UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

Quarterly Report Pursuant to Section 13 or 15(d)

of the Securities Exchange Act of 1934

For the quarterly period ended ~~September 30, 2017~~March 31, 2022

Commission File Number 001-18761

MONSTER BEVERAGE CORPORATION

(Exact name of ~~Registrant~~registrant as specified in its charter)

	Delaware	47-1809393
	(State or other jurisdiction of	(I.R.S. Employer
	incorporation or organization)	Identification No.)

1 Monster Way

Corona, California 92879

(Address of principal executive offices) (Zip code)

(951) 739 –- 6200

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock	MNST	Nasdaq Global Select Market

Indicate by check mark whether the ~~Registrant~~registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the ~~Registrant~~registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes X ~~No __~~ No__

Indicate by check mark whether the registrant has submitted electronically ~~and posted on its corporate Web site, if any,~~ every Interactive Data File required to be submitted ~~and posted~~ pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit ~~and post~~ such files).

Yes X No __

Indicate by check mark whether the ~~Registrant~~registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company, or an emerging growth company. See ~~definition~~the definitions of “large accelerated filer,” “accelerated ~~filer”~~filer,” “smaller reporting company,” and ~~“smaller reporting~~“emerging growth company” in Rule 12b-2 of the Exchange Act.

Large ~~Accelerated Filer~~ xaccelerated filer	☒	Accelerated filero	☐
Non-accelerated filer	☐	Smaller reporting company	☐
~~Non-accelerated filer~~ o ~~(Do not check if smaller reporting company)~~		~~Smaller reporting~~Emerging growth companyo	☐

~~Emerging growth company~~ o

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o☐

Indicate by check mark whether the ~~Registrant~~registrant is a shell company (as defined byin Rule 12b-2 of the Exchange Act).

Yes ~~___~~__ No X

The ~~Registrant~~registrant had ~~563,963,300~~529,671,407 shares of common stock, par value $0.005 per share, outstanding as of ~~October 26, 2017.~~April 29, 2022.

Table of Contents

MONSTER BEVERAGE CORPORATION AND SUBSIDIARIES

~~SEPTEMBER 30, 2017~~MARCH 31, 2022

INDEX

~~Part I.~~
	~~FINANCIAL INFORMATION~~	Page No.
Part I.	FINANCIAL INFORMATION
~~Item 1.~~
Item 1.	Condensed Consolidated Financial Statements (Unaudited)

	Condensed Consolidated Balance Sheets as of ~~September 30, 2017~~March 31, 2022 and December 31, ~~2016~~2021	3

	Condensed Consolidated Statements of Income for the ~~Three-~~Three-Months Ended March 31, 2022 and ~~Nine-Months Ended September 30, 2017 and 2016~~2021	4

	Condensed Consolidated Statements of Comprehensive Income for the ~~Three-~~Three-Months Ended March 31, 2022 and ~~Nine-Months Ended September 30, 2017 and 2016~~2021	5

	Condensed Consolidated Statements of Stockholders’ Equity for the Three-Months Ended March 31, 2022 and 2021	6

	Condensed Consolidated Statements of Cash Flows for the ~~Nine-Months~~Three-Months Ended ~~September 30, 2017~~March 31, 2022 and ~~2016~~2021	67

	Notes to Condensed Consolidated Financial Statements	89

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	2832

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	4648

Item 4.	Controls and Procedures	4748

Part II.	OTHER INFORMATION

Item 1.	Legal Proceedings	4748

Item 1A.	Risk Factors	4748

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	47

~~Item 3.~~	~~Defaults Upon Senior Securities~~	48

~~Item 4.~~	~~Mine Safety Disclosures~~	48

~~Item 5.~~	~~Other Information~~	48

~~Item 6.~~	~~Exhibits~~	48

	~~Signatures~~	49

Item 3.	Defaults Upon Senior Securities	49

Item 4.	Mine Safety Disclosures	49

Item 5.	Other Information	49

Item 6.	Exhibits	50

	Signatures	51

Table of Contents

PART I – FINANCIAL INFORMATION

ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

MONSTER BEVERAGE CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

AS OF ~~SEPTEMBER 30, 2017~~MARCH 31, 2022 AND DECEMBER 31, ~~2016~~

~~(In Thousands, Except Par Value) (Unaudited)~~

September 30,
2017

December 31,
2016

ASSETS

CURRENT ASSETS:

Cash and cash equivalents

  $
465,559

  $
377,582

Short-term investments

630,348

220,554

Accounts receivable, net

535,336

448,051

TCCC Transaction receivable

-

125,000

Inventories

213,341

161,971

Prepaid expenses and other current assets

46,095

32,562

Prepaid income taxes

43,618

66,550

Total current assets

1,934,297

1,432,270

INVESTMENTS

7,003

2,394

PROPERTY AND EQUIPMENT, net

225,421

173,343

DEFERRED INCOME TAXES

158,739

159,556

GOODWILL

1,331,643

1,331,643

OTHER INTANGIBLE ASSETS, net

1,033,481

1,032,635

OTHER ASSETS

18,322

21,630

Total Assets

  $
4,708,906

  $
4,153,471

LIABILITIES AND STOCKHOLDERS’ EQUITY

CURRENT LIABILITIES:

Accounts payable

  $
229,551

  $
193,270

Accrued liabilities

112,732

79,526

Accrued promotional allowances

158,824

110,237

Accrued distributor terminations

15,656

8,184

Deferred revenue

43,566

41,672

Accrued compensation

27,199

30,043

Income taxes payable

10,156

7,657

Total current liabilities

597,684

470,589

DEFERRED REVENUE

342,249

353,173

OTHER LIABILITIES

819

-

COMMITMENTS AND CONTINGENCIES (Note 10)

STOCKHOLDERS’ EQUITY:

Common stock - $0.005 par value; 1,250,000 shares authorized;
625,132 shares issued and 563,959 outstanding as of September 30, 2017;
623,201 shares issued and 566,566 outstanding as of December 31, 2016

3,126

3,116

Additional paid-in capital

4,111,781

4,051,245

Retained earnings

2,726,904

2,107,548

Accumulated other comprehensive loss

(15,533)

(23,249)

Common stock in treasury, at cost; 61,173 shares and 56,635 shares as of September 30, 2017 and December 31, 2016, respectively

(3,058,124)

(2,808,951)

Total stockholders’ equity

3,768,154

3,329,709

Total Liabilities and Stockholders’ Equity

  $
4,708,906

  $
4,153,471

~~See accompanying notes to condensed consolidated financial statements.~~

~~MONSTER BEVERAGE CORPORATION AND SUBSIDIARIES~~2021

~~CONDENSED CONSOLIDATED STATEMENTS OF INCOME~~(In Thousands, Except Par Value) (Unaudited)


	March 31,		December 31,
	2022		2021
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	1,014,786	$	1,326,462
Short-term investments		1,717,648		1,749,727
Accounts receivable, net		1,039,780		896,658
Inventories		821,132		593,357
Prepaid expenses and other current assets		110,327		82,668
Prepaid income taxes		39,993		33,238
Total current assets		4,743,666		4,682,110

INVESTMENTS		65,652		99,419
PROPERTY AND EQUIPMENT, net		407,391		313,753
DEFERRED INCOME TAXES, net		225,221		225,221
GOODWILL		1,411,928		1,331,643
OTHER INTANGIBLE ASSETS, net		1,232,113		1,072,386
OTHER ASSETS		101,488		80,252
Total Assets	$	8,187,459	$	7,804,784

LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES:
Accounts payable	$	438,256	$	404,263
Accrued liabilities		234,111		210,964
Accrued promotional allowances		270,785		211,461
Deferred revenue		42,540		42,530
Accrued compensation		37,551		65,459
Income taxes payable		21,118		30,399
Total current liabilities		1,044,361		965,076

DEFERRED REVENUE		238,241		243,249

OTHER LIABILITIES		38,185		29,508

COMMITMENTS AND CONTINGENCIES (Note 12)

STOCKHOLDERS’ EQUITY:
Common stock - $0.005 par value; 1,250,000 shares authorized; 640,528 shares issued and 529,642 shares outstanding as of March 31, 2022; 640,043 shares issued and 529,323 shares outstanding as of December 31, 2021		3,203		3,200
Additional paid-in capital		4,673,302		4,652,620
Retained earnings		8,103,752		7,809,549
Accumulated other comprehensive loss		(72,145)		(69,165)
Common stock in treasury, at cost; 110,886 shares and 110,720 shares as of March 31, 2022 and December 31, 2021, respectively		(5,841,440)		(5,829,253)
Total stockholders’ equity		6,866,672		6,566,951
Total Liabilities and Stockholders’ Equity	$	8,187,459	$	7,804,784

~~FOR THE THREE- AND NINE-MONTHS ENDED SEPTEMBER 30, 2017 AND 2016~~

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

Three-Months Ended

Nine-Months Ended

September 30,

September 30,

2017

2016

2017

2016

NET SALES

  $
909,476

  $
787,954

  $
2,558,690

  $
2,295,628

COST OF SALES

339,767

284,979

924,610

851,741

GROSS PROFIT

569,709

502,975

1,634,080

1,443,887

OPERATING EXPENSES

252,337

212,600

702,405

610,277

OPERATING INCOME

317,372

290,375

931,675

833,610

INTEREST and OTHER INCOME (EXPENSE), net

3,996

(1,037)

2,103

(651)

INCOME BEFORE PROVISION FOR INCOME TAXES

321,368

289,338

933,778

832,959

PROVISION FOR INCOME TAXES

102,624

97,695

314,422

293,221

NET INCOME

  $
218,744

  $
191,643

  $
619,356

  $
539,738

NET INCOME PER COMMON SHARE:

Basic

  $
0.39

  $
0.34

  $
1.09

  $
0.91

Diluted

  $
0.38

  $
0.33

  $
1.07

  $
0.89

WEIGHTED AVERAGE NUMBER OF SHARES OF COMMON STOCK AND COMMON STOCK EQUIVALENTS:

Basic

567,878

571,137

567,550

594,219

Diluted

578,368

583,293

577,964

606,279

See accompanying notes to condensed consolidated financial statements.

Table of Contents

MONSTER BEVERAGE CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF ~~COMPREHENSIVE~~ INCOME

FOR THE ~~THREE-~~THREE-MONTHS ENDED MARCH 31, 2022 AND ~~NINE-MONTHS ENDED SEPTEMBER 30, 2017 AND 2016~~2021

~~(In Thousands) (Unaudited)~~

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

Three-Months Ended
September 30,

Nine-Months Ended
September 30,

2017

2016

2017

2016

Net income, as reported

  $
218,744

  $
191,643

  $
619,356

  $
539,738

Other comprehensive income:

Change in foreign currency translation adjustment

1,329

(57)

7,641

7,344

Available-for-sale investments:

Change in net unrealized (losses) gains

(29)

-

75

-

Reclassification adjustment for net gains included in net income

-

-

-

-

Net change in available-for-sale investments

(29)

-

75

-

Other comprehensive income

1,300

(57)

7,716

7,344

Comprehensive income

  $
220,044

  $
191,586

  $
627,072

  $
547,082


	Three-Months Ended
	March 31,
	2022		2021

NET SALES	$	1,518,574	$	1,243,816

COST OF SALES		741,907		528,881

GROSS PROFIT		776,667		714,935

OPERATING EXPENSES		377,178		300,789

OPERATING INCOME		399,489		414,146

INTEREST and OTHER EXPENSE, net		7,300		759

INCOME BEFORE PROVISION FOR INCOME TAXES		392,189		413,387

PROVISION FOR INCOME TAXES		97,986		98,193

NET INCOME	$	294,203	$	315,194

NET INCOME PER COMMON SHARE:
Basic	$	0.56	$	0.60
Diluted	$	0.55	$	0.59

WEIGHTED AVERAGE NUMBER OF SHARES OF COMMON STOCK AND COMMON STOCK EQUIVALENTS:
Basic		529,405		528,195
Diluted		535,554		534,982

See accompanying notes to condensed consolidated financial statements.

Table of Contents

MONSTER BEVERAGE CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF ~~CASH FLOWS~~COMPREHENSIVE INCOME

FOR THE ~~NINE-MONTHS~~THREE-MONTHS ENDED ~~SEPTEMBER 30, 2017~~MARCH 31, 2022 AND ~~2016~~2021

~~(In Thousands) (Unaudited)~~

(In Thousands) (Unaudited)

Nine-Months Ended

September 30, 2017

September 30, 2016

CASH FLOWS FROM OPERATING ACTIVITIES:

Net income

  $
619,356

  $
539,738

Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation and amortization

35,104

29,874

Gain on disposal of property and equipment

(514)

(171)

Stock-based compensation

39,265

33,735

Deferred income taxes

1,862

(1,652)

Effect on cash of changes in operating assets and liabilities:

Accounts receivable

(70,865
)
(100,233)

TCCC Transaction receivable

125,000

-

Distributor receivables

1,605

(21,034)

Inventories

(46,700)

18,355

Prepaid expenses and other current assets

(9,210)

(8,805)

Prepaid income taxes

24,168

(136,899)

Accounts payable

24,653

21,795

Accrued liabilities

15,867

8,303

Accrued promotional allowances

42,064

23,411

Accrued distributor terminations

7,416

(5,466)

Accrued compensation

(3,230)

(346)

Income taxes payable

(4,142)

3,340

Other liabilities

819

-

Deferred revenue

(12,461)

16,757

Net cash provided by operating activities

790,057

420,702

CASH FLOWS FROM INVESTING ACTIVITIES:

Maturities of held-to-maturity investments

-

892,453

Sales of available-for-sale investments

358,107

2,993

Purchases of held-to-maturity investments

-

(378,254)

Purchases of available-for-sale investments

(768,276)

(24,405)

Purchases of property and equipment

(67,738)

(67,527)

Proceeds from sale of property and equipment

855

705

Purchases of AFF Assets, net

-

(688,485)

Increase in intangibles

(5,137)

(4,255)

(Increase) decrease in other assets

(1,216)

56

Net cash used in investing activities

(483,405)

(266,719)

CASH FLOWS FROM FINANCING ACTIVITIES:

Principal payments on debt

(1,878)

(1,731)

Issuance of common stock

26,776

10,615

Purchases of common stock held in treasury

(249,173)

(2,002,441)

Net cash used in financing activities

(224,275)

(1,993,557)

Effect of exchange rate changes on cash and cash equivalents

5,600

5,683

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS

87,977

(1,833,891)

CASH AND CASH EQUIVALENTS, beginning of period

377,582

2,175,417

CASH AND CASH EQUIVALENTS, end of period

  $
465,559

  $
341,526

SUPPLEMENTAL INFORMATION:

Cash paid during the period for:

Interest

  $
55

  $
54

Income taxes

  $
293,980

  $
429,371


	Three-Months Ended
	March 31,
	2022		2021
Net income, as reported	$	294,203	$	315,194
Other comprehensive income (loss):
Change in foreign currency translation adjustment		1,079		(27,932)
Available-for-sale investments:
Change in net unrealized (losses) gains		(4,059)		24
Reclassification adjustment for net gains included in net income		—		—
Net change in available-for-sale investments		(4,059)		24
Other comprehensive income (loss)		(2,980)		(27,908)
Comprehensive income	$	291,223	$	287,286

See accompanying notes to condensed consolidated financial statements.

Table of Contents

MONSTER BEVERAGE CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

FOR THE THREE-MONTHS ENDED MARCH 31, 2022 AND 2021

(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, 2021	640,043	$	3,200	$	4,652,620	$	7,809,549	$	(69,165)	(110,720)	$	(5,829,253)	$	6,566,951
Stock-based compensation	—		—		16,175		—		—	—		—		16,175
Exercise of stock options	485		3		4,507		—		—	—		—		4,510
Unrealized loss, net on available-for-sale securities	—		—		—		—		(4,059)	—		—		(4,059)
Repurchase of common stock	—		—		—		—		—	(166)		(12,187)		(12,187)
Foreign currency translation	—		—		—		—		1,079	—		—		1,079
Net income	—		—		—		294,203		—	—		—		294,203
Balance, March 31, 2022	640,528	$	3,203	$	4,673,302	$	8,103,752	$	(72,145)	(110,886)	$	(5,841,440)	$	6,866,672


								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, 2020	638,662	$	3,193	$	4,537,982	$	6,432,074	$	3,034	(110,565)	$	(5,815,423)	$	5,160,860
Stock-based compensation	0		0		17,949		0		0	0		0		17,949
Exercise of stock options	492		3		6,758		0		0	0		0		6,761
Unrealized gain, net on available-for-sale securities	0		0		0		0		24	0		0		24
Repurchase of common stock	0		0		0		0		0	(150)		(13,419)		(13,419)
Foreign currency translation	0		0		0		0		(27,932)	0		0		(27,932)
Net income	0		0		0		315,194		0	0		0		315,194
Balance, March 31, 2021	639,154	$	3,196	$	4,562,689	$	6,747,268	$	(24,874)	(110,715)	$	(5,828,842)	$	5,459,437

See accompanying notes to condensed consolidated financial statements.

Table of Contents

MONSTER BEVERAGE CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE ~~NINE-MONTHS~~THREE-MONTHS ENDED ~~SEPTEMBER 30, 2017~~MARCH 31, 2022 AND ~~2016~~2021

(In Thousands) (Unaudited)


	Three-Months Ended
	March 31,
	2022		2021
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	294,203	$	315,194
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		14,599		12,825
Non-cash lease expense		1,481		952
Gain on disposal of property and equipment		(6)		(88)
Stock-based compensation		16,332		18,362
Effect on cash of changes in operating assets and liabilities net of acquisition:
Accounts receivable		(134,433)		(147,452)
Inventories		(208,673)		(39,546)
Prepaid expenses and other assets		(29,621)		(18,487)
Prepaid income taxes		(5,885)		(7,076)
Accounts payable		18,329		36,859
Accrued liabilities		20,603		32,441
Accrued promotional allowances		61,171		13,965
Accrued compensation		(32,122)		(24,443)
Income taxes payable		(9,818)		(13,287)
Other liabilities		(596)		504
Deferred revenue		(5,915)		(5,250)
Net cash (used in) provided by operating activities		(351)		175,473

CASH FLOWS FROM INVESTING ACTIVITIES:
Sales of available-for-sale investments		504,808		325,751
Purchases of available-for-sale investments		(441,925)		(440,570)
Acquisition of CANarchy, net of cash		(330,356)		—
Purchases of property and equipment		(21,511)		(8,400)
Proceeds from sale of property and equipment		14		231
Additions to intangibles		(8,419)		(7,239)
Increase in other assets		(6,241)		(18,856)
Net cash used in investing activities		(303,630)		(149,083)

CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings on debt		3,454		957
Issuance of common stock		4,510		6,761
Purchases of common stock held in treasury		(12,187)		(13,419)
Net cash used in financing activities		(4,223)		(5,701)

Effect of exchange rate changes on cash and cash equivalents		(3,472)		(22,223)

NET DECREASE IN CASH AND CASH EQUIVALENTS		(311,676)		(1,534)
CASH AND CASH EQUIVALENTS, beginning of period		1,326,462		1,180,413
CASH AND CASH EQUIVALENTS, end of period	$	1,014,786	$	1,178,879

SUPPLEMENTAL INFORMATION:
Cash paid during the period for:
Interest	$	91	$	13
Income taxes	$	112,863	$	121,866

See accompanying notes to condensed consolidated financial statements.

Table of Contents

MONSTER BEVERAGE CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE THREE-MONTHS ENDED MARCH 31, 2022 AND 2021

(In Thousands) (Unaudited) (Continued)

SUPPLEMENTAL DISCLOSURE OF NON-CASH ITEMS

~~The Company entered into capital leases for the acquisition of promotional vehicles of $2.0 million and $2.2 million for the nine-months ended September 30, 2017 and 2016, respectively.~~

Included in accrued liabilities as of ~~September 30, 2017~~March 31, 2022 and ~~2016~~2021 were ~~$6.0~~$11.3 million and ~~$0.2 million, respectively, related to purchases of property and equipment.~~

~~Included in accrued liabilities as of September 30, 2017 and 2016 were $4.6 million and $2.3~~$7.8 million, respectively, related to additions to other intangible assets.

Included in accounts payable as of March 31, 2022 and 2021 were equipment purchases of $4.0 million and $0.4 million, respectively.

Included in accounts payable as of ~~September 30, 2017~~March 31, 2021 were available-for-sale short-term investment purchases of ~~$4.2~~$4.4 million.

See accompanying notes to condensed consolidated financial statements.

Table of Contents

MONSTER BEVERAGE CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

1.~~BASIS OF PRESENTATION~~

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, ~~2016 (“Form 10-K”)~~2021 for a summary of significant accounting policies utilized by the Company and its consolidated subsidiaries and other disclosures, which should be read in conjunction with this Quarterly Report on Form 10-Q (“Form 10-Q”).

The Company’s condensed consolidated financial statements included in this Form 10-Q have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and Securities and Exchange Commission (“SEC”) rules and regulations applicable to interim financial reporting. They do not include all the information and footnote disclosures normally included in annual financial statements prepared in accordance with GAAP. The information set forth in these interim condensed consolidated financial statements for the ~~three-~~three-months ended March 31, 2022 and ~~nine-months ended September 30, 2017 and 2016,~~2021, respectively, is unaudited and reflects all adjustments, which include only normal recurring adjustments and which in the opinion of management are necessary to make the interim condensed consolidated financial statements not misleading. Results of operations for periods covered by this report may not necessarily be indicative of results of operations for the full year.

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

Recent Accounting Pronouncements

2.~~RECENT ACCOUNTING PRONOUNCEMENTS~~There have been no material changes in recently issued or adopted accounting pronouncements from those disclosed in our Annual Report on Form 10-K for the fiscal year ended December 31, 2021.

2.	ACQUISITIONS AND DIVESTITURES

On February 17, 2022, the Company completed its acquisition of CANarchy Craft Brewery Collective LLC (“CANarchy”), a craft beer and hard seltzer company, for $330.4 million in cash, subject to adjustments (the “CANarchy Transaction”). The CANarchy Transaction allows the Company to enter the alcohol beverage sector and brings the Cigar City family of brands including Jai Alai IPA and Florida Man IPA, the Oskar Blues family of brands including Dale’s Pale Ale and Wild Basin Hard Seltzers, the Deep Ellum family of brands including Dallas Blonde and Deep Ellum IPA, the Perrin Brewing family of brands including Black Ale, the Squatters family of brands including Hop Rising Double IPA and Juicy IPA, the Wasatch family of brands including Apricot Hefeweizen, as well as certain other brands (collectively the “CANarchy Brands”) to the Company’s beverage portfolio. The transaction does not include CANarchy’s stand-alone restaurants. The Company’s organizational structure for its existing energy beverage business will remain unchanged. CANarchy will function independently, retaining its own organizational structure and team.

~~In May 2017,~~The Company accounted for the CANarchy Transaction in accordance with Financial Accounting Standards Board ~~(the “FASB”~~(“FASB”) ~~issued~~ Accounting Standards ~~Update~~Codification (“~~ASU”~~ASC”) ~~No. 2017-09, “Compensation–Stock Compensation (Topic 718): Scope~~805 “Business Combinations”.

