Item 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

​

MONSTER BEVERAGE CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

AS OF JUNE 30, 2023 AND DECEMBER 31, 2022

(In Thousands, Except Par Value) (Unaudited)

​

​	​	​	​	​	​	​
​	​	June 30,		​	December 31,
​		2023			2022
ASSETS	​	​	​	​	​	​
CURRENT ASSETS:	​	​	​	​	​	​
Cash and cash equivalents	​	$	1,869,774	​	$	1,307,141
Short-term investments	​		1,417,239			1,362,314
Accounts receivable, net	​		1,333,004			1,016,203
Inventories	​		846,812			935,631
Prepaid expenses and other current assets	​		148,750			109,823
Prepaid income taxes	​		38,534			33,785
Total current assets	​		5,654,113			4,764,897
​	​	​	​	​	​	​
INVESTMENTS	​		62,248			61,443
PROPERTY AND EQUIPMENT, net	​		576,645			516,897
DEFERRED INCOME TAXES, net	​		177,039			177,039
GOODWILL	​		1,417,941			1,417,941
OTHER INTANGIBLE ASSETS, net	​		1,224,100			1,220,410
OTHER ASSETS	​		151,252			134,478
Total Assets	​	$	9,263,338		$	8,293,105
​	​	​	​	​	​	​
LIABILITIES AND STOCKHOLDERS’ EQUITY	​	​	​	​	​	​
CURRENT LIABILITIES:	​	​	​	​	​	​
Accounts payable	​	$	568,613		$	444,265
Accrued liabilities	​		198,656			172,991
Accrued promotional allowances	​		283,647			255,631
Deferred revenue	​		42,765			43,311
Accrued compensation	​		56,195			72,463
Income taxes payable	​		12,704			13,317
Total current liabilities	​		1,162,580			1,001,978
​	​	​	​	​	​	​
DEFERRED REVENUE	​		215,039			223,800
​	​	​	​	​	​	​
OTHER LIABILITIES	​	​	44,255	​	​	42,286
​	​	​	​	​	​	​
COMMITMENTS AND CONTINGENCIES (Note 11)	​	​	​	​	​	​
​	​	​	​	​	​	​
STOCKHOLDERS’ EQUITY1:	​	​	​	​	​	​
Common stock - $0.005 par value; 5,000,000 shares authorized; 1,118,269 shares issued and 1,047,485 shares outstanding as of June 30, 2023; 1,283,688 shares issued and 1,044,600 shares outstanding as of December 31, 2022	​	​	5,591	​	​	6,418
Additional paid-in capital	​		4,869,791			4,776,804
Retained earnings	​		5,120,063			9,001,173
Accumulated other comprehensive loss	​		(155,725)			(159,073)
Common stock in treasury, at cost; 70,784 shares and 239,088 shares as of June 30, 2023 and December 31, 2022, respectively	​		(1,998,256)			(6,600,281)
Total stockholders’ equity	​		7,841,464			7,025,041
Total Liabilities and Stockholders’ Equity	​	$	9,263,338		$	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- AND SIX-MONTHS ENDED JUNE 30, 2023 AND 2022

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

​

​	​	​	​	​	​	​	​	​	​	​	​	​
​	​	Three-Months Ended					​	Six-Months Ended
​	​	June 30,					​	June 30,
​		2023			2022			2023			2022
​	​	​	​	​	​	​	​	​	​	​	​	​
NET SALES	​	$	1,854,961	​	$	1,655,260	​	$	3,553,891	​	$	3,173,833
​	​	​	​	​	​	​	​	​	​	​	​	​
COST OF SALES	​		880,739	​		875,399	​		1,681,820	​		1,617,306
​	​	​	​	​	​	​	​	​	​	​	​	​
GROSS PROFIT	​		974,222	​		779,861	​		1,872,071	​		1,556,527
​	​	​	​	​	​	​	​	​	​	​	​	​
OPERATING EXPENSES	​		450,417	​		406,910	​		863,201	​		784,088
​	​	​	​	​	​	​	​	​	​	​	​	​
OPERATING INCOME	​		523,805	​		372,951	​	​	1,008,870	​		772,439
​	​	​	​	​	​	​	​	​	​	​	​	​
INTEREST and OTHER INCOME (EXPENSE), net	​		15,159	​		(6,781)	​		27,653	​		(14,080)
​	​	​	​	​	​	​	​	​	​	​	​	​
INCOME BEFORE PROVISION FOR INCOME TAXES	​		538,964	​		366,170	​	​	1,036,523	​		758,359
​	​	​	​	​	​	​	​	​	​	​	​	​
PROVISION FOR INCOME TAXES	​	​	125,093	​	​	92,810	​	​	225,208	​	​	190,796
​	​	​	​	​	​	​	​	​	​	​	​	​
NET INCOME	​	$	413,871	​	$	273,360	​	$	811,315	​	$	567,563
​	​	​	​	​	​	​	​	​	​	​	​	​
NET INCOME PER COMMON SHARE1:	​	​	​	​	​	​	​	​	​	​	​	​
Basic	​	$	0.40	​	$	0.26	​	$	0.78	​	$	0.54
Diluted	​	$	0.39	​	$	0.26	​	$	0.77	​	$	0.53
​	​	​	​	​	​	​	​	​	​	​	​	​
WEIGHTED AVERAGE NUMBER OF SHARES OF COMMON STOCK AND COMMON STOCK EQUIVALENTS1:	​	​	​	​	​	​	​	​	​	​	​	​
Basic	​		1,047,065	​		1,057,233	​		1,045,993	​		1,058,017
Diluted	​		1,060,093	​		1,069,622	​		1,059,667	​		1,070,418

​

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- AND SIX-MONTHS ENDED JUNE 30, 2023 AND 2022

(In Thousands) (Unaudited)

​

​	​	​	​	​	​	​	​	​	​	​	​	​
​	​	Three-Months Ended						Six-Months Ended
​	​	June 30,					​	June 30,
​		2023			2022			2023			2022
Net income, as reported	​	$	413,871	​	$	273,360	​	$	811,315	​	$	567,563
Other comprehensive income (loss):	​	​	​	​	​	​	​	​	​	​	​	​
Change in foreign currency translation adjustment	​		(5,775)	​		(79,707)	​		2,206	​		(78,628)
Available-for-sale investments:	​	​	​	​	​	​	​	​	​	​	​	​
Change in net unrealized gains (losses)	​		(773)	​		(1,105)	​		2,408	​		(5,164)
Net losses on commodity derivatives	​		(1,266)	​		—	​		(1,266)	​		—
Other comprehensive income (loss)	​		(7,814)	​		(80,812)	​		3,348	​		(83,792)
Comprehensive income	​	$	406,057	​	$	192,548	​	$	814,663	​	$	483,771

​

See accompanying notes to condensed consolidated financial statements.

