of one month 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 ASC 815, “Derivatives and Hedging”. Therefore, gains and losses on the Company’s foreign currency exchange contracts are recognized in interest and other income (expense), net, in the condensed consolidated statements of income, and are largely offset by the changes in the fair value of the underlying economically hedged item.

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

​

​	​	​	​	​	​	​	​	​
September 30, 2022
Derivatives not designated as	​	​	​	​	​	​	​	​
hedging instruments under	​	Notional		​	Fair		​	​
ASC 815		Amount			Value			Balance Sheet Location
Assets:	​	​	​	​	​	​	​	​
Foreign currency exchange contracts:	​	​	​	​	​	​	​	​
Receive USD/pay COP	​	$	11,264	​	$	298		Accounts receivable, net
Receive USD/pay CLP	​	​	42,139	​	​	250		Accounts receivable, net
Receive USD/pay NZD	​	​	3,614	​	​	81		Accounts receivable, net
Receive USD/pay ZAR	​	​	3,172	​		41		Accounts receivable, net
Receive RSD/pay USD	​	​	1,809	​	​	16	​	Accounts receivable, net
Receive USD/pay AUD	​	​	520	​	​	8	​	Accounts receivable, net
​	​	​	​	​	​	​	​	​
Liabilities:	​	​	​	​	​	​	​	​
Foreign currency exchange contracts:	​	​	​	​	​	​	​	​
Receive USD/pay GBP	​	$	12,492	​	$	(308)	​	Accrued liabilities
Receive CAD/pay USD	​	​	20,757	​	​	(277)	​	Accrued liabilities
Receive USD/pay CNY	​	​	11,877	​	​	(141)		Accrued liabilities
Receive USD/pay EUR	​	​	16,703	​		(82)		Accrued liabilities
Receive SGD/pay USD	​	​	16,969	​	​	(47)	​	Accrued liabilities
Receive USD/pay MXN	​	​	20,673	​	​	(34)	​	Accrued liabilities
Receive USD/pay DKK	​	​	1,893	​		(9)		Accrued liabilities

​

MONSTER BEVERAGE CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Tabular Dollars in Thousands, Except Per Share Amounts) (Unaudited)

​

​

​	​	​	​	​	​	​	​	​
December 31, 2021
Derivatives not designated as	​	​	​	​	​	​	​	​
hedging instruments under	​	Notional		​	Fair		​	​
ASC 815		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

​

The net gains (losses) on derivative instruments in the condensed consolidated statements of income were as follows:

​

​	​	​	​	​	​	​	​	​
​	​	​	​	Amount of gain (loss)
​	​	​	​	recognized in income on
​	​	​	​	derivatives
​	​	​	​	Three-months ended
Derivatives not designated as	​	Location of gain (loss)	​	​	​	​	​	​
hedging instruments under	​	recognized in income on	​	September 30,		​	September 30,
ASC 815		derivatives		2022			2021
Foreign currency exchange contracts		Interest and other income (expense), net	​	$	4,631	​	$	(308)

​

​	​	​	​	​	​	​	​	​
​	​	​	​	Amount of gain (loss)
​	​	​	​	recognized in income on
​	​	​	​	derivatives
​	​	​	​	Nine-months ended
Derivatives not designated as	​	Location of gain (loss)	​	​	​	​	​	​
hedging instruments under	​	recognized in income on	​	September 30,		​	September 30,
ASC 815		derivatives		2022			2021
Foreign currency exchange contracts		Interest and other income (expense), net	​	$	1,355	​	$	(5,706)

​

​

MONSTER BEVERAGE CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Tabular Dollars in Thousands, Except Per Share Amounts) (Unaudited)

​

8.	INVENTORIES

Inventories consist of the following at:

​

​	​	​	​	​	​	​
​		September 30,			December 31,
​		2022			2021
Raw materials	​	$	450,097	​	$	349,865
Work in process	​	​	1,574	​	​	—
Finished goods	​		411,306	​		243,492
​	​	$	862,977	​	$	593,357

​

​

9.	PROPERTY AND EQUIPMENT, NET

Property and equipment consist of the following at:

​

​	​	​	​	​	​	​
​		September 30,			December 31,
​		2022			2021
Land	​	$	139,248	​	$	85,455
Leasehold improvements	​		30,710	​		11,795
Furniture and fixtures	​		9,175	​		8,274
Office and computer equipment	​		22,642	​		21,601
Computer software	​		6,496	​		7,409
Equipment	​		253,057	​		189,820
Buildings	​		162,034	​		148,971
Vehicles	​		46,715	​		45,088
Assets under construction	​	​	58,791	​	​	20,125
​	​		728,868	​		538,538
Less: accumulated depreciation and amortization	​		(243,318)	​		(224,785)
​	​	$	485,550	​	$	313,753

​

Total depreciation and amortization expense recorded was $13.6 million and $11.3 million for the three-months ended September 30, 2022 and 2021, respectively. Total depreciation and amortization expense recorded was $40.5 million and $34.5 million for the nine-months ended September 30, 2022 and 2021, respectively.

​

MONSTER BEVERAGE CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Tabular Dollars in Thousands, Except Per Share Amounts) (Unaudited)

​

10.GOODWILL AND OTHER INTANGIBLE ASSETS

The following is a roll-forward of goodwill for the nine-months ended September 30, 2022 and 2021 by reportable segment:

​

​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
​	​	Monster		​	​	​	​	​	​	​	​	​	​	​	​
​	​	Energy®		​	Strategic		​	Alcohol		​	​	​	​	​	​
​		Drinks			Brands			Brands			Other			Total
Balance at December 31, 2021	​	$	693,644	​	$	637,999	​	$	—	​	$	—	​	$	1,331,643
Acquisitions	​		—	​		—	​		81,298	​		—	​		81,298
Balance at September 30, 2022	​	$	693,644	​	$	637,999	​	$	81,298	​	$	—	​	$	1,412,941

​

​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
​	​	Monster		​	​	​	​	​	​	​	​	​	​	​	​
​	​	Energy®		​	Strategic		​	Alcohol		​	​	​	​	​	​
​		Drinks			Brands			Brands			Other			Total
Balance at December 31, 2020	​	$	693,644	​	$	637,999	​	$	—	​	$	—	​	$	1,331,643
Acquisitions	​		—	​		—	​		—	​		—	​		—
Balance at September 30, 2021	​	$	693,644	​	$	637,999	​	$	—	​	$	—	​	$	1,331,643

​

Intangible assets consist of the following at:

​

​	​	​	​	​	​	​
​		September 30,			December 31,
​		2022			2021
Amortizing intangibles	​	$	121,372	​	$	66,872
Accumulated amortization	​		(66,781)	​		(61,227)
​	​		54,591	​		5,645
Non-amortizing intangibles	​		1,171,235	​		1,066,741
​	​	$	1,225,826	​	$	1,072,386

​

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 fifteen years. Total amortization expense recorded was $2.0 million and $1.1 million for the three-months ended September 30, 2022 and 2021, respectively. Total amortization expense recorded was $5.6 million and $3.3 million for the nine-months ended September 30, 2022 and 2021, respectively.

The following is the future estimated amortization expense related to amortizing intangibles as of September 30, 2022:

​

​	​	​	​
2022 (from October 1, 2022 to December 31, 2022)		$	2,010
2023	​	​	4,745
2024	​	​	3,647
2025	​	​	3,647
2026	​	​	3,646
2027 and thereafter	​	​	36,896
​	​	$	54,591

​

​

11.	DISTRIBUTION AGREEMENTS

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, or at the inception of certain sales/marketing programs are accounted for as deferred revenue and are recognized as revenue ratably over the anticipated life of the respective agreement, generally 20 years or program duration, as the case may be. Revenue recognized was $10.0

MONSTER BEVERAGE CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Tabular Dollars in Thousands, Except Per Share Amounts) (Unaudited)

​

million and $10.4 million for the three-months ended September 30, 2022 and 2021, respectively. Revenue recognized was $30.0 million and $31.3 million for the nine-months ended September 30, 2022 and 2021, respectively.

​

12.	COMMITMENTS AND CONTINGENCIES

The Company had purchase commitments aggregating approximately $275.5 million at September 30, 2022, which represented 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 had contractual obligations aggregating approximately $338.9 million at September 30, 2022, which related primarily to sponsorships and other marketing activities.