Table of Modification Accounting,” clarifying when a change to the terms or conditions of a share-based payment award must be accounted for as a modification. The new guidance requires modification accounting if the fair value, vesting condition or the classification of the award is not the same immediately before and after a change to the terms and conditions of the award. The new guidance is effective for the Company on a prospective basis beginning on January 1, 2018, with early adoption permitted. ~~The Company is currently evaluating the impact of ASU No. 2017-09 on its financial position, results of operations and liquidity.~~Contents

~~In January 2017, the FASB issued ASU No. 2017-01~~~~, “~~~~Business Combinations (Topic 805): Clarifying the Definition of a Business~~”, which clarifies the definition of a business with the objective of adding guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. This amendment is effective for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. Early adoption is permitted. ~~The Company is currently evaluating the impact of ASU No. 2017-01 on its financial position, results of operations and liquidity.~~

~~In January 2017, the FASB issued ASU No. 2017-04, “Intangibles and Other (Topic 350): Simplifying the Test for Goodwill Impairment~~”, which eliminates the requirement to calculate the implied fair value of goodwill, but rather requires an entity to record an impairment charge based on the excess of a reporting unit’s carrying value over its fair value. This amendment is effective for annual or interim goodwill impairment tests in fiscal years beginning after December 15, 2019. Early adoption is permitted. ~~The Company is currently evaluating the impact of ASU No. 2017-04 on its financial position, results of operations and liquidity.~~

MONSTER BEVERAGE CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

~~In October 2016,~~The following table summarizes the FASB issued ASU No. 2016-16, “Income Taxes (Topic 740): Intra-Entity Transfers of Assets Other Than Inventory”, in an effort to improve the accounting for the income tax consequences of intra-entity transfers of assets other than inventory. Current GAAP prohibits the recognition of current and deferred income taxes for an intra-entity asset transfer until the asset has been sold to an outside party. FASB ASU No. 2016-16 establishes the requirement that an entity recognize the income tax consequences of an intra-entity transfer of an asset other than inventory when the transfer occurs. ASU No. 2016-16 is effective for financial statements issued for annual periods beginning after December 15, 2017 and interim periods within those annual periods. Earlier application is permitted aspreliminary fair value allocations of the ~~beginning of an interim or annual reporting period, with any adjustments reflected as of the beginning of the fiscal year of adoption.~~ CANarchy Transaction:


	Identifiable
	Assets
	Acquired and
	Liabilities		Consideration
	Assumed		Transferred
Intangibles - trademarks (non-amortizing)	$	94,500	$	—
Intangibles - customer relationships (amortizing)		54,500		—
Intangibles - permits (non-amortizing)		6,500		—
Property and equipment, net		81,285		—
Inventory		18,900		—
Right-of -use assets		12,836		—
Operating lease liabilities		(12,836)		—
Working capital (excluding inventory)		(4,844)		—
Other		(770)		—
Goodwill		80,285		—
Cash		3,248		333,604
Total	$	333,604	$	333,604

The ~~Company is currently evaluating the impact of ASU No. 2016-16 on its financial position, results of operations and liquidity.~~

In August 2016, the FASB issued ASU No. 2016-15, “Statement of Cash Flows (Topic 230)”. The new guidance is intended to reduce diversity in practice in how certain transactions are classified in the statement of cash flows. ASU No. 2016-15 is effective for fiscal years, and interim periods within those years, beginning after December 15, 2017. Early adoption is permitted, provided that all of the amendments are adopted in the same period. The guidance requires application using a retrospective transition method. The Company is currently evaluating the impact of ASU No. 2016-15 on its financial position, results of operations and liquidity.

In June 2016, the FASB issued ASU No. 2016-13, “Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments”. The accounting standard changes the methodology for measuring credit losses on financial instruments and the timing when such losses are recorded. ASU No. 2016-13 is effective for fiscal years, and interim periods within those years, beginning after December 15, 2019. Early adoption is permitted for fiscal years, and interim periods within those years, beginning after December 15, 2018. The Company is currently evaluating the impact of ASU No. 2016-13 on its financial position, results of operations and liquidity.

In February 2016, the FASB issued ASU No. 2016-02, “Leases (Topic 842)”. This update is intended to increase transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements. This update is effective for annual and interim reporting periods beginning after December 15, 2018, including interim periods within those fiscal years. Early adoption is permitted. The Company is currently evaluating the impact of ASU No. 2016-02 on its financial position, results of operations and liquidity.

In May 2014, the FASB issued ASU No. 2014-09, “Revenue from Contracts with Customers (Topic 606)”, which supersedes previous revenue recognition guidance. ASU No. 2014-09 requires that a company recognize revenue at an amount that reflects the consideration to which the company expects to be entitled in exchange for transferring goods or services to a customer. In applying the new guidance, a company will (i) identify the contract(s) with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the contract’s performance obligations; and (v) recognize revenue when (or as) the entity satisfies a performance obligation. ASU No. 2014-09 was to be effective for reporting periods beginning after December 15, 2016. However, on July 9, 2015, the FASB voted to approve a one-year deferral of the effective date. This new guidance is effective for the Company beginning January 1, 2018 and can be adopted using either a full retrospective or modified approach. The Company has made significant progress in its evaluation of the amended revenue recognition guidance in Topic 606, however, such evaluationfair value analysis has yet to progress to a stage where there is sufficient information for a ~~preliminary position~~definitive measurement of the ~~impact~~respective fair values. Accordingly, the respective fair value allocations are preliminary and are based on ~~the Company’s consolidated financial statements. Therefore, the~~valuations derived from estimated fair value assumptions used by management. The Company is unable at this time to provide (i) qualitative financial statement disclosures of the potential impact that this standard will have on its financial statements when adopted, (ii) a description of the effects of the accounting policies it expects to apply, (iii) a comparison to its current revenue recognition policies and (iv) a method for adoption. The Company’s expects to complete its ~~evaluation by December 15, 2017.~~fair value analysis at a level of detail necessary to finalize the underlying fair value allocations as soon as practicable, but no later than twelve months from the closing of the CANarchy Transaction.

The Company determined the preliminary estimated fair values as follows:

●

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

●

Customer relationships – distributor method of the income approach

●

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

●

Property and equipment – cost approach

●

Inventory – comparative sales method and replacement cost method

The preliminary book value of the working capital (excluding inventory) approximates fair value.

The Company has determined goodwill in accordance with ASC 805-30-30-1, “Business Combinations,” which requires the recognition of goodwill for the excess of the aggregate consideration over the net amounts of identifiable assets acquired and liabilities assumed as of the acquisition date.

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

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

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MONSTER BEVERAGE CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

3.	REVENUE RECOGNITION

The Company has 4 operating and reportable segments: (i) Monster Energy® Drinks segment (“Monster Energy® Drinks”), which is primarily comprised of the Company’s Monster Energy® drinks, Reign Total Body Fuel® high performance energy drinks and True North^TM Pure Energy Seltzers, (ii) Strategic Brands segment (“Strategic Brands”), which is primarily comprised of the various energy drink brands acquired from The Coca-Cola Company (“TCCC”) in 2015 as well as the Company’s affordable energy brands, (iii) Alcohol Brands segment ("Alcohol Brands"), which is primarily comprised of the various craft beers and hard seltzers purchased as part of the CANarchy Transaction on February 17, 2022 and (iv) Other segment (“Other”), which is comprised of certain products sold by American Fruits and Flavors, LLC, a wholly-owned subsidiary of the Company, to independent third-party customers (the “AFF Third-Party Products”).

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

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

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

The majority of the Company’s revenue is recognized when it satisfies a single performance obligation by transferring control of its products to a customer. Control is generally transferred when the Company’s products are either shipped or delivered based on the terms contained within the underlying contracts or agreements. Certain of the Company’s bottlers/distributors may also perform a separate function as a co-packer on the Company’s behalf. In such cases, control of the Company’s products passes to such bottlers/distributors when they notify the Company that they have taken possession or transferred the relevant portion of the Company’s finished goods. The Company’s general payment terms are short-term in duration. The Company does not have significant financing components or payment terms. The Company did not have any material unsatisfied performance obligations as of March 31, 2022 and December 31, 2021.

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

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

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

●

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

●

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

●

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

●

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

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MONSTER BEVERAGE CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

●

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

●

discounted or free products;

●

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

●

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

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

3.~~INVESTMENTS~~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.

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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, 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


	Three-Months Ended March 31, 2021
							Latin
							America
	U.S. and						and
Net Sales	Canada		EMEA¹		Asia Pacific		Caribbean		Total
Monster Energy® Drinks	$	773,504	$	219,300	$	106,747	$	70,729	$	1,170,280
Strategic Brands		37,683		19,909		8,438		1,779		67,809
Alcohol Brands²		—		—		—		—		—
Other		5,727		—		—		—		5,727
Total Net Sales	$	816,914	$	239,209	$	115,185	$	72,508	$	1,243,816

¹Europe, Middle East and Africa (“EMEA”)

²Effectively 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, 2022, the Company had $280.8 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, 2021, the Company had $285.8 million of deferred revenue, which is included in current and long-term deferred revenue in the Company’s condensed consolidated balance sheet. During the three-months ended March 31, 2022 and 2021, $10.0 million and $10.4 million, respectively, of deferred revenue was recognized in net sales. See Note 11.

LEASES

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

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

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

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

The components of lease cost were comprised of the following:


	Three-Months		Three-Months
	Ended March 31,		Ended March 31,
	2022		2021
Operating lease cost	$	1,694	$	1,131

Short-term lease cost		929		953

Variable lease cost		183		162

Finance leases:
Amortization of ROU assets		127		134
Interest on lease liabilities		3		4
Finance lease cost		130		138

Total lease cost	$	2,936	$	2,384

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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,
	2022		2021
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash outflows from operating leases	$	1,652	$	991
Operating cash outflows from finance leases		3		4
Financing cash outflows from finance leases		592		689

ROU assets obtained in exchange for lease obligations:
Finance leases		832		1,495
Operating leases		13,197		36

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


	March 31, 2022
	Real Estate		Equipment		Total		Balance Sheet Location
Operating leases	$	33,644	$	558	$	34,202	Other Assets
Finance leases		—		2,035		2,035	Property and Equipment, net


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

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


	March 31, 2022
	Operating Leases		Finance Leases
Accrued liabilities	$	6,398	$	1,205
Other liabilities		26,713		36
Total	$	33,111	$	1,241


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

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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, 2022 and December 31, 2021 were as follows:


	March 31, 2022
	Operating Leases		Finance Leases
Weighted-average remaining lease term (years)	7.1		0.9
Weighted-average discount rate	3.2	%	1.6	%


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

The following table reconciles the undiscounted future lease payments for operating and finance leases to the operating and finance leases recorded in the Company’s condensed consolidated balance sheet at March 31, 2022:


	Undiscounted Future Lease Payments
	Operating Leases		Finance Leases
2022 (excluding the three-months ended March 31, 2022)	$	5,527	$	1,030
2023		6,531		200
2024		5,323		13
2025		4,034		8
2026		3,179		—
2027 and thereafter		12,674		—
Total lease payments		37,268		1,251
Less imputed interest		(4,157)		(10)
Total	$	33,111	$	1,241

As of March 31, 2022, the Company did not have any significant additional operating or finance leases that have not yet commenced.

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MONSTER BEVERAGE CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

5.	INVESTMENTS

The following table summarizes the Company’s investments at:

September 30, 2017	Amortized Cost		Gross Unrealized Holding Gains		Gross Unrealized Holding Losses		Fair Value		Continuous Unrealized Loss Position less than 12 Months		Continuous Unrealized Loss Position greater than 12 Months

																					Continuous		Continuous
															Gross		Gross				Unrealized		Unrealized
															Unrealized		Unrealized				Loss Position		Loss Position
													Amortized		Holding		Holding		Fair		less than 12		greater than 12
March 31, 2022													Cost		Gains		Losses		Value		Months		Months
Available-for-sale
Short-term:
Commercial paper	$	66,344	$	-	$	-	$	66,344	$	-	$	-	$	276,413	$	—	$	—	$	276,413	$	—	$	—
Certificates of deposit	50,677		-		-		50,677		-		-			37,010		—		—		37,010		—		—
Municipal securities	402,062		41		126		401,977		126		-			168,958		2		482		168,478		482
U.S. government agency securities	53,342		1		28		53,315		28		-			78,831		—		342		78,489		342		—
U.S. Treasuries	11,982		-		1		11,981		1		-
Variable rate demand notes	46,054		-		-		46,054		-		-
U.S. treasuries														1,161,042		—		3,784		1,157,258		3,784		—
Long-term:
U.S. government agency securities														21,455		—		158		21,297		158		—
Municipal securities	2,010		-		3		2,007		3		-			5,284				18		5,266		18
U.S. government agency securities	5,001		-		5		4,996		5		-
U.S. treasuries														39,313		—		224		39,089		224		—
Total	$	637,472	$	42	$	163	$	637,351	$	163	$	-	$	1,788,306	$	2	$	5,008	$	1,783,300	$	5,008	$	—

December 31, 2016	Amortized Cost		Gross Unrealized Holding Gains		Gross Unrealized Holding Losses		Fair Value		Continuous Unrealized Loss Position less than 12 Months		Continuous Unrealized Loss Position greater than 12 Months
Available-for-sale
Short-term:
Commercial paper	$	40,382	$	-	$	-	$	40,382	$	-	$	-
Municipal securities	140,379		-		181		140,198		181		-
U.S. government agency securities	26,057		-		6		26,051		6		-
Variable rate demand notes	13,923		-		-		13,923		-		-
Long-term:
Municipal securities	2,403		-		9		2,394		9		-
Total	$	223,144	$	-	$	196	$	222,948	$	196	$	-


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

During the ~~three-~~three-months ended March 31, 2022 and ~~nine-months ended September 30, 2017 and 2016,~~2021, realized gains or losses recognized on the sale of investments were not significant.

The Company’s investments at ~~September 30, 2017~~March 31, 2022 and December 31, ~~2016 in commercial paper, certificates of deposit, municipal securities, U.S. Treasuries, U.S. government agency securities and/or variable rate demand notes (“VRDNs”)~~2021 carried investment grade credit ratings. ~~VRDNs are floating rate municipal bonds with embedded put options that allow the bondholder to sell the security at par plus accrued interest. All~~

Table of the put options are secured by a pledged liquidity source. While they are classified as marketable investment securities, the put option allows the VRDNs to be liquidated at par on a same day, or more generally, on a seven-day settlement basis.Contents

MONSTER BEVERAGE CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

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

	September 30, 2017				December 31, 2016

	Amortized Cost		Fair Value		Amortized Cost		Fair Value

									March 31, 2022				December 31, 2021
									Amortized Cost		Fair Value		Amortized Cost		Fair Value
Less than 1 year:
Commercial paper	$	66,344	$	66,344	$	40,382	$	40,382	$	276,413	$	276,413	$	334,077	$	334,077
Certificates of deposit	50,677		50,677		-		-
Municipal securities	402,062		401,977		140,379		140,198
U. S. Treasuries	11,982		11,981		-		-
U.S. government agency securities	53,342		53,315		26,057		26,051
Due 1 -10 years:
Municipal securities	2,010		2,007		2,403		2,394			168,958		168,478		666		666
U.S. government agency securities	5,001		4,996		-		-			78,831		78,489		62,687		62,661
Variable rate demand notes	6,664		6,664		3,917		3,917
Due 11 - 20 years:
Variable rate demand notes	26,016		26,016		6,003		6,003
Due 21 - 30 years:
Variable rate demand notes	13,374		13,374		4,003		4,003
Certificates of deposit										37,010		37,010		44,502		44,502
U.S. treasuries										1,161,042		1,157,258		1,308,536		1,307,821
Due 1 - 10 years:
U.S. treasuries										39,313		39,089		87,133		86,943
Municipal securities										5,284		5,266		—		—
U.S. government agency securities										21,455		21,297		12,500		12,476
Total	$	637,472	$	637,351	$	223,144	$	222,948	$	1,788,306	$	1,783,300	$	1,850,101	$	1,849,146

4.~~FAIR VALUE OF CERTAIN FINANCIAL ASSETS AND LIABILITIES~~

6.	FAIR VALUE OF CERTAIN FINANCIAL ASSETS AND LIABILITIES

~~Accounting Standards Codification (“ASC”)~~ASC 820 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 ~~which~~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.

Table of Contents

·~~Level 1:~~ MONSTER BEVERAGE CORPORATION AND SUBSIDIARIES~~Quoted prices~~

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Tabular Dollars in ~~active markets for identical assets or liabilities.~~Thousands, Except Per Share Amounts) (Unaudited)

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

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

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

~~MONSTER BEVERAGE CORPORATION AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

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

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

September 30, 2017	Level 1		Level 2			Level 3		Total

March 31, 2022											Level 1		Level 2		Level 3		Total
Cash	$	330,758	$	-		$	-	$	330,758		$	748,324	$	—	$	—	$	748,324
Money market funds	69,273		-			-		69,273				138,161		—		—		138,161
Certificates of deposit	-		56,698			-		56,698				—		38,411		—		38,411
Commercial paper	-		81,708			-		81,708				—		290,410		—		290,410
Variable rate demand notes	-		46,054			-		46,054
Municipal securities	-		423,159			-		423,159				—		202,667		—		202,667
U.S. government agency securities	-		83,279			-		83,279				—		99,786		—		99,786
U.S. Treasuries	-		11,981			-		11,981
U.S. treasuries												—		1,280,327		—		1,280,327
Foreign currency derivatives	-		(339		)	-		(339		)		—		(4,483)		—		(4,483)
Total	$	400,031	$	702,540		$	-	$	1,102,571		$	886,485	$	1,907,118	$	—	$	2,793,603


Amounts included in:
Cash and cash equivalents	$	400,031	$	65,528		$	-	$	465,559		$	886,485	$	128,301	$	—	$	1,014,786
Short-term investments	-		630,348			-		630,348				—		1,717,648		—		1,717,648
Accounts receivable, net	-		174			-		174				—		239		—		239
Investments	-		7,003			-		7,003				—		65,652		—		65,652
Accrued liabilities	-		(513		)	-		(513		)		—		(4,722)		—		(4,722)
Total	$	400,031	$	702,540		$	-	$	1,102,571		$	886,485	$	1,907,118	$	—	$	2,793,603

December 31, 2016	Level 1		Level 2			Level 3		Total
Cash	$	278,972	$	-		$	-	$	278,972
Money market funds	76,112		-			-		76,112
Commercial paper	-		47,855			-		47,855
Variable rate demand notes	-		13,923			-		13,923
Municipal securities	-		157,617			-		157,617
U.S. government agency securities	-		26,051			-		26,051
Foreign currency derivatives	-		(528		)	-		(528		)
Total	$	355,084	$	244,918		$	-	$	600,002

Amounts included in:
Cash and cash equivalents	$	355,084	$	22,498		$	-	$	377,582
Short-term investments	-		220,554			-		220,554
Accounts receivable, net	-		236			-		236
Investments	-		2,394			-		2,394
Accrued liabilities	-		(764		)	-		(764		)
Total	$	355,084	$	244,918		$	-	$	600,002


December 31, 2021	Level 1		Level 2		Level 3		Total
Cash	$	749,089	$	—	$	—	$	749,089
Money market funds		440,826		—		—		440,826
Certificates of deposit		—		44,502		—		44,502
Commercial paper		—		335,477		—		335,477
Municipal securities		—		2,428		—		2,428
U.S. government agency securities		—		75,137		—		75,137
U.S. treasuries		—		1,528,149		—		1,528,149
Foreign currency derivatives		—		(278)		—		(278)
Total	$	1,189,915	$	1,985,415	$	—	$	3,175,330

Amounts included in:
Cash and cash equivalents	$	1,189,915	$	136,547	$	—	$	1,326,462
Short-term investments		—		1,749,727		—		1,749,727
Accounts receivable, net		—		654		—		654
Investments		—		99,419		—		99,419
Accrued liabilities		—		(932)		—		(932)
Total	$	1,189,915	$	1,985,415	$	—	$	3,175,330

All of the Company’s short-term and long-term investments are classified within Level 1 or Level 2 of the fair value hierarchy. The Company’s valuation of its Level 1 investments ~~which include money market funds,~~ is based on quoted market prices in active markets for identical securities. The Company’s valuation of its Level 2 investments ~~which include municipal securities, commercial paper, certificates of deposit, VRDNs, U.S. Treasuries and U.S. government agency securities,~~ 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 no0 transfers between Level 1 and Level 2 measurements during the ~~nine-months~~three-months ended ~~September 30, 2017~~March 31, 2022, or during the ~~year ended~~year-ended December 31, ~~2016,~~2021, and there were no changes in the Company’s valuation techniques.

Table of Contents

MONSTER BEVERAGE CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

5.~~DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES~~

7.
DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES

The Company is exposed to foreign currency exchange rate risks related primarily to its foreign business operations. During the ~~nine-months~~three-months ended ~~September 30, 2017~~March 31, 2022 and the ~~year ended~~year-ended December 31, ~~2016,~~2021, the Company entered into forward currency exchange contracts with financial institutions to create an economic hedge to specifically manage a portion of the foreign exchange risk exposure associated with certain consolidated subsidiaries’ non-functional currency denominated assets and liabilities. All foreign currency exchange contracts of the Company that were outstanding as of ~~September 30, 2017~~March 31, 2022 have terms of one month or less. The Company does not enter into forward currency exchange contracts for speculation or trading purposes.

