Item 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

MONSTER BEVERAGE CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

AS OF MARCH 31, 2023 AND DECEMBER 31, 2022

(In Thousands, Except Par Value) (Unaudited)


	March 31,		December 31,
	2023		2022
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	1,672,660	$	1,307,141
Short-term investments		1,383,028		1,362,314
Accounts receivable, net		1,190,351		1,016,203
Inventories		906,723		935,631
Prepaid expenses and other current assets		110,958		109,823
Prepaid income taxes		30,889		33,785
Total current assets		5,294,609		4,764,897

INVESTMENTS		41,152		61,443
PROPERTY AND EQUIPMENT, net		545,922		516,897
DEFERRED INCOME TAXES, net		177,039		177,039
GOODWILL		1,417,941		1,417,941
OTHER INTANGIBLE ASSETS, net		1,222,598		1,220,410
OTHER ASSETS		145,101		134,478
Total Assets	$	8,844,362	$	8,293,105

LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES:
Accounts payable	$	491,249	$	444,265
Accrued liabilities		245,932		172,991
Accrued promotional allowances		308,094		255,631
Deferred revenue		44,440		43,311
Accrued compensation		42,673		72,463
Income taxes payable		55,123		13,317
Total current liabilities		1,187,511		1,001,978

DEFERRED REVENUE		219,764		223,800

OTHER LIABILITIES		41,727		42,286

COMMITMENTS AND CONTINGENCIES (Note 11)

STOCKHOLDERS’ EQUITY1:
Common stock - $0.005 par value; 1,250,000 shares authorized; 1,117,392 shares issued and 1,046,616 shares outstanding as of March 31, 2023; 1,283,688 shares issued and 1,044,600 shares outstanding as of December 31, 2022		5,587		6,418
Additional paid-in capital		4,829,301		4,776,804
Retained earnings		4,706,192		9,001,173
Accumulated other comprehensive loss		(147,911)		(159,073)
Common stock in treasury, at cost; 70,776 shares and 239,088 shares as of March 31, 2023 and December 31, 2022, respectively		(1,997,809)		(6,600,281)
Total stockholders’ equity		7,395,360		7,025,041
Total Liabilities and Stockholders’ Equity	$	8,844,362	$	8,293,105

1 Stock Split - On February 28, 2023, the Company announced a two-for-one stock split of its common stock to be effected in the form of a 100% stock dividend. The stock dividend was issued on March 27, 2023 (the “Stock Split”). The accompanying condensed consolidated financial statements and notes thereto have been retroactively updated to reflect the Stock Split. See Note 1 for additional information.

See accompanying notes to condensed consolidated financial statements.

MONSTER BEVERAGE CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

FOR THE THREE-MONTHS ENDED MARCH 31, 2023 AND 2022

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


	Three-Months Ended
	March 31,
	2023		2022

NET SALES	$	1,698,930	$	1,518,574

COST OF SALES		801,081		741,907

GROSS PROFIT		897,849		776,667

OPERATING EXPENSES		412,785		377,178

OPERATING INCOME		485,064		399,489

INTEREST and OTHER INCOME (EXPENSE), net		12,496		(7,300)

INCOME BEFORE PROVISION FOR INCOME TAXES		497,560		392,189

PROVISION FOR INCOME TAXES		100,116		97,986

NET INCOME	$	397,444	$	294,203

NET INCOME PER COMMON SHARE1:
Basic	$	0.38	$	0.28
Diluted	$	0.38	$	0.27

WEIGHTED AVERAGE NUMBER OF SHARES OF COMMON STOCK AND COMMON STOCK EQUIVALENTS1:
Basic		1,044,909		1,058,810
Diluted		1,059,069		1,071,108

¹ Stock Split - The accompanying condensed consolidated financial statements and notes thereto have been retroactively updated to reflect the Stock Split. See Note 1 for additional information.

See accompanying notes to condensed consolidated financial statements.

MONSTER BEVERAGE CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

FOR THE THREE-MONTHS ENDED MARCH 31, 2023 AND 2022

(In Thousands) (Unaudited)


	Three-Months Ended
	March 31,
	2023		2022
Net income, as reported	$	397,444	$	294,203
Other comprehensive income (loss):
Change in foreign currency translation adjustment		7,981		1,079
Available-for-sale investments:
Change in net unrealized gains (losses)		3,181		(4,059)
Other comprehensive income (loss)		11,162		(2,980)
Comprehensive income	$	408,606	$	291,223

See accompanying notes to condensed consolidated financial statements.