The Company has a credit facility with HSBC Bank (China) Company Limited, Shanghai Branch, of $15.0 million. At September 30, 2022, the interest rate on borrowings under the line of credit was 5.5%. As of September 30, 2022, $6.3 million was outstanding on this line of credit.

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 September 30, 2022, no loss contingencies were included in the Company’s condensed consolidated balance sheet.

​

On September 29, 2022, a jury in the U.S. District Court for the Central District of California awarded Monster Energy Company (“MEC”) approximately $293 million in damages in its false advertising and trade secrets case against Vital Pharmaceuticals, Inc. (“VPX”), the maker of Bang Energy. The jury found VPX and its chief executive officer to have falsely advertised the “super creatine” ingredient of Bang Energy and to have acted willfully and deliberately in violating the federal Lanham Act. The jury also found that VPX stole trade secrets and interfered with the Company’s contracts over shelf space with certain key vendors. VPX may also be liable for enhanced and punitive damages as will be determined by the judge presiding over the case at a later date.

​

In April 2022, MEC and Orange Bang, Inc. (“Orange Bang”) filed a joint motion in the United States District Court for the Central District of California to confirm a final arbitration award against VPX that awarded MEC and Orange Bang $175.0 million and a 5% royalty on all future sales of VPX’s Bang Energy drink and other Bang-branded products as well as certain fees and costs. Pursuant to the terms of the agreement between MEC and Orange Bang, the award and future royalties will be shared equally between MEC and Orange Bang. The arbitration arose from a settlement agreement that VPX entered into in 2010 with Orange Bang, a family-owned beverage business. Pursuant to the terms of that agreement, VPX is only permitted to use the Bang mark on “creatine-based” products or on Bang products that are marketed and sold only in the vitamin and dietary supplement sections of stores. On September 29, 2022, the United States District Court for the Central District of California entered final judgment confirming the award. On October 28, 2022, VPX filed a notice of appeal of the District Court’s final judgement confirming the award.

​

On October 10, 2022, VPX, along with certain of its domestic subsidiaries and affiliates, filed for protection under Chapter 11 of the Bankruptcy Code in the Southern District of Florida. Per ASC 450 “Contingencies”, the Company will not recognize the September 2022 jury award or April 2022 arbitration award until the awards are realized or realizable. As of November 4, 2022, the proceedings have yet to progress to a stage where there is sufficient information for an accurate timeline of when the awards will be realized or realizable, if at all.

​

MONSTER BEVERAGE CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Tabular Dollars in Thousands, Except Per Share Amounts) (Unaudited)

​

13.	ACCUMULATED OTHER COMPREHENSIVE LOSS

Changes in accumulated other comprehensive loss by component, after tax, for the nine-months ended September 30, 2022 and 2021 are as follows:

​

​	​	​	​	​	​	​	​	​	​
​	​	​	​	​	Unrealized		​	​	​
​		Currency			Losses on			​	​
​	​	Translation		​	Available-for-		​	​	​
​		Losses			Sale Securities			Total
Balance at December 31, 2021	​	$	(68,209)	​	$	(956)	​	$	(69,165)
Other comprehensive (loss) income before reclassifications	​		(147,450)	​	​	(7,840)	​	​	(155,290)
Amounts reclassified from accumulated other comprehensive (loss) income	​		—	​	​	—	​	​	—
Net current-period other comprehensive (loss) income	​		(147,450)	​	​	(7,840)	​	​	(155,290)
Balance at September 30, 2022	​	$	(215,659)	​	$	(8,796)	​	$	(224,455)

​

​	​	​	​	​	​	​	​	​	​
​	​	​	​	​	Unrealized		​	​	​
​		Currency		​	Gains (Losses)		​	​	​
​		Translation			on Available-for-			​	​
​		Losses			Sale Securities			Total
Balance at December 31, 2020	​	$	2,950	​	$	84	​	$	3,034
Other comprehensive (loss) income before reclassifications	​		(46,412)	​	​	(117)	​	​	(46,529)
Amounts reclassified from accumulated other comprehensive (loss) income	​		—	​	​	—	​	​	—
Net current-period other comprehensive (loss) income	​		(46,412)	​	​	(117)	​	​	(46,529)
Balance at September 30, 2021	​	$	(43,462)	​	$	(33)	​	$	(43,495)

​

​

14.	TREASURY STOCK

On March 13, 2020, the Company’s Board of Directors authorized a 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 three-months ended September 30, 2022, the Company purchased approximately 1.8 million shares of common stock at an average purchase price of $87.55 per share, for a total amount of approximately $157.4 million (excluding broker commissions), which exhausted the availability under the March 2020 Repurchase Plan. Such shares are included in the common stock in treasury in the accompanying condensed balance sheet at September 30, 2022.