​

​

MONSTER BEVERAGE CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

FOR THE THREE- AND SIX-MONTHS ENDED JUNE 30, 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
​		​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
Stock-based compensation	​	—	​	​	—	​	​	17,176	​	​	—	​	​	—	​	—	​	​	—	​	​	17,176
Stock options/awards		877	​	​	4	​	​	23,314	​	​	—	​	​	—	​	—	​	​	—	​	​	23,318
Unrealized gain (loss), net on available-for-sale securities		—	​		—	​		—	​		—	​		(773)		—	​		—	​		(773)
Repurchase of common stock		—	​	​	—	​	​	—	​	​	—	​	​	—	​	(8)	​	​	(447)	​	​	(447)
Foreign currency translation	​	—	​	​	—	​	​	—	​	​	—	​	​	(5,775)	​	—	​	​	—	​	​	(5,775)
Net losses on commodity derivatives		—	​	​	—	​	​	—	​	​	—	​	​	(1,266)	​	—	​	​	—	​	​	(1,266)
Net income	​	—	​	​	—	​	​	—	​	​	413,871	​	​	—	​	—	​	​	—	​	​	413,871
​		​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
Balance, June 30, 2023	​	1,118,269	​	$	5,591	​	$	4,869,791	​	$	5,120,063	​	$	(155,725)	​	(70,784)	​	$	(1,998,256)	​	$	7,841,464

​

​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
​	​	​	​	​	​	​	​	​	​	​	​	​	​		​	​	​	​	​	​	​	​
​	​	​	​	​	​	​	​	​	​	​	​	​	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
​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
Stock-based compensation		—		​	—		​	16,157		​	—		​	—	​	—		​	—		​	16,157
Stock options/awards	​	832	​	​	4	​	​	18,108	​	​	—	​	​	—	​	—	​	​	—	​	​	18,112
Unrealized gain (loss), net on available-for-sale securities		—	​	​	—	​	​	—	​	​	—	​	​	(1,105)	​	—	​	​	—	​	​	(1,105)
Repurchase of common stock		—	​	​	—	​	​	—	​	​	—	​	​	—	​	(6,572)	​	​	(284,311)	​	​	(284,311)
Foreign currency translation		—	​		—	​		—	​		—	​		(79,707)		—	​		—	​		(79,707)
Net income		—	​	​	—	​	​	—	​	​	273,360	​	​	—	​	—	​	​	—	​	​	273,360
​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
Balance, June 30, 2022	​	1,281,888	​	$	6,410	​	$	4,704,364	​	$	8,377,112	​	$	(152,957)	​	(228,344)	​	$	(6,125,751)	​	$	6,809,178

​

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 SIX-MONTHS ENDED JUNE 30, 2023 AND 2022

(In Thousands) (Unaudited)

​

​	​	​	​	​	​	​
​	​	Six-Months Ended
​	​	June 30,
​		2023			2022
CASH FLOWS FROM OPERATING ACTIVITIES:	​	​	​	​	​	​
Net income	​	$	811,315	​	$	567,563
Adjustments to reconcile net income to net cash provided by operating activities:	​	​	​	​	​	​
Depreciation and amortization	​	​	32,384	​	​	30,432
Non-cash lease expense	​	​	2,828	​	​	3,222
Gain on disposal of property and equipment	​	​	(767)	​	​	(69)
Loss on impairment of intangibles	​	​	2,800	​	​	—
Stock-based compensation	​	​	34,603	​	​	32,609
Deferred income taxes	​	​	—	​	​	21,934
Effect on cash of changes in operating assets and liabilities net of acquisition:	​	​	​	​	​	​
Accounts receivable	​	​	(317,808)	​	​	(289,236)
Inventories	​	​	93,077	​	​	(299,076)
Prepaid expenses and other assets	​	​	(36,779)	​	​	(55,663)
Prepaid income taxes	​	​	(3,345)	​	​	(1,220)
Accounts payable	​	​	132,173	​	​	85,499
Accrued liabilities	​	​	20,491	​	​	(789)
Accrued promotional allowances	​	​	23,643	​	​	77,746
Accrued compensation	​	​	(17,616)	​	​	(15,311)
Income taxes payable	​	​	(1,219)	​	​	(14,666)
Other liabilities	​	​	(257)	​	​	(3,211)
Deferred revenue	​	​	(12,361)	​	​	(9,101)
Net cash provided by operating activities	​	​	763,162	​	​	130,663
​	​	​	​	​	​	​
CASH FLOWS FROM INVESTING ACTIVITIES:	​	​	​	​	​	​
Sales of available-for-sale investments	​	​	1,037,803	​	​	1,409,707
Purchases of available-for-sale investments	​	​	(1,091,126)	​	​	(964,267)
Acquisition of CANarchy, net of cash	​	​	—	​	​	(329,472)
Purchases of property and equipment	​	​	(82,425)	​	​	(99,446)
Proceeds from sale of property and equipment	​	​	1,035	​	​	372
Additions to intangibles	​	​	(5,926)	​	​	(9,894)
Increase in other assets	​	​	(17,570)	​	​	(12,738)
Net cash used in investing activities	​	​	(158,209)	​	​	(5,738)
​	​	​	​	​	​	​
CASH FLOWS FROM FINANCING ACTIVITIES:	​	​	​	​	​	​
(Payments) borrowings on debt	​	​	(6,661)	​	​	4,924
Issuance of common stock	​	​	59,666	​	​	22,622
Purchases of common stock held in treasury	​	​	(90,825)	​	​	(296,499)
Net cash used in financing activities	​	​	(37,820)	​	​	(268,953)
​	​	​	​	​	​	​
Effect of exchange rate changes on cash and cash equivalents	​	​	(4,500)	​	​	(50,395)
​	​	​	​	​	​	​
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS	​	​	562,633	​	​	(194,423)
CASH AND CASH EQUIVALENTS, beginning of period	​	​	1,307,141	​	​	1,326,462
CASH AND CASH EQUIVALENTS, end of period	​	$	1,869,774	​	$	1,132,039
​	​	​	​	​	​	​
SUPPLEMENTAL INFORMATION:	​	​	​	​	​	​
Cash paid during the period for:	​	​	​	​	​	​
Interest	​	$	147	​	$	227
Income taxes	​	$	232,896	​	$	209,513

​

See accompanying notes to condensed consolidated financial statements.

​

MONSTER BEVERAGE CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE SIX-MONTHS ENDED JUNE 30, 2023 AND 2022

(In Thousands) (Unaudited) (Continued)

SUPPLEMENTAL DISCLOSURE OF NON-CASH ITEMS

Included in accrued liabilities as of June 30, 2023 and 2022 were $9.6 million and $3.4 million, respectively, related to net additions to other intangible assets.

Included in accounts payable as of June 30, 2023 were $3.2 million related to net additions to other intangible assets.

Included in accounts payable as of June 30, 2022 were available-for-sale short-term investment purchases of $3.4 million.

Included in accounts payable as of June 30, 2023 and 2022 were $2.0 million and $0.1 million, respectively, related to equipment purchases.