MONSTER BEVERAGE CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

FOR THE THREE-MONTHS ENDED MARCH 31, 2023 AND 2022

(In Thousands) (Unaudited)



								Accumulated Other					Total
	Common stock			Additional		Retained		Comprehensive		Treasury stock			Stockholders’
	Shares	Amount		Paid-in Capital		Earnings		(Loss) Income		Shares	Amount		Equity
Balance, December 31, 2022	1,283,688	$	6,418	$	4,776,804	$	9,001,173	$	(159,073)	(239,088)	$	(6,600,281)	$	7,025,041
Stock-based compensation	—		—		15,743		—		—	—		—		15,743
Stock options/awards	3,704		19		36,329		—		—	—		—		36,348
Unrealized gain (loss), net on available-for-sale securities	—		—		—		—		3,181	—		—		3,181
Repurchase of common stock	—		—		—		—		—	(1,688)		(90,378)		(90,378)
Retirement of treasury stock	(170,000)		(850)		425		(4,692,425)		—	170,000		4,692,850		—
Foreign currency translation	—		—		—		—		7,981	—		—		7,981
Net income	—		—		—		397,444		—	—		—		397,444
Balance, March 31, 2023	1,117,392	$	5,587	$	4,829,301	$	4,706,192	$	(147,911)	(70,776)	$	(1,997,809)	$	7,395,360



								Accumulated Other					Total
	Common stock			Additional		Retained		Comprehensive		Treasury stock			Stockholders’
	Shares	Amount		Paid-in Capital		Earnings		(Loss) Income		Shares	Amount		Equity
Balance, December 31, 2021	1,280,086	$	6,400	$	4,649,420	$	7,809,549	$	(69,165)	(221,440)	$	(5,829,253)	$	6,566,951
Stock-based compensation	—		—		16,175		—		—	—		—		16,175
Stock options/awards	970		6		4,504		—		—	—		—		4,510
Unrealized gain (loss), net on available-for-sale securities	—		—		—		—		(4,059)	—		—		(4,059)
Repurchase of common stock	—		—		—		—		—	(332)		(12,187)		(12,187)
Foreign currency translation	—		—		—		—		1,079	—		—		1,079
Net income	—		—		—		294,203		—	—		—		294,203
Balance, March 31, 2022	1,281,056	$	6,406	$	4,670,099	$	8,103,752	$	(72,145)	(221,772)	$	(5,841,440)	$	6,866,672

¹ Stock Split - The accompanying condensed consolidated financial statements and notes thereto have been retroactively updated to reflect the Stock Split. See Note 1 for additional information.

See accompanying notes to condensed consolidated financial statements.

MONSTER BEVERAGE CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE THREE-MONTHS ENDED MARCH 31, 2023 AND 2022

(In Thousands) (Unaudited)


	Three-Months Ended
	March 31,
	2023		2022
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	397,444	$	294,203
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation and amortization		16,808		14,599
Non-cash lease expense		2,160		1,481
Gain on disposal of property and equipment		(385)		(6)
Stock-based compensation		16,051		16,332
Effect on cash of changes in operating assets and liabilities net of acquisition:
Accounts receivable		(167,512)		(134,433)
Inventories		35,495		(208,673)
Prepaid expenses and other assets		1,273		(29,621)
Prepaid income taxes		3,986		(5,885)
Accounts payable		51,124		18,329
Accrued liabilities		14,207		20,603
Accrued promotional allowances		48,265		61,171
Accrued compensation		(30,261)		(32,122)
Income taxes payable		41,617		(9,818)
Other liabilities		(751)		(596)
Deferred revenue		(5,046)		(5,915)
Net cash provided by (used in) operating activities		424,475		(351)

CASH FLOWS FROM INVESTING ACTIVITIES:
Sales of available-for-sale investments		522,501		504,808
Purchases of available-for-sale investments		(518,751)		(441,925)
Acquisition of CANarchy, net of cash		—		(330,356)
Purchases of property and equipment		(40,100)		(21,511)
Proceeds from sale of property and equipment		564		14
Additions to intangibles		(3,952)		(8,419)
Increase in other assets		(13,028)		(6,241)
Net cash used in investing activities		(52,766)		(303,630)

CASH FLOWS FROM FINANCING ACTIVITIES:
(Payments) borrowings on debt		(7,271)		3,454
Issuance of common stock		36,348		4,510
Purchases of common stock held in treasury		(35,126)		(12,187)
Net cash used in financing activities		(6,049)		(4,223)

Effect of exchange rate changes on cash and cash equivalents		(141)		(3,472)

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS		365,519		(311,676)
CASH AND CASH EQUIVALENTS, beginning of period		1,307,141		1,326,462
CASH AND CASH EQUIVALENTS, end of period	$	1,672,660	$	1,014,786

SUPPLEMENTAL INFORMATION:
Cash paid during the period for:
Interest	$	96	$	91
Income taxes	$	56,985	$	112,863

See accompanying notes to condensed consolidated financial statements.

MONSTER BEVERAGE CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE THREE-MONTHS ENDED MARCH 31, 2023 AND 2022

(In Thousands) (Unaudited) (Continued)

SUPPLEMENTAL DISCLOSURE OF NON-CASH ITEMS

Included in accrued liabilities as of March 31, 2023 and 2022 were $9.6 million and $11.3 million, respectively, related to net additions to other intangible assets.

Included in accounts payable as of March 31, 2023 and 2022 were $2.5 million and $4.0 million, respectively, related to equipment purchases.

Included in accrued liabilities as of March 31, 2023 was $55.3 million of withholding taxes due related to common stock purchased from employees.