On June 14, 2022, the Company’s Board of Directors authorized a share repurchase program for the purchase of up to an additional $500.0 million of the Company’s outstanding common stock (the “June 2022 Repurchase Plan”). During the three-months ended September 30, 2022, the Company purchased approximately 1.3 million shares of common stock at an average purchase price of $88.11 per share, for a total amount of approximately $115.5 million (excluding broker commissions), under the June 2022 Repurchase Plan. As of November 4, 2022, $182.8 million remained available for repurchase under the June 2022 Repurchase Plan.

During the three-months ended September 30, 2022, no shares of common stock were purchased from employees in lieu of cash payments for options exercised or withholding taxes due.

​

15.	STOCK-BASED COMPENSATION

The Company has two stock-based compensation plans under which shares were available for grant at September 30, 2022: (i) the Monster Beverage Corporation 2020 Omnibus Incentive Plan, including 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 as Amended and Restated on February 23, 2022, including the Monster Beverage Corporation Deferred Compensation Plan for Non-Employee Directors as a sub-plan thereunder.

MONSTER BEVERAGE CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Tabular Dollars in Thousands, Except Per Share Amounts) (Unaudited)

​

The Company recorded $16.6 million and $16.7 million of compensation expense relating to outstanding options, restricted stock units, performance share units and other share-based awards during the three-months ended September 30, 2022 and 2021, respectively. The Company recorded $49.2 million and $52.4 million of compensation expense relating to outstanding options, restricted stock units, performance share units and other share-based awards during the nine-months ended September 30, 2022 and 2021, respectively.

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 three-months ended September 30, 2022 and 2021 was $2.0 million and $2.0 million, respectively. 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 nine-months ended September 30, 2022 and 2021 was $4.6 million and $6.1 million, respectively.

Stock Options

Under the Company’s stock-based compensation plans, all stock options granted as of September 30, 2022 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 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 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:

​

​	​	​	​	​	​	​	​	​	​
​	​	Three-Months Ended September 30,			​	Nine-Months Ended September 30,			​
​		2022		2021		2022		2021	​
Dividend yield	​	0.0	%	0.0	%	0.0	%	0.0	%
Expected volatility	​	27.6	%	28.3	%	27.7	%	28.9	%
Risk-free interest rate	​	2.8	%	0.7	%	2.1	%	0.8	%
Expected term	​	6.2 years	​	5.8 years	​	6.1 years	​	5.8 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 the 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 CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Tabular Dollars in Thousands, Except Per Share Amounts) (Unaudited)

​

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	​	​	​
​	​	Shares	​	Price Per		​	Term	​	Aggregate
Options		(in thousands)		Share			(in years)		Intrinsic Value
Outstanding at January 1, 2022		13,860	​	$	48.19		5.1	​	$	663,148
Granted 01/01/22 - 03/31/22		2,489	​	$	73.96	​	​	​	​	​
Granted 04/01/22 - 06/30/22		8	​	$	88.05	​	​	​	​	​
Granted 07/01/22 - 09/30/22		34	​	$	95.72	​	​	​	​	​
Exercised		(813)	​	$	42.74	​	​	​	​	​
Cancelled or forfeited		(143)	​	$	72.26	​	​	​	​	​
Outstanding at September 30, 2022		15,435	​	$	52.54		5.2	​	$	533,680
Vested and expected to vest in the future at September 30, 2022	​	15,043	​	$	51.97	​	5.1	​	$	528,586
Exercisable at September 30, 2022		10,287	​	$	43.06		3.7	​	$	451,963

​

The weighted-average grant-date fair value of options granted during the three-months ended September 30, 2022 and 2021 was $31.94 per share and $26.90 per share, respectively. The weighted-average grant-date fair value of options granted during the nine-months ended September 30, 2022 and 2021 was $23.35 per share and $25.81 per share, respectively.