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

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

September 30, 2017
Derivatives not designated as hedging instruments under FASB ASC 815-20	Notional Amount		Fair Value		Balance Sheet Location


March 31, 2022						March 31, 2022
Derivatives not designated as
hedging instruments under							Notional		Fair
ASC 815-20							Amount		Value		Balance Sheet Location
Assets:
Foreign currency exchange contracts:
Receive USD/pay GBP	$	31,067	$	74	Accounts receivable, net
Receive USD/pay ZAR	20,121		27		Accounts receivable, net
Receive USD/pay MXN	12,673		52		Accounts receivable, net
Receive USD/pay NZD	1,665		5		Accounts receivable, net
Receive USD/pay SEK	1,405		4		Accounts receivable, net
Receive USD/pay CLP	4,316		12		Accounts receivable, net


Receive RSD/pay USD							$	9,913	$	138	Accounts receivable, net
Receive SGD/pay USD								16,662		88	Accounts receivable, net
Receive USD/pay CNY								12,353		13	Accounts receivable, net

Liabilities:
Foreign currency exchange contracts:
Receive USD/pay RUB							$	5,382	$	(3,888)	Accrued liabilities
Receive USD/pay EUR	$	112,406	$	(434)	Accrued liabilities			19,061		(317)	Accrued liabilities
Receive USD/pay ZAR								5,398		(281)	Accrued liabilities
Receive USD/pay NZD								4,095		(64)	Accrued liabilities
Receive USD/pay DKK								3,335		(59)	Accrued liabilities
Receive USD/pay COP								10,097		(51)	Accrued liabilities
Receive USD/pay GBP								19,410		(34)	Accrued liabilities
Receive USD/pay AUD	21,644		(1)		Accrued liabilities			871		(28)	Accrued liabilities
Receive CAD/pay USD	11,269		(38)		Accrued liabilities
Receive SGD/pay USD	3,770		(8)		Accrued liabilities
Receive USD/pay TRY	5,394		(7)		Accrued liabilities
Receive USD/pay BRL	3,722		(19)		Accrued liabilities
Receive USD/pay COP	2,327		(6)		Accrued liabilities

Table of Contents

MONSTER BEVERAGE CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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


December 31, 2021
Derivatives not designated as
hedging instruments under	Notional		Fair
FASB ASC 815-20	Amount		Value		Balance Sheet Location
Assets:
Foreign currency exchange contracts:
Receive SGD/pay USD	$	16,544	$	297	Accounts receivable, net
Receive USD/pay COP		9,754		296	Accounts receivable, net
Receive RSD/pay USD		9,837		46	Accounts receivable, net
Receive USD/pay RUB		7,175		15	Accounts receivable, net

Liabilities:
Foreign currency exchange contracts:
Receive USD/pay GBP	$	29,929	$	(666)	Accrued liabilities
Receive USD/pay AUD		2,602		(88)	Accrued liabilities
Receive USD/pay CNY		12,230		(74)	Accrued liabilities
Receive USD/pay NZD		2,693		(45)	Accrued liabilities
Receive USD/pay EUR		3,045		(29)	Accrued liabilities
Receive USD/pay ZAR		4,140		(21)	Accrued liabilities
Receive USD/pay DKK		1,461		(9)	Accrued liabilities

December 31, 2016

Derivatives not designated as
hedging instruments under
FASB ASC 815-20

Notional
Amount

Fair
Value

Balance Sheet Location

Assets:

Foreign currency exchange contracts:

Receive CAD/pay USD

  $
22,314

  $
173

Accounts receivable, net

Receive SGD/pay USD

7,915

24

Accounts receivable, net

Receive NOK/pay USD

2,138

28

Accounts receivable, net

Receive USD/pay CLP

4,094

9

Accounts receivable, net

Receive USD/pay COP

2,330

2

Accounts receivable, net

Liabilities:

Foreign currency exchange contracts:

Receive USD/pay GBP

  $
7,718

  $
(57)

Accrued liabilities

Receive USD/pay EUR

29,621

(325)

Accrued liabilities

Receive USD/pay AUD

15,135

(74)

Accrued liabilities

Receive USD/pay ZAR

20,405

(296)

Accrued liabilities

Receive USD/pay MXN

25,864

(4)

Accrued liabilities

Receive USD/pay BRL

3,138

(3)

Accrued liabilities

Receive USD/pay NZD

2,076

(5)

Accrued liabilities

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


		Amount of loss
		recognized in income on
		derivatives
Derivatives not designated as	Location of loss	Three-months ended
hedging instruments under	recognized in income on	March 31,		March 31,
ASC 815-20	derivatives	2022		2021
Foreign currency exchange contracts	Interest and other expense, net	$	4,019	$	3,870

Amount of (loss) gain
recognized in income on
derivatives

Three-months ended
Derivatives not designated as
hedging instruments under
FASB ASC 815-20

Location of (loss) gain
recognized in income on
derivatives

September 30,
2017

September 30,
2016

Foreign currency exchange contracts

Interest and other income (expense), net

$
(2,172)

$
(882)

Amount of (loss) gain
recognized in income on
derivatives

Nine-months ended
Derivatives not designated as
hedging instruments under
FASB ASC 815-20

Location of (loss) gain
recognized in income on
derivatives

September 30,
2017

September 30,
2016

Foreign currency exchange contracts

Interest and other income (expense), net

$
(11,639)

$
(424)

8.	INVENTORIES

Inventories consist of the following at:


	March 31,		December 31,
	2022		2021
Raw materials	$	455,318	$	349,865
Work in process		1,471		—
Finished goods		364,343		243,492
	$	821,132	$	593,357

Table of Contents

MONSTER BEVERAGE CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

6.~~INVENTORIES~~

~~Inventories consist of the following at:~~

September 30,
2017

December 31,
2016

Raw materials

  $
83,190

  $
58,658

Finished goods

130,151

103,313

  $
213,341

  $
161,971

7.~~PROPERTY AND EQUIPMENT, NET~~

9.	PROPERTY AND EQUIPMENT, NET

Property and equipment consist of the following at:

	September 30, 2017		December 31, 2016

					March 31,		December 31,
					2022		2021
Land	$	47,373	$	46,596	$	86,522	$	85,455
Leasehold improvements	4,121		2,687			31,272		11,845
Furniture and fixtures	4,490		3,635			9,185		8,274
Office and computer equipment	13,702		11,701			23,026		21,601
Computer software	3,238		3,274			8,085		8,383
Equipment	143,435		114,230			251,184		190,333
Buildings	104,720		69,547			186,371		167,243
Vehicles	36,876		31,582			47,603		45,404
	357,955		283,252
						643,248		538,538
Less: accumulated depreciation and amortization	(132,534)		(109,909)			(235,857)		(224,785)
	$	225,421	$	173,343
					$	407,391	$	313,753

Total depreciation and amortization expense recorded was ~~$9.4~~$13.1 million and ~~$7.5~~$11.7 million for the three-months ended ~~September 30, 2017~~March 31, 2022 and ~~2016,~~2021, respectively. ~~Total depreciation and amortization expense recorded was $26.2 million and $22.2 million for the nine-months ended September 30, 2017 and 2016, respectively.~~

~~MONSTER BEVERAGE CORPORATION AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

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

8.10. GOODWILL AND OTHER INTANGIBLE ASSETS

The following is a roll-forward of goodwill for the ~~nine-months~~three-months ended ~~September 30, 2017~~March 31, 2022 and 2021 by reportable segment:

Monster
Energy®
Drinks

Strategic
Brands

Other

Total

Balance at December 31, 2016

$
693,644

$
637,999

$
-

$
1,331,643

Acquisitions

-

-

-

-

Balance at September 30, 2017

$
693,644

$
637,999

$
-

$
1,331,643


	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


	Monster
	Energy®		Strategic		Alcohol
	Drinks		Brands		Brands		Other		Total
Balance at December 31, 2020	$	693,644	$	637,999	$	—	$	—	$	1,331,643
Acquisitions		0		0		0		0		0
Balance at March 31, 2021	$	693,644	$	637,999	$	—	$	—	$	1,331,643

Intangible assets consist of the following at:

	September 30, 2017		December 31, 2016

					March 31,		December 31,
					2022		2021
Amortizing intangibles	$	71,396	$	71,290	$	121,372	$	66,872
Accumulated amortization	(23,421)		(14,535)			(62,761)		(61,227)
	47,975		56,755
						58,611		5,645
Non-amortizing intangibles	985,506		975,880			1,173,502		1,066,741
	$	1,033,481	$	1,032,635
					$	1,232,113	$	1,072,386

Table of Contents

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 ~~seven~~fifteen years. Total amortization expense recorded was ~~$3.0 million for both the three-months ended September 30, 2017 and 2016. Total amortization expense recorded was $8.9~~$1.5 million and ~~$7.7 million for the nine-months ended September 30, 2017 and 2016, respectively.~~

9.~~DISTRIBUTION AGREEMENTS~~

In accordance with ASC No. 420 “Exit or Disposal Cost Obligations”, the Company expenses distributor termination costs in the period in which the written notification of termination occurs. The Company incurred termination costs of $15.9 million and $4.7$1.1 million for the three-months ended ~~September 30, 2017~~March 31, 2022 and ~~2016,~~March 31, 2021, respectively.

The ~~Company incurred termination costs~~following is the future estimated amortization expense related to amortizing intangibles as of $35.9 million and $33.4 million for the nine-months ended September 30, 2017 and 2016, respectively. Such termination costs have been expensed in full and are included in operating expenses for the three- and nine-months ended September 30, 2017 and 2016.March 31, 2022:


2022 (excluding the three-months ended March 31, 2022)	$	6,029
2023		4,745
2024		3,647
2025		3,647
2026		3,646
2027 and thereafter		36,897
	$	58,611

11. DISTRIBUTION AGREEMENTS

In the normal course of business, amounts received pursuant to new and/or amended distribution agreements entered into with certain bottlers/distributors, relating to the costs associated with terminating agreements with the Company’s prior distributors, or at the inception of certain sales/marketing programs are accounted for as deferred revenue and are recognized as revenue ratably over the anticipated life of the respective ~~distribution~~ agreement, generally 20 ~~years.~~years or program duration, as the case may be. Revenue recognized was ~~$11.4~~$10.0 million and ~~$8.4~~$10.4 million for the three-months ended ~~September 30, 2017~~March 31, 2022 and ~~2016,~~2021, respectively. ~~Revenue recognized was $31.6 million and $28.6 million for the nine-months ended September 30, 2017 and 2016, respectively.~~

~~MONSTER BEVERAGE CORPORATION AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

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

~~10.~~12. COMMITMENTS AND CONTINGENCIES

The Company had purchase commitments aggregating approximately ~~$28.1~~$384.1 million at ~~September 30, 2017,~~March 31, 2022, which represented commitments made by the Company and its subsidiaries to various suppliers of raw materials for the production of its products. These obligations vary in terms, but are generally satisfied within one year.

The Company had contractual obligations aggregating approximately ~~$126.0~~$335.4 million at ~~September 30, 2017,~~March 31, 2022, which related primarily to sponsorships and other marketing activities.

The Company ~~had operating lease commitments aggregating approximately $17.4 million at September 30, 2017, which related primarily to warehouse and office space.~~

In September 2016, the Company completed its acquisition of approximately 49 acres of land, located in Rialto, CA, for a purchase price of approximately $39.1 million. The Company is constructing an approximately 1,000,000 square-foot building (the “Rialto Warehouse”), which it anticipates will be LEED certified, to replace its current leased warehouse and distribution facilities located in Corona, CA. The Company entered into an approximately $38.1 million guaranteed maximum price construction contract for the construction of the building, of which $6.2 million remained outstanding as of September 30, 2017. During the three-months ended September 30, 2017, the Company commenced its transition to the Rialto Warehouse and estimates that it will be fully operational by December 31, 2017.

~~In December 2016, the Company entered into~~has a credit facility with HSBC Bank (China) Company Limited, Shanghai Branch, ~~consisting~~ of ~~a working capital line of credit under which~~$15.0 million. At March 31, 2022, the ~~Company may borrow up to $4.0 million of non-collateralized debt. In February 2017, the working capital line limit was increased from $4.0 million to $9.0 million. Interest~~interest rate on borrowings under the line of credit ~~is based on the People’s Bank of China benchmark lending rates multiplied by 1.05.~~was 5.5%. As of ~~September 30, 2017, the Company had $1.1~~March 31, 2022, $9.9 million was outstanding on this line of ~~credit, including interest, which is included in accounts payable in the condensed consolidated balance sheet.~~

~~Legal Proceedings~~

credit.

Litigation – The Company has been named a defendant in numerous personal injury lawsuits, claiming that the death or other serious injury of the plaintiffs was caused by consumption of Monster Energy® brand energy drinks. The plaintiffs in these lawsuits allege strict product liability, negligence, fraudulent concealment, breach of implied warranties and wrongful death. The Company believes that each complaint is without merit and plans a vigorous defense. The Company also believes that any damages, if awarded, would not have a material adverse effect on the Company’s financial position or results of operations.

~~State Attorney General Inquiry~~ – In July 2012, the Company received a subpoena from the Attorney General for the State of New York in connection with its investigation concerning the Company’s advertising, marketing, promotion, ingredients, usage and sale of its Monster Energy® brand energy drinks. Production of documents pursuant to that subpoena was completed in approximately May 2014.

On August 6, 2014, the Attorney General for the State of New York issued a second subpoena seeking additional documents and the deposition of a Company employee. On September 8, 2014, the Company moved to quash the second subpoena in the Supreme Court, New York County. The motion was fully briefed and was argued on March 17, 2015. On January 13, 2017, the Court issued an opinion in which it agreed with certain Company arguments regarding the scope of the subpoena and the Attorney General’s investigation, but denied the motion to quash and granted the Attorney General’s cross-motion to compel compliance. It is unknown what, if any, action the state Attorney General may take against the Company, the relief which may be sought in the event of any such proceeding or whether such proceeding could have a material adverse effect on the Company’s business, financial condition or results of operations.

~~MONSTER BEVERAGE CORPORATION AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

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

~~Furthermore, from~~ — From time to time in the normal course of business, the Company is named in ~~other~~ litigation, including labor and employment matters, personal injury matters, consumer class actions, intellectual property ~~litigation~~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 ~~the~~ 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, ~~or in the amount of~~and any related insurance ~~reimbursements recorded.~~reimbursements. As of ~~September 30, 2017,~~March 31, 2022, 0 loss contingencies were included in the Company’s condensed consolidated balance ~~sheet includes accrued loss contingencies~~sheet.

Table of ~~approximately $4.7 million.~~Contents

MONSTER BEVERAGE CORPORATION AND SUBSIDIARIES

~~11.~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

13. ACCUMULATED OTHER COMPREHENSIVE LOSS

Changes in accumulated other comprehensive loss by component, after tax, for the ~~nine-months~~three-months ended ~~September 30, 2017~~March 31, 2022 and 2021 are as follows:


			Unrealized
	Currency		Losses on
	Translation		Available-for-
	Losses		Sale Securities		Total
Balance at December 31, 2021	$	(68,209)	$	(956)	$	(69,165)
Other comprehensive (loss) income before reclassifications		1,079		(4,059)		(2,980)
Amounts reclassified from accumulated other comprehensive (loss) income		0		0		0
Net current-period other comprehensive (loss) income		1,079		(4,059)		(2,980)
Balance at March 31, 2022	$	(67,130)	$	(5,015)	$	(72,145)


			Unrealized
	Currency		Gains on
	Translation		Available-for-
	Losses		Sale Securities		Total
Balance at December 31, 2020	$	2,950	$	84	$	3,034
Other comprehensive (loss) income before reclassifications		(27,932)		24		(27,908)
Amounts reclassified from accumulated other comprehensive (loss) income		—		—		—
Net current-period other comprehensive (loss) income		(27,932)		24		(27,908)
Balance at March 31, 2021	$	(24,982)	$	108	$	(24,874)

Currency
Translation
Losses

Unrealized
(Gains) Losses
on Available-for-
Sale Securities

Total

Balance at December 31, 2016

  $
23,056

  $
193

  $
23,249

Other comprehensive loss (gain) before reclassifications

-

-

-

Amounts reclassified from accumulated other comprehensive loss (gain)

-

-

-

Net current-period other comprehensive loss (gain)

(7,641)

(75)

(7,716)

Balance at September 30, 2017

  $
15,415

  $
118

  $
15,533

~~12.~~14. TREASURY STOCK

On ~~February 28, 2017,~~March 13, 2020, the Company’s Board of Directors authorized a ~~new~~ share repurchase program for the purchase of up to $500.0 million of the Company’s outstanding common stock (the ~~“February 2017~~“March 2020 Repurchase Plan”). During the three-months ended ~~September 30, 2017, the Company purchased 4.5 million~~March 31, 2022, 0 shares ~~of common stock at an average purchase price of $54.91 per share, for a total amount of $248.8 million (excluding broker commissions),~~were repurchased under the ~~February 2017~~March 2020 Repurchase Plan.

As of May 6, 2022, $441.5 million remained available for repurchase under the March 2020 Repurchase Plan.

During the three-months ended ~~September 30, 2017, 892~~March 31, 2022, 0.2 million shares of common stock were purchased from employees in lieu of cash payments for options exercised or withholding taxes due for a total amount of ~~$0.05~~$12.2 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 condensed consolidated balance sheet at September 30, 2017.

~~MONSTER BEVERAGE CORPORATION AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

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

~~13.~~15. STOCK-BASED COMPENSATION

The Company has ~~two~~2 stock-based compensation plans under which shares were available for grant at ~~September 30, 2017:~~March 31, 2022: (i) the Monster Beverage Corporation ~~2011~~2020 Omnibus Incentive Plan, ~~(the “2011 Omnibus Incentive Plan”) and~~including the Monster Beverage Corporation ~~Stock~~Deferred Compensation Plan as a sub-plan thereunder, and (ii) the Monster Beverage Corporation 2017 Compensation Plan for Non-Employee Directors ~~(the “2017~~as Amended and Restated on February 23, 2022, including the Monster Beverage Corporation Deferred Compensation Plan for Non-Employee Directors ~~Plan”).~~

as a sub-plan thereunder.

The Company recorded ~~$13.3~~$16.3 million and ~~$12.1~~$18.4 million of compensation expense relating to outstanding options, restricted stock ~~awards, stock appreciation rights~~units, performance share units and ~~restricted stock units~~other share-based awards during the three-months ended ~~September 30, 2017~~March 31, 2022 and 2016, respectively. The Company recorded $39.3 million and $33.7 million of compensation expense relating to outstanding options, restricted stock awards, stock appreciation rights and restricted stock units during the nine-months ended September 30, 2017 and 2016,2021, respectively.

The ~~excess~~ tax benefit for tax deductions from non-qualified stock option exercises, disqualifying dispositions of incentive stock options and vesting of restricted stock units and ~~restricted stock awards~~performance share units for the three-months ended ~~September 30, 2017~~March 31, 2022 and ~~2016~~2021 was ~~$2.5~~$0.4 million and ~~$3.5~~$1.4 million, respectively. ~~The excess tax benefit for tax deductions from non-qualified stock option exercises, disqualifying dispositions~~

Table of ~~incentive stock options, vesting of restricted stock units and restricted stock awards for the nine-months ended September 30, 2017 and 2016 was $13.8 million and $7.1 million, respectively.~~Contents

MONSTER BEVERAGE CORPORATION AND SUBSIDIARIES

In 2016, the Company adopted the Monster Beverage Corporation Deferred Compensation Plan (the “Deferred Compensation Plan”) (a sub plan to the 2011 Omnibus Incentive Plan). Deferrals under the Deferred Compensation Plan are unfunded and unsecured. As of September 30, 2017, deferrals under the Deferred Compensation Plan are solely comprised of cash compensation and equity compensation coming due after September 30, 2018 and are not materialNOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Tabular Dollars in ~~the aggregate.~~Thousands, Except Per Share Amounts) (Unaudited)

During the quarter ending June 30, 2017, the Company adopted the Monster Beverage Corporation Deferred Compensation Plan for Non-Employee Directors (the “Non-Employee Director Deferral Plan”) (a sub-plan to the 2017 Directors Plan), pursuant to which non-employee directors may elect to defer cash and/or equity based compensation and to receive the deferred compensation, either at a pre-determined time in the future or upon departure from the Company’s Board of Directors, as provided for under the Non-Employee Director Deferral Plan. Deferrals under the Non-Employee Director Deferral Plan are unfunded and unsecured. As of September 30, 2017, there were no deferrals under the Non-Employee Director Deferral Plan.

Stock Options

Under the Company’s stock-based compensation plans, all stock options granted as of ~~September 30, 2017~~March 31, 2022 were granted at prices based on the fair value of the Company’s common stock on the date of grant. The Company records compensation expense for ~~employee~~ stock options based on the estimated fair value of the options on the date of grant using the Black-Scholes-Merton option pricing formula with the assumptions included in the table below. The Company records compensation expense for non-employee stock options based on the estimated fair value of the options as of the earlier of (1) the date at which a commitment for performance by the non-employee to earn the stock option is reached or (2) the date at which the non-employee’s performance is complete, using the Black-Scholes-Merton option pricing formula with the assumptions included in the table below. The Company uses historical data to determine the exercise behavior, volatility and forfeiture rate of the options.

~~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 September 30,		Nine-Months Ended September 30,
	2017	2016	2017	2016

					Three-Months Ended March 31,
					2022		2021
Dividend yield	0.0%	0.0%	0.0%	0.0%	0.0	%	0.0	%
Expected volatility	35.3%	36.3%	36.6%	36.1%	27.7	%	28.9	%
Risk-free interest rate	1.7%	1.1%	2.1%	1.4%	2.1	%	0.8	%
Expected term	5.9 years	6.4 years	6.1 years	6.3 years	6.0 years		5.8 years

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

Risk-Free Interest Rate: The risk-free interest rate is based on the U.S. ~~Treasury zero coupon~~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:

Options

Number of
Shares (In
thousands)

Weighted-
Average
Exercise
Price Per
Share

Weighted-
Average
Remaining
Contractual
Term (In
years)

Aggregate
Intrinsic Value

Outstanding at January 1, 2017

22,643

  $
23.55

5.8

  $
474,739

Granted 01/01/17 - 03/31/17

1,319

  $
45.94

Granted 04/01/17 - 06/30/17

26

  $
49.71

Granted 07/01/17 - 09/30/17

12

  $
56.08

Exercised

(1,643)

  $
16.30

Cancelled or forfeited

(391)

  $
39.32

Outstanding at September 30, 2017

21,966

  $
25.20

5.4

  $
659,989

Vested and expected to vest in the

future at September 30, 2017

20,870

  $
24.26

5.2

  $
646,739

Exercisable at September 30, 2017

13,030

  $
14.29

3.4

  $
533,683


				Weighted-
		Weighted-		Average
		Average		Remaining
	Number of	Exercise		Contractual	Aggregate
	Shares	Price Per		Term (in	Intrinsic
Options	(in thousands)	Share		years)	Value
Outstanding at January 1, 2022	13,860	$	48.19	5.1	$	663,148
Granted 01/01/22 - 03/31/22	2,489	$	73.96
Exercised	(114)	$	39.57
Cancelled or forfeited	(17)	$	65.92
Outstanding at March 31, 2022	16,218	$	52.19	5.6	$	459,540
Vested and expected to vest in the future at March 31, 2022	15,723	$	51.52	5.5	$	455,553
Exercisable at March 31, 2022	10,862	$	42.96	4.1	$	402,706

The weighted-average grant-date fair value of options granted during the three-months ended ~~September 30, 2017~~March 31, 2022 and ~~2016~~2021 was ~~$20.61~~$23.21 per share and ~~$19.74~~$25.78 per share, respectively. ~~The weighted-average grant-date fair value of options granted during the nine-months ended September 30, 2017 and 2016 was $18.04 per share and $16.94 per share, respectively.~~

The total intrinsic value of options exercised during the three-months ended ~~September 30, 2017~~March 31, 2022 and ~~2016~~2021 was ~~$12.5~~$4.9 million and ~~$9.1~~$7.2 million, respectively. ~~The total intrinsic value~~

Table of ~~options exercised during the nine-months ended September 30, 2017 and 2016 was $53.4 million and $30.6 million, respectively.~~Contents

MONSTER BEVERAGE CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

Cash received from option exercises under all plans for the three-months ended ~~September 30, 2017~~March 31, 2022 and ~~2016~~2021 was ~~approximately $7.7~~$4.5 million and ~~$2.4 million, respectively. Cash received from option exercises under all plans for the nine-months ended September 30, 2017 and 2016 was approximately $26.8 million and $10.6~~$6.8 million, respectively.

At ~~September 30, 2017,~~March 31, 2022, there was ~~$91.8~~$95.4 million of total unrecognized compensation expense related to non-vested options granted to employees under the Company’s ~~share-based payment~~stock-based compensation plans. That cost is expected to be recognized over a weighted-average period of ~~2.8~~3.4 years.

~~Restricted Stock Awards and~~ Restricted Stock Units and Performance Share Units

The cost of stock-based compensation for restricted stock ~~awards~~units and ~~restricted stock~~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 ~~awards~~units and ~~non-vested restricted stock~~performance share units as follows:

Number of
Shares (in
thousands)

Weighted
Average
Grant-Date
Fair Value

Non-vested at January 1, 2017

556

  $
39.95

Granted 01/01/17- 03/31/17

252

  $
46.27

Granted 04/01/17- 06/30/17

23

  $
50.86

Granted 07/01/17- 09/30/17

-

  $
-

Vested

(289)

  $
37.64

Forfeited/cancelled

(2)

  $
20.69

Non-vested at September 30, 2017

540

  $
44.67


		Weighted
	Number of	Average
	Shares (in	Grant-Date
	thousands)	Fair Value
Non-vested at January 1, 2022	910	$	69.02
Granted 01/01/22 - 03/31/22¹	484	$	71.88
Vested	(371)	$	64.15
Forfeited/cancelled	(2)	$	59.67
Non-vested at March 31, 2022	1,021	$	72.17

~~No restricted stock~~¹The grant activity for performance share units ~~or restricted stock awards were granted during~~is recorded based on the ~~three-months ended September 30, 2017 and September 30, 2016.~~ 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 restricted stock awards~~and/or performance share units granted during the ~~nine-months~~three-months ended ~~September 30, 2017~~March 31, 2022 and ~~2016~~2021 was ~~$46.65~~$73.45 and $88.96 per share, ~~and $44.71 per share,~~ respectively.

As of ~~September 30, 2017, 0.5~~March 31, 2022, 0.9 million of restricted stock units and ~~restricted stock awards~~performance share units are expected to vest over their respective terms.

At ~~September 30, 2017,~~March 31, 2022, total unrecognized compensation expense relating to non-vested restricted stock ~~awards~~units and ~~non-vested restricted stock~~performance share units was ~~$17.3~~$56.7 million, which is expected to be recognized over a weighted-average period of ~~1.7~~2.4 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, 2022, other share-based awards outstanding included grants that vest over three years payable in the first quarters of 2023, 2024 and 2025.

At March 31, 2022, there was $0.5 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 cost is expected to be recognized over a weighted-average period of 0.8 years.