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, 2022 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-months ended March 31, 2023 and 2022, 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.

Treasury Stock Retirement – On March 10, 2023, the Company retired 170.0 million shares (stock split adjusted) of treasury stock owned by the Company. The retired treasury stock had a carrying value of approximately $4.69 billion. The Company’s accounting policy upon the formal retirement of treasury stock is to deduct its par value from common stock and to reflect any excess of cost over par as a deduction from retained earnings.

Stock Split – On February 28, 2023, the Company announced a two-for-one stock split of the Company’s common stock to be effected in the form of a 100% stock dividend. The common stock dividend was issued on March 27, 2023 (the “Stock Split”) and the Company’s common stock began trading at the split adjusted price on March 28, 2023. Accordingly, all per share amounts, average common stock outstanding, common stock outstanding, common stock repurchased and equity-based compensation presented in the condensed consolidated financial statements and notes have been adjusted retroactively, where applicable, to reflect the Stock Split. Stockholders’ equity has been retroactively adjusted, where applicable, to give effect to the Stock Split for all periods presented by reclassifying the par value of the additional shares issued in connection with the Stock Split to Common Stock from Retained Earnings and Additional Paid-in Capital.

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, 2022.

MONSTER BEVERAGE CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

2.	REVENUE RECOGNITION

Revenues are accounted for in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 606, “Revenue from Contracts with Consumers”. 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, Monster_®_ Tour WaterTM and Reign Storm® total wellness energy drinks, (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 acquisition of CANarchy Craft Brewery Collective LLC (“CANarchy”) on February 17, 2022 (the “CANarchy Transaction”) as well as The Beast UnleashedTM flavored malt beverages (“FMBs”) 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 primarily 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 and gas 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 and gas 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 ready-to-drink canned beers, hard seltzers and FMBs primarily to beer 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 March 31, 2023 and December 31, 2022.

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 for the Company’s energy drink products primarily include consideration given to the Company’s non-alcohol 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;

MONSTER BEVERAGE CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

	●	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 for its energy drink products 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 for its energy drink products 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. Promotional and other allowances for our Alcohol Brands segment primarily include price promotions where permitted.

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 March 31, 2023
							Latin
							America
	U.S. and						and
Net Sales	Canada		EMEA1		Asia Pacific		Caribbean		Total
Monster Energy® Drinks	$	1,021,328	$	277,111	$	121,994	$	141,235	$	1,561,668
Strategic Brands		43,043		30,951		8,983		3,381		86,358
Alcohol Brands		46,290		—		—		—		46,290
Other		4,614		—		—		—		4,614
Total Net Sales	$	1,115,275	$	308,062	$	130,977	$	144,616	$	1,698,930


	Three-Months Ended March 31, 2022
							Latin
							America
	U.S. and						and
Net Sales	Canada		EMEA1		Asia Pacific		Caribbean		Total
Monster Energy® Drinks	$	925,680	$	260,889	$	110,556	$	107,722	$	1,404,847
Strategic Brands		53,051		30,176		6,662		2,704		92,593
Alcohol Brands2		15,207		—		—		—		15,207
Other		5,927		—		—		—		5,927
Total Net Sales	$	999,865	$	291,065	$	117,218	$	110,426	$	1,518,574

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

2_Effectively from February 17, 2022 to March 31, 2022_

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 March 31, 2023, the Company had $264.2 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, 2022, the Company had $267.1 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 March 31, 2023 and 2022, $9.9 million and $10.0 million, respectively, of deferred revenue was recognized in net sales. See Note 10.

3.	LEASES

The Company leases identified assets comprised 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.

MONSTER BEVERAGE CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

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 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 11 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.

The components of lease cost were comprised of the following:


	Three-Months		Three-Months
	Ended		Ended
	March 31,		March 31,
	2023		2022
Operating lease cost	$	2,467	$	1,694

Short-term lease cost		979		929

Variable lease cost		215		183

Finance leases:
Amortization of ROU assets		123		127
Interest on lease liabilities		14		3
Finance lease cost		137		130

Total lease cost	$	3,798	$	2,936

MONSTER BEVERAGE CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

Supplemental cash flow information for the following periods:


	Three-Months		Three-Months
	Ended March 31,		Ended March 31,
	2023		2022
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash outflows from operating leases	$	2,391	$	1,652
Operating cash outflows from finance leases		14		3
Financing cash outflows from finance leases		598		592

ROU assets obtained in exchange for lease obligations:
Finance leases		2,227		832
Operating leases		313		13,197

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


	March 31, 2023
	Real Estate		Equipment		Total		Balance Sheet Location
Operating leases	$	35,953	$	256	$	36,209	Other Assets
Finance leases		—		3,694		3,694	Property and Equipment, net


	December 31, 2022
	Real Estate		Equipment		Total		Balance Sheet Location
Operating leases	$	37,682	$	330	$	38,012	Other Assets
Finance leases		—		1,598		1,598	Property and Equipment, net

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


	March 31, 2023
	Operating Leases		Finance Leases
Accrued liabilities	$	7,642	$	2,393
Other liabilities		27,958		33
Total	$	35,600	$	2,426