The total intrinsic value of options exercised during the three-months ended September 30, 2022 and 2021 was $15.3 million and $14.0 million, respectively. The total intrinsic value of options exercised during the nine-months ended September 30, 2022 and 2021 was $38.2 million and $42.2 million, respectively.

Cash received from option exercises under all plans for the three-months ended September 30, 2022 and 2021 was $12.1 million and $12.7 million, respectively. Cash received from option exercises under all plans for the nine-months ended September 30, 2022 and 2021 was $34.8 million and $37.2 million, respectively.

At September 30, 2022, there was $77.5 million of total unrecognized compensation expense related to non-vested options granted to employees under the Company’s stock-based compensation plans. That cost is expected to be recognized over a weighted-average period of 2.9 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.

MONSTER BEVERAGE CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Tabular Dollars in Thousands, Except Per Share Amounts) (Unaudited)

​

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, 2022	​	910	​	$	69.02
Granted 01/01/22 - 03/31/221	​	484	​	$	71.88
Granted 04/01/22 - 06/30/22	​	15	​	$	87.52
Granted 07/01/22 - 09/30/22	​	6	​	$	95.17
Vested	​	(388)	​	$	64.56
Forfeited/cancelled	​	(13)	​	$	68.77
Non-vested at September 30, 2022	​	1,014	​	$	72.52

​

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 depending on the achievement of pre-established performance goals.

The weighted-average grant-date fair value of restricted stock units and/or performance share units granted during the three-months ended September 30, 2022 and 2021 was $95.17 and $89.84 per share, respectively. The weighted-average grant-date fair value of restricted stock units and/or performance share units granted during the nine-months ended September 30, 2022 and 2021 was $74.23 and $89.12 per share, respectively.

As of September 30, 2022, 1.0 million of restricted stock units and performance share units are expected to vest over their respective terms.

At September 30, 2022, total unrecognized compensation expense relating to non-vested restricted stock units and performance share units was $43.8 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 September 30, 2022, other share-based awards outstanding included grants that vest over three years payable in the first quarters of 2023, 2024 and 2025.

At September 30, 2022, there was $0.2 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 0.3 years.

​

MONSTER BEVERAGE CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Tabular Dollars in Thousands, Except Per Share Amounts) (Unaudited)

​

16.	INCOME TAXES

The following is a roll-forward of the Company’s total gross unrecognized tax benefits, not including interest and penalties, for the nine-months ended September 30, 2022:

​

​	​	​	​
​	​	Gross Unrecognized
​		Tax Benefits
Balance at December 31, 2021	​	$	—
Additions for tax positions related to the current year	​		—
Additions for tax positions related to the prior years	​		2,008
Increases for tax positions related to the prior years	​		—
Balance at September 30, 2022	​	$	2,008

​

The Company recognizes accrued interest and penalties related to unrecognized tax benefits in the provision for income taxes in the Company’s condensed consolidated financial statements. As of September 30, 2022, the Company had approximately $0.4 million in accrued interest and penalties related to unrecognized tax benefits. If the Company were to prevail on all uncertain tax positions, the resultant impact on the Company’s effective tax rate would not be significant. It is expected that any change in the amount of unrecognized tax benefits 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. The Company’s 2018 through 2021 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 2021 tax years.

​

17.	EARNINGS PER SHARE

A reconciliation of the weighted-average shares used in the basic and diluted earnings per common share computations is presented below (in thousands):

​

​	​	​	​	​	​	​	​	​
​	​	Three-Months Ended			​	Nine-Months Ended
​	​	September 30,			​	September 30,
​		2022		2021		2022		2021
Weighted-average shares outstanding:	​	​	​	​	​	​	​	​
Basic	​	526,797		528,997		528,263		528,618
Dilutive	​	6,503		6,918		6,336		6,936
Diluted	​	533,300		535,915		534,599		535,554

​

For the three-months ended September 30, 2022 and 2021, options and awards outstanding totaling 3.5 million shares and 1.0 million shares, respectively, were excluded from the calculations as their effect would have been antidilutive. For the nine-months ended September 30, 2022 and 2021, options and awards outstanding totaling 2.9 million shares and 0.8 million shares, respectively, were excluded from the calculations as their effect would have been antidilutive.