Table of Contents

MONSTER BEVERAGE CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

~~14.~~16. INCOME TAXES

~~The following is a roll-forward~~As of March 31, 2022, the Company does not have unrecognized tax benefits. In addition, the Company’s ~~total gross unrecognized tax benefits, not including interest and penalties, for the nine-months ended September 30, 2017:~~

	~~Gross Unrecognized Tax~~ ~~Benefits~~
~~Balance at December 31, 2016~~	$	9
~~Additions for tax positions related to the current year~~	-
~~Additions for tax positions related to the prior year~~	~~6,540~~
~~Decreases related to settlement with taxing authority~~	~~(9)~~
~~Balance at September 30, 2017~~	$	~~6,540~~

~~The Company recognizes~~policy is to recognize accrued interest and penalties related to unrecognized tax benefits in the provision for income taxes in the Company’s condensed consolidated financial statements. As of September 30, 2017, the Company had approximately $1.2 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.

On August 7, 2015, the Internal Revenue Service (the “IRS”) began its examination of the Company’s U.S. federal income tax returns for the years ended December 31, 2012 and 2013. On October 18, 2016, the IRS began its examination of the Company’s U.S. federal income tax return for the year ended December 31, 2014. On March 27, 2017, the IRS began its examination of the Company’s U.S. federal income tax return for the year ended December 31, 2015.

The Company is in various stages of examination with certain states and certain foreign ~~jurisdictions.~~jurisdictions, including the United Kingdom and Ireland. The Company’s ~~2012~~2018 through ~~2016~~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 ~~2012~~2017 through ~~2016~~2021 tax years.

~~15.~~17. EARNINGS PER SHARE

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


	Three-Months Ended
	March 31,
	2022	2021
Weighted-average shares outstanding:
Basic	529,405	528,195
Dilutive	6,149	6,787
Diluted	535,554	534,982

Three-Months Ended

Nine-Months Ended

September 30,

September 30,

2017

2016

2017

2016

Weighted-average shares outstanding:

Basic

567,878

571,137

567,550

594,219

Dilutive

10,490

12,156

10,414

12,060

Diluted

578,368

583,293

577,964

606,279

~~MONSTER BEVERAGE CORPORATION AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

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

For the three-months ended ~~September 30, 2017~~March 31, 2022 and ~~2016,~~2021, options and awards outstanding totaling ~~5.9~~1.6 million shares and 1.9 million shares, respectively, were excluded from the calculations as their effect would have been antidilutive. For the nine-months ended September 30, 2017 and 2016, options and awards outstanding totaling 8.4 million shares and 1.70.2 million shares, respectively, were excluded from the calculations as their effect would have been antidilutive.

~~16.~~18. SEGMENT INFORMATION

The Company has ~~three~~ 4 operating and reportable ~~segments,~~segments: (i) Monster Energy® Drinks segment, ~~(“Monster Energy® Drinks”),~~ which is primarily comprised of the Company’s Monster Energy® drinks, ~~Monster Hydro~~TMReign Total Body Fuel® high performance energy drinks and ~~Mutant® Super Soda drinks,~~True North^® Pure Energy Seltzers, (ii) Strategic Brands segment, ~~(“Strategic Brands”),~~ which is primarily comprised of the various energy drink brands acquired from ~~The Coca-Cola Company (“TCCC”)~~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 ~~(iii)~~hard seltzers purchased as part of the CANarchy Transaction on February 17, 2022 and (iv) Other segment, ~~(“Other”),~~ which is comprised of ~~certain products sold by American Fruits & Flavors LLC, a wholly-owned subsidiary of~~ the ~~Company, to independent third-party customers.~~

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 and full service beverage~~ bottlers/distributors. In some cases, the Company sells ready-to-drink packaged drinks directly to retail grocery and specialty chains, wholesalers, club stores, mass merchandisers, convenience chains, ~~food service~~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, full service~~ bottlers/distributors ~~or retailers, including,~~and to retail grocery and specialty chains, wholesalers, club stores, mass merchandisers, convenience chains, ~~food service~~foodservice customers, drug stores, value stores, e-commerce retailers and the military. To a lesser extent, the ~~Company’s~~ Strategic Brands segment generates net operating revenues by selling certain ready-to-drink packaged energy drinks to ~~bottlers and full service beverage~~ bottlers/distributors.

Table of Contents

MONSTER BEVERAGE CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

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

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

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

Corporate and unallocated amounts that do not relate to a reportable segment have been allocated to “Corporate & Unallocated.” No asset information, other than goodwill and other intangible assets, has been provided ~~for~~ 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-~~three-months ended March 31, 2022 and ~~nine-months ended September 30, 2017 and 2016~~2021 are as follows:

	Three-Months Ended				Nine-Months Ended
	September 30,				September 30,
	2017		2016		2017		2016

									Three-Months Ended
									March 31,
									2022		2021
Net sales:
Monster Energy® Drinks(1)	$	827,690	$	710,130	$	2,311,521	$	2,075,511
Monster Energy® Drinks¹									$	1,404,847	$	1,170,280
Strategic Brands	76,586		72,138		230,255		207,990			92,593		67,809
Alcohol Brands²										15,207		—
Other	5,200		5,686		16,914		12,127			5,927		5,727
Corporate and unallocated	-		-		-		-			—		—
	$	909,476	$	787,954	$	2,558,690	$	2,295,628
									$	1,518,574	$	1,243,816

	Three-Months Ended				Nine-Months Ended
	September 30,				September 30,
	2017		2016		2017		2016

									Three-Months Ended
									March 31,
									2022		2021
Operating Income:
Monster Energy® Drinks(1) (2)	$	333,210	$	308,493	$	968,864	$	874,822
Monster Energy® Drinks¹									$	454,563	$	464,819
Strategic Brands	42,663		40,075		137,945		127,169			57,195		45,140
Alcohol Brands²										(4,953)		—
Other	1,451		1,186		4,585		1,528			1,127		1,793
Corporate and unallocated	(59,952)		(59,379)		(179,719)		(169,909)			(108,443)		(97,606)
	$	317,372	$	290,375	$	931,675	$	833,610
									$	399,489	$	414,146

	Three-Months Ended				Nine-Months Ended
	September 30,				September 30,
	2017		2016		2017		2016

									Three-Months Ended
									March 31,
									2022		2021
Income before tax:
Monster Energy® Drinks(1) (2)	$	333,065	$	308,612	$	968,716	$	875,024
Monster Energy® Drinks¹									$	455,134	$	464,968
Strategic Brands	42,663		40,073		137,931		127,141			57,254		45,140
Alcohol Brands²										(5,606)		—
Other	1,451		1,186		4,585		1,528			1,137		1,793
Corporate and unallocated	(55,811)		(60,533)		(177,454)		(170,734)			(115,730)		(98,514)
	$	321,368	$	289,338	$	933,778	$	832,959
									$	392,189	$	413,387

(1)

Includes $10.0 million and $10.4 million for the three-months ended March 31, 2022 and 2021, respectively, related to the recognition of deferred revenue.

(2)

Effectively from February 17, 2022 to March 31, 2022.

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~~(1)~~Includes $11.4 million and $8.4 million for the three-months ended September 30, 2017 and 2016, respectively, related to the recognition of deferred revenue. Includes $31.6 million and $28.6 million for the nine-months ended September 30, 2017 and 2016, respectively, related to the recognition of deferred revenue.

~~(2)~~Includes $15.9 million and $4.7 million for the three-months ended September 30, 2017 and 2016, respectively, related to distributor termination costs. Includes $35.9 million and $33.4 million for the nine-months ended September 30, 2017 and 2016, respectively, related to distributor termination costs.

MONSTER BEVERAGE CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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


	Three-Months Ended
	March 31,
	2022		2021
Depreciation and amortization:
Monster Energy® Drinks	$	8,159	$	9,022
Strategic Brands		233		264
Alcohol Brands		2,283		—
Other		1,110		1,126
Corporate and unallocated		2,814		2,413
	$	14,599	$	12,825

Three-Months Ended

Nine-Months Ended

September 30,

September 30,

2017

2016

2017

2016

Depreciation and amortization:

Monster Energy® Drinks

  $
7,546

  $
5,974

  $
20,959

  $
17,651

Strategic Brands

1,836

1,777

5,474

5,325

Other

1,152

1,151

3,458

2,305

Corporate and unallocated

1,795

1,522

5,213

4,593

  $
12,329

  $
10,424

  $
35,104

  $
29,874

September 30,
2017

December 31,
2016

Goodwill and other intangible assets:

Monster Energy® Drinks

  $
1,343,437

  $
1,334,494

Strategic Brands

997,054

1,001,749

Other

24,633

28,035

Corporate and unallocated

-

-

  $
2,365,124

  $
2,364,278

Corporate and unallocated expenses for the three-months ended ~~September 30, 2017~~March 31, 2022 include ~~$37.9~~$68.1 million of payroll costs, of which ~~$13.3~~$16.2 million was attributable to stock-based compensation expenses (see Note ~~13,~~15 “Stock-Based Compensation”), as well as ~~$11.9~~$26.4 million attributable to professional service expenses, including accounting and legal costs, and ~~$10.1~~$13.9 million of other operating expenses.

Corporate and unallocated expenses for the three-months ended ~~September 30, 2016~~March 31, 2021 include ~~$33.2~~$65.1 million of payroll costs, of which ~~$12.1~~$18.3 million was attributable to stock-based compensation expenses (see Note ~~13,~~15 “Stock-Based Compensation”), as well as ~~$16.9~~$20.4 million attributable to professional service expenses, including accounting and legal costs, and ~~$9.3~~$12.1 million of other operating expenses.

Corporate and unallocated expenses for the nine-months ended September 30, 2017 include $114.0 million of payroll costs, of which $39.3 million was attributable to stock-based compensation expenses (see Note 13, “Stock-Based Compensation”), as well as $38.3 million attributable to professional service expenses, including accounting and legal costs, and $27.5 million of other operating expenses. Corporate and unallocated expenses for the nine-months ended September 30, 2016 include $92.7 million of payroll costs, of which $33.7 million was attributable to stock-based compensation expenses (see Note 13, “Stock-Based Compensation”), as well as $52.4 million attributable to professional service expenses, including accounting and legal costs, and $24.8 million of other operating expenses.

~~TCCC, through certain wholly-owned subsidiaries (the “TCCC Subsidiaries”),~~Coca-Cola Europacific Partners (formerly Coca-Cola European Partners) accounted for approximately ~~14%~~12% and ~~41%~~11% of the Company’s net sales for the three-months ended ~~September 30, 2017~~March 31, 2022 and ~~2016,~~2021, respectively. ~~The TCCC Subsidiaries~~

Coca-Cola Consolidated, Inc. accounted for approximately ~~21%~~9% and ~~43%~~12% of the Company’s net sales for the ~~nine-months~~three-months ended ~~September 30, 2017~~March 31, 2022 and ~~2016,~~2021, respectively. As part of TCCC’s North America Refranchising initiative (the “North America Refranchising”), the territories of certain TCCC Subsidiaries have been transitioned to certain independent/non wholly-owned TCCC bottlers/distributors. Accordingly, the Company’s percentage of net sales classified as sales to the TCCC Subsidiaries decreased for three- and nine-months ended September 30, 2017. CCBCC Operations,

Reyes Coca-Cola Bottling, LLC accounted for approximately ~~14%~~10% and 9% of the Company’s net sales for the three-months ended ~~September 30, 2017~~March 31, 2022 and ~~2016,~~2021, respectively. ~~CCBCC Operations, LLC accounted for approximately 13% and 8% of the Company’s net sales for the nine-months ended September 30, 2017 and 2016, respectively.~~

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~~MONSTER BEVERAGE CORPORATION AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

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

Net sales to customers outside the United States amounted to ~~$260.1~~$553.4 million and ~~$190.8~~$459.4 million for the three-months ended ~~September 30, 2017~~March 31, 2022 and ~~2016,~~2021, respectively. ~~Net~~Such sales ~~to customers outside the United States amounted to $698.9 million~~were approximately 36% and ~~$540.2 million~~37% of net sales for three-months ended March 31, 2022 and 2021, respectively.

Goodwill and other intangible assets for the ~~nine-months ended September 30, 2017~~Company’s reportable segments as of March 31, 2022 and ~~2016, respectively.~~December 31, 2021 are as follows:


	March 31,		December 31,
	2022		2021
Goodwill and other intangible assets:
Monster Energy® Drinks	$	1,425,023	$	1,420,503
Strategic Brands		979,268		978,032
Alcohol Brands		235,353		—
Other		4,397		5,494
Corporate and unallocated		—		—
	$	2,644,041	$	2,404,029

~~17.~~

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MONSTER BEVERAGE CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

19. RELATED PARTY TRANSACTIONS

TCCC controls approximately ~~18%~~19.3% of the voting interests of the Company. The TCCC ~~through~~Subsidiaries, the TCCC ~~Subsidiaries~~Related Parties and ~~through~~ certain TCCC ~~affiliated companies (the “TCCC Affiliates”) purchases~~independent bottlers/distributors purchase and ~~distributes certain of~~distribute the Company’s products ~~both domestically~~in domestic and in certain international ~~territories.~~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 Affiliates for the three-months ended September 30, 2017 and 2016, were $12.7 million and $8.1 million, respectively. TCCC commissions, based on sales to the TCCC Affiliates for the nine-months ended September 30, 2017 and 2016, were $33.5 million and $19.0 million, respectively.

TCCC commissions, based on sales to the TCCC Subsidiaries and the TCCC Related Parties, were $18.4 million and $16.1 million for the three-months ended March 31, 2022 and 2021, respectively, and are ~~accounted for~~included as a reduction to ~~revenue~~net sales.

TCCC commissions, based on sales to TCCC independent bottlers/distributors, were $11.0 million and $5.5 million for the three-months ended March 31, 2022 and 2021, respectively, and are ~~reported~~included in ~~net sales to the TCCC Subsidiaries.~~

operating expenses.

Net sales to the TCCC Subsidiaries for the three-months ended ~~September 30, 2017~~March 31, 2022 and ~~2016~~2021 were ~~$130.7~~$31.8 million and ~~$321.9~~$27.1 million, respectively. Net sales to the TCCC Subsidiaries for the nine-months ended September 30, 2017 and 2016 were $540.4 million and $981.0 million, respectively. As part of the North America Refranchising, the territories of certain TCCC Subsidiaries have been transitioned to certain independent/non wholly-owned TCCC bottlers/distributors. Accordingly, the Company’s net sales classified as sales to the TCCC Subsidiaries decreased for three- and nine-months ended September 30, 2017.

The Company also purchases concentrates from TCCC which are then sold to ~~both~~certain of the ~~TCCC Affiliates and the TCCC Subsidiaries.~~Company’s bottlers/distributors. Concentrate purchases from TCCC were ~~$7.6~~$8.5 million and ~~$6.2~~$6.4 million for the three-months ended ~~September 30, 2017~~March 31, 2022 and ~~2016,~~2021, respectively. ~~Concentrate purchases from TCCC were $20.2 million and $20.9 million for the nine-months ended September 30, 2017 and 2016, respectively.~~

Certain TCCC Subsidiaries also contract manufacture certain of the Company’s ~~Monster Energy® brand~~ energy ~~drinks as well as Mutant® Super Soda~~ drinks. ~~Contract~~Such contract manufacturing expenses were ~~$3.6~~$9.2 million and ~~$2.2~~$7.4 million for the three-months ended ~~September 30, 2017~~March 31, 2022 and ~~2016,~~2021, respectively. ~~Contract manufacturing expenses were $8.7 million and $6.0 million for the nine-months ended September 30, 2017 and 2016, respectively.~~

~~MONSTER BEVERAGE CORPORATION AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

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

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

	September 30, 2017		December 31, 2016


					March 31,		December 31,
					2022		2021
Accounts receivable, net	$	85,896	$	151,756	$	115,497	$	94,647
TCCC transaction receivable	$	-	$	125,000
Accounts payable	$	(60,350)	$	(41,210)	$	(37,629)	$	(35,248)
Accrued promotional allowances	$	(22,641)	$	(27,056)	$	(7,254)	$	(4,536)
Accrued liabilities					$	(35,849)	$	(26,616)

~~Two directors~~In 2021, TCCC exercised its contract rights for a third-party public accounting firm (the "Accounting Firm") to conduct an examination relating to commissions and ~~officers~~fees payable to TCCC and marketing contributions payable to the Company, for the years ended December 31, 2015 through December 31, 2020. The Company understands that the Accounting Firm has advised TCCC that it may be entitled to additional commissions and fees and/or reduced amounts of marketing contributions due to the Company in an aggregate amount of up to approximately $65.0 million. No portion of such amounts have been recognized in the Company’s condensed consolidated financial statements at March 31, 2022. The Company disputes any liability for additional commissions or fees payable to TCCC or reduced amounts of marketing contributions due to the Company for these periods.

NaN director of the Company through certain trusts, and ~~their families~~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 ~~each of~~ the three-months ended ~~September 30, 2017~~March 31, 2022 and ~~2016~~2021 were ~~$0.6 million. Expenses incurred with such company in connection with promotional materials purchased during the nine-months ended September 30, 2017 and 2016 were $2.0~~$1.1 million and ~~$0.9~~$0.4 million, respectively.

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.

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MONSTER BEVERAGE CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

In December 2018, the Company and a director of the Company entered into a 50-50 partnership that purchased land, and real property thereon, in Kona, Hawaii for the purpose of producing coffee products. The Company’s initial 50% contribution of $1.9 million was accounted for as an equity investment. During the three-months ended March 31, 2022, the Company recorded an equity loss of $0.03 million As of March 31, 2022, the Company’s equity investment is $1.3 million and is included in other assets (non-current) in the accompanying condensed consolidated balance sheet. At March 31, 2022 and December 31, 2021, the Company had $6.1 million and $3.4 million, respectively, in loans receivable from the partnership.

20.SUBSEQUENT EVENTS

In April 2022, Monster Energy Company (“MEC”) and Orange Bang, Inc. (“Orange Bang”) filed a joint motion in the United States District Court for the Central District of California to confirm a final arbitration award against Vital Pharmaceuticals, Inc. (“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 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. MEC agreed to help Orange Bang defend its rights in exchange for half of any recovery. Upon examining evidence presented at the arbitration, the arbitrator found that Super Creatine is not creatine and that VPX’s Bang products are not creatine based and, therefore, don’t comply with the agreement between Orange Bang and VPX. The motion is scheduled for hearing in the 2022 second quarter. Per ASC No. 450 “Contingencies”, the Company will not recognize the award or royalties until such time as they are realized or realizable. The award and royalties will be realized or realizable when VPX has no remaining potential for appeal or reversal of the decision and all contingencies have been resolved. As of May 6, 2022, the proceedings have yet to progress to a stage where there is sufficient information for an accurate timeline of when the awards will be realized or realizable, if at all.

On May 5, 2022, the Company acquired certain real property, leases and equipment in Norwalk, California for a purchase price of $62.5 million. The Company intends to utilize the property as a manufacturing facility for certain of its products.

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Our Business

When this report uses the words “the Company”, “we”, “us”, and “our”, these words refer to Monster Beverage Corporation and its subsidiaries, unless the context otherwise requires. Based in Corona, California, Monster Beverage Corporation is a holding company and conducts no operating business except through its consolidated subsidiaries. The Company’s subsidiaries primarily develop and market energy drinks, ~~as well as Mutant® Super Sodas.~~and to a lesser extent, craft beers and hard seltzers.

~~Acquisitions and Divestitures~~

CANarchy Acquisition

On ~~April 1, 2016,~~February 17, 2022, we completed our acquisition of ~~flavor supplier~~CANarchy Craft Brewery Collective LLC (“CANarchy”), a craft beer and ~~long-time~~hard seltzer company, for $330.4 million in cash, subject to adjustments. The transaction allows us to enter the alcohol beverage sector and brings the Cigar City family of brands including Jai Alai IPA and Florida Man IPA, the Oskar Blues family of brands including Dale’s Pale Ale and Wild Basin Hard Seltzers, the Deep Ellum family of brands including Dallas Blonde and Deep Ellum IPA, the Perrin Brewing family of brands including Black Ale, the Squatters family of brands including Hop Rising Double IPA and Juicy IPA and the Wasatch family of brands including Apricot Hefeweizen to our beverage portfolio. The transaction does not include CANarchy’s stand-alone restaurants. Our organizational structure for our existing energy beverage business ~~partner American Fruits & Flavors (“AFF”),~~will remain unchanged. CANarchy will function independently, retaining its own organizational structure and team.

Russia-Ukraine Conflict

During the first quarter of fiscal 2022, the Russia-Ukraine conflict did not have a material impact on our financial position, results of operations and liquidity. Net sales in ~~an asset acquisition that brought our primary flavor supplier in-house, secured the intellectual property~~Russia and Ukraine combined were approximately 1.1% of our most important flavors in perpetuity and further enhanced our flavor development and global flavor footprint capabilities (the “AFF Transaction”). Pursuant to the terms of the AFF Transaction, we purchased AFF for $688.5 million in cash.

~~We accounted~~total net sales for the ~~AFF Transaction in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 805 “Business Combinations”. Inventory purchased under~~twelve months ended December 31, 2021.We will continue to monitor future developments relative to this conflict and its potential impacts.

The COVID – 19 Pandemic

The COVID-19 pandemic has directly and indirectly impacted our business. The duration and severity of this impact will depend on future developments that are highly uncertain and cannot be accurately predicted, including new information regarding the AFF Transaction was recorded at fair value. Raw material cost savings from the AFF Transaction were approximately $27.7 million and $23.3 million in the three-months ended September 30, 2017 and 2016, respectively. Raw material cost savings from the AFF Transaction were approximately $79.7 million and $24.4 million in the nine-months ended September 30, 2017 and 2016, respectively. Raw material costs savings from the AFF Transaction were minimally realized in the six-months ended June 30, 2016 as the Company’s inventory on hand prior to the AFF Transaction,COVID-19 pandemic, as well as the emergence of new variants, the actions taken to limit its spread and the economic impact on local, regional, national and international markets. See “Part I, Item 1A – Risk Factors” in our Form 10-K.

We continue to address the COVID-19 pandemic with a global task force team working to mitigate the potential impacts on our people and business.

We are incredibly proud of the teamwork exhibited by our employees, co-packers and bottlers/distributors around the world who are endeavoring to maintain the integrity of our supply chain. Despite the ongoing impact of the COVID-19 pandemic, we achieved record first quarter net sales in 2022.

As countries continue to combat the COVID-19 pandemic, and as governments and/or local authorities impose regulations regarding COVID-19 testing, vaccine mandates and related workplace restrictions, there remains a risk that the COVID-19 pandemic may continue to impact our business and supply chain, including our ability to recruit and/or retain our employees as well as impact our co-packers, bottlers/distributors and/or suppliers.

A reduction in demand for our products or changes in consumer purchasing and consumption patterns, as well as continued economic uncertainty as a result of the COVID-19 pandemic, could adversely affect the financial conditions of retailers and consumers, resulting in reduced or canceled orders for our products, purchase returns and closings of retail or wholesale establishments or other locations in which our products are sold.

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Distribution and Supply Chain

In the first quarter of 2022, we experienced a significant increase in cost of sales relative to the comparative 2021 first quarter, primarily due to increased freight rates and fuel costs, including cost relating to the importation of aluminum cans, as well as aluminum can costs attributable to higher aluminum commodity pricing. We also experienced a significant increase in ingredient and other input costs, including secondary packaging materials, co-packing fees and production inefficiencies, which adversely impacted costs of sales. Furthermore, we experienced significant increases in distribution expenses including increased fuel, freight and warehousing costs which adversely impacted operating costs.

We continue to address the controllable challenges in our supply chain and are focused on increasing our finished product inventory ~~acquired~~levels in proximity to our customers, where possible, to reduce the excessive cost of freight to satisfy consumer demand.

We continue to implement measures to mitigate our increased product and distribution costs through pricing actions and reductions in promotions.

Liquidity and Capital Resources

As of the date of this filing, we expect to maintain substantial liquidity as we manage through the current environment as described in the ~~AFF Transaction which was recorded at fair value, were not recognized through cost of goods sold until the end of the second quarter of 2016.~~

“Liquidity and Capital Resources” section below.