	December 31, 2022
	Operating Leases		Finance Leases
Accrued liabilities	$	7,747	$	757
Other liabilities		29,586		41
Total	$	37,333	$	798

MONSTER BEVERAGE CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

The weighted-average remaining lease terms and weighted-average discount rates for operating and finance leases at March 31, 2023 and December 31, 2022 were as follows:


	March 31, 2023
	Operating Leases		Finance Leases
Weighted-average remaining lease term (years)	6.6		0.9
Weighted-average discount rate	3.5	%	5.7	%


	December 31, 2022
	Operating Leases		Finance Leases
Weighted-average remaining lease term (years)	6.7		0.8
Weighted-average discount rate	3.4	%	3.6	%

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 March 31, 2023:


	Undiscounted Future Lease Payments
	Operating Leases		Finance Leases
2023 (from April 1, 2023 to December 31, 2023)	$	6,626	$	2,051
2024		7,469		423
2025		5,318		17
2026		4,181		2
2027		4,059		—
2028 and thereafter		12,352		—
Total lease payments		40,005		2,493
Less imputed interest		(4,405)		(67)
Total	$	35,600	$	2,426

As of March 31, 2023, the Company had an additional operating lease for office and warehouse space that had not yet commenced of $1.1 million in aggregate. This operating lease will commence in June 2023 with a term of four years. As of March 31, 2023, the Company did not have any significant additional finance leases that had not yet commenced.

MONSTER BEVERAGE CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

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
March 31, 2023	Cost		Gains		Losses		Value		Months		Months
Available-for-sale
Short-term:
Commercial paper	$	296,708	$	1	$	1	$	296,708	$	1	$	—
Certificates of deposit		12,630		—		—		12,630		—		—
Municipal securities		129,779		3		208		129,574		208		—
U.S. government agency securities		129,605		35		332		129,308		332		—
U.S. treasuries		744,403		156		2,180		742,379		2,180		—
Corporate bonds		72,536		15		122		72,429		122		—
Long-term:
U.S. government agency securities		10,432		7		9		10,430		9		—
U.S. treasuries		28,996		9		34		28,971		34		—
Corporate bonds		1,753		—		2		1,751		2		—
Total	$	1,426,842	$	226	$	2,888	$	1,424,180	$	2,888	$	—


									Continuous		Continuous
			Gross		Gross				Unrealized		Unrealized
			Unrealized		Unrealized				Loss Position		Loss Position
	Amortized		Holding		Holding		Fair		less than 12		greater than 12
December 31, 2022	Cost		Gains		Losses		Value		Months		Months
Available-for-sale
Short-term:
Commercial paper	$	197,712	$	1	$	4	$	197,709	$	4	$	—
Certificates of deposit		10,078		—		—		10,078		—		—
Municipal securities		211,791		60		612		211,239		612		—
U.S. government agency securities		109,697		3		715		108,985		715		—
U.S. treasuries		838,825		17		4,539		834,303		4,539		—
Long-term:
U.S. government agency securities		2,016		—		3		2,013		3		—
U.S. treasuries		53,215		20		71		53,164		71		—
Variable rate demand notes		6,266		—		—		6,266		—		—
Total	$	1,429,600	$	101	$	5,944	$	1,423,757	$	5,944	$	—

During the three-months ended March 31, 2023 and 2022, realized gains or losses recognized on the sale of investments were not significant.

The Company’s investments at March 31, 2023 and December 31, 2022 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:


	March 31, 2023				December 31, 2022
	Amortized Cost		Fair Value		Amortized Cost		Fair Value
Less than 1 year:
Commercial paper	$	296,708	$	296,708	$	197,712	$	197,710
Municipal securities		129,779		129,574		211,791		211,239
U.S. government agency securities		129,605		129,308		109,697		108,985
Certificates of deposit		12,630		12,630		10,078		10,078
U.S. treasuries		744,403		742,379		838,825		834,302
Corporate bonds		72,536		72,429		—		—
Due 1 -10 years:
U.S. treasuries		28,996		28,971		53,215		53,164
U.S. government agency securities		10,432		10,430		2,016		2,013
Variable rate demand notes		—		—		4,862		4,862
Corporate bonds		1,753		1,751		—		—
Due 11 - 20 years:
Variable rate demand notes		—		—		1,404		1,404
Total	$	1,426,842	$	1,424,180	$	1,429,600	$	1,423,757

5.	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:


March 31, 2023	Level 1		Level 2		Level 3		Total
Cash	$	886,785	$	—	$	—	$	886,785
Money market funds		713,009		—		—		713,009
Certificates of deposit		—		41,050		—		41,050
Commercial paper		—		310,774		—		310,774
Corporate bonds		—		74,180		—		74,180
Municipal securities		—		129,574		—		129,574
U.S. government agency securities		—		151,678		—		151,678
U.S. treasuries		—		789,790		—		789,790
Foreign currency derivatives		—		77		—		77
Total	$	1,599,794	$	1,497,123	$	—	$	3,096,917