​

18.	SEGMENT INFORMATION

The Company has four 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, (iii) Alcohol Brands segment, which is primarily comprised of the various craft beers and hard seltzers purchased as part of the CANarchy Transaction on February 17, 2022 and (iv) Other segment, which is comprised of the AFF Third-Party Products.

MONSTER BEVERAGE CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Tabular Dollars in Thousands, Except Per Share Amounts) (Unaudited)

​

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.

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.

The Company’s Alcohol Brands segment primarily generates operating revenues by selling kegged and canned beer as well as hard seltzers primarily to distributors in the United States.

Generally, the Alcohol Brands segment will have lower gross profit margin percentages than the Monster Energy® Drinks 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.

MONSTER BEVERAGE CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Tabular Dollars in Thousands, Except Per Share Amounts) (Unaudited)

​

The net revenues derived from the Company’s reportable segments and other financial information related thereto for the three- and nine-months ended September 30, 2022 and 2021 are as follows:

​

​	​	​	​	​	​	​	​	​	​	​	​	​
​	​	Three-Months Ended					​	Nine-Months Ended
​	​	September 30,					​	September 30,
​		2022			2021			2022			2021
Net sales:	​	​	​	​	​	​	​	​	​	​	​	​
Monster Energy® Drinks1	​	$	1,502,219	​	$	1,329,793	​	$	4,444,755	​	$	3,867,162
Strategic Brands	​		88,802	​		74,449	​		260,536	​		229,193
Alcohol Brands2	​	​	26,818	​	​	—	​	​	74,472	​	​	—
Other	​		6,447	​		6,315	​		18,356	​		19,953
Corporate and unallocated	​		—	​		—	​		—	​		—
​	​	$	1,624,286	​	$	1,410,557	​	$	4,798,119	​	$	4,116,308

​

​	​	​	​	​	​	​	​	​	​	​	​	​
​	​	Three-Months Ended					​	Nine-Months Ended
​	​	September 30,					​	September 30,
​		2022			2021			2022			2021
Operating Income:	​	​	​	​	​	​	​	​	​	​	​	​
Monster Energy® Drinks1	​	$	492,534	​	$	500,641	​	$	1,388,815	​	$	1,512,633
Strategic Brands	​		47,282	​		40,184	​		145,977	​		139,398
Alcohol Brands2	​	​	(10,262)	​	​	—	​	​	(19,873)	​	​	—
Other	​		977	​		1,146	​		3,138	​		5,266
Corporate and unallocated	​		(112,601)	​		(97,507)	​		(327,688)	​		(272,710)
​	​	$	417,930	​	$	444,464	​	$	1,190,369	​	$	1,384,587

​

​	​	​	​	​	​	​	​	​	​	​	​	​
​	​	Three-Months Ended					​	Nine-Months Ended
​	​	September 30,					​	September 30,
​		2022			2021			2022			2021
Income before tax:	​	​	​	​	​	​	​	​	​	​	​	​
Monster Energy® Drinks1	​	$	493,486	​	$	500,929	​	$	1,391,026	​	$	1,513,421
Strategic Brands	​		47,319	​		40,198	​		146,082	​		139,419
Alcohol Brands2	​	​	(10,124)	​	​	—	​	​	(19,620)	​	​	—
Other	​		977	​		1,144	​		3,139	​		5,264
Corporate and unallocated	​		(111,579)	​		(100,097)	​		(342,190)	​		(275,696)
​	​	$	420,079	​	$	442,174	​	$	1,178,437	​	$	1,382,408

​

(1)	Includes $10.0 million and $10.4 million for the three-months ended September 30, 2022 and 2021, respectively, related to the recognition of deferred revenue. Includes $30.0 million and $31.3 million for the nine-months ended September 30, 2022 and 2021, respectively, related to the recognition of deferred revenue.

(2)	Nine-Months ended September 30, 2022 - effectively from February 17, 2022 to September 30, 2022.