~~Distributor Terminations~~Overview

In accordance with ASC No. 420 “Exit or Disposal Cost Obligations”, we expense distributor termination costs in the period in which the written notification of termination occurs. We incurred termination costs of $15.9 million and $4.7 million for the three-months ended September 30, 2017 and 2016, respectively, related to the distribution rights transferred to The Coca-Cola Company’s (“TCCC”) distribution network. We incurred termination costs of $35.9 million and $33.4 million for the nine-months ended September 30, 2017 and 2016, respectively, related to the distribution rights transferred to TCCC’s distribution network. Such termination costs have been expensed in full and are included in operating expenses for the three- and nine-months ended September 30, 2017 and 2016.

~~Overview~~

We develop, market, sell and distribute energy drink beverages ~~super sodas and/or~~and concentrates for energy drink beverages, primarily under the following brand names:

·●Monster Energy®	·~~Nalu®~~● NOS®
·●Monster ~~Rehab®~~Energy Ultra®	·~~NOS®~~● Full Throttle®
·●Monster ~~Energy Extra Strength Nitrous Technology®~~Rehab®	·~~Full Throttle®~~● Burn®
·~~Java Monster®~~● Monster Energy ® Nitro	·~~Burn®~~● Mother®
·~~Muscle~~● Java Monster®	·~~Mother®~~● Nalu®
·~~Mega Monster Energy®~~● Muscle Monster®	·~~Ultra®~~● Ultra Energy®
·~~Punch~~● Espresso Monster®	·●Play® and Power Play® (stylized)
·~~Juice~~● Punch Monster®	·~~Gladiator®~~● Relentless®
·~~Übermonster®~~● Juice Monster®	·~~Relentless®~~● BPM®
·~~BU®~~● Monster Hydro® Energy Water	·~~Samurai®~~● BU®
·~~Mutant®~~● Monster Hydro® Super ~~Soda~~Sport	·~~BPM®~~● Gladiator®
·●Monster ~~Hydro~~TMHydroSport Super Fuel®	·~~Monster Energy Ultra®~~● Samurai®
·~~Espresso~~● MonsterTM Super Fuel®	● Live+®
● Monster Dragon Tea®	● Predator®
● Reign Total Body Fuel®	● Fury®
● Reign Inferno® Thermogenic Fuel	● True North®

~~Our Monster Energy® brand energy drinks, which represented 90.5%~~

We also develop, market, sell and ~~89.8%~~distribute craft beers and hard seltzers under a number of ~~our net sales for the three-months ended September 30, 2017~~brands, including, Jai Alai IPA, Florida Man IPA, Dale’s Pale Ale, Wild Basin Hard Seltzers, Dallas Blonde, Deep Ellum IPA, Black Ale, Hop Rising Double IPA, Juicy IPA, Apricot Hefeweizen and ~~2016, respectively, primarily include the following:~~a host of other brands.

·~~Monster Energy®~~

·~~Lo-Carb Monster Energy®~~

·~~Monster Assault®~~

·~~Juice Monster® Khaos®~~

·~~Juice Monster® Ripper®~~

·~~Juice Monster® Pipeline Punch®~~

·~~Juice Monster® Mango Loco~~

·~~Monster Energy® Import~~

·~~Punch Monster® Baller’s Blend® (formerly Dub Edition)~~

·~~Punch Monster® Mad Dog (formerly Dub Edition)~~

·~~Monster Rehab® Tea + Lemonade + Energy~~

·~~Monster Rehab® Raspberry Tea + Energy (formerly Rojo)~~

·~~Monster Rehab® Green Tea + Energy~~

·~~Monster Rehab® Tea + Orangeade + Energy~~

·~~Monster Rehab® Tea + Pink Lemonade + Energy~~

·~~Monster Rehab® Peach Tea + Energy~~

·~~Muscle Monster® Vanilla~~

·~~Muscle Monster® Chocolate~~

·~~Muscle Monster® Strawberry~~

·~~Muscle Monster® Banana~~

·~~Monster Energy Absolutely Zero®~~

·~~Monster Hydro~~TM ~~Mean Green®~~

·~~Monster Hydro~~TM ~~Manic Melon~~TM

·~~Monster Hydro~~TM ~~Tropical Thunder~~TM

·~~Java Monster® Kona Blend~~

·~~Java Monster® Loca Moca®~~

·~~Java Monster® Mean Bean®~~

·~~Java Monster® Vanilla Light~~

·~~Java Monster® Irish Blend®~~

·~~Java Monster® Salted Caramel~~

·~~Mega Monster Energy®~~

·~~Monster Energy Extra Strength Nitrous Technology® Super Dry™~~

·~~Monster Energy Extra Strength Nitrous Technology® Anti-Gravity®~~

·~~M3® Monster Energy® Super Concentrate~~

·~~Monster Energy Zero Ultra®~~

·~~Monster Energy Ultra Blue®~~

·~~Monster Energy Ultra Red®~~

·~~Monster Energy Ultra Black®~~

·~~Monster Energy Ultra Sunrise®~~

·~~Monster Energy Ultra Citron®~~

·~~Monster Energy Ultra Violet~~TM

·~~Monster Energy® Valentino Rossi~~

·~~Übermonster® Energy Brew~~TM

·~~Monster Energy® Lewis Hamilton 44~~

·~~Monster Energy® Gronk~~

·~~Monster Energy® Fury~~

We have ~~three~~four operating and reportable ~~segments,~~segments: (i) Monster Energy® Drinks segment (“Monster Energy® Drinks”), which is primarily comprised of the Company’s Monster Energy® drinks, ~~Monster Hydro~~TMReign Total Body Fuel® high performance energy drinks and ~~Mutant® Super Soda drinks,~~True North® Pure Energy Seltzers, (ii) Strategic Brands segment (“Strategic Brands”), which is primarily comprised of the various energy drink brands acquired from ~~TCCC~~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 ~~(iii)~~hard seltzers purchased as part of the CANarchy Transaction on February 17, 2022 and (iv) Other segment (“Other”), which is comprised of certain products sold by ~~AFF~~American Fruits and Flavors, LLC, a wholly-owned subsidiary, to independent third-party customers (the “AFF Third-Party Products”).

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During the three-months ended ~~September 30, 2017,~~March 31, 2022, we continued to expand our existing energy drink portfolio by adding additional products to our portfolio in a number of countries and further ~~develop~~developed our distribution markets. During the three-months ended ~~September 30, 2017,~~March 31, 2022, we ~~introduced~~sold the following ~~product:~~

·~~Monster Energy® Fury (September 2017)~~

~~Subsequent~~new products to ~~September 30, 2017, we introduced Espresso Monster~~TM ~~espresso + energy and NOS Nitro Mango.~~our customers:

●

Java Monster® Cold Brew Latte

●

Java Monster® Cold Brew Sweet Black

●

Juice Monster® Aussie Style Lemonade^TM

●

Monster Energy® Ultra Peachy Keen®

●

Rehab® Monster® Watermelon

●

Reign Total Body Fuel® Reignbow Sherbet

●

Live+® Watermelon

●

Mother® Kiwi Sublime

●

Play® Peach

●

Predator® Peach

●

Predator® Red Apple

●

Relentless® Peach

●

Relentless® Raspberry

In the normal course of business, we discontinue certain products and/or product lines. Those products or product lines discontinued in the three-months ended ~~September 30, 2017,~~March 31, 2022, either individually or in aggregate, did not have a material adverse impact on our financial position, results of operations or liquidity.

Our net sales of ~~$909.5 million~~$1.52 billion for the three-months ended ~~September 30, 2017~~March 31, 2022 represented record sales for our ~~third~~first fiscal quarter. The vast majority of our net sales are derived from our Monster Energy® brand energy drinks. Net sales of our Monster Energy® brand energy drinks were $823.4 million for the three-months ended September 30, 2017. Net sales of our Strategic Brands were $76.6 million for the three-months ended September 30, 2017.

Our Monster Energy® Drinks segment represented 91.0% and 90.1% of our consolidated net sales for the three-months ended September 30, 2017 and 2016, respectively. Our Strategic Brands segment represented 8.4% and 9.2% of our consolidated net sales for the three-months ended September 30, 2017 and 2016, respectively. Our Other segment represented 0.6% and 0.7% of our consolidated net sales for the three-months ended September 30, 2017 and 2016, respectively.

Net changes in foreign currency exchange rates had an unfavorable impact on net sales ~~in the Monster Energy® Drinks segment~~ of approximately ~~$0.4~~$32.9 million for the three-months ended ~~September 30, 2017. Net changes in foreign currency exchange rates had a favorable impact on~~March 31, 2022.

The vast majority of our net sales inare derived from our Monster Energy® Drinks segment. Net sales of our Monster Energy® Drinks segment were $1.40 billion for the three-months ended March 31, 2022. Net sales of our Strategic Brands segment ~~of approximately $1.1~~were $92.6 million for the three-months ended ~~September 30, 2017.~~

~~Our~~March 31, 2022. Net sales and marketing strategy for all our beverages is to focus our efforts on developing brand awareness through image-enhancing programs and product sampling. We use our branded vehicles and other promotional vehicles at events where we offer samples of our ~~products to consumers. We utilize “push-pull” methods to enhance shelf and display space exposure in~~Alcohol Brands segment were $15.2 million for the three-months ended March 31, 2022. Net sales outlets (including racks, coolers and barrel coolers), advertising, in-store promotions and in-store placement of point-of-sale materials to encourage demand from consumers for our products. We also support our brands with prize promotions, price promotions, competitions, endorsements from selected public and sports figures, sports personality endorsements, sampling and sponsorship of selected athletes, teams, series, bands, esports, causes and events. In-store posters, outdoor posters, print, radio and television advertising (directly and through our sponsorships and endorsements) and coupons may also be used to promote our brands.

We believe that one of the keys to success in the beverage industry is differentiation, making our brands and products visually appealing and distinctive from other beverages on the shelves of retailers. We review our products and packaging on an ongoing basis and, where practical, endeavor to make them different and unique. The labels and graphics for many of our ~~products are redesigned~~Other segment were $5.9 million for the three-months ended March 31, 2022. Our Monster Energy® Drinks segment represented 92.5% and 94.1% of our net sales for the three-months ended March 31, 2022 and 2021, respectively. Our Strategic Brands segment represented 6.1% and 5.5% of our net sales for the three-months ended March 31, 2022 and 2021, respectively. Our Alcohol Segment represented 1.0% of our net sales for the three-months ended March 31, 2022 (effectively from ~~time~~February 17 to ~~time to maximize their visibility~~March 31, 2022). Our Other segment represented 0.4% of our net sales for both the three-months ended March 31, 2022 and ~~identification, wherever they may be placed in stores, which we continue to reevaluate from time to time.~~

2021.

Our growth strategy includes expanding our international ~~business.~~business and expanding our business in new sectors, such as the alcohol beverage sector. Net sales to customers outside the United States ~~amounted to $260.1 million and $190.8~~were $553.4 million for the three-months ended ~~September 30, 2017 and 2016, respectively.~~March 31, 2022, an increase of approximately $94.0 million, or 20.4% higher than net sales to customers outside of the United States of $459.4 million for the three-months ended March 31, 2021. Such sales were approximately ~~29%~~36% and ~~24%~~37% of net sales for the three-months ended ~~September 30, 2017~~March 31, 2022 and ~~2016,~~2021, respectively. ~~Net changes in foreign currency exchange rates had a favorable impact on net sales~~On February 17, 2022, the Company completed the CANarchy Transaction which allowed the Company to ~~customers outside~~enter the ~~United States~~alcohol beverage sector.

Table of ~~approximately $0.7 million for the three-months ended September 30, 2017.~~Contents

Our customers are primarily full service beverage bottlers/distributors, retail grocery and specialty chains, wholesalers, club stores, mass merchandisers, convenience chains, ~~food service~~foodservice customers, value stores, e-commerce retailers and the military. Percentages of our gross ~~sales~~billings to our various customer types for the ~~three-~~three-months ended March 31, 2022 and ~~nine-months ended September 30, 2017 and 2016~~2021 are reflected below. Such information includes sales made by us directly to the customer types concerned, which include our full service beverage bottlers/distributors in the United States. Such full service beverage bottlers/distributors in turn sell certain of our products to some of the same customer types listed below. We limit our description of our customer types to include only our sales to our full service bottlers/distributors without reference to such bottlers/distributors’ sales to their own customers.

Three-Months Ended
September 30,

Nine-Months Ended
September 30,

2017

2016

2017

2016

U.S. full service bottlers/distributors

62%

65%

62%

65%

International full service bottlers/distributors

30%

26%

29%

25%

Club stores and mass merchandisers

7%

7%

7%

8%

Retail grocery, specialty chains and wholesalers

1%

1%

1%

1%

Other

0%

1%

1%

1%


	Three-Months Ended
	March 31,
	2022		2021
U.S. full service bottlers/distributors	49	%	50	%
International full service bottlers/distributors	39	%	38	%
Club stores and e-commerce retailers	9	%	10	%
Retail grocery, direct convenience, specialty chains and wholesalers	2	%	1	%
Direct value stores and other	1	%	1	%

Our customers include Coca-Cola ~~Refreshments USA,~~Canada Bottling Limited, Coca-Cola Consolidated, Inc., Coca-Cola Bottling Company ~~CCBCC Operations, LLC,~~ United, ~~Bottling Contracts Company, LLC,~~Inc., Reyes Coca-Cola Bottling, ~~Great Lakes Coca-Cola Bottling,~~LLC, Coca-Cola Southwest Beverages LLC, The Coca-Cola Bottling Company of Northern New England, Inc., Swire Pacific Holdings, Inc. (USA), Liberty Coca-Cola Beverages, LLC, Coca-Cola Europacific Partners (formerly Coca-Cola European Partners and Coca-Cola Amatil), Coca-Cola Hellenic, Coca-Cola FEMSA, Swire Coca-Cola (China), COFCO Coca-Cola, Coca-Cola Beverages Africa, Coca-Cola İçecek and certain other TCCC ~~independent~~network bottlers, ~~Coca-Cola European Partners, Coca-Cola Hellenic, Coca-Cola FEMSA, Coca-Cola Amatil, Swire Coca-Cola group in China, COFCO Coca-Cola group in China, Coca-Cola Beverages Africa,~~ Asahi Soft Drinks, Co., Ltd., ~~Kalil Bottling Group,~~ Wal-Mart, Inc. (including Sam’s Club), Costco Wholesale Corporation and select Anheuser-Busch distributors (the “AB Distributors”). TCCC, through certain wholly-owned subsidiaries (the “TCCC Subsidiaries”), accounted for approximately 14% and 41% of our net sales for the three-months ended September 30, 2017 and 2016, respectively. The TCCC Subsidiaries, accounted for approximately 21% and 43% of our net sales for the nine-months ended September 30, 2017 and 2016, respectively. As part of TCCC’s North America Refranchising initiative (the “North America Refranchising”), the territories of certain TCCC Subsidiaries have been transitioned to certain independent/non wholly-owned TCCC bottler/distributors. Accordingly, our percentage of net sales classified as sales to the TCCC Subsidiaries decreased for the three- and nine-months ended September 30, 2017. CCBCC Operations, LLC accounted for approximately 14% and 9% of our net sales for the three-months ended September 30, 2017 and 2016, respectively. CCBCC Operations, LLC accounted for approximately 13% and 8% of our net sales for the nine-months ended September 30, 2017 and 2016, respectively.Amazon.com, Inc. A decision by any large customer to decrease amounts purchased from us or to cease carrying our products could have a material ~~negative~~adverse effect on our financial condition and ~~consolidated~~ results of operations.

Coca-Cola Europacific Partners accounted for approximately 12% and 11% of our net sales for the three-months ended March 31, 2022 and 2021, respectively.

Coca-Cola Consolidated, Inc. accounted for approximately 9% and 12% of our net sales for the three-months ended March 31, 2022 and 2021, respectively.

Reyes Coca-Cola Bottling, LLC accounted for approximately 10% and 9% of our net sales for the three-months ended March 31, 2022 and 2021, respectively.

Table of Contents

Results of Operations

The following table sets forth key statistics for the ~~three-~~three-months ended March 31, 2022 and ~~nine-months ended September 30, 2017 and 2016.~~2021.


	Three-Months Ended						Percentage
(In thousands, except per share amounts)	March 31,						Change
	2022			2021			22 vs. 21
Net sales¹	$	1,518,574		$	1,243,816		22.1	%
Cost of sales		741,907			528,881		40.3	%
Gross profit*¹		776,667			714,935		8.6	%
Gross profit as a percentage of net sales		51.1	%		57.5	%

Operating expenses		377,178			300,789		25.4	%
Operating expenses as a percentage of net sales		24.8	%		24.2	%

Operating income¹		399,489			414,146		(3.5)	%
Operating income as a percentage of net sales		26.3	%		33.3	%

Interest and other expense, net		7,300			759		861.8	%

Income before provision for income taxes¹		392,189			413,387		(5.1)	%

Provision for income taxes		97,986			98,193		(0.2)	%

Income taxes as a percentage of income before taxes		25.0	%		23.8	%

Net income	$	294,203		$	315,194		(6.7)	%
Net income as a percentage of net sales		19.4	%		25.3	%

Net income per common share:
Basic	$	0.56		$	0.60		(6.9)	%
Diluted	$	0.55		$	0.59		(6.8)	%

Case sales (in thousands) (in 192‑ounce case equivalents)		168,793			138,566		21.8	%

(In thousands, except per share amounts)

Three-Months Ended
September 30,

Percentage
Change

Nine-Months Ended
September 30,

Percentage
Change

2017

2016

17 vs. 16

2017

2016

17 vs. 16
Net sales1

$
909,476

$
787,954

15.4%

$
2,558,690

$
2,295,628

11.5%
Cost of sales

339,767

284,979

19.2%

924,610

851,741

8.6%
Gross profit*1

569,709

502,975

13.3%

1,634,080

1,443,887

13.2%

Gross profit as a percentage of net sales1

62.6%

63.8%

63.9%

62.9%

Operating expenses2

252,337

212,600

18.7%

702,405

610,277

15.1%

Operating expenses as a percentage of net sales

27.7%

27.0%

27.5%

26.6%

Operating income1,2

317,372

290,375

9.3%

931,675

833,610

11.8%
Operating income as a percentage of net sales

34.9%

36.9%

36.4%

36.3%

Interest and other income (expense), net

3,996

(1,037)

(485.3%)

2,103

(651)

(423.0%)

Income before provision for income taxes1,2

321,368

289,338

11.1%

933,778

832,959

12.1%

Provision for income taxes

102,624

97,695

5.0%

314,422

293,221

7.2%

Income taxes as a percentage of income before taxes

31.9%

33.8%

33.7%

35.2%

Net income1,2

$
218,744

$
191,643

14.1%

$
619,356

$
539,738

14.8%
Net income as a percentage of net sales

24.1%

24.3%

24.2%

23.5%

Net income per common share:

Basic

$
0.39

$
0.34

14.8%

$
1.09

$
0.91

20.1%
Diluted

$
0.38

$
0.33

15.1%

$
1.07

$
0.89

20.4%

Case sales (in thousands)

(in 192-ounce case equivalents)

96,184

82,767

16.2%

273,409

242,994

12.5%

¹¹Includes ~~$11.4~~$10.0 million and ~~$8.4~~$10.4 million for the three-months ended ~~September 30, 2017~~March 31, 2022 and ~~2016,~~2021, respectively, related to the recognition of deferred revenue. ~~Includes $31.6 million and $28.6 million for the nine-months ended September 30, 2017 and 2016, respectively, related to the recognition of deferred revenue.~~

²Includes $15.9 million and $4.7 million for the three-months ended September 30, 2017 and 2016, respectively, of distributor termination costs. Includes $35.9 million and $33.4 million for the nine-months ended September 30, 2017 and 2016, respectively, of distributor termination costs.

*Gross profit may not be comparable to that of other entities since some entities include all costs associated with their distribution process in cost of sales, whereas others exclude certain costs and instead include such costs within another line item such as operating expenses. We include out-bound freight and warehouse costs in operating expenses rather than in cost of sales.

~~Results of Operations for the Three-Months Ended September 30, 2017 Compared to the Three-Months Ended September 30, 2016.~~Net Sales

Net Sales. Net sales were ~~$909.5 million~~$1.52 billion for the three-months ended ~~September 30, 2017,~~March 31, 2022, an increase of approximately ~~$121.5~~$274.8 million, or ~~15.4%~~22.1% higher than net sales of ~~$788.0 million~~$1.24 billion for the three-months ended September 30, 2016. The increase in net sales of our Monster Energy® brand energy drinks represented approximately $116.0 million of the overall increase in net sales. Net sales of our Monster Energy® brand energy drinks increased partially due to increased sales by volume as a result of increased domestic and international consumer demand. Net sales of our Strategic Brands were $76.6 million for the three-months ended September 30, 2017, an increase of $4.4 million, or 6.2% higher than net sales of $72.1 million for the three-months ended September 30, 2016. Net sales of our AFF Third-Party Products were $5.2 million for the three-months ended September 30, 2017, a decrease of $0.5 million, or 8.5% lower than net sales of $5.7 million for the three-months ended September 30, 2016. No other individual product line contributed either a material increase or decrease to net sales for the three-months ended September 30, 2017.

March 31, 2021. Net changes in foreign currency exchange rates had an unfavorable impact on net sales ~~in the Monster Energy® Drinks segment~~ of approximately ~~$0.4~~$32.9 million for the three-months ended September 30, 2017. Net changes in foreign currency exchange rates had a favorable impact on net sales in the Strategic Brands segment of approximately $1.1 million for the three-months ended September 30, 2017.

Case sales, in 192-ounce case equivalents, were 96.2 million cases for the three-months ended September 30, 2017, an increase of approximately 13.4 million cases, or 16.2% higher than case sales of 82.8 million cases for the three-months ended September 30, 2016. The overall average net sales per case (excluding net sales of AFF Third-Party Products of $5.2 million and $5.7 million for the three-months ended September 30, 2017 and 2016, respectively, as these sales do not have unit case equivalents) decreased to $9.40 for the three-months ended September 30, 2017, which was 0.5% lower than the average net sales per case of $9.45 for the three-months ended September 30, 2016. The lower average net sales price per case was primarily attributable to the changes in geographic sales mix.

March 31, 2022.

Net sales for the Monster Energy® Drinks segment were ~~$827.7 million~~$1.40 billion for the three-months ended ~~September 30, 2017,~~March 31, 2022, an increase of approximately ~~$117.6~~$234.6 million, or ~~16.6%~~20.0% higher than net sales of ~~$710.1 million~~$1.17 billion for the three-months ended ~~September 30, 2016.~~

March 31, 2021. Net sales for the Strategic Brands segment were $76.6 million for the three-months ended September 30, 2017, an increase of approximately $4.4 million, or 6.2% higher than net sales of $72.1 million for the three-months ended September 30, 2016.

Net sales for the Other segment were $5.2 million for the three-months ended September 30, 2017, a decrease of approximately $0.5 million, or 8.5% lower than net sales of $5.7 million for the three-months ended September 30, 2016.

~~Gross Profit.~~ Gross profit was $569.7 million for the three-months ended September 30, 2017, an increase of approximately $66.7 million, or 13.3% higher than the gross profit of $503.0 million for the three-months ended September 30, 2016. Gross profit as a percentage of net sales decreased to 62.6% for the three-months ended September 30, 2017 from 63.8% for the three-months ended September 30, 2016. The increase in gross profit dollars was primarily the result of the $116.0 million increase in net sales of our Monster Energy® brand energy drinks. The decrease in gross profit as a percentage of net sales was primarily attributable to geographical sales mix (our foreign operations generally have lower gross profit margins), as well as to product sales mix and increases in other costs.

~~Operating Expenses~~. Total operating expenses were $252.3 million for the three-months ended September 30, 2017, an increase of approximately $39.7 million, or 18.7% higher than total operating expenses of $212.6 million for the three-months ended September 30, 2016. The increase in operating expenses was primarily due to increased expenditures of $11.2 million associated with distributor terminations, increased expenditures of $9.0 million for sponsorships and endorsements, increased payroll expenses of $6.5 million (of which $1.1 million was related to an increase in stock-based compensation), increased out-bound freight and warehouse costs of $4.7 million, increased expenditures of $4.4 million for commissions, increased expenditures of $4.3 million for merchandise displays and increased expenditures of $4.2 million for allocated trade development. The increase in operating expenses was partially offset by decreased expenditures of $5.1 million for professional service fees, including legal and accounting costs.