Amounts included in:
Cash and cash equivalents	$	1,599,794	$	72,866	$	—	$	1,672,660
Short-term investments		—		1,383,028		—		1,383,028
Accounts receivable, net		—		382		—		382
Investments		—		41,152		—		41,152
Accrued liabilities		—		(305)		—		(305)
Total	$	1,599,794	$	1,497,123	$	—	$	3,096,917


December 31, 2022	Level 1		Level 2		Level 3		Total
Cash	$	1,132,509	$	—	$	—	$	1,132,509
Money market funds		121,444		—		—		121,444
Certificates of deposit		—		10,078		—		10,078
Commercial paper		—		225,067		—		225,067
Variable rate demand notes		—		6,266		—		6,266
Municipal securities		—		213,798		—		213,798
U.S. government agency securities		—		113,357		—		113,357
U.S. treasuries		—		908,379		—		908,379
Foreign currency derivatives		—		(3,733)		—		(3,733)
Total	$	1,253,953	$	1,473,212	$	—	$	2,727,165

Amounts included in:
Cash and cash equivalents	$	1,253,953	$	53,188	$	—	$	1,307,141
Short-term investments		—		1,362,314		—		1,362,314
Accounts receivable, net		—		965		—		965
Investments		—		61,443		—		61,443
Accrued liabilities		—		(4,698)		—		(4,698)
Total	$	1,253,953	$	1,473,212	$	—	$	2,727,165

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 three-months ended March 31, 2023, or during the year-ended December 31, 2022, 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)

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 three-months ended March 31, 2023 and the year-ended December 31, 2022, 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 March 31, 2023 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:


March 31, 2023
Derivatives not designated as
hedging instruments under	Notional		Fair
ASC 815	Amount		Value		Balance Sheet Location
Assets:
Foreign currency exchange contracts:
Receive CAD/pay USD	$	44,220	$	168	Accounts receivable, net
Receive USD/pay CLP		56,610		159	Accounts receivable, net
Receive USD/pay COP		15,493		37	Accounts receivable, net
Receive RSD/pay USD		4,560		18	Accounts receivable, net

Liabilities:
Foreign currency exchange contracts:
Receive USD/pay EUR	$	48,377	$	(105)	Accrued liabilities
Receive USD/pay ZAR		4,117		(97)	Accrued liabilities
Receive USD/pay NZD		6,906		(32)	Accrued liabilities
Receive USD/pay CNY		18,642		(31)	Accrued liabilities
Receive USD/pay GBP		14,292		(24)	Accrued liabilities
Receive SGD/pay USD		24,977		(10)	Accrued liabilities
Receive AUD/pay USD		2,884		(6)	Accrued liabilities

MONSTER BEVERAGE CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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


December 31, 2022
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	$	15,883	$	398	Accounts receivable, net
Receive CAD/pay USD		34,467		106	Accounts receivable, net
Receive USD/pay MXN		12,430		88	Accounts receivable, net
Receive USD/pay GBP		43,551		118	Accounts receivable, net
Receive RSD/pay USD		3,513		112	Accounts receivable, net
Receive GBP/pay USD		34,716		100	Accounts receivable, net
Receive GBP/pay USD		4,321		31	Accounts receivable, net
Receive USD/pay COP		11,570		12	Accounts receivable, net

Liabilities:
Foreign currency exchange contracts:
Receive USD/pay CLP	$	43,071	$	(2,549)	Accrued liabilities
Receive USD/pay EUR		40,592		(1,377)	Accrued liabilities
Receive USD/pay CNY		12,460		(362)	Accrued liabilities
Receive USD/pay EUR		34,714		(295)	Accrued liabilities
Receive USD/pay NZD		4,093		(91)	Accrued liabilities
Receive USD/pay AUD		1,271		(23)	Accrued liabilities
Receive USD/pay ZAR		3,124		(1)	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	March 31,		March 31,
ASC 815	derivatives	2023		2022
Foreign currency exchange contracts	Interest and other income (expense), net	$	(7,852)	$	(4,019)

7.	INVENTORIES

Inventories consist of the following at:


	March 31,		December 31,
	2023		2022
Raw materials	$	421,914	$	467,392
Work in process		1,615		1,688
Finished goods		483,194		466,551
	$	906,723	$	935,631

MONSTER BEVERAGE CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

8.	PROPERTY AND EQUIPMENT, NET

Property and equipment consist of the following at:


	March 31,		December 31,
	2023		2022
Land	$	139,922	$	139,798
Leasehold improvements		31,753		31,327
Furniture and fixtures		9,335		9,286
Office and computer equipment		22,532		22,386
Computer software		5,310		5,906
Equipment		255,991		244,739
Buildings		164,821		163,885
Vehicles		51,675		49,175
Assets under construction		111,283		83,553
		792,622		750,055
Less: accumulated depreciation and amortization		(246,700)		(233,158)
	$	545,922	$	516,897

Total depreciation and amortization expense was $14.8 million and $13.1 million for the three-months ended March 31, 2023 and 2022, respectively.