​

​	​	​	​	​	​	​	​	​	​	​	​	​
​	​	Three-Months Ended					​	Nine-Months Ended
​	​	September 30,					​	September 30,
​		2022			2021			2022			2021
Depreciation and amortization:	​	​	​	​	​	​	​	​	​	​	​	​
Monster Energy® Drinks	​	$	7,773	​	$	8,477	​	$	24,035	​	$	26,315
Strategic Brands	​		234	​		283	​		709	​		832
Alcohol Brands	​	​	3,713	​	​	—	​	​	9,679	​	​	—
Other	​		1,121	​		1,122	​		3,345	​		3,373
Corporate and unallocated	​		2,768	​		2,474	​		8,272	​		7,334
​	​	$	15,609	​	$	12,356	​	$	46,040	​	$	37,854

​

MONSTER BEVERAGE CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Tabular Dollars in Thousands, Except Per Share Amounts) (Unaudited)

​

Corporate and unallocated expenses for the three-months ended September 30, 2022 include $69.4 million of payroll costs, of which $16.2 million was attributable to stock-based compensation expenses (see Note 15 “Stock-Based Compensation”), as well as $26.0 million attributable to professional service expenses, including accounting and legal costs, and $17.2 million of other operating expenses.

Corporate and unallocated expenses for the three-months ended September 30, 2021 include $63.4 million of payroll costs, of which $16.7 million was attributable to stock-based compensation expenses (see Note 15 “Stock-Based Compensation”), as well as $19.3 million attributable to professional service expenses, including accounting and legal costs, and $14.8 million of other operating expenses.

Corporate and unallocated expenses for the nine-months ended September 30, 2022 include $207.6 million of payroll costs, of which $48.5 million was attributable to stock-based compensation expenses (see Note 15 “Stock-Based Compensation”), as well as $69.3 million attributable to professional service expenses, including accounting and legal costs, and $50.8 million of other operating expenses.

Corporate and unallocated expenses for the nine-months ended September 30, 2021 include $189.7 million of payroll costs, of which $52.2 million was attributable to stock-based compensation expenses (see Note 15 “Stock-Based Compensation”), as well as $60.6 million attributable to professional service expenses, including accounting and legal costs, and $22.4 million of other operating expenses. Corporate and unallocated expenses for the nine-months ended September 30, 2021, were partially offset by $16.9 million due to the reversal of amounts previously accrued in connection with an intellectual property claim.

Coca-Cola Europacific Partners (formerly Coca-Cola European Partners) accounted for approximately 12% of the Company’s net sales for both the three-months ended September 30, 2022 and 2021. Coca-Cola Europacific Partners accounted for approximately 13% and 12% of the Company’s net sales for the nine-months ended September 30, 2022 and 2021, respectively.

Coca-Cola Consolidated, Inc. accounted for approximately 11% of the Company’s net sales for both the three-months ended September 30, 2022 and 2021. Coca-Cola Consolidated, Inc. accounted for approximately 10% and 11% of the Company’s net sales for the nine-months ended September 30, 2022 and 2021, respectively.

Reyes Coca-Cola Bottling, LLC accounted for approximately 10% of the Company’s net sales for both the three-months ended September 30, 2022 and 2021. Reyes Coca-Cola Bottling, LLC accounted for approximately 10% of the Company’s net sales for both the nine-months ended September 30, 2022 and 2021.

Net sales to customers outside the United States amounted to $610.6 million and $527.4 million for the three-months ended September 30, 2022 and 2021, respectively. Such sales were approximately 38% and 37% of net sales for the three-months ended September 30, 2022 and 2021, respectively. Net sales to customers outside the United States amounted to $1.81 billion and $1.53 billion for the nine-months ended September 30, 2022 and 2021, respectively. Such sales were approximately 38% and 37% of net sales for the nine-months ended September 30, 2022 and 2021, respectively.

Goodwill and other intangible assets for the Company’s reportable segments as of September 30, 2022 and December 31, 2021 are as follows:

​

​	​	​	​	​	​	​
​		September 30,			December 31,
​		2022			2021
Goodwill and other intangible assets:	​	​	​	​	​	​
Monster Energy® Drinks	​	$	1,424,667	​	$	1,420,503
Strategic Brands	​		977,851	​		978,032
Alcohol Brands	​	​	234,049	​	​	—
Other	​		2,200	​		5,494
Corporate and unallocated	​		—	​		—
​	​	$	2,638,767	​	$	2,404,029

​

​

MONSTER BEVERAGE CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Tabular Dollars in Thousands, Except Per Share Amounts) (Unaudited)

​

19.	RELATED PARTY TRANSACTIONS

TCCC controls approximately 19.6% of the voting interests of the Company. The TCCC Subsidiaries, the TCCC Related Parties and certain TCCC independent bottlers/distributors 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.