~~Contribution Margin.~~ ~~Contribution margin~~ for the Monster Energy® Drinks segment was $333.2 million for the three-months ended September 30, 2017, an increase of approximately $24.7 million, or 8.0% higher than contribution margin of $308.5 million for the three-months ended September 30, 2016. The increase in contribution margin for the Monster Energy® Drinks segment wasincreased primarily ~~the result of the $116.0 million increase in net~~due to increased worldwide sales by volume of our Monster Energy® brand energy drinks ~~partially offset by increased expenditures of $11.2 million associated with distributor terminations.~~

Contribution margin for the Strategic Brands segment was $42.7 million for the three-months ended September 30, 2017, an increase of approximately $2.6 million, or 6.5% higher than contribution margin of $40.1 million for the three-months ended September 30, 2016. The increase in contribution margin for the Strategic Brands segment was primarily due to an increase in net sales.

Contribution margin for the Other segment was $1.5 million for the three-months ended September 30, 2017, an increase of approximately $0.3 million, or 22.3% higher than contribution margin of $1.2 million for the three-months ended September 30, 2016.

~~Operating Income.~~ Operating income was $317.4 million for the three-months ended September 30, 2017, an increase of approximately $27.0 million, or 9.3% higher than operating income of $290.4 million for the three-months ended September 30, 2016. Operating income as a percentage of net sales decreased to 34.9% for the three-months ended September 30, 2017 from 36.9% for the three-months ended September 30, 2016. The decrease in operating income as a percentage of net sales was primarily due to decrease in gross profit as a percentage of nets sales ~~as well as in~~creased expenditures of $11.2 million associated with distributor terminations. Operating income was $41.9 million and $22.0 million for the three-months ended September 30, 2017 and 2016, respectively, in connection with our operations in Africa, Asia, Australia, Europe, the Middle East and South America.

~~Interest and Other Income (Expense), net~~. Interest and other non-operating income (expense), net, was $4.0 million for the three-months ended September 30, 2017, as compared to interest and other non-operating income (expense), net of ($1.0) million for the three-months ended September 30, 2016. Foreign currency transaction gains (losses) were $1.8 million and ($1.5) million for the three-months ended September 30, 2017 and 2016, respectively. Interest income was $2.3 million and $0.4 million for the three-months ended September 30, 2017 and 2016, respectively.

~~Provision for Income Taxes~~. Provision for income taxes was $102.6 million for the three-months ended September 30, 2017, an increase of $4.9 million, or 5.0% higher than the provision for income taxes of $97.7 million for the three-months ended September 30, 2016. The effective combined federal, state and foreign tax rate decreased to 31.9% from 33.8% for the three-months ended September 30, 2017 and 2016, respectively. The decrease in the effective tax rate was primarily due to the increase in profits earned by foreign subsidiaries in lower tax jurisdictions relative to the United States.

~~Net Income~~. Net income was $218.7 million for the three-months ended September 30, 2017, an increase of $27.1 million, or 14.1% higher than net income of $191.6 million for the three-months ended September 30, 2016. The increase in net income was primarily due to the $66.7 million increase in gross profit. ~~The increase in net income was~~ ~~partially offset by the $39.7 million increase in operating expenses, of which $11.2 million was attributable to an increase in distributor termination expenses.~~

~~Results of Operations for the Nine-Months Ended September 30, 2017 Compared to the Nine-Months Ended September 30, 2016.~~

~~Net Sales.~~ Net sales were $2,558.7 million for the nine-months ended September 30, 2017, an increase of approximately $263.1 million, or 11.5% higher than net sales of $2,295.6 million for the nine-months ended September 30, 2016. The increase in net sales of our Monster Energy® brand energy drinks represented approximately $229.5 million of the overall increase in net sales. Net sales of our Monster Energy® brand energy drinks increased partially due to increased sales by volume as a result of increased ~~domestic and international~~ consumer ~~demand. Net~~demand, as well as sales of our Strategic Brands were $230.3 million for the nine-months ended September 30, 2017, an increase of $22.3 million, or 10.7% higher than net sales of $208.0 million for the nine-months ended September 30, 2016. Net sales of our AFF Third-Party Products were $16.9 million for the nine-months ended September 30, 2017, an increase of $4.8 million, or 39.5% higher than net sales of $12.1 million (effectively from April 1, 2016 to September 30, 2016) for the nine-months ended September 30, 2016. No other individual product line contributed either a material increase or decrease to net sales for the nine-months ended September 30, 2017.

True North® Pure Energy Seltzers (introduced in August 2021). Net changes in foreign currency exchange rates had an unfavorable impact on net sales infor the Monster Energy® Drinks segment of approximately ~~$13.4~~$29.6 million for the ~~nine-months~~three-months ended ~~September 30, 2017.~~March 31, 2022.

Table of Contents

Net sales for the Strategic Brands segment were $92.6 million for the three-months ended March 31, 2022, an increase of approximately $24.8 million, or 36.6% higher than net sales of $67.8 million for the three-months ended March 31, 2021. Net sales for the Strategic Brands segment increased primarily due to increased worldwide sales by volume of our NOS® and Predator® brand energy drinks as a result of increased consumer demand. Net changes in foreign currency exchange rates had ~~a favorable~~an unfavorable impact on net sales inof approximately $3.3 million for the Strategic Brands segment ~~of approximately $2.2~~for the three-months ended March 31, 2022.

Net sales for the Alcohol Brands segment were $15.2 million for the ~~nine-months~~three-months ended ~~September 30, 2017.~~March 31, 2022 (effectively from February 17 to March 31, 2022).

Net sales for the Other segment were $5.9 million for the three-months ended March 31, 2022, an increase of approximately $0.2 million, or 3.5% higher than net sales of $5.7 million for the three-months ended March 31, 2021.

Case sales for our energy drink products, in 192-ounce case equivalents, were ~~273.4~~168.8 million cases for the ~~nine-months~~three-months ended ~~September 30, 2017,~~March 31, 2022, an increase of approximately ~~30.4~~30.2 million cases or ~~12.5%~~21.8% higher than case sales of ~~243.0~~138.6 million cases for the ~~nine-months~~three-months ended ~~September 30, 2016.~~March 31, 2021. The overall average net sales per case ~~(excluding net sales of AFF Third-Party Products of $16.9 million and $12.1 million~~decreased to $8.87 for the ~~nine-months~~three-months ended ~~September 30, 2017 and 2016, respectively, as these sales do not have unit case equivalents) decreased to $9.30 for the nine-months ended September 30, 2017,~~March 31, 2022, which was ~~1.1%~~0.7% lower than the average net sales per case of ~~$9.40~~$8.94 for the ~~nine-months~~three-months ended ~~September 30, 2016. The lower average net sales price per case was primarily attributable to the changes in geographic sales mix.~~March 31, 2021.

~~Net~~Barrel sales for our craft beers and hard seltzers, in 31 US gallon equivalents, were 0.05 million barrels for the ~~Monster Energy® Drinks segment were $2,311.5~~three-months ended March 31, 2022.

Gross Profit

Gross profit was $776.7 million for the ~~nine-months~~three-months ended ~~September 30, 2017,~~March 31, 2022, an increase of approximately ~~$236.0~~$61.7 million, or ~~11.4% higher than net sales of $2,075.5 million for the nine-months ended September 30, 2016.~~

Net sales for the Strategic Brands segment were $230.3 million for the nine-months ended September 30, 2017, an increase of approximately $22.3 million, or 10.7% higher than net sales of $208.0 million for the nine-months ended September 30, 2016.

Net sales for the Other segment were $16.9 million for the nine-months ended September 30, 2017, an increase of approximately $4.8 million, or 39.5% higher than net sales of $12.1 million (effectively from April 1, 2016 to September 30, 2016) for the nine-months ended September 30, 2016.

~~Gross Profit.~~ ~~Gross profit was $1,634.1 million for the nine-months ended September 30, 2017, an increase of approximately $190.2 million, or 13.2%~~8.6% higher than the gross profit of ~~$1,443.9~~$714.9 million for the ~~nine-months~~three-months ended ~~September 30, 2016. Gross profit as a percentage of net sales increased to 63.9% for the nine-months ended September 30, 2017 from 62.9% for the nine-months ended September 30, 2016.~~March 31, 2021. The increase in gross profit dollars was primarily the result of the ~~$229.5~~$274.8 million increase in net sales ~~of our Monster Energy® brand energy drinks as well as an~~ ~~approximately $55.2 million~~ ~~increase in raw material cost savings~~ for the ~~nine-months~~three-months ended ~~September 30, 2017~~March 31, 2022.

Gross profit as a percentage of net sales decreased to 51.1% for the three-months ended March 31, 2022 from 57.5% for the ~~AFF Transaction~~.three-months ended March 31, 2021. The ~~increase in~~decrease for the three-months ended March 31, 2022 was primarily the result of increased freight rates and fuel costs, including costs relating to the importation of aluminum cans, increased aluminum can costs attributable to higher aluminum commodity pricing, increased ingredient and other input costs, including secondary packaging materials, increased co-packing fees, production inefficiencies and geographical sales mix.

In addition, gross profit as a percentage of net sales for the three-months ended March 31, 2022 was ~~primarily attributable to raw material~~adversely impacted by the CANarchy Transaction. Inventory purchased as part of the CANarchy Transaction was recorded at fair value. The purchased inventory was subsequently sold in the three-months ended March 31, 2022 and was recognized through cost ~~savings from~~of goods sold at fair value (purchased cost), resulting in no recognized gross profits on the ~~AFF Transaction~~ ~~and changes in domestic product sales mix, which were partially offset~~associated sales. Gross profit was negatively impacted by ~~geographical sales mix (our foreign operations generally have lower gross profit margins) and increases in other costs.~~approximately $3.8 million during the three-months ended March 31, 2022 as a result.

Operating Expenses.

Total operating expenses were ~~$702.4~~$377.2 million for the ~~nine-months~~three-months ended ~~September 30, 2017,~~March 31, 2022, an increase of approximately ~~$92.1~~$76.4 million, or ~~15.1%~~25.4% higher than total operating expenses of ~~$610.3~~$300.8 million for the ~~nine-months~~three-months ended ~~September 30, 2016.~~ March 31, 2021.

The increase in operating expenses was primarily due to increased payroll expenses of $29.6 million (of which $5.5 million was related to an increase in stock-based compensation), increased expenditures of $22.9 million for sponsorships and endorsements, increased expenditures of $13.7 million for commissions, increased expenditures of $7.8 million for allocated trade development, increased expenditures of $6.0 million for merchandise displays and increased out-bound freight and warehouse costs of ~~$5.5 million. The increase in operating expenses was partially offset by decreased~~$27.0 million, increased expenditures of ~~$13.8~~$12.6 million for travel and entertainment, increased payroll expenses of $10.0 million, increased expenditures of $6.3 million for professional service ~~fees,~~expenses, including accounting and legal costs ($3.6 million related to the CANarchy Transaction), increased expenditures of $5.6 million for commissions and ~~accounting costs.~~increased expenditures of $5.3 million for sponsorships and endorsements. Operating expenses as a percentage of net sales for the three-months ended March 31, 2022 were 24.8% as compared to 24.2% for the three-months ended March 31, 2021. Operating expenses as a percentage of net sales for the three-months ended March 31, 2019 (pre COVID-19) were 27.7%.

Table of Contents

Operating Income

Operating income was $399.5 million for the three-months ended March 31, 2022, a decrease of approximately $14.7 million, or 3.5% lower than operating income of $414.1 million for the three-months ended March 31, 2021. Operating income as a percentage of net sales decreased to 26.3% for the three-months ended March 31, 2022 from 33.3% for the three-months ended March 31, 2021. Operating income for the three-months ended March 31, 2022 decreased primarily as a result of the decrease in the gross profit as a percentage of net sales as well as the increase in operating expenses. Operating income was $71.5 million and $96.8 million for the three-months ended March 31, 2022 and 2021, respectively, for our operations in EMEA, Asia Pacific, Latin America and the Caribbean.

~~Contribution Margin.~~ ~~Contribution margin~~Operating income for the Monster Energy® Drinks segment, exclusive of corporate and unallocated expenses, was ~~$968.9~~$454.6 million for the ~~nine-months~~three-months ended ~~September 30, 2017, an increase~~March 31, 2022, a decrease of approximately ~~$94.0~~$10.3 million, or ~~10.7% higher~~2.2% lower than ~~contribution margin~~operating income of ~~$874.8~~$464.8 million for the ~~nine-months~~three-months ended ~~September 30, 2016.~~March 31, 2021. The ~~increase~~decrease in ~~contribution margin~~operating income for the Monster Energy® Drinks segment was primarily the result of ~~the $229.5 million~~a decrease in gross profit as a percentage of net sales as well as an increase in ~~net sales of our Monster Energy® brand energy drinks as well an~~ ~~approximately $55.2 million~~ ~~increase in raw material cost savings for the nine-months ended September 30, 2017 from the AFF Transaction~~.operating expenses.

~~Contribution margin~~Operating income for the Strategic Brands segment, exclusive of corporate and unallocated expenses, was ~~$137.9~~$57.2 million for the ~~nine-months~~three-months ended ~~September 30, 2017,~~March 31, 2022, an increase of approximately ~~$10.8~~$12.1 million, or ~~8.5%~~26.7% higher than ~~contribution margin~~operating income of ~~$127.2~~$45.1 million for the ~~nine-months~~three-months ended ~~September 30, 2016.~~March 31, 2021. The increase in ~~contribution margin~~operating income for the Strategic Brands segment was primarily ~~due to~~the result of an increase in net sales.

Operating loss for the Alcohol Brands segment, exclusive of corporate and unallocated expenses, was $5.0 million for the three-months ended March 31, 2022. Inventory purchased as part of the CANarchy Transaction was recorded at fair value.The inventory acquired was subsequently sold in the three-months ended March 31, 2022 and was recognized through cost of goods sold at fair value (purchased cost), resulting in no recognized profits on the associated sales. Operating income was negatively impacted by approximately $3.8 million during the three-months ended March 31, 2022 as a result. As of March 31, 2022, all purchased inventory recorded at fair value had been sold.

~~Contribution margin~~Operating income for the Other segment, exclusive of corporate and unallocated expenses, was ~~$4.6~~$1.1 million for the ~~nine-months~~three-months ended ~~September 30, 2017, an increase~~March 31, 2022, a decrease of approximately ~~$3.1~~$0.7 million, or ~~200.1% higher than contribution margin of $1.5 million for the nine-months ended September 30, 2016.~~

~~Operating Income.~~ ~~Operating income was $931.7 million for the nine-months ended September 30, 2017, an increase of approximately $98.1 million, or 11.8% higher~~37.5% lower than operating income of ~~$833.6~~$1.8 million for the ~~nine-months~~three-months ended September 30, 2016. Operating income as a percentage of net sales increased to 36.4% for the nine-months ended September 30, 2017 from 36.3% for the nine-months ended September 30, 2016. Operating income was $119.3 million and $76.9 million for the nine-months ended September 30, 2017 and 2016, respectively, in connection with our operations in Africa, Asia, Australia, Europe, the Middle East and South America.March 31, 2021.

Interest and Other ~~Income (Expense),~~Expense, net.

Interest and other non-operating ~~income (expense),~~expense, net, was ~~$2.1~~$7.3 million for the ~~nine-months~~three-months ended ~~September 30, 2017,~~March 31, 2022, as compared to interest and other non-operating ~~income (expense),~~expense, net, of ~~($0.7)~~$0.8 million for the ~~nine-months~~three-months ended ~~September 30, 2016.~~March 31, 2021. Foreign currency transaction losses were ~~$2.0~~$8.4 million and ~~$4.3~~$0.8 million for the ~~nine-months~~three-months ended ~~September 30, 2017~~March 31, 2022 and ~~2016,~~2021, respectively. Interest income was ~~$4.5~~$1.5 million and ~~$3.5~~$1.1 million for the ~~nine-months~~three-months ended ~~September 30, 2017~~March 31, 2022 and ~~2016,~~2021, respectively.

Provision for Income Taxes.

Provision for income taxes was ~~$314.4~~$98.0 million for the ~~nine-months~~three-months ended ~~September 30, 2017, an increase~~March 31, 2022, a decrease of ~~$21.2~~$0.2 million, or ~~7.2% higher~~0.2% lower than the provision for income taxes of ~~$293.2~~$98.2 million for the ~~nine-months~~three-months ended ~~September 30, 2016.~~March 31, 2021. The effective combined federal, state and foreign tax rate ~~decreased~~increased to ~~33.7%~~25.0% from ~~35.2%~~23.8% for the ~~nine-months~~three-months ended ~~September 30, 2017~~March 31, 2022 and ~~2016,~~2021, respectively. The ~~decrease~~increase in ~~the~~ effective tax rate was primarily ~~due~~attributable to the increase in ~~profits earned by~~the net losses in certain foreign subsidiaries that have no related income tax benefits as a result of the prior establishment of valuation allowances on their deferred tax assets.

Net Income

Net income was $294.2 million for the three-months ended March 31, 2022, a decrease of $21.0 million, or 6.7% lower than net income of $315.2 million for the three-months ended March 31, 2021. The decrease in ~~lower tax jurisdictions relative~~net income for the three-months ended March 31, 2022 was primarily due to the ~~United States~~decrease in the gross profit percentage of net sales as well as the increase in ~~equity compensation deductions.~~operating expenses.

~~Net Income~~~~. Net income was $619.4 million for the nine-months ended September 30, 2017, an increase~~Table of ~~$79.6 million, or 14.8% higher than net income~~Contents

Key Business Metrics

We use certain key metrics and financial measures not prepared in accordance with United States Generally Accepted Accounting Principles (“GAAP”) to evaluate and manage our business. For a further discussion of $539.7 million for the nine-months ended September 30, 2016. The increase in net income was primarily due to the $190.2 million increase in gross profit. The increase in net income was partially offset by the increase in operating expenses of $92.1 million.

how we use key metrics and certain non-GAAP financial measures, see “Non-GAAP Financial Measures and Other Key Metrics”.

Non-GAAP Financial Measures and Other Key Metrics

Gross Billings**

Gross ~~Sales**.~~ ~~Gross sales~~billings were ~~$1,042.0 million~~$1.74 billion for the three-months ended ~~September 30, 2017,~~March 31, 2022, an increase of approximately ~~$128.8~~$293.9 million, or ~~14.1%~~20.3% higher than gross ~~sales~~billings of ~~$913.3 million~~$1.45 billion for the three-months ended September 30, 2016. The increase in gross sales of our Monster Energy® brand energy drinks represented approximately $120.9 million of the overall increase in gross sales. Gross sales of our Monster Energy® brand energy drinks increased partially due to increased sales by volume as a result of increased domestic and international consumer demand. Gross sales of our Strategic Brands were $80.7 million for the three-months ended September 30, 2017, an increase of $3.6 million, or 4.7% higher than gross sales of $77.1 million for the three-months ended September 30, 2016. Gross sales of our AFF Third-Party Products were $5.2 million for the three-months ended September 30, 2017, a decrease of $0.5 million, or 8.5% lower than gross sales of $5.7 million for the three-months ended September 30, 2016. No other individual product line contributed either a material increase or decrease to net sales for the three-months ended September 30, 2017. Promotional and other allowances, as described in the footnote below, were $132.6 million for the three-months ended September 30, 2017, an increase of $7.2 million, or 5.8% higher than promotional and other allowances of $125.3 million for the three-months ended September 30, 2016. Promotional and other allowances as a percentage of gross sales decreased to 12.7% from 13.7% for the three-months ended September 30, 2017 and 2016, respectively.

March 31, 2021. Net changes in foreign currency exchange rates had an unfavorable impact on gross ~~sales in~~billings of approximately $38.3 million for the three-months ended March 31, 2022.

Gross billings for the Monster Energy® Drinks segment ~~of approximately $0.8 million~~were $1.62 billion for the three-months ended ~~September 30, 2017. Net changes in foreign currency exchange rates had a favorable impact on gross sales in the Strategic Brands segment~~March 31, 2022, an increase of approximately ~~$1.1~~$252.4 million, or 18.5% higher than gross billings of $1.37 billion for the three-months ended ~~September 30, 2017.~~

March 31, 2021. Gross ~~Sales**.~~ ~~Gross sales were $2,926.6 million~~billings for the ~~nine-months ended September 30, 2017, an increase of approximately $289.9 million, or 11.0% higher than gross~~Monster Energy® Drinks segment increased primarily due to increased worldwide sales ~~of $2,636.6 million for the nine-months ended September 30, 2016. The increase in gross sales~~by volume of our Monster Energy® brand energy drinks ~~represented approximately $256.4 million of the overall increase in gross sales. Gross sales of our Monster Energy® brand energy drinks increased partially due to increased sales by volume~~ as a result of increased ~~domestic and international~~ consumer demand. Gross sales of our Strategic Brands were $244.0 million for the nine-months ended September 30, 2017, an increase of $18.5 million, or 8.2% higher than gross sales of $225.5 million for the nine-months ended September 30, 2016. Gross sales of our AFF Third-Party Products were $16.9 million for the nine-months ended September 30, 2017, an increase of $4.6 million, or 37.5% higher than gross sales of $12.3 million for the nine-months ended September 30, 2016. No other individual product line contributed either a material increase or decrease to net sales for the nine-months ended September 30, 2017. Promotional and other allowances, as described in the footnote below, were $367.9 million for the nine-months ended September 30, 2017, an increase of $26.9 million, or 7.9% higher than promotional and other allowances of $341.0 million for the nine-months ended September 30, 2016. Promotional and other allowances as a percentage of gross sales decreased to 12.6% from 12.9% for the nine-months ended September 30, 2017 and 2016, respectively.

Net changes in foreign currency exchange rates had an unfavorable impact on gross ~~sales in~~billings for the Monster Energy® Drinks segment of approximately ~~$19.7~~$35.1 million for the ~~nine-months~~three-months ended ~~September 30, 2017.~~March 31, 2022.

Gross billings for the Strategic Brands segment were $104.3 million for the three-months ended March 31, 2022, an increase of $25.9 million, or 33.1% higher than gross billings of $78.4 million for the three-months ended March 31, 2021. Net changes in foreign currency exchange rates had ~~a favorable~~an unfavorable impact on gross ~~sales~~billings in the Strategic Brands segment of approximately ~~$2.2~~$3.3 million for the ~~nine-months~~three-months ended ~~September 30, 2017.~~March 31, 2022.

Gross billings for the Alcohol Brands segment were $15.4 million for the three-months ended March 31, 2022.

Gross billings for the Other segment were $5.9 million for the three-months ended March 31, 2022, an increase of $0.2 million, or 3.5% higher than gross billings of $5.7 million for the three-months ended March 31, 2021.

Promotional allowances, commissions and other expenses, as described in the footnote below, were $235.4 million for the three-months ended March 31, 2022, an increase of $18.7 million, or 8.6% higher than promotional allowances, commissions and other expenses of $216.7 million for the three-months ended March 31, 2021. Promotional allowances, commissions and other expenses as a percentage of gross billings decreased to 13.5% from 14.9% for the three-months ended March 31, 2022 and 2021, respectively.

**Gross ~~sales~~Billings represent amounts invoiced to customers net of cash discounts and returns. Gross billings are used internally by management as an indicator of and to monitor operating performance, including sales performance of particular products, salesperson performance, product growth or declines and is useful to investors in evaluating overall Company performance. The use of gross ~~sales~~billings allows evaluation of sales performance before the effect of any promotional items, which can mask certain performance issues. We therefore believe that the presentation of gross ~~sales~~billings provides a useful measure of our operating performance. The use of gross ~~sales~~billings is not a measure that is recognized under GAAP and should not be considered as an alternative to net sales, which is determined in accordance with GAAP, and should not be used alone as an indicator of operating performance in place of net sales. Additionally, gross ~~sales~~billings may not be comparable to similarly titled measures used by other companies, as gross ~~sales~~billings has been defined by our internal reporting practices. In addition, gross ~~sales~~billings may not be realized in the form of cash receipts as promotional payments and allowances may be deducted from payments received from certain ~~customers.~~customers.