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- and six-months ended June 30, 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.

Derivative Financial Instruments – The Company uses derivative financial instruments for the purpose of hedging risk exposures to fluctuations in foreign currency exchange rates and aluminum commodity prices. The Company’s derivative instruments are recorded in the consolidated balance sheets at fair value. The Company values each derivative financial instrument by obtaining valuation information from a reliable and observable market source. For a derivative designated as a cash flow hedge, the derivative’s mark to fair value is initially recorded as a component of accumulated other comprehensive income (loss) and subsequently reclassified into earnings when the hedged item affects earnings, unless it is probable that the forecasted transaction will not occur. Derivatives that do not qualify for hedge accounting are marked to fair value with gains and losses immediately recorded in earnings. In the consolidated statements of cash flows, derivative activities are classified based on the cash flows of the items being hedged. Upon the dedesignation of an effective derivative contract, the gains or losses are deferred in accumulated other comprehensive income (loss) until the originally hedged item affects earnings, unless it is probable the hedged item will not occur, at which time it is recognized immediately. Any gains or losses incurred after the dedesignation date are recorded in earnings immediately.

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 Water® 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 primarily 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 June 30, 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 June 30, 2023
​	​	​	​		​	​		​	​		Latin			​	​
​	​	​	​	​	​	​	​	​	​	​	America		​		​
​	​	U.S. and		​	​	​	​	​	​	​	and		​		​
Net Sales		Canada			EMEA1			Asia Pacific			Caribbean			Total
Monster Energy® Drinks	​	$	1,068,887	​	$	339,522	​	$	138,478	​	$	140,000	​	$	1,686,887
Strategic Brands	​		47,226	​		42,050	​		7,828	​		2,586	​		99,690
Alcohol Brands	​	​	61,076	​	​	—	​	​	—	​	​	—	​	​	61,076
Other	​		7,308	​		—	​		—	​		—	​		7,308
Total Net Sales	​	$	1,184,497	​	$	381,572	​	$	146,306	​	$	142,586	​	$	1,854,961

​

​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
​	​	Three-Months Ended June 30, 2022
​	​	​	​		​	​		​	​		Latin		​		​
​	​	​	​	​	​	​	​	​	​	​	America		​	​	​
​	​	U.S. and		​	​	​	​	​		​	and		​	​	​
Net Sales		Canada			EMEA1			Asia Pacific			Caribbean			Total
Monster Energy® Drinks	​	$	973,674	​	$	308,839	​	$	116,788	​	$	138,389	​	$	1,537,690
Strategic Brands	​	​	38,368	​		29,171	​		7,477	​		4,126	​		79,142
Alcohol Brands	​	​	32,447	​	​	—	​	​	—	​	​	—	​	​	32,447
Other	​	​	5,981	​		—	​		—	​		—	​		5,981
Total Net Sales	​	$	1,050,470	​	$	338,010	​	$	124,265	​	$	142,515	​	$	1,655,260

​

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

​

​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
​	​	Six-Months Ended June 30, 2023
​	​	​	​		​	​		​	​		Latin			​	​
​	​	​	​	​	​	​	​	​	​	​	America		​	​	​
​	​	U.S. and		​	​	​	​			​	and		​	​	​
Net Sales		Canada			EMEA1			Asia Pacific			Caribbean			Total
Monster Energy® Drinks	​	$	2,090,215	​	$	616,633	​	$	260,472	​	$	281,235	​	$	3,248,555
Strategic Brands	​		90,269	​		73,001	​		16,811	​		5,967	​		186,048
Alcohol Brands	​		107,366	​		—	​		—	​		—	​		107,366
Other	​		11,922	​		—	​		—	​		—	​		11,922
Total Net Sales	​	$	2,299,772	​	$	689,634	​	$	277,283	​	$	287,202	​	$	3,553,891

​

​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
​	​	Six-Months Ended June 30, 2022
​		​	​		​	​		​	​		Latin			​	​
​	​	​	​	​	​	​	​	​	​	​	America		​	​	​
​	​	U.S. and		​	​	​	​			​	and		​	​	​
Net Sales		Canada			EMEA1			Asia Pacific			Caribbean			Total
Monster Energy® Drinks	​	$	1,899,354	​	$	569,728	​	$	227,343	​	$	246,111	​	$	2,942,536
Strategic Brands	​		91,420	​		59,347	​		14,138	​		6,830	​		171,735
Alcohol Brands2	​		47,654	​		—	​		—	​		—	​		47,654
Other	​		11,908	​		—	​		—	​		—	​		11,908
Total Net Sales	​	$	2,050,336	​	$	629,075	​	$	241,481	​	$	252,941	​	$	3,173,833

​

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

2_Effectively from February 17, 2022 to June 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 June 30, 2023, the Company had $257.8 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 June 30, 2023 and 2022, $10.0 million and $10.1 million, respectively, of deferred revenue was recognized in net sales. See Note 10. During the six-months ended June 30, 2023 and 2022, $19.9 million and $20.1 million, respectively, of deferred revenue was recognized in net sales. See Note 10.

​

3.	LEASES

The Company leases identified assets consisting primarily of office and warehouse space, warehouse equipment and vehicles. Leases are classified as either finance leases or operating leases based on criteria in ASC 842, “Leases”. 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 components of lease cost were as follows:

​

​	​	​	​	​	​	​	​	​	​	​	​	​
​	​	Three-Months Ended June 30,					​	Six-Months Ended June 30,
​		2023			2022			2023			2022
Operating lease cost	​	$	2,616	​	$	2,238	​	$	5,083	​	$	3,932
Short-term lease cost	​		1,070	​		939	​		2,049	​		1,869
Variable lease cost	​		226	​		195	​		441	​		378
​	​	​	​	​	​	​	​	​	​	​	​	​
Finance leases:	​	​	​	​	​	​	​	​	​	​	​	​
Amortization of right-of-use assets	​		202	​		148	​		325	​		275
Interest on lease liabilities	​		44	​		7	​		58	​		10
Finance lease cost	​		246	​		155	​		383	​		285
​	​	​	​	​	​	​	​	​	​	​	​	​
Total lease cost	​	$	4,158	​	$	3,527	​	$	7,956	​	$	6,464

​

Supplemental cash flow information related to leases was as follows:

​

​	​	​	​	​	​	​
​	​	Six-Months Ended June 30,
​		2023			2022
Cash paid for amounts included in the measurement of lease liabilities:	​	​	​	​	​	​
Operating cash outflows from operating leases	​	$	4,818	​	$	3,682
Operating cash outflows from finance leases	​	​	58	​	​	10
Financing cash outflows from finance leases	​	​	1,683	​	​	1,179
​	​	​	​	​	​	​
Right-of-use assets obtained in exchange for lease obligations:	​	​	​	​	​	​
Finance leases	​	​	5,115	​	​	1,561
Operating leases	​	​	1,847	​	​	18,339

​

MONSTER BEVERAGE CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

​

Supplemental balance sheet information related to leases was as follows:

​

​	​	​	​	​	​	​	​	​
​		​		June 30,			December 31,
​	​	Balance Sheet Location	​	2023		​	2022
Operating leases:				​			​
Right-of-use assets		Other assets	​	$	37,111	​	$	38,012
​	​	​	​	​	​	​	​	​
Current lease liabilities		Accrued liabilities	​	$	7,835	​	$	7,747
Noncurrent lease liabilities		Other liabilities	​		28,829	​		29,586
Total operating lease liabilities			​	$	36,664	​	$	37,333
​	​	​	​	​	​	​	​	​
Finance leases:			​			​
Right-of-use assets		Property and equipment, net	​	$	5,335	​	$	1,598
​	​	​	​	​	​	​	​	​
Current lease liabilities		Accrued liabilities	​	$	4,205	​	$	757
Noncurrent lease liabilities		Other liabilities	​		29	​		41
Total finance lease liabilities			​	$	4,234	​	$	798

​

Weighted-average remaining lease term and weighted-average discount rate for the Company’s leases were as follows:

​

​	​	​	​	​	​
​	​	June 30, 2023	​	December 31, 2022	​
Weighted-average remaining lease term in years:	​	​	​	​	​
Operating leases	​	6.5		6.7	​
Finance leases	​	0.8	​	0.8	​
​	​	​	​	​	​
Weighted-average discount rate:	​	​	​	​	​
Operating leases	​	3.6	%	3.4	%
Finance leases	​	5.9	%	3.6	%

​

The following table outlines maturities of the Company’s lease liabilities as of June 30, 2023:

​

​	​	​	​	​	​	​
​		Operating Leases			Finance Leases
2023 (from July 1, 2023 to December 31, 2023)	​	$	4,592	​	$	2,711
2024	​		8,089	​		1,620
2025	​		5,962	​		17
2026	​		4,780	​		2
2027	​	​	4,650	​	​	—
2028 and thereafter	​		13,183	​		—
Total lease payments	​		41,256	​		4,350
Less imputed interest	​		(4,592)	​		(116)
Total	​	$	36,664	​	$	4,234

​

As of June 30, 2023, the Company did not have any significant additional 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
June 30, 2023		Cost			Gains			Losses			Value			Months			Months
Available-for-sale	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
Short-term:	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
Commercial paper	​	$	329,770	​	$	—	​	$	2	​	$	329,768	​	$	2	​	$	—
Certificates of deposit	​	​	15,161	​	​	—	​	​	—	​	​	15,161	​	​	—	​	​	—
Municipal securities	​		59,158	​	​	—	​	​	125	​	​	59,033	​	​	125	​	​	—
U.S. government agency securities	​		152,071	​		—	​		489	​		151,582	​		489	​		—
U.S. treasuries	​	​	705,370	​		31	​		2,002	​		703,399	​		2,002	​		—
Corporate bonds	​	​	158,748	​	​	10	​	​	462	​	​	158,296	​	​	462	​	​	—
Long-term:	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
U.S. government agency securities	​	​	2,580	​	​	—	​	​	9	​	​	2,571	​	​	9	​	​	—
U.S. treasuries	​	​	39,011	​	​	—	​	​	309	​	​	38,702	​	​	309	​	​	—
Corporate bonds	​	​	21,065	​	​	—	​	​	90	​	​	20,975	​	​	90	​	​	—
Total	​	$	1,482,934	​	$	41	​	$	3,488	​	$	1,479,487	​	$	3,488	​	$	—

​

​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
​	​	​	​	​	​	​	​	​	​	​	​	​	​	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- and six-months ended June 30, 2023 and 2022, realized gains or losses recognized on the sale of investments were not significant.

The Company’s investments at June 30, 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:

​

​	​	​	​	​	​	​	​	​	​	​	​	​
​	​	June 30, 2023					​	December 31, 2022
​		Amortized Cost			Fair Value			Amortized Cost			Fair Value
Less than 1 year:	​	​	​	​	​	​	​	​	​	​	​	​
Commercial paper	​	$	329,770	​	$	329,768		$	197,712	​	$	197,710
Municipal securities	​		59,158	​		59,033			211,791	​		211,239
U.S. government agency securities	​		152,071	​		151,582			109,697	​		108,985
Certificates of deposit	​		15,161	​		15,161			10,078	​		10,078
U.S. treasuries	​	​	705,370	​	​	703,399	​	​	838,825	​	​	834,302
Corporate bonds	​	​	158,748	​	​	158,296	​	​	—	​	​	—
Due 1 - 10 years:	​	​	​	​	​	​	​	​	​	​	​	​
U.S. treasuries	​	​	39,011	​	​	38,702	​	​	53,215	​	​	53,164
U.S. government agency securities	​		2,580	​		2,571			2,016	​		2,013
Variable rate demand notes	​	​	—	​	​	—	​	​	4,862	​	​	4,862
Corporate bonds	​	​	21,065	​	​	20,975	​	​	—	​	​	—
Due 11 - 20 years:	​	​	​	​	​	​	​	​	​	​	​	​
Variable rate demand notes	​		—	​		—			1,404	​		1,404
Total	​	$	1,482,934	​	$	1,479,487		$	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:

​

​	​	​	​	​	​	​	​	​	​	​	​	​
June 30, 2023		Level 1			Level 2			Level 3			Total
Cash	​	$	877,582	​	$	—	​	$	—	​	$	877,582
Money market funds	​		911,446	​		—	​		—	​		911,446
Certificates of deposit	​	​	—	​	​	47,109	​	​	—	​	​	47,109
Commercial paper	​		—	​		336,764	​		—	​		336,764
Corporate bonds	​	​	—	​	​	179,271	​	​	—	​	​	179,271
Municipal securities	​		—	​		59,033	​		—	​		59,033
U.S. government agency securities	​		—	​		162,351	​		—	​		162,351
U.S. treasuries	​	​	—	​	​	775,707	​	​	—	​	​	775,707
Foreign currency derivatives	​		—	​		178	​		—	​		178
Commodity derivatives	​		—	​		(1,266)	​		—	​		(1,266)
Total	​	$	1,789,028	​	$	1,559,147	​	$	—	​	$	3,348,175
​	​	​	​	​	​	​	​	​	​	​	​	​
Amounts included in:	​	​	​	​	​	​	​	​	​	​	​	​
Cash and cash equivalents	​	$	1,789,028	​	$	80,746	​	$	—	​	$	1,869,774
Short-term investments	​		—	​		1,417,239	​		—	​		1,417,239
Accounts receivable, net	​		—	​		270	​		—	​		270
Investments	​		—	​		62,248	​		—	​		62,248
Accrued liabilities	​		—	​		(1,219)	​		—	​		(1,219)
Other liabilities	​		—	​		(137)	​		—	​		(137)
Total	​	$	1,789,028	​	$	1,559,147	​	$	—	​	$	3,348,175