9.GOODWILL AND OTHER INTANGIBLE ASSETS

The following is a roll-forward of goodwill for the three-months ended March 31, 2023 and 2022 by reportable segment:


	Monster
	Energy®		Strategic		Alcohol
	Drinks		Brands		Brands		Other		Total
Balance at December 31, 2022	$	693,644	$	637,999	$	86,298	$	—	$	1,417,941
Acquisitions		—		—		—		—		—
Balance at March 31, 2023	$	693,644	$	637,999	$	86,298	$	—	$	1,417,941


	Monster
	Energy®		Strategic		Alcohol
	Drinks		Brands		Brands		Other		Total
Balance at December 31, 2021	$	693,644	$	637,999	$	—	$	—	$	1,331,643
Acquisitions		—		—		80,285		—		80,285
Balance at March 31, 2022	$	693,644	$	637,999	$	80,285	$	—	$	1,411,928

Intangible assets consist of the following at:


	March 31,		December 31,
	2023		2022
Amortizing intangibles	$	121,378	$	121,378
Accumulated amortization		(70,800)		(68,790)
		50,578		52,588
Non-amortizing intangibles		1,172,020		1,167,822
	$	1,222,598	$	1,220,410

MONSTER BEVERAGE CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

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 was $2.0 million and $1.5 million for the three-months ended March 31, 2023 and 2022, respectively.

The following is the future estimated amortization expense related to amortizing intangibles as of March 31, 2023:


2023 (from April 1, 2023 to December 31, 2023)	$	2,736
2024		3,648
2025		3,647
2026		3,647
2027		3,646
2028 and thereafter		33,254
	$	50,578

10.	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 $9.9 million and $10.0 million for the three-months ended March 31, 2023 and 2022, respectively.

11.	COMMITMENTS AND CONTINGENCIES

The Company had purchase commitments aggregating approximately $336.8 million at March 31, 2023, 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 $380.6 million at March 31, 2023, 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 March 31, 2023, the interest rate on borrowings under the line of credit was 5.5%. As of March 31, 2023, $1.1 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 March 31, 2023, $0.3 million of loss contingencies were included in the Company’s accompanying consolidated balance sheet. As of December 31, 2022, no loss contingencies were included in the Company’s accompanying consolidated balance sheet.

MONSTER BEVERAGE CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

On September 29, 2022, a jury in the U.S. District Court for the Central District of California (the “District Court”) 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 former chief executive officer John H. Owoc 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 MEC’s contracts over shelf space with certain key vendors. On April 12, 2023, the District Court granted Monster’s motion for a permanent injunction which, among other things, enjoins VPX, Mr. Owoc, and others working in concert with them from falsely or deceptively claiming that BANG or any other beverages contain creatine or a form of creatine, requires them to remove all such advertising within 60 days, and requires VPX and Mr. Owoc to issue corrective statements to consumers and non-consumer partners, including retailers and distributors. The parties have completed briefing the remaining post-verdict issues, including MEC’s request for enhanced and punitive damages.

In April 2022, MEC and Orange Bang, Inc. (“Orange Bang”) filed a joint motion in the District Court 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, after accounting for MEC’s expended fees and costs, 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 District Court entered final judgment confirming the award. On October 28, 2022, VPX filed a notice of appeal of the District Court’s final judgment 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. Due to such ongoing proceedings, VPX’s appeal of the District Court’s final judgment confirming the final arbitration award is stayed. While reserving all rights to appeal, VPX made its first royalty payment of $3.6 million on February 14, 2023, which is for sales of Bang Energy drink and other Bang-branded products from October 10, 2022 through December 31, 2022. This payment is subject to potential claw back if, among other things, the judgment and final arbitration award are overturned on appeal or VPX becomes administratively insolvent. In addition, per ASC 450 “Contingencies”, the Company will not recognize the September 2022 jury award or the April 2022 arbitration award until the awards are realized or realizable. As of May 5, 2023, the proceedings have yet to progress to a stage where there is sufficient information for an accurate timeline of when the awards, including any royalty payments received, 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)

12.	ACCUMULATED OTHER COMPREHENSIVE LOSS

Changes in accumulated other comprehensive loss by component, after tax, for the three-months ended March 31, 2023 and 2022 are as follows:


			Unrealized
	Currency		Gains (Losses)
	Translation		on Available-for-
	Losses		Sale Securities		Total
Balance at December 31, 2022	$	(153,230)	$	(5,843)	$	(159,073)
Other comprehensive income before reclassifications		7,981		3,181		11,162
Net current-period other comprehensive income		7,981		3,181		11,162
Balance at March 31, 2023	$	(145,249)	$	(2,662)	$	(147,911)


			Unrealized
	Currency		Gains (Losses)
	Translation		on Available-for-
	Losses		Sale Securities		Total
Balance at December 31, 2021	$	(68,209)	$	(956)	$	(69,165)
Other comprehensive (loss) income before reclassifications		1,079		(4,059)		(2,980)
Net current-period other comprehensive (loss) income		1,079		(4,059)		(2,980)
Balance at March 31, 2022	$	(67,130)	$	(5,015)	$	(72,145)

13.	TREASURY STOCK

On March 10, 2023, the Company retired 170.0 million shares (stock split adjusted) of treasury stock owned by the Company. The retired stock had a carrying value of approximately$4.69 billion. The Company’s accounting policy upon the formal retirement of treasury stock is to deduct its par value from common stock and to reflect any excess of cost over par as a deduction from retained earnings.