Table of Contents

The following table reconciles the non-GAAP financial measure of gross ~~sales~~billings with the most directly comparable GAAP financial measure of net sales:


	Three-Months Ended				Percentage
	March 31,				Change
(In thousands)	2022		2021		22 vs. 21
Gross Billings	$	1,743,927	$	1,450,036	20.3	%
Deferred Revenue		10,020		10,440	(4.0)	%
Less: Promotional allowances, commissions and other expenses***		235,373		216,660	8.6	%
Net Sales	$	1,518,574	$	1,243,816	22.1	%

(In thousands)

Three-Months Ended
September 30,

Percentage
Change

Nine-Months Ended
September 30,

Percentage
Change

2017

2016

17 vs. 16

2017

2016

17 vs. 16
Gross sales, net of discounts and returns

  $
1,042,046

  $
913,277

14.1%

  $
2,926,564

  $
2,636,631

11.0%
Less: Promotional and other allowances***

132,570

125,323

5.8%

367,874

341,003

7.9%
Net Sales

  $
909,476

  $
787,954

15.4%

  $
2,558,690

  $
2,295,628

11.5%

***Although the expenditures described in this line item are determined in accordance with GAAP and meet GAAP requirements, the presentation thereof does not conform ~~with~~to GAAP presentation requirements. Additionally, our definition of promotional and other allowances may not be comparable to similar items presented by other companies. Promotional and other allowances for our energy drink products primarily include consideration given to ~~the Company’s~~our bottlers/distributors or retail customers including, but not limited to the following: (i) discounts granted off list prices to support price promotions to end-consumers by retailers; (ii) reimbursements given to ~~the Company’s~~our bottlers/distributors for agreed portions of their promotional spend with retailers, including slotting, shelf space allowances and other fees for both new and existing products; (iii) ~~the Company’s~~our agreed share of fees given to bottlers/distributors and/or directly to retailers for advertising, in-store marketing and promotional activities; (iv) ~~the Company’s~~our agreed share of slotting, shelf space allowances and other fees given directly to ~~retailers;~~retailers, club stores and/or wholesalers; (v) incentives given to ~~the Company’s~~our bottlers/distributors and/or retailers for achieving or exceeding certain predetermined sales goals; (vi) discounted or free products; (vii) contractual fees given to ~~the Company’s~~our bottlers/distributors related to sales made by ~~the Company~~us direct to certain customers that fall within the ~~bottler’s/~~bottlers’/distributors’ sales territories; and (viii) certain commissions ~~paid~~based on sales to our ~~customers.~~bottlers/distributors. The presentation of promotional and other allowances facilitates an evaluation of their impact on the determination of net sales and the spending levels incurred or correlated with such sales. Promotional and other allowances for our energy drink products. constitute a material portion of our marketing activities. ~~The Company’s~~Our promotional allowance programs for our energy drink products with ~~its~~our numerous bottlers/distributors and/or retailers are executed through separate agreements in the ordinary course of business. These agreements generally provide for one or more of the arrangements described above and are of varying durations, ranging from one week to one year. The primary drivers of our promotional and other allowance activities for our energy drink products for the ~~three-~~three-months ended March 31, 2022 and ~~nine-months ended September 30, 2017 and 2016~~2021 were (i) to increase sales volume and trial, (ii) to address market conditions, and (iii) to secure shelf and display space at retail.

~~Liquidity and Capital Resources~~Sales

~~Cash flows provided by operating activities.~~ Cash provided by operating activities was $790.1 million for the nine-months ended September 30, 2017, as compared with cash provided by operating activities of $420.7 million for the nine-months ended September 30, 2016.

For the nine-months ended September 30, 2017, cash provided by operating activities was primarily attributable to net income earned of $619.4 million and adjustments for certain non-cash expenses, consisting of $39.3 million of stock-based compensation and $35.1 million of depreciation and other amortization. For the nine-months ended September 30, 2017, cash provided by operating activities also increased due to a $125.0 million decrease in the TCCC Transaction receivables, a $42.1 million increase in accrued promotional allowances, a $24.7 million increase in accounts payable, a $24.2 million decrease in prepaid income taxes, a $15.9 million increase in accrued liabilities and a $7.4 million increase in accrued distributor terminations. For the nine-months ended September 30, 2017, cash used in operating activities was primarily attributable to a $70.9 million increase in accounts receivable, a $46.7 million increase in inventories, a $12.5 million decrease in deferred revenue, a $9.2 million increase in prepaid expenses and other current assets, a $4.1 million decrease in income taxes payable and a $3.2 million decrease in accrued compensation.

For the nine-months ended September 30, 2016, cash provided by operating activities was primarily attributable to net income earned of $539.7 million and adjustments for certain non-cash expenses, consisting of $33.7 million of stock-based compensation and $29.9 million of depreciation and other amortization. For the nine-months ended September 30, 2016, cash provided by operating activities also increased due to a $23.4 million increase in accrued promotional allowances, a $21.8 million increase in accounts payable, an $18.4 million decrease in inventories, a $16.8 million increase in deferred revenue, an $8.3 million increase in accrued liabilities and a $3.3 million increase in income taxes payable. For the nine-months ended September 30, 2016, cash used in operating activities was the result of a $136.9 million increase in prepaid income taxes, a $100.2 million increase in accounts receivable, a $21.0 million increase in distributor receivables, an $8.8 million increase in prepaid expenses and other current assets, a $5.5 million decrease in accrued distributor terminations and a $0.3 million decrease in accrued compensation.

~~Cash flows used in investing activities.~~ Cash used in investing activities was $483.4 million for the nine-months ended September 30, 2017 as compared to cash used in investing activities of $266.7 million for the nine-months ended September 30, 2016.

For the nine-months ended September 30, 2017, cash used in investing activities was primarily attributable to purchases of available-for-sale investments. For the nine-months ended September 30, 2016,cash used in investing activities was primarily attributable to the purchase of AFF as well as purchases of held-to-maturity investments. For the nine-months ended September 30, 2017, cash provided by investing activities was primarily attributable to sales of available-for-sale investments. For the nine-months ended September 30, 2016, cash provided by investing activities was primarily attributable to maturities of held-to-maturity investments. For both the nine-months ended September 30, 2017 and 2016, cash used in investing activities also included the acquisitions of fixed assets consisting of vans and promotional vehicles, coolers and other equipment to support our marketing and promotional activities, production equipment, furniture and fixtures, office and computer equipment, real property, computer software, equipment used for sales and administrative activities, certain leasehold improvements and improvements to real property. We expect to continue to use a portion of our cash in excess of our requirements for operations for purchasing short-term and long-term investments, leasehold improvements, the acquisition of capital equipment (specifically, vans, trucks and promotional vehicles, coolers, other promotional equipment, merchandise displays, warehousing racks as well as items of production equipment required to produce certain of our existing and/or new products and to develop our brand in international markets), the completion of the construction of our new warehouse and for other corporate purposes. From time to time, we may also use cash to purchase additional real property related to our beverage business and/or acquire compatible businesses.

~~Cash flows used in financing activities.~~ Cash used in financing activities was $224.3 million for the nine-months ended September 30, 2017 as compared to cash used in financing activities of $1,993.6 million for the nine-months ended September 30, 2016. The cash flows used in financing activities for both the nine-months ended September 30, 2017 and 2016 was primarily the result of the repurchases of our common stock. The cash flows provided by financing activities for both the nine-months ended September 30, 2017, and 2016 was primarily attributable to the issuance of our common stock.

Purchases of inventories, increases in accounts receivable and other assets, acquisition of property and equipment (including real property, personal property and coolers), leasehold improvements, advances for or the purchase of equipment for our bottlers, acquisition and maintenance of trademarks, payments of accounts payable, income taxes payable and purchases of our common stock are expected to remain our principal recurring use of cash.

~~Cash and cash equivalents, short-term and long-term investments.~~ At September 30, 2017, we had $465.6 million in cash and cash equivalents and $637.4 million in short and long-term investments. We have historically invested these amounts in U.S. Treasury bills, U.S. government agency securities and municipal securities, commercial paper, certificates of deposit, variable rate demand notes and money market funds meeting certain criteria. We maintain our investments for cash management purposes and not for purposes of speculation. Our risk management policies emphasize credit quality (primarily based on short-term ratings by nationally recognized statistical organizations) in selecting and maintaining our investments. We regularly assess market risk of our investments and believe our current policies and investment practices adequately limit those risks. However, certain of these investments are subject to general credit, liquidity, market and interest rate risks. These market risks associated with our investment portfolio may have an adverse effect on our future results of operations, liquidity and financial condition.

Of our $465.6 million of cash and cash equivalents held at September 30, 2017, $268.8 million was held by our foreign subsidiaries. No short-term or long-term investments were held by our foreign subsidiaries at September 30, 2017. We do not intend, nor do we foresee a need, to repatriate undistributed earnings of our foreign subsidiaries other than to repay certain intercompany debt owed to our U.S. operations. Under current tax laws, if funds in excess of intercompany amounts owed were repatriated to our U.S. operations we would be required to accrue and pay additional income taxes on such excess funds at the tax rates then in effect.

We believe that cash available from operations, including our cash resources and access to credit, will be sufficient for our working capital needs, including purchase commitments for raw materials and inventory, increases in accounts receivable, payments of tax liabilities, expansion and development needs, purchases of capital assets, purchases of equipment and properties, purchases of shares of our common stock and the completion of the construction of our new warehouse, through at least the next 12 months. Based on our current plans, at this time we estimate that capital expenditures, including the purchases of real property, are likely to be less than $100.0 million through September 30, 2018. However, future business opportunities may cause a change in this estimate.

~~The following represents a summary of the Company’s contractual commitments and related scheduled maturities as of September 30, 2017:~~

Payments due by period (in thousands)

Obligations

Total

Less than
1 year

1-3
years

3-5
years

More than
5 years

Contractual Obligations1

  $
126,008

  $
75,522

  $
41,512

  $
8,974

  $
-

Capital Leases

1,231

1,231

-

-

-

Operating Leases

17,428

3,147

3,528

3,279

7,474

Purchase Commitments2

28,118

28,118

-

-

-

Construction Contract3

6,150

6,150

-

-

-

  $
178,935

  $
114,168

  $
45,040

  $
12,253

  $
7,474

1~~Contractual obligations include our obligations related to sponsorships and other commitments.~~

2Purchase commitments include obligations made by us and our subsidiaries to various suppliers for raw materials used in the production of our products. These obligations vary in terms, but are generally satisfied within one year.

3In September 2016, the Company completed its acquisition of approximately 49 acres of land, located in Rialto, CA, for a purchase price of approximately $39.1 million. The Company is constructing an approximately 1,000,000 square-foot building (the “Rialto Warehouse”), which it anticipates will be LEED certified, to replace its current leased warehouse and distribution facilities located in Corona, CA. The Company entered into an approximately $38.1 million guaranteed maximum price construction contract for the construction of the building, of which $6.2 million remained outstanding as of September 30, 2017. During the three-months ended September 30, 2017, the Company commenced its transition to the Rialto Warehouse and estimates that it will be fully operational by December 31, 2017.

In addition, approximately $6.5 million of unrecognized tax benefits have been recorded as liabilities as of September 30, 2017. It is expected that the amount of unrecognized tax benefits will not significantly change within the next 12 months. As of September 30, 2017, we had $1.2 million of accrued interest and penalties related to unrecognized tax benefits.

~~Sales~~

The table below discloses selected quarterly data regarding sales for the ~~three-~~three-months ended March 31, 2022 and ~~nine-months ended September 30, 2017 and 2016,~~2021, respectively. Data from any one or more quarters or periods is not necessarily indicative of annual results or continuing trends.

Sales of ~~beverages~~our energy drinks are expressed in unit case volume. A “unit case” means a unit of measurement equal to 192 U.S. fluid ounces of finished beverage (24 eight-ounce servings). Unit case volume means the number of unit cases (or unit case equivalents) of finished products or concentrates as if converted into finished products sold by us.

Table of Contents

Our quarterly results of operations reflect seasonal trends that are primarily the result of increased demand in the warmer months of the year. It has been our experience that beverage sales tend to be lower during the first and fourth quarters of each calendar year. However, our experience with our energy drink products suggests they may be less seasonal than the seasonality of traditional beverages. In addition, our continued growth internationally may further reduce the impact of seasonality on our business. Quarterly fluctuations may also be affected by other factors including the introduction of new products, the opening of new markets where temperature fluctuations are more pronounced, the addition of new ~~bottlers, customers and~~ bottlers/distributors, changes in the sales mix of our products and changes in advertising and promotional expenses. The COVID-19 pandemic including new variants may also have an impact on consumer behavior and change the seasonal fluctuation of our business.


	Three-Months Ended
	March 31,
(In thousands, except average net sales per case)	2022		2021
Net sales	$	1,518,574	$	1,243,816
Less: Alcohol Brands segment sales		(15,207)		—
Less: Other segment sales		(5,927)		(5,727)
Adjusted net sales¹	$	1,497,440	$	1,238,089

Case sales by segment:¹
Monster Energy® Drinks		140,126		117,936
Strategic Brands		28,667		20,630
Total case sales		168,793		138,566
Average net sales per case - Energy Drinks	$	8.87	$	8.94

(In thousands, except average

Three-Months Ended

Nine-Months Ended
net sales per case)

September 30,

September 30,

2017

2016

2017

2016
Net sales1

  $
909,476

  $
787,954

$
2,558,690

$
2,295,628
Less: AFF third-party sales

(5,200)

(5,686)

(16,914)

(12,127)
Adjusted net sales2

  $
904,276

  $
782,268

$
2,541,776

$
2,283,501
Case sales by segment:

Monster Energy® Drinks

78,330

66,870

220,433

192,887
Strategic Brands

17,854

15,897

52,976

50,107
Other2

-

-

-

-
Total case sales

96,184

82,767

273,409

242,994
Average net sales per case

  $
9.40

  $
9.45

$
9.30

$
9.40

¹1~~Includes $11.4 million and $8.4 million for the three-months ended September 30, 2017 and 2016, respectively, related~~Excludes Alcohol Brands segment (effectively from February 17, 2022 to ~~the recognition of deferred revenue. Includes $31.6 million~~March 31, 2022) and ~~$28.6 million for the nine-months ended September 30, 2017 and 2016, respectively, related to the recognition of deferred revenue.~~

2~~Excludes~~ Other segment net sales, ~~of $5.2 million and $5.7 million for the three-months ended September 30, 2017 and 2016, respectively, comprised of net sales of AFF Third-Party Products to independent third-party customers~~ as these sales do not have unit case equivalents. ~~Excludes Other segment net~~

Sales of our Alcohol products are expressed in barrel volume. A “Barrel” means a unit of measurement equal to 31 US gallons. Barrel sales ~~of $16.9 million and $12.1~~were 0.05 million for the ~~nine-months~~three-months ended ~~September 30, 2017 and 2016, respectively, comprised of sales of AFF Third-Party Products to independent third-party customers as these sales do not have unit case equivalents.~~

March 31, 2022.

See Item 2, “Management’s Discussion and Analysis of Financial Condition and Results of Operations ~~- Our Business”~~– Results of Operations” for additional information related to the increase in sales.

Liquidity and Capital Resources

Cash and cash equivalents, short-term and long-term investments. At March 31, 2022, we had $1.01 billion in cash and cash equivalents, $1.72 billion in short-term investments and $65.7 million in long-term investments, including certificates of deposit, commercial paper, U.S. government agency securities, municipal securities and U.S. treasuries. We maintain our investments for cash management purposes and not for purposes of speculation. Our risk management policies emphasize credit quality (primarily based on short-term ratings by nationally recognized statistical organizations) in selecting and maintaining our investments. We regularly assess market risk of our investments and believe our current policies and investment practices adequately limit those risks. However, certain of these investments are subject to general credit, liquidity, market and interest rate risks. These market risks associated with our investment portfolio may have an adverse effect on our future results of operations, liquidity and financial condition.

Of our $1.01 billion of cash and cash equivalents held at March 31, 2022, $489.8 million was held by our foreign subsidiaries. No short-term or long-term investments were held by our foreign subsidiaries at March 31, 2022.

We believe that cash available from operations, including our cash resources and access to credit, will be sufficient for our working capital needs, including purchase commitments for raw materials and inventory, increases in accounts receivable, payments of tax liabilities, expansion and development needs, purchases of capital assets, purchases of equipment, purchases of real property and purchases of shares of our common stock, through at least the next 12 months. Based on our current plans, at this time we estimate that capital expenditures (exclusive of common stock repurchases) are likely to be less than $200.0 million through March 31, 2023. However, future business opportunities may cause a change in this estimate.

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The following summarizes our cash flows for the three-months ended March 31, 2022 and 2021 (in thousands):


Net cash (used in) provided by:
	2022		2021
Operating activities	$	(351)	$	175,473
Investing activities	$	(303,630)	$	(149,083)
Financing activities	$	(4,223)	$	(5,701)

Cash flows (used in) provided by operating activities. Cash used in operating activities was ($0.4) million for the three-months ended March 31, 2022, as compared with cash provided by operating activities of $175.5 million for the three-months ended March 31, 2021.

For the three-months ended March 31, 2022, cash provided by operating activities was primarily attributable to net income earned of $294.2 million and adjustments for certain non-cash expenses, consisting of $16.3 million of stock-based compensation and $14.6 million of depreciation and amortization. For the three-months ended March 31, 2022, cash provided by operating activities also increased due to a $61.2 million increase in accrued promotional allowances, a $20.6 million increase in accrued liabilities and an $18.3 million increase in accounts payable. For the three-months ended March 31, 2022, cash used in operating activities was primarily attributable to a $208.7 million increase in inventories, a $134.4 million increase in accounts receivable, a $32.1 million decrease in accrued compensation, a $29.6 million increase in prepaid expenses and other assets, a $9.8 million decrease in income taxes payable, a $5.9 million increase in prepaid income taxes and a $5.9 million decrease in deferred revenue.

For the three-months ended March 31, 2021, cash provided by operating activities was primarily attributable to net income earned of $315.2 million and adjustments for certain non-cash expenses, consisting of $18.4 million of stock-based compensation and $12.8 million of depreciation and amortization. For the three-months ended March 31, 2021, cash provided by operating activities also increased due to a $36.9 million increase in accounts payable, a $32.4 million increase in accrued liabilities and a $14.0 million increase in accrued promotional allowances. For the three-months ended March 31, 2021, cash used in operating activities was primarily attributable to a $147.5 million increase in accounts receivable, a $39.5 million increase in inventories, a $24.4 million decrease in accrued compensation, an $18.5 million increase in prepaid expenses and other assets, a $13.3 million decrease in income taxes payable, a $7.1 million increase in prepaid income taxes and a $5.3 million decrease in deferred revenue.

Cash flows used in investing activities. Cash used in investing activities was $306.6 million for the three-months ended March 31, 2022 as compared to cash used in investing activities of $149.1 million for the three-months ended March 31, 2021.

For both the three-months ended March 31, 2022 and 2021, cash provided by investing activities was primarily attributable to sales of available-for-sale investments. For the three-months ended March 31, 2022, cash used in investing activities included $330.4 million related to the CANarchy Transaction. For both the three-months ended March 31, 2022 and 2021, cash used in investing activities was attributable to purchases of available-for-sale investments. To a lesser extent, for both the three-months ended March 31, 2022 and 2021, cash used in investing activities also included the acquisitions of fixed assets consisting of vans and promotional vehicles, coolers and other equipment to support our marketing and promotional activities, production equipment, furniture and fixtures, office and computer equipment, computer software, equipment used for sales and administrative activities, certain leasehold improvements, as well as acquisitions of and/or improvements to real property. We expect to continue to use a portion of our cash in excess of our requirements for operations for purchasing short-term and long-term investments, leasehold improvements, the acquisition of capital equipment (specifically, vans, trucks and promotional vehicles, coolers, other promotional equipment, merchandise displays, warehousing racks as well as items of production equipment required to produce certain of our existing and/or new products) to develop our brand in international markets and for other corporate purposes. From time to time, we may also use cash to purchase additional real property related to our beverage business and/or acquire compatible businesses.

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Cash flow used in financing activities. Cash used in financing activities was $4.2 million for the three-months ended March 31, 2022 as compared to cash used in financing activities of $5.7 million for the three-months ended March 31, 2021. The cash used in financing activities for both the three-months ended March 31, 2022 and 2021 was primarily the result of the repurchases of our common stock. The cash provided by financing activities for both the three-months ended March 31, 2022, and 2021 was primarily attributable to the issuance of our common stock under our stock-based compensation plans and borrowings on debt.

The following represents a summary of the Company’s contractual commitments and related scheduled maturities as of March 31, 2022:


	Payments due by period (in thousands)
			Less than		1‑3		3‑5		More than
Obligations	Total		1 year		years		years		5 years

Contractual Obligations¹	$	335,356	$	255,348	$	79,935	$	73	$	—
Finance Leases		1,251		1,214		31		6		—
Operating Leases		37,268		7,277		11,160		6,924		11,907
Purchase Commitments²		384,111		377,290		6,537		284		—
	$	757,986	$	641,129	$	97,663	$	7,287	$	11,907

¹Contractual obligations include our obligations related to sponsorships and other commitments.

²Purchase commitments include obligations made by us and our subsidiaries to various suppliers for raw materials used in the production of our products. These obligations vary in terms, but are generally satisfied within one year.

No unrecognized tax benefits have been recorded as liabilities as of March 31, 2022. It is expected that the amount of unrecognized tax benefits will not significantly change within the next 12 months.

Critical Accounting Policies and Estimates

Our consolidated financial statements are prepared in accordance with GAAP. GAAP requires us to make estimates and assumptions that affect the reported amounts in our consolidated financial statements. Critical accounting estimates are those that management believes are the most important to the portrayal of our financial condition and results and require the most difficult, subjective or complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain and that have had, or are reasonably likely to have, a material impact on our financial condition or results of operations. Judgments and uncertainties may result in materially different amounts being reported under different conditions or using different assumptions. There have been no material changes to our critical accounting policies or estimates from the information provided in “Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Part II, Item 8 – Financial Statements and Supplementary Data – Note 1 – Organization and Summary of Significant Accounting Policies”, included in our Annual Report on Form 10-K for the fiscal year ended December 31, ~~2016~~2021 (“Form 10-K”).

Recent Accounting Pronouncements

~~In May 2017, the FASB~~There have been no material changes in recently issued ~~Accounting Standards Update (“ASU”) No. 2017-09, “Compensation—Stock Compensation (Topic 718): Scope of Modification Accounting,” clarifying when a change to the terms~~ or ~~conditions of a share-based payment award must be accounted~~adopted accounting pronouncements from those disclosed in our Annual Report on Form 10-K for as a modification. The new guidance requires modification accounting if the fair value, vesting condition or the classification of the award is not the same immediately before and after a change to the terms and conditions of the award. The new guidance is effective for the Company on a prospective basis beginning on January 1, 2018, with early adoption permitted. The Company is currently evaluating the impact of ASU No. 2017-09 on its financial position, results of operations and liquidity.

In January 2017, the FASB issued ASU No. 2017-01, “Business Combinations (Topic 805): Clarifying the Definition of a Business”, which clarifies the definition of a business with the objective of adding guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. This amendment is effective for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. Early adoption is permitted. The Company is currently evaluating the impact of ASU No. 2017-01 on its financial position, results of operations and liquidity.

In January 2017, the FASB issued ASU No. 2017-04, “Intangibles and Other (Topic 350): Simplifying the Test for Goodwill Impairment”, which eliminates the requirement to calculate the implied fair value of goodwill, but rather requires an entity to record an impairment charge based on the excess of a reporting unit’s carrying value over its fair value. This amendment is effective for annual or interim goodwill impairment tests in fiscal years beginning after December 15, 2019. Early adoption is permitted. The Company is currently evaluating the impact of ASU No. 2017-04 on its financial position, results of operations and liquidity.