​

​	​	​	​	​	​	​	​	​	​	​	​	​
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- and six-months ended June 30, 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 accounts for its derivative instruments and hedging activities under ASC 815, “Derivatives and Hedging.” The following table presents the fair values of the Company’s derivative instruments:

​

​	​	​	​	​	​	​	​	​
​		Fair value
​	​	June 30,			December 31,			​
Derivatives designated as hedging instruments	​	2023		​	2022		​	Balance Sheet location
Assets:		​			​		​
Commodity contracts	​	$	—	​	$	—	​	Accounts receivable, net
Liabilities:	​			​			​
Commodity contracts	​	$	(1,129)	​	$	—	​	Accrued liabilities
Commodity contracts	​	$	(137)	​	$	—	​	Other liabilities

​

​	​	​	​	​	​	​	​	​
​		Fair value
​	​	June 30,			December 31,			​
Derivatives not designated as hedging instruments	​	2023		​	2022		​	Balance Sheet location
Assets:		​			​		​
Foreign currency exchange contracts	​	$	270	​	$	965	​	Accounts receivable, net
Liabilities:	​			​			​
Foreign currency exchange contracts	​	$	(92)	​	$	(4,698)	​	Accrued liabilities

​

Cash Flow Hedging Strategy

The Company uses cash flow hedges to minimize the variability in cash flows of forecasted transactions caused by fluctuations in commodity prices. The changes in the fair values of derivatives designated as cash flow hedges are recorded in accumulated other comprehensive income (loss) (“AOCI”) and are reclassified into the line item in our condensed consolidated statement of income in which the hedged items are recorded in the same period that the hedged items affect earnings. The changes in the fair values of hedges that are determined to be ineffective are immediately reclassified from AOCI into earnings. The maximum length of time for which the Company hedges its exposure to the variability in future cash flows is currently less than two years.

The Company has entered into commodity hedge contracts to mitigate the price risk associated with a portion of its forecasted aluminum purchases. These derivative instruments were designated as part of the Company’s commodity cash flow hedging program. The objective of this hedging program is to reduce the variability of cash flows associated with future purchases of aluminum. The total notional values of derivatives that were designated and qualified for this program were $30.4 million as of June 30, 2023. Transactions under the commodity cash flow hedging program were executed beginning in May 2023.

The following table presents the impact that changes in the fair values of derivatives designated as cash flow hedges had on other comprehensive income (“OCI”), AOCI and earnings:

​

​	​	​	​	​	​	​	​	​
Three-months ended June 30, 2023
Derivatives		​	​		​		Gain (loss)
designated as	​	Gain (loss) recognized		​	Location of gain (loss)	​	reclassified from
hedging instruments	​	in AOCI		​	recognized in income	​	AOCI into income
Commodity contracts	​	$	(1,266)		Cost of sales	​	$	—

​

​	​	​	​	​	​	​	​	​
Six-months ended June 30, 2023
Derivatives		​	​		​		Gain (loss)
designated as	​	Gain (loss) recognized		​	Location of gain (loss)	​	reclassified from
hedging instruments	​	in AOCI		​	recognized in income	​	AOCI into income
Commodity contracts	​	$	(1,266)		Cost of sales	​	$	—

​

MONSTER BEVERAGE CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

​

As of June 30, 2023, the Company estimates that it will reclassify into earnings net gains (losses) of ($1.0) million from the amount recorded in AOCI as the anticipated cash flows occur during the next 12 months.

Economic (Non-Designated) Hedging Strategy

The Company is exposed to foreign currency exchange rate risks related primarily to its foreign business operations. During the six-months ended June 30, 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 June 30, 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. 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 total notional values of derivatives related to our foreign currency economic hedges were $176.0 million and $299.8 million as of June 30, 2023 and December 31, 2022, respectively.

The net gains (losses) on derivatives not designated as hedging instruments in the condensed consolidated statements of income were as follows:

​

​	​	​	​	​	​	​	​	​
​	​	​	​	Gain (loss)
​	​	​	​	recognized in income on
​	​	​	​	derivatives
​	​	​	​	Three-months ended
Derivatives not designated as	​	Location of gain (loss)	​	June 30,		​	June 30,
hedging instruments	​	recognized in income on derivatives	​	2023		​	2022
Foreign currency exchange contracts		Interest and other income (expense), net	​	$	(1,924)	​	$	743

​

​	​	​	​	​	​	​	​	​
​	​	​	​	Gain (loss)
​	​	​	​	recognized in income on
​	​	​	​	derivatives
​	​	​	​	Six-months ended
Derivatives not designated as	​	Location of gain (loss)	​	June 30,		​	June 30,
hedging instruments	​	recognized in income on derivatives	​	2023		​	2022
Foreign currency exchange contracts		Interest and other income (expense), net	​	$	(9,775)	​	$	(3,275)

​

Certain of the Company’s counterparty agreements contain provisions that require the Company to post collateral on derivative instruments in a net liability position, for which the Company posted collateral of $1.1 million as of June 30, 2023.

​

MONSTER BEVERAGE CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

​

​

7.	INVENTORIES

Inventories consist of the following at:

​

​	​	​	​	​	​	​
​		June 30,			December 31,
​		2023			2022
Raw materials	​	$	399,564	​	$	467,392
Work in process	​	​	1,848	​	​	1,688
Finished goods	​		445,400	​		466,551
​	​	$	846,812	​	$	935,631

​

​

8.	PROPERTY AND EQUIPMENT, NET

Property and equipment consist of the following at:

​

​	​	​	​	​	​	​
​		June 30,			December 31,
​		2023			2022
Land	​	$	139,975	​	$	139,798
Leasehold improvements	​		33,245	​		31,327
Furniture and fixtures	​		9,393	​		9,286
Office and computer equipment	​		23,326	​		22,386
Computer software	​		4,941	​		5,906
Equipment	​		269,671	​		244,739
Buildings	​		165,598	​		163,885
Vehicles	​		57,162	​		49,175
Assets under construction	​	​	133,086	​	​	83,553
​	​		836,397	​		750,055
Less: accumulated depreciation and amortization	​		(259,752)	​		(233,158)
​	​	$	576,645	​	$	516,897

​

Total depreciation and amortization expense was $14.7 million and $13.8 million for the three-months ended June 30, 2023 and 2022, respectively. Total depreciation and amortization expense was $29.5 million and $26.9 million for the six-months ended June 30, 2023 and 2022, respectively.