On June 14, 2022, 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 “June 2022 Repurchase Plan”). During the three-months ended March 31, 2023, no shares were repurchased under the June 2022 Repurchase Plan. As of May 5, 2023, $182.8 million remained available for repurchase under the June 2022 Repurchase Plan.

On November 2, 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 “November 2022 Repurchase Plan”). During the three-months ended March 31, 2023, no shares were repurchased under the November 2022 Repurchase Plan. As of May 5, 2023, $500.0 million remained available for repurchase under the November 2022 Repurchase Plan.

The aggregate amount of the Company’s outstanding common stock that remains available for repurchase under all previously authorized repurchase plans is $682.8 million as of May 5, 2023.

During the three-months ended March 31, 2023, 1.7 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 $90.4 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 March 31, 2023.

MONSTER BEVERAGE CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

14.	STOCK-BASED COMPENSATION

The Company has two stock-based compensation plans under which shares were available for grant at March 31, 2023: (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.

The Company recorded $16.1 million and $16.3 million of compensation expense relating to outstanding options, restricted stock units, performance share units and other share-based awards during the three-months ended March 31, 2023 and 2022, 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 March 31, 2023 and 2022 was $25.9 million and $0.4 million, respectively.

Stock Options

Under the Company’s stock-based compensation plans, all stock options granted as of March 31, 2023 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 March 31,
	2023		2022
Dividend yield	0.0	%	0.0	%
Expected volatility	27.6	%	27.7	%
Risk-free interest rate	3.7	%	2.1	%
Expected term	6.3 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 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 (in	Price Per		Term (in	Aggregate
Options	thousands)	Share		years)	Intrinsic Value
Outstanding at January 1, 2023	29,710	$	26.38	5.0	$	724,651
Granted 01/01/23 - 03/31/23	3,962	$	50.82
Exercised	(3,129)	$	11.62
Cancelled or forfeited	(73)	$	37.39
Outstanding at March 31, 2023	30,470	$	31.04	5.8	$	699,802
Vested and expected to vest in the future at March 31, 2023	29,381	$	30.58	5.6	$	688,532
Exercisable at March 31, 2023	19,309	$	24.79	4.0	$	564,190

The weighted-average grant-date fair value of options granted during the three-months ended March 31, 2023 and 2022 was $18.23 per share and $11.61 per share, respectively.

The total intrinsic value of options exercised during the three-months ended March 31, 2023 and 2022 was $131.0 million and $4.9 million, respectively.

Cash received from option exercises under all plans for the three-months ended March 31, 2023 and 2022 was $36.3 million and $4.5 million, respectively.

At March 31, 2023, there was $125.2 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 3.6 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, 2023	2,026	$	36.27
Granted 01/01/23 - 03/31/231	523	$	48.49
Vested	(576)	$	32.87
Forfeited/cancelled	(4)	$	32.80
Non-vested at March 31, 2023	1,969	$	40.52

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.

MONSTER BEVERAGE CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

The weighted-average grant-date fair value of restricted stock units and/or performance share units granted during the three-months ended March 31, 2023 and 2022 was $50.83 and $36.73 per share, respectively.

As of March 31, 2023, 1.8 million of restricted stock units and performance share units are expected to vest over their respective terms.

At March 31, 2023, total unrecognized compensation expense relating to non-vested restricted stock units and performance share units was $53.6 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 March 31, 2023, other share-based awards outstanding included grants that vest over three years payable in the first quarters of 2024, 2025 and 2026.

At March 31, 2023, there was $0.3 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 1.4 years.

15.	INCOME TAXES

The following is a roll-forward of the Company’s total gross unrecognized tax benefits, not including interest and penalties, for the three-months ended March 31, 2023:


	Gross Unrecognized
	Tax Benefits
Balance at December 31, 2022	$	3,020
Additions for tax positions related to the current year		—
Additions for tax positions related to the prior years		738
Decreases for tax positions related to the prior years		—
Balance at March 31, 2023	$	3,758

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 March 31, 2023, the Company had approximately $0.6 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 2019 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 2018 through 2021 tax years.

MONSTER BEVERAGE CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

16.	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
	March 31,
	2023	2022
Weighted-average shares outstanding:
Basic	1,044,909	1,058,810
Dilutive	14,160	12,298
Diluted	1,059,069	1,071,108

For the three-months ended March 31, 2023 and 2022, options and awards outstanding totaling 2.6 million shares and 3.2 million shares, respectively, were excluded from the calculations as their effect would have been antidilutive.

17.	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, Monster_®_ Tour WaterTM and Reign Storm® total wellness energy drinks, (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 as well as The Beast UnleashedTM FMBs and (iv) 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 and gas chains, drug stores, foodservice customers, value stores, e-commerce retailers and the military.