TCCC commissions, based on sales to the TCCC Subsidiaries and the TCCC Related Parties, were $12.8 million and $23.6 million for the three-months ended September 30, 2022 and 2021, respectively, and are included as a reduction to net sales. TCCC commissions, based on sales to the TCCC Subsidiaries and the TCCC Related Parties, were $41.3 million and $59.9 million for the nine-months ended September 30, 2022 and 2021, respectively, and are included as a reduction to net sales.

TCCC commissions, based on sales to TCCC independent bottlers/distributors, were $5.5 million and $9.1 million for the three-months ended September 30, 2022 and 2021, respectively, and are included in operating expenses. TCCC commissions, based on sales to TCCC independent bottlers/distributors, were $24.4 million and $22.6 million for the nine-months ended September 30, 2022 and 2021, respectively, and are included in operating expenses.

Net sales to the TCCC Subsidiaries for the three-months ended September 30, 2022 and 2021 were $36.6 million and $30.3 million, respectively. Net sales to the TCCC Subsidiaries for the nine-months ended September 30, 2022 and 2021 were $95.0 million and $84.4 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 $6.5 million and $7.1 million for the three-months ended September 30, 2022 and 2021, respectively. Concentrate purchases from TCCC were $21.5 million and $21.3 million for the nine-months ended September 30, 2022 and 2021, respectively.

Certain TCCC Subsidiaries also contract manufacture certain of the Company’s energy drinks. Such contract manufacturing expenses were $9.1 million and $6.8 million for the three-months ended September 30, 2022 and 2021, respectively. Such contract manufacturing expenses were $23.1 million and $20.8 million for the nine-months ended September 30, 2022 and 2021, respectively.

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

​

​	​	​	​	​	​	​
​	​	September 30,		​	December 31,
​		2022			2021
Accounts receivable, net	​	$	86,180	​	$	94,647
Accounts payable	​	$	(37,613)	​	$	(35,248)
Accrued promotional allowances	​	$	(5,308)	​	$	(4,536)
Accrued liabilities	​	$	(40,117)	​	$	(26,616)

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In 2021, TCCC exercised its contract rights for a third-party public accounting firm to conduct an examination relating to commissions and fees payable to TCCC and marketing contributions payable to the Company, for the years ended December 31, 2015 through December 31, 2020. During the three-months ended September 30, 2022, the Company was informed by TCCC that there would be no material adjustments as a result of this examination.

One director of the Company through certain trusts, and a family member of one director are the 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 three-months ended September 30, 2022 and 2021 were $1.3 million and $1.0 million, respectively. Expenses incurred with such company in connection with promotional materials purchased during the nine-months ended September 30, 2022 and 2021 were $4.7 million and $2.7 million, respectively.

MONSTER BEVERAGE CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Tabular Dollars in Thousands, Except Per Share Amounts) (Unaudited)

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During the nine-months ended September 30, 2022, the Company occasionally chartered a private aircraft that is indirectly owned by Mr. Rodney C. Sacks, Co-Chief Executive Officer and Chairman of the Board of Directors. On certain occasions, Mr. Sacks was accompanied by guests and other Company personnel when using such aircraft for business travel. During the nine-months ended September 30, 2022, the Company incurred costs of $0.08 million, amounts the Company believes are commensurate with market rates for comparable travel. No amounts were incurred by the Company during the three-months ended September 30, 2022.

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. This partnership meets the definition of a Variable Interest Entity (“VIE”) for which the Company has determined that it is the primary beneficiary. Therefore, the Company consolidates the VIE in the accompanying condensed consolidated financial statements. The aggregate carrying values of the VIE’s assets and liabilities, after elimination of any intercompany transactions and balances, as well as the results of operations for all periods presented, are not material to the Company’s condensed consolidated financial statements.

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20.	SUBSEQUENT EVENTS

On November 2, 2022, the Company’s Board of Directors authorized a new share repurchase program for the purchase of up to an additional $500.0 million of the Company’s outstanding common stock. As a result, the aggregate amount available to repurchase the Company’s common stock as of November 4, 2022 is $682.8 million.

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