​

MONSTER BEVERAGE CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

​

9.GOODWILL AND OTHER INTANGIBLE ASSETS

The following is a roll-forward of goodwill for the six-months ended June 30, 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 June 30, 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	​		—	​		—	​		81,298	​		—	​		81,298
Balance at June 30, 2022	​	$	693,644	​	$	637,999	​	$	81,298	​	$	—	​	$	1,412,941

​

Intangible assets consist of the following at:

​

​	​	​	​	​	​	​
​		June 30,			December 31,
​		2023			2022
Amortizing intangibles	​	$	121,378	​	$	121,378
Accumulated amortization	​		(71,712)	​		(68,790)
​	​		49,666	​		52,588
Non-amortizing intangibles	​		1,174,434	​		1,167,822
​	​	$	1,224,100	​	$	1,220,410

​

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 $0.9 million and $2.0 million for the three-months ended June 30, 2023 and 2022, respectively. Total amortization expense was $2.9 million and $3.5 million for the six-months ended June 30, 2023 and 2022, respectively. For the three- and six-months ended June 30, 2023, impairment charges of $2.8 million and $2.8 million, respectively, were recorded to non-amortizing intangibles. For the three- and six-months ended June 30, 2022, no intangible impairments were recorded.

The following is the future estimated amortization expense related to amortizing intangibles as of June 30, 2023:

​

​	​	​	​
2023 (from July 1, 2023 to December 31, 2023)		$	1,824
2024	​	​	3,648
2025	​	​	3,647
2026	​	​	3,647
2027	​	​	3,646
2028 and thereafter	​	​	33,254
​	​	$	49,666

​

​

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

MONSTER BEVERAGE CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

​

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 million and $10.1 million for the three-months ended June 30, 2023 and 2022, respectively. Revenue recognized was $19.9 million and $20.1 million for the six-months ended June 30, 2023 and 2022, respectively.

​

11.	COMMITMENTS AND CONTINGENCIES

The Company had purchase commitments aggregating approximately $309.3 million at June 30, 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 $380.4 million at June 30, 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 June 30, 2023, the interest rate on borrowings under the line of credit was 5.5%. As of June 30, 2023, $2.7 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 June 30, 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.

​

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 (the “Jury Award”) 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, enjoined 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 required VPX and Mr. Owoc to issue corrective statements to consumers and non-consumer partners, including retailers and distributors.

In April 2022, MEC and Orange Bang, Inc. (“Orange Bang”) filed a joint motion in a separate District Court action 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 (the “Arbitration Award”). 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 Arbitration Award. On October 28, 2022, VPX filed a notice of appeal of the District Court’s final judgment confirming the Arbitration 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 Arbitration Award was stayed. While reserving all rights to appeal, VPX made its first royalty payment of $3.6

MONSTER BEVERAGE CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

​

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. On May 25, 2023, VPX made an additional royalty payment in the amount of approximately $3.7 million for sales of Bang-branded products from January 1, 2023 through March 31, 2023. Per ASC 450 “Contingencies”, the Company will not recognize the royalty payments until they are realized or realizable.

On June 28, 2023, VPX and certain of its affiliates (“Bang Energy”) entered into an Asset Purchase Agreement (the “APA”) with the Company (“Buyer”), which among other things, provided for the Buyer’s acquisition of substantially all of Bang Energy’s assets. The transactions contemplated by the APA were approved by the U.S. Bankruptcy Court for the Southern District of Florida on July 14, 2023 and closed on July 31, 2023, at which time Monster was deemed to have allowed general unsecured claims in VPX’s bankruptcy case relating to the Jury Award (subject to the potential modification of the Jury Award in light of pending post-verdict motions filed by MEC and VPX) and the Arbitration Award. Pursuant to the APA, Bang Energy and the Company have mutually released each other from all claims and liabilities related to the Jury Award and the Arbitration Award, except any claims that the Company might have against Mr. Owoc in relation to the Jury Award. Per ASC 450 “Contingencies”, the Company will not recognize the allowed general unsecured claims, or the Jury Award as it relates to Mr. Owoc, until they are realized or realizable.

In June 2023, the Company entered into an agreement with Orange Bang regarding the Company’s use and registration of certain Bang® trademarks and trade names, subject to the successful closure of the APA. Under this agreement, the Company will pay Orange Bang a one-time payment of approximately $12.5 million and a 2.5% royalty on all future sales of products bearing the tradename Bang®.

​

12.	ACCUMULATED OTHER COMPREHENSIVE LOSS

Changes in accumulated other comprehensive loss by component, after tax, for the six-months ended June 30, 2023 and 2022 are as follows:

​

​	​	​	​	​	​	​	​	​	​	​	​	​
​	​	Accumulated		​	​	​	​	Unrealized		​	​	​
​	​	Net Losses on			Currency			Gains (Losses)			​	​
​	​	Commodity		​	Translation		​	on Available-for-		​	​	​
​		Derivatives			Gains (Losses)			Sale Securities			Total
Balance at December 31, 2022	​	$	—	​	$	(153,230)	​	$	(5,843)	​	$	(159,073)
Other comprehensive income before reclassifications	​	​	(1,266)	​		2,206	​	​	2,408	​	​	3,348
Net current-period other comprehensive (loss) gain	​	​	(1,266)	​		2,206	​	​	2,408	​	​	3,348
Balance at June 30, 2023	​	$	(1,266)	​	$	(151,024)	​	$	(3,435)	​	$	(155,725)

​

​	​	​	​	​	​	​	​	​	​	​	​	​
​	​	Accumulated		​	​	​	​	Unrealized		​	​	​
​	​	Net Losses on			Currency		​	Losses		​	​	​
​	​	Commodity			Translation			on Available-for-			​	​
​		Derivatives			Losses			Sale Securities			Total
Balance at December 31, 2021	​	$	—	​	$	(68,209)	​	$	(956)	​	$	(69,165)
Other comprehensive loss before reclassifications	​	​	—	​		(78,628)	​	​	(5,164)	​	​	(83,792)
Net current-period other comprehensive loss	​	​	—	​		(78,628)	​	​	(5,164)	​	​	(83,792)
Balance at June 30, 2022	​	$	—	​	$	(146,837)	​	$	(6,120)	​	$	(152,957)

​

​

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.

MONSTER BEVERAGE CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

​

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 June 30, 2023, no shares were repurchased under the June 2022 Repurchase Plan. As of August 4, 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 June 30, 2023, no shares were repurchased under the November 2022 Repurchase Plan. As of August 4, 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 August 4, 2023.

During the three-months ended June 30, 2023, 7,579 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 $0.4 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 June 30, 2023.

​

14.	STOCK-BASED COMPENSATION

The Company has two stock-based compensation plans under which shares were available for grant at June 30, 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 $18.6 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 June 30, 2023 and 2022, respectively. The Company recorded $34.6 million and $32.6 million of compensation expense relating to outstanding options, restricted stock units, performance share units and other share-based awards during the six-months ended June 30, 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 June 30, 2023 and 2022 was $4.1 million and $2.2 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 six-months ended June 30, 2023 and 2022 was $30.0 million and $2.7 million, respectively.

Stock Options

Under the Company’s stock-based compensation plans, all stock options granted as of June 30, 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.

MONSTER BEVERAGE CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

​

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

​

​	​	​	​	​	​	​	​	​	​
​	​	Three-Months Ended June 30,			​	Six-Months Ended June 30,			​
​		2023		2022	​	2023		2022	​
Dividend yield	​	0.0	%	0.0	%	0.0	%	0.0	%
Expected volatility	​	27.4	%	27.8	%	27.6	%	27.7	%
Risk-free interest rate	​	3.7	%	3.0	%	3.7	%	2.1	%
Expected term	​	6.3 years	​	6.2 years	​	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.