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.

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-months ended March 31, 2023 and 2022 were as follows:


	Three-Months Ended
	March 31,
	2023		2022
Net sales:
Monster Energy® Drinks1	$	1,561,669	$	1,404,847
Strategic Brands		86,357		92,593
Alcohol Brands2		46,290		15,207
Other		4,614		5,927
Corporate and unallocated		—		—
	$	1,698,930	$	1,518,574


	Three-Months Ended
	March 31,
	2023		2022
Operating Income:
Monster Energy® Drinks1	$	560,819	$	454,563
Strategic Brands		51,771		57,195
Alcohol Brands2		(6,883)		(4,953)
Other		(293)		1,127
Corporate and unallocated		(120,350)		(108,443)
	$	485,064	$	399,489


	Three-Months Ended
	March 31,
	2023		2022
Income before tax:
Monster Energy® Drinks1	$	561,674	$	455,134
Strategic Brands		51,788		57,254
Alcohol Brands2		(6,867)		(5,606)
Other		(293)		1,137
Corporate and unallocated		(108,742)		(115,730)
	$	497,560	$	392,189

	(1)	Includes $9.9 million and $10.0 million for the three-months ended March 31, 2023 and 2022, respectively, related to the recognition of deferred revenue.

	(2)	For the three-months ended March 31, 2022, effectively from February 17, 2022 to March 31, 2022.


	Three-Months Ended
	March 31,
	2023		2022
Depreciation and amortization:
Monster Energy® Drinks	$	8,989	$	8,159
Strategic Brands		221		233
Alcohol Brands		4,051		2,283
Other		1,123		1,110
Corporate and unallocated		2,424		2,814
	$	16,808	$	14,599

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 March 31, 2023 include $80.3 million of payroll costs, of which $15.7 million was attributable to stock-based compensation expenses (see Note 14 “Stock-Based Compensation”), as well as $22.1 million attributable to professional service expenses, including accounting and legal costs, and $18.0 million of other operating expenses.

Corporate and unallocated expenses for the three-months ended March 31, 2022 include $68.1 million of payroll costs, of which $16.2 million was attributable to stock-based compensation expenses (see Note 14 “Stock-Based Compensation”), as well as $26.4 million attributable to professional service expenses, including accounting and legal costs, and $13.9 million of other operating expenses.

Coca-Cola Europacific Partners accounted for approximately 13% and 12% of the Company’s net sales for the three-months ended March 31, 2023 and 2022, respectively.

Coca-Cola Consolidated, Inc. accounted for approximately 10% and 9% of the Company’s net sales for the three-months ended March 31, 2023 and 2022, respectively.

Reyes Coca-Cola Bottling, LLC accounted for approximately 9% and 10% of the Company’s net sales for the three-months ended March 31, 2023 and 2022, respectively.

Net sales to customers outside the United States amounted to $622.9 million and $553.4 million for the three-months ended March 31, 2023 and 2022, respectively. Such sales were approximately 37% and 36% of net sales for the three-months ended March 31, 2023 and 2022, respectively.

Goodwill and other intangible assets for the Company’s reportable segments as of March 31, 2023 and December 31, 2022 were as follows:


	March 31,		December 31,
	2023		2022
Goodwill and other intangible assets:
Monster Energy® Drinks	$	1,427,947	$	1,424,212
Strategic Brands		980,360		979,896
Alcohol Brands		232,232		233,140
Other		—		1,103
	$	2,640,539	$	2,638,351

18.	RELATED PARTY TRANSACTIONS

TCCC controls approximately 19.5% 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 $15.7 million and $18.4 million for the three-months ended March 31, 2023 and 2022, respectively, and are included as a reduction to net sales.

TCCC commissions, based on sales to TCCC independent bottlers/distributors, were $8.8 million and $11.0 million for the three-months ended March 31, 2023 and 2022, respectively, and are included in operating expenses.

Net sales to the TCCC Subsidiaries for the three-months ended March 31, 2023 and 2022 were $35.1 million and $31.8 million, respectively.

MONSTER BEVERAGE CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

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 $8.5 million for the three-months ended March 31, 2023 and 2022, respectively.

Certain TCCC Subsidiaries also contract manufacture certain of the Company’s energy drinks. Such contract manufacturing expenses were $7.4 million and $9.2 million for the three-months ended March 31, 2023 and 2022, respectively.

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


	March 31,		December 31,
	2023		2022
Accounts receivable, net	$	128,697	$	88,169
Accounts payable	$	(36,703)	$	(35,467)
Accrued promotional allowances	$	(10,833)	$	(11,222)
Accrued liabilities	$	(23,569)	$	(14,733)

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 both the three-months ended March 31, 2023 and 2022 was $1.1 million.

During the three-months ended March 31, 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 three-months ended March 31, 2022, the Company incurred costs of $0.08 million, an amount the Company believes is commensurate with market rates for comparable travel. No amounts were incurred by the Company during the three-months ended March 31, 2023.

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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