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	​	​	​	​	​
Granted 04/01/23 - 06/30/23		31	​	$	59.36	​	​	​	​	​
Exercised		(3,990)	​	$	14.95	​	​	​	​	​
Cancelled or forfeited		(222)	​	$	37.82	​	​	​	​	​
Outstanding at June 30, 2023		29,491	​	$	31.15		5.6	​	$	775,296
Vested and expected to vest in the future at June 30, 2023	​	28,511	​	$	30.71	​	5.4	​	$	762,069
Exercisable at June 30, 2023		18,659	​	$	24.70		3.8	​	$	610,938

​

The weighted-average grant-date fair value of options granted during the three-months ended June 30, 2023 and 2022 was $21.14 per share and $14.96 per share, respectively. The weighted-average grant-date fair value of options granted during the six-months ended June 30, 2023 and 2022 was $18.25 per share and $11.62 per share, respectively.

The total intrinsic value of options exercised during the three-months ended June 30, 2023 and 2022 was $26.9 million and $18.0 million, respectively. The total intrinsic value of options exercised during the six-months ended June 30, 2023 and 2022 was $157.9 million and $22.9 million, respectively.

Cash received from option exercises under all plans for the three-months ended June 30, 2023 and 2022 was $23.3 million and $18.1 million, respectively. Cash received from option exercises under all plans for the six-months ended June 30, 2023 and 2022 was $59.7 million and $22.6 million, respectively.

MONSTER BEVERAGE CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

​

At June 30, 2023, there was $115.6 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 3.4 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
Granted 04/01/23 - 06/30/23	​	22	​	$	59.70
Vested	​	(592)	​	$	32.80
Forfeited/cancelled	​	(11)	​	$	32.83
Non-vested at June 30, 2023	​	1,968	​	$	40.85

​

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 June 30, 2023 and 2022 was $59.17 and $43.76 per share, respectively. The weighted-average grant-date fair value of restricted stock units and/or performance share units granted during the six-months ended June 30, 2023 and 2022 was $48.93 and $36.98 per share, respectively.

As of June 30, 2023, 1.9 million of restricted stock units and performance share units are expected to vest over their respective terms.

At June 30, 2023, total unrecognized compensation expense relating to non-vested restricted stock units and performance share units was $47.1 million, which is expected to be recognized over a weighted-average period of 1.7 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 June 30, 2023, other share-based awards outstanding included grants that vest over three years payable in the first quarters of 2024, 2025 and 2026.

At June 30, 2023, there was $1.5 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 expense is expected to be recognized over a weighted-average period of 1.7 years.

MONSTER BEVERAGE CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

​

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 six-months ended June 30, 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 June 30, 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 June 30, 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 2022 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 2022 tax years.

​

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			​	Six-Months Ended
​	​	June 30,			​	June 30,
​		2023		2022		2023		2022
Weighted-average shares outstanding:	​	​	​	​	​	​	​	​
Basic	​	1,047,065		1,057,233		1,045,993		1,058,017
Dilutive	​	13,028		12,389		13,674		12,401
Diluted	​	1,060,093		1,069,622		1,059,667		1,070,418

​

For the three-months ended June 30, 2023 and 2022, options and awards outstanding totaling 4.1 million shares and 3.5 million shares, respectively, were excluded from the calculations as their effect would have been antidilutive. For the six-months ended June 30, 2023 and 2022, options and awards outstanding totaling 2.6 million shares and 2.5 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 Water® 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 primarily 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 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.

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 ready-to-drink canned beers, hard seltzers and FMBs primarily to beer distributors in the United States.

Generally, the Alcohol Brands segment has 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 six-months ended June 30, 2023 and 2022 were as follows:

​

​	​	​	​	​	​	​	​	​	​	​	​	​
​	​	Three-Months Ended					​	Six-Months Ended
​	​	June 30,					​	June 30,
​		2023			2022			2023			2022
Net sales:	​	​	​	​	​	​	​	​	​	​	​	​
Monster Energy® Drinks1	​	$	1,686,887	​	$	1,537,690	​	$	3,248,555	​	$	2,942,536
Strategic Brands	​		99,690	​		79,142	​		186,048	​		171,735
Alcohol Brands2	​	​	61,076	​	​	32,447	​	​	107,366	​	​	47,654
Other	​		7,308	​		5,981	​		11,922	​		11,908
Corporate and unallocated	​		—	​		—	​		—	​		—
​	​	$	1,854,961	​	$	1,655,260	​	$	3,553,891	​	$	3,173,833

​

​	​	​	​	​	​	​	​	​	​	​	​	​
​	​	Three-Months Ended					​	Six-Months Ended
​	​	June 30,					​	June 30,
​		2023			2022			2023			2022
Operating Income:	​	​	​	​	​	​	​	​	​	​	​	​
Monster Energy® Drinks1	​	$	597,922	​	$	441,719	​	$	1,158,740	​	$	896,282
Strategic Brands	​		55,137	​		41,500	​		106,909	​		98,695
Alcohol Brands2	​	​	(6,577)	​	​	(4,657)	​	​	(13,460)	​	​	(9,611)
Other	​		1,651	​		1,034	​		1,358	​		2,161
Corporate and unallocated	​		(124,328)	​		(106,645)	​		(244,677)	​		(215,088)
​	​	$	523,805	​	$	372,951	​	$	1,008,870	​	$	772,439

​

​	​	​	​	​	​	​	​	​	​	​	​	​
​	​	Three-Months Ended					​	Six-Months Ended
​	​	June 30,					​	June 30,
​		2023			2022			2023			2022
Income before tax:	​	​	​	​	​	​	​	​	​	​	​	​
Monster Energy® Drinks1	​	$	598,656	​	$	442,407	​	$	1,160,330	​	$	897,540
Strategic Brands	​		55,149	​		41,509	​		106,938	​		98,763
Alcohol Brands2	​	​	(6,584)	​	​	(3,890)	​	​	(13,451)	​	​	(9,496)
Other	​		1,657	​		1,025	​		1,364	​		2,162
Corporate and unallocated	​		(109,914)	​		(114,881)	​		(218,658)	​		(230,610)
​	​	$	538,964	​	$	366,170	​	$	1,036,523	​	$	758,359

​

(1)	Includes $10.0 million and $10.1 _million for the three-months ended June 30, 2023 and 2022, respectively, related to the recognition of deferred revenue. Includes $_19.9 _million and $_20.1 million for the six-months ended June 30, 2023 and 2022, respectively, related to the recognition of deferred revenue.

(2)	For the six-months ended June 30, 2022, effectively from February 17, 2022 to June 30, 2022.

​

​	​	​	​	​	​	​	​	​	​	​	​	​
​	​	Three-Months Ended					​	Six-Months Ended
​	​	June 30,					​	June 30,
​		2023			2022			2023			2022
Depreciation and amortization:	​	​	​	​	​	​	​	​	​	​	​	​
Monster Energy® Drinks	​	$	8,817	​	$	8,102	​	$	17,806	​	$	16,262
Strategic Brands	​		196	​		242	​		417	​		475
Alcohol Brands	​	​	4,106	​	​	3,683	​	​	8,157	​	​	5,966
Other	​		51	​		1,113	​		1,174	​		2,224
Corporate and unallocated	​		2,406	​		2,682	​		4,830	​		5,505
​	​	$	15,576	​	$	15,822	​	$	32,384	​	$	30,432

​

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 June 30, 2023 include $82.6 million of payroll costs, of which $18.1 million was attributable to stock-based compensation expenses (see Note 14 “Stock-Based Compensation”), as well as $25.3 million attributable to professional service expenses, including accounting and legal costs, and $16.4 million of other operating expenses.

Corporate and unallocated expenses for the three-months ended June 30, 2022 include $70.0 million of payroll costs, of which $16.0 million was attributable to stock-based compensation expenses (see Note 15 “Stock-Based Compensation”), as well as $16.9 million attributable to professional service expenses, including accounting and legal costs, and $19.7 million of other operating expenses.

Corporate and unallocated expenses for the six-months ended June 30, 2023 include $162.9 million of payroll costs, of which $33.8 million was attributable to stock-based compensation expenses (see Note 14 “Stock-Based Compensation”), as well as $47.4 million attributable to professional service expenses, including accounting and legal costs, and $34.4 million of other operating expenses.

Corporate and unallocated expenses for the six-months ended June 30, 2022 include $138.1 million of payroll costs, of which $32.2 million was attributable to stock-based compensation expenses (see Note 15 “Stock-Based Compensation”), as well as $43.3 million attributable to professional service expenses, including accounting and legal costs, and $33.7 million of other operating expenses.

Coca-Cola Europacific Partners accounted for approximately 14% of the Company’s net sales for both the three-months ended June 30, 2023 and 2022. Coca-Cola Europacific Partners accounted for approximately 13% of the Company’s net sales for both the six-months ended June 30, 2023 and 2022.

Coca-Cola Consolidated, Inc. accounted for approximately 10% and 11% of the Company’s net sales for the three-months ended June 30, 2023 and 2022, respectively. Coca-Cola Consolidated, Inc. accounted for approximately 10% of the Company’s net sales for both the six-months ended June 30, 2023 and 2022.

Reyes Holdings, LLC accounted for approximately 10% and 9% of the Company’s net sales for the three-months ended June 30, 2023 and 2022, respectively. Reyes Holdings, LLC accounted for approximately 10% and 9% of the Company’s net sales for the six-months ended June 30, 2023 and 2022, respectively.

Net sales to customers outside the United States amounted to $715.4 million and $649.0 million for the three-months ended June 30, 2023 and 2022, respectively. Such sales were approximately 39% of net sales for both the three-months ended June 30, 2023 and 2022. Net sales to customers outside the United States amounted to $1.34 billion and $1.20 billion for the six-months ended June 30, 2023 and 2022, respectively. Such sales were approximately 38% of net sales for both the six-months ended June 30, 2023 and 2022.

Goodwill and other intangible assets for the Company’s reportable segments as of June 30, 2023 and December 31, 2022 were as follows:

​

​	​	​	​	​	​	​
​		June 30,			December 31,
​		2023			2022
Goodwill and other intangible assets:	​	​	​	​	​	​
Monster Energy® Drinks	​	$	1,431,947	​	$	1,424,212
Strategic Brands	​		981,570	​		979,896
Alcohol Brands	​	​	228,524	​	​	233,140
Other	​		—	​		1,103
​	​	$	2,642,041	​	$	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.

MONSTER BEVERAGE CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

​

TCCC commissions, based on sales to the TCCC Subsidiaries and the TCCC Related Parties, were $18.1 million and $10.1 million for the three-months ended June 30, 2023 and 2022, 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 $33.8 million and $28.5 million for the six-months ended June 30, 2023 and 2022, respectively, and are included as a reduction to net sales.

TCCC commissions, based on sales to TCCC independent bottlers/distributors, were $8.1 million and $7.8 million for the three-months ended June 30, 2023 and 2022, respectively, and are included in operating expenses. TCCC commissions, based on sales to TCCC independent bottlers/distributors, were $16.9 million and $18.8 million for the six-months ended June 30, 2023 and 2022, respectively, and are included in operating expenses.

Net sales to the TCCC Subsidiaries for the three-months ended June 30, 2023 and 2022 were $33.2 million and $26.5 million, respectively. Net sales to the TCCC Subsidiaries for the six-months ended June 30, 2023 and 2022 were $68.3 million and $58.3 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 $8.3 million and $6.5 million for the three-months ended June 30, 2023 and 2022, respectively. Concentrate purchases from TCCC were $14.8 million and $15.0 million for the six-months ended June 30, 2023 and 2022, respectively.

Certain TCCC Subsidiaries also contract manufacture certain of the Company’s energy drinks. Such contract manufacturing expenses were $7.5 million and $4.8 million for the three-months ended June 30, 2023 and 2022, respectively. Such contract manufacturing expenses were $15.0 million and $14.0 million for the six-months ended June 30, 2023 and 2022, respectively.

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

​

​	​	​	​	​	​	​
​	​	June 30,		​	December 31,
​		2023			2022
Accounts receivable, net	​	$	120,640	​	$	88,169
Accounts payable	​	$	(41,542)	​	$	(35,467)
Accrued promotional allowances	​	$	(10,807)	​	$	(11,222)
Accrued liabilities	​	$	(22,651)	​	$	(14,733)

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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 June 30, 2023 and 2022 was $1.0 million and $2.3 million, respectively. Expenses incurred with such company in connection with promotional materials purchased during the six-months ended June 30, 2023 and 2022 was $2.1 million and $3.4 million, respectively.

The Company occasionally charters 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 is accompanied by guests and other Company personnel when using such aircraft for business travel. During the three-months ended June 30, 2023, the Company incurred costs of $0.03 million, amounts the Company believes is commensurate with market rates for comparable travel. No amounts were incurred during the three-months ended June 30, 2022. During the six-months ended June 30, 2023 and 2022, the Company incurred costs of $0.03 million and $0.08 million, respectively, amounts the Company believes is commensurate with market rates for comparable travel.

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

MONSTER BEVERAGE CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

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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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19.	SUBSEQUENT EVENTS

On July 31, 2023, a subsidiary of the Company, Blast Asset Acquisition LLC, completed its acquisition of substantially all of the assets of Vital Pharmaceuticals, Inc. and its debtor affiliates (collectively, “Bang Energy”) for a purchase price of approximately $362.0 million in cash, subject to adjustments. The acquired assets include Bang Energy® drinks and a beverage production facility in Phoenix, AZ.

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