In October 2016, the FASB issued ASU No. 2016-16, “Income Taxes (Topic 740): Intra-Entity Transfers of Assets Other Than Inventory”, in an effort to improve the accounting for the income tax consequences of intra-entity transfers of assets other than inventory. Current GAAP prohibits the recognition of current and deferred income taxes for an intra-entity asset transfer until the asset has been sold to an outside party. FASB ASU No. 2016-16 establishes the requirement that an entity recognize the income tax consequences of an intra-entity transfer of an asset other than inventory when the transfer occurs. ASU No. 2016-16 is effective for financial statements issued for annual periods beginning after December 15, 2017 and interim periods within those annual periods. Earlier application is permitted as of the beginning of an interim or annual reporting period, with any adjustments reflected as of the beginning of the fiscal year ~~of adoption. The Company is currently evaluating the impact of ASU No. 2016-16 on its financial position, results of operations and liquidity.~~

In August 2016, the FASB issued ASU No. 2016-15, “Statement of Cash Flows (Topic 230)”. The new guidance is intended to reduce diversity in practice in how certain transactions are classified in the statement of cash flows. ASU No. 2016-15 is effective for fiscal years, and interim periods within those years, beginning afterended December 15, 2017. Early adoption is permitted, provided that all of the amendments are adopted in the same period. The guidance requires application using a retrospective transition method. The Company is currently evaluating the impact of ASU No. 2016-15 on its financial position, results of operations and liquidity.

In May 2014, the FASB issued ASU No. 2014-09, “Revenue from Contracts with Customers (Topic 606)”, which supersedes previous revenue recognition guidance. ASU No. 2014-09 requires that a company recognize revenue at an amount that reflects the consideration to which the company expects to be entitled in exchange for transferring goods or services to a customer. In applying the new guidance, a company will (i) identify the contract(s) with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the contract’s performance obligations; and (v) recognize revenue when (or as) the entity satisfies a performance obligation. ASU No. 2014-09 was to be effective for reporting periods beginning after December 15, 2016. However, on July 9, 2015, the FASB voted to approve a one-year deferral of the effective date. This new guidance is effective for the Company beginning January 1, 2018 and can be adopted using either a full retrospective or modified approach. The Company has made significant progress in its evaluation of the amended revenue recognition guidance in Topic 606, however, such evaluation has yet to progress to a stage where there is sufficient information for a preliminary position of the impact on the Company’s consolidated financial statements. Therefore, the Company is unable at this time to provide (i) qualitative financial statement disclosures of the potential impact that this standard will have on its financial statements when adopted, (ii) a description of the effects of the accounting policies it expects to apply, (iii) a comparison to its current revenue recognition policies and (iv) a method for adoption. ~~The Company’s expects to complete its evaluation by December 15, 2017.~~

31, 2021.

Inflation

~~We believe inflation did not have~~Inflation had a ~~significant~~negative impact on our results of operations for the ~~periods presented.~~three-months ended March 31, 2022.

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Forward-Looking Statements

Certain statements made in this report may constitute forward-looking statements (within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended) (the “Exchange Act”) regarding the expectations of management with respect to revenues, profitability, adequacy of funds from operations and our existing credit facility, among other things. All statements containing a projection of revenues, income (loss), earnings (loss) per share, capital expenditures, dividends, capital structure or other financial items, a statement of management’s plans and objectives for future operations, or a statement of future economic performance contained in management’s discussion and analysis of financial condition and results of operations, including statements related to new products, volume growth and statements encompassing general optimism about future operating results and non-historical information, are forward-looking statements within the meaning of the Exchange Act. Without limiting the foregoing, the words “believes,” “thinks,” “anticipates,” “plans,” “expects,” and similar expressions are intended to identify forward-looking statements.

Management cautions that these statements are qualified by their terms and/or important factors, many of which are outside our control, and involve a number of risks, uncertainties and other factors, that could cause actual results and events to differ materially from the statements made including, but not limited to, the following:

●

Our ability to ~~recognize any~~absorb, mitigate or pass on to our bottlers/distributors and/or ~~all~~consumers increases in commodity, fuel, freight and other costs;

●

The impact of rising costs and inflation on the discretionary income of our consumers, particularly the rising cost of gasoline;

●

The impact of the ~~benefits from~~military conflict in Ukraine, including supply chain disruptions, volatility in commodity prices, increased economic uncertainty and escalating geopolitical tensions;

●

The human and economic consequences of the ~~TCCC transaction~~COVID-19 pandemic, including new variants, as well as the measures taken or that may be taken in the future by governments, and consequently, businesses (including the Company and its suppliers, bottlers/ distributors, co-packers and other service providers) and the ~~AFF Transaction;~~

public at large to limit the COVID-19 pandemic;

●

Fluctuations in growth and/or growth rates and/or declining sales in the domestic and international energy drink and alcohol beverage categories generally, including in the convenience and gas channel (which is our largest channel) and the impact on demand for our products resulting from deteriorating economic conditions and/or financial uncertainties due to the COVID-19 pandemic;

●

The ~~effect~~impact of temporary plant closures, production slowdowns and disruptions in operations experienced by our suppliers, bottlers/distributors and/or co-packers as a result of the COVID-19 pandemic, including any material disruptions on the production and distribution of our products;

●

The impact of potential future reductions of our sponsorship and endorsement activities as well as our sampling activities as a result of COVID-19 or other pandemics on our future sales and market share;

●

The impact of countries being in lockdown due to the COVID-19 pandemic at various times;

●

The impact of vaccine mandates on our business and supply chain, including our ability to recruit and/or retain employees, and disruptions in the business of our co-packers, bottlers/distributors and/or suppliers;

●

Closures of, and continued restrictions on, on-premise retailers and other establishments which sell our products as the result of the COVID-19 pandemic;

●

The limitation or reduction by our suppliers, bottlers/distributors and/or co-packers of their activities and/or operations during the COVID-19 pandemic;

●

The impact of the COVID-19 pandemic on our product sampling programs;

●

Our ability to introduce new products and the impact of the COVID-19 pandemic on our innovation activities;

●

Our ability to successfully adapt to the changing landscape of advertising, marketing, promotional, sponsorship and endorsement opportunities created by the COVID-19 pandemic;

●

Other effects of the COVID-19 pandemic on our employees, such as mental health challenges that employees may face;

●

The impact of any reductions in productivity and disruptions to our business routines while most office-based employees of the Company are working remotely;

●

The impact of logistical issues, including shortages of shipping containers, port of entry congestion and increased freight costs;

●

We have extensive commercial arrangements with TCCC onand, as a result, our future ~~performance;~~

performance is substantially dependent on the success of our relationship with TCCC;

●

The impact of TCCC’s bottlers/distributors distributing Coca-Cola brand energy drinks and possible reductions in the number of our SKUs carried by such bottlers/distributors and/or such bottlers/distributors imposing limitations on distributing new product SKUs;

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●

The effect of TCCC ~~becoming~~being one of our significant ~~shareholders~~stockholders and the potential divergence of TCCC’s interests from those of our other ~~shareholders;~~

stockholders;

·	~~The effect of TCCC’s refranchising initiative to transition from a TCCC owned system to an independent/non-wholly owned bottling system, including our~~●	Our ability to maintain relationships with ~~the bottler/distributors;~~
·	~~Our ability to successfully enter into new distribution agreements with~~TCCC system bottlers/distributors ~~within the TCCC distribution system for new international territories;~~ and manage their ongoing commitment to focus on our products;

·	~~The slowing of and/or decline in the sales growth rates of the energy drink category and/or the U.S. convenience store market generally;~~
· ●	Disruption in distribution ~~or sales~~channels and/or decline in sales due to the termination and/or ~~appointment~~insolvency of existing and/or new domestic and/or international bottlers/distributors;

●

Lack of anticipated demand for our products in domestic and/or international markets;

●

Fluctuations in the inventory levels of our bottlers/distributors, planned or otherwise, and the resultant impact on our revenues;

●

Unfavorable regulations, including taxation requirements, age restrictions imposed on the sale, purchase, or consumption of our products, marketing restrictions, product registration requirements, tariffs, trade restrictions, container size limitations and/or ingredient restrictions;

●

The effect of inquiries from, and/or actions by, state attorneys general, the Federal Trade Commission (the “FTC”), the Food and Drug Administration (the “FDA”), municipalities, city attorneys, other government agencies, quasi-government agencies, ~~and/or~~ government officials (including members of U.S. Congress), and/or analogous central and local agencies and other authorities in the foreign countries in which our products are manufactured and/or distributed, into the advertising, marketing, promotion, ingredients, sale and/or consumption of our energy drink products, including voluntary and/or required changes to our business practices;

●

Our ability to comply with laws, regulations and evolving industry standards regarding consumer privacy and data use and security, including with respect to the General Data Protection Regulation and the California Consumer Privacy Act of 2018;

●

Our ability to achieve profitability and/or repatriate cash from certain of our operations outside the United States;

●

Our ability to manage legal and regulatory requirements in foreign jurisdictions, potential difficulties in staffing and managing foreign operations and potentially higher incidence of fraud or corruption and credit risk of foreign customers and/or bottlers/distributors;

●

Changes in U.S. tax laws as a result of any legislation proposed by the new U.S. Presidential Administration or U.S. Congress, which may include efforts to change or repeal the 2017 Tax Cuts and Jobs Act and the federal corporate income tax rate reduction;

●

Our ability to produce our products in international markets in which they are sold, thereby reducing freight costs and/or product damages;

●

Our ability to effectively manage our inventories and/or our accounts receivables;

●

Our foreign currency exchange rate risk with respect to our sales, expenses, profits, assets and liabilities denominated in currencies other than the U.S. dollar, which will continue to increase as foreign sales increase;

●

The long-term impact of the United Kingdom’s departure from the European Union (or “Brexit”);

●

Changes in accounting standards may affect our reported profitability;

●

Implications of the Organization for Economic Cooperation and Development’s base erosion and profit shifting project;

●

Any proceedings which may be brought against us by the Securities and Exchange Commission (the “SEC”), the FDA, the FTC or other governmental agencies or bodies;

●

The outcome and/or possibility of future shareholder derivative actions or shareholder securities litigation that may be filed against us and/or against certain of our officers and directors, and the possibility of other private shareholder litigation;

●

The outcome of product liability or consumer fraud litigation and/or class action litigation (or its analog in foreign jurisdictions) regarding the safety of our products and/or the ingredients in and/or claims made in connection with our products and/or alleging false advertising, marketing and/or promotion, and the possibility of future product liability and/or class action lawsuits;

~~The outcome of any other litigation;~~

●

Exposure to significant liabilities due to litigation, legal or regulatory proceedings;

●

Intellectual property injunctions;

●

Unfavorable resolution of tax matters;

●

Uncertainty and volatility in the domestic and global ~~economies;~~

economies, including risk of counterparty default or failure;

●

Our ability to address any significant deficiencies or material weakness in our internal controls over financial reporting;

●

Our ability to continue to generate sufficient cash flows to support our expansion plans and general operating activities;

●

Decreased demand for our products resulting from changes in consumer preferences, including changes in demand for different packages, sizes and configurations, obesity and other perceived health concerns, including concerns relating to certain ingredients in our products or packaging, product safety concerns and/or from decreased consumer discretionary spending power;

●

Adverse publicity surrounding obesity and health concerns related to our products, product safety and quality, water usage, environmental impact and sustainability, human rights, our culture, workforce and labor and workplace laws;

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●

Changes in demand that are weather related and/or for other reasons, including changes in product category ~~consumption;~~

and/or package consumption and changes in cost and availability of certain key ingredients including aluminum cans, as well as disruptions to the supply chain, as a result of climate change and extreme weather conditions;

●

The impact of unstable political conditions, civil unrest, large scale terrorist acts, the outbreak or escalation of armed hostilities, major natural disasters and extreme weather conditions, or widespread outbreaks of infectious diseases (such as the COVID-19 pandemic);

●

The impact on our business of competitive products and pricing pressures and our ability to gain or maintain our share of sales in the marketplace as a result of actions by ~~competitors;~~

competitors, including unsubstantiated and/or misleading claims, false advertising claims and tortious interference, as well as competitors selling misbranded products;

●

The impact on our business of trademark and trade dress infringement proceedings brought against us relating to our brands, including our Reign Total Body Fuel® high performance energy drinks, which could result in an injunction barring us from selling certain of our products and/or require changes to be made to our current trade dress;

●

Our ability to ~~introduce new products;~~

implement and/or maintain price increases, including through reductions in promotional allowances;

●

An inability to achieve volume growth through product and packaging initiatives;

●

Our ability to sustain the current level of sales and/or achieve growth for our Monster Energy® brand energy drinks and/or our other products, including ~~the~~our Strategic Brands and Alcohol Brands;

●

Our ability to implement our growth strategy, including expanding our business in existing and new sectors, such as the alcoholic beverage sector;

●

The inherent operational risks presented by the alcoholic beverage industry that may not be adequately covered by insurance or lead to litigation relating to the abuse or misuse of our products;

●

Our ability to successfully integrate CANarchy and other acquired ~~from TCCC;~~

businesses or assets;

●

The impact of criticism of our energy drink products and/or the energy drink market generally and/or legislation enacted (whether as a result of such criticism or otherwise) that restricts the marketing or sale of energy drinks (including prohibiting the sale of energy drinks at certain establishments or pursuant to certain governmental programs), ~~limit~~limits caffeine content in beverages, ~~require~~requires certain product labeling disclosures and/or warnings, ~~impose~~imposes excise and/or sales taxes, ~~limit~~limits product sizes and/or ~~impose~~imposes age restrictions for the sale of energy drinks;

●

Our ability to comply with and/or resulting lower consumer demand and/or lower profit margins for energy drinks and/or alcohol beverages due to proposed and/or future U.S. federal, state and local laws and regulations and/or proposed or existing laws and regulations in certain foreign jurisdictions and/or any changes therein, including changes in taxation requirements (including tax rate changes, new tax laws, new and/or increased excise, sales and/or other taxes on our products and revised tax law interpretations) and environmental laws, as well as the Federal Food, Drug, &and Cosmetic Act ~~as amended by the Dietary Supplement Health and Education Act,~~ and regulations or rules made thereunder or in connection therewith by the FDA, as well as changes in any other food, drug or similar laws in the United States and internationally, especially those changes that may restrict the sale of energy and/or alcohol drinks (including prohibiting the sale of energy drinks at certain establishments or pursuant to certain governmental programs), limit caffeine or alcohol content in beverages, require certain product labeling disclosures and/or warnings, impose excise taxes, impose sugar taxes, limit product sizes, or impose age restrictions for the sale of energy and/or alcohol drinks, as well as laws and regulations or rules made or enforced by the ~~FDA, the~~ Bureau of Alcohol, Tobacco, ~~and~~ Firearms and Explosives and/or the ~~FTC;~~

FTC or their foreign counterparts;

●

Disruptions in the timely import or export of our products and/or ingredients including flavors, flavor ingredients and supplement ingredients due to port congestion, strikes and related labor issues or otherwise;

	●	Our ability to satisfy all criteria set forth in any model energy drink guidelines, including, without limitation, those adopted by the American Beverage Association, of which ~~the Company is~~we are a member, and/or any international beverage ~~association~~associations and the impact ~~on the Company of such guidelines;~~
·	~~Disruptions in the timely import or export~~ of our ~~products and/or ingredients due~~failure to ~~port strikes and related labor issues;~~ satisfy such guidelines may have on our business;

●

The effect of unfavorable or adverse public relations, press, articles, comments and/or media attention;

●

Changes in the cost, quality and availability of containers, packaging materials, aluminum cans, the Midwest and other premiums, raw materials, including flavors and flavor ingredients, and other ingredients and juice concentrates, and our ability to obtain and/or maintain favorable supply arrangements and relationships and procure timely and/or sufficient production of all or any of our products to meet customer demand;

●

Any shortages that may be experienced in the procurement of containers and/or other raw materials including, without limitation, ~~the~~flavors, flavor ingredients, supplement ingredients, aluminum cans generally, PET containers used for our Monster ~~Hydro~~TMHydro® energy ~~drinks;~~

drinks, 24-ounce aluminum cap cans and 550ml BRE aluminum cans with resealable ends;

●

Limitations in securing the supply of sufficient quantities of aluminum cans may cause us to focus on producing higher volume products. As a result, certain of our lower volume products may be temporarily discontinued by our bottlers/distributors and/or their retail customers, and we may not be able to reinstate all, or any, of such lower volume products in the future;

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●

In order to secure sufficient quantities of aluminum cans and sufficient co-packing availability in the future, we may be required to commit to minimum purchase volumes and/or minimum co-packing volumes. In the event that we over-estimate future demand for our products and therefore may not purchase such minimum quantities in full, or utilize such minimum co-packing volumes in full, we may incur claims and/or costs or losses in respect of such shortfalls;

●

The impact on our cost of sales of corporate activity among the limited number of suppliers from whom we purchase certain raw ~~materials on our cost of sales;~~

materials;

●

Our ability to pass on to our customers all or a portion of any increases in the costs of raw materials, ingredients, commodities and/or other cost inputs affecting our business;

●

Our ability to achieve both internal domestic and international forecasts, which may be based on projected volumes and sales of many product types and/or new products, certain of which are more profitable than others; there can be no assurance that we will achieve projected levels of sales as well as forecasted product and/or geographic mixes;

●

Our ability to penetrate new domestic and/or international markets and/or gain approval or mitigate the delay in securing approval for the sale of our products in various countries;

·	~~Economic or political instability in one or more of our international markets;~~
· ●	The effectiveness of sales and/or marketing efforts by us and/or by the ~~full service~~ bottlers/distributors of our products, most of whom distribute products that may be regarded as competitive with our products;

●

Unilateral decisions by ~~full service~~ bottlers/distributors, buying groups, convenience chains, grocery chains, mass merchandisers, specialty chain stores, e-commerce retailers, e-commerce websites, club stores and other customers to discontinue carrying all or any of our products that they are carrying at any time, restrict the range of our products they carry, impose restrictions or limitations on the sale of our products and/or the sizes of containers of our products and/or devote less resources to the sale of our products;

●

The impact of certain activities by competitors and others to persuade regulators and/or retailers and/or customers in certain countries to reduce the permitted or maximum container sizes for our products from those currently being sold and marketed by us;

●

The impact of possible trading disputes between our bottler/distributors and their customers and/or one or more buying groups which may result in the delisting of certain of the Company products, temporarily or otherwise;

●

The effects of retailer consolidation on our ~~business;~~

business and our ability to successfully adapt to the rapidly changing retail landscape;

●

Our ability to adapt to the changing retail landscape with the rapid growth in e-commerce retailers;

●

The effects of bottler/distributor consolidation on our business;

●

The costs and/or effectiveness, now or in the future, of our advertising, marketing and promotional strategies;

●

The success of our sports marketing, social media and other general marketing endeavors both domestically and internationally;

●

Unforeseen economic and political changes and local or international catastrophic events;

●

Possible product recalls and/or reformulations of certain of our products and/or market withdrawals of certain of our products due to defective ~~production;~~

and/or non-compliant formulas or production in one or more jurisdictions;

●

Our ability to make suitable arrangements and/or procure sufficient capacity for the co-packing of any of our products both domestically and internationally, the timely replacement of discontinued co-packing arrangements and/or limitations on co-packing availability, including for retort production;

●

Our ability to make suitable arrangements for the timely procurement of non-defective raw materials;

●

Our inability to protect and/or the loss of our intellectual property rights and/or our inability to use our trademarks, trade names or designs and/or trade dress in certain countries;

●

Volatility of stock prices which may restrict stock sales, stock purchases or other ~~opportunities;~~

opportunities as well as negatively impact the motivation of equity award grantees;

●

Provisions in our organizational documents and/or control by insiders which may prevent changes in control even if such changes would be beneficial to other stockholders;

●

The failure of our bottlers and/or ~~contract packers~~co-packers to manufacture our products on a timely basis or at all;

·	~~Exposure to significant liabilities due to litigation, legal or regulatory proceedings;~~
· ●	Any disruption in and/or lack of effectiveness of our information technology systems, including a breach of cyber security, that disrupts our business or negatively impacts customer ~~relationships;~~relationships, as well as cybersecurity incidents involving data shared with third parties; and

●

Recruitment and retention of senior management, other key employees and our employee base in general.

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The foregoing list of important factors and other risks detailed from time to time in our reports filed with the SEC is not exhaustive. See the section entitled “Risk Factors” in our Form 10-K and in Item 1A of this Quarterly Report for a more complete discussion of these risks and uncertainties and for other risks and uncertainties. Those factors and the other risk factors described therein are not necessarily all of the important factors that could cause actual results or developments to differ materially from those expressed in any of our forward-looking statements. Other unknown or unpredictable factors also could harm our results. Consequently, our actual results could be materially different from the results described or anticipated by our forward-looking statements, due to the inherent uncertainty of estimates, forecasts and projections and may be better or worse than anticipated. Given these uncertainties, you should not rely on forward-looking statements. Forward-looking statements represent our estimates and assumptions only as of the date that they were made. We expressly disclaim any duty to provide updates to forward-looking statements, and the estimates and assumptions associated with them, after the date of this report, in order to reflect changes in circumstances or expectations or the occurrence of unanticipated events except to the extent required by applicable securities laws.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

There have been no material changes in our market ~~risk~~risks during the three-months ended ~~September 30, 2017~~March 31, 2022 compared with the disclosures in Part II, Item 7A of our Form 10-K.

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures — – Under the supervision and with the participation of the Company’s management, including our ~~Chief~~Co-Chief Executive ~~Officer~~Officers and Chief Financial Officer, we have evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13(a)-15(e) and 15(d)-15(e) of the Exchange Act) as of the end of the period covered by this report. Based upon this evaluation, the ~~Chief~~Co-Chief Executive ~~Officer~~Officers and Chief Financial Officer have concluded that our disclosure controls and procedures are adequate and effective to ensure that information we are required to disclose in reports that we file or submit under the Exchange Act is (1) recorded, processed, summarized and reported within the time periods specified in rules and forms of the SEC and (2) accumulated and communicated to our management, including its principal executive and principal financial officers, as appropriate, to allow timely decisions regarding required disclosures.

Changes in Internal Control Over Financial Reporting — – There were no changes in the Company’s internal controls over financial reporting during the quarter ended ~~September 30, 2017,~~March 31, 2022, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II - OTHER INFORMATION

ITEM 1.LEGAL PROCEEDINGS

The information required by this Item is incorporated herein by reference to the Notes to Condensed Consolidated Financial Statements— - Note ~~10.~~12. Commitments and Contingencies: ~~Legal Proceedings~~Litigation in Part I, Item 1, of this Quarterly Report on Form 10-Q.

ITEM 1A.RISK FACTORS

~~Our~~In addition to the other information set forth in this Quarterly Report on Form 10-Q, including Management’s Discussion and Analysis of Financial Condition and Results of Operations and the condensed consolidated financial statements and related notes, and the following additional risk ~~factors are~~factor, you should carefully consider the risks discussed in “Part I, Item 1A – Risk Factors” in our Form 10-K. There have been no material changes with respect to the risk factors disclosed in our Form 10-K. However, we note that the risks described in this report and in our Form 10-K are not the only risks facing our Company, and such additional risks or uncertainties that we currently deem to be immaterial or are unknown to us could negatively impact our business, operations, or financial results.

Regulations concerning our alcoholic beverages may adversely affect our business, financial condition or results of operations and inhibit the sales of such products.

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Governmental agencies heavily regulate the alcoholic beverage industry. In particular, they monitor and regulate licensing, warehousing, trade and pricing practices, permitted and required labeling, including warning labels and other such signage, advertising and relations with wholesalers and retailers. In addition, other countries in which we sell such beverages impose duties, excise taxes and/or other related taxes. If such agencies or jurisdictions, foreign or domestic, choose to implement new or revised laws, regulations, fees, taxes, or other such requirements, our business, financial condition or results of operations could be materially, adversely affected. Additionally, if such governmental bodies require increased additional product labeling, warning requirements, or limitations on the marketing or sale of our alcohol products due to their contents or allegations concerning their potential to cause adverse health effects, our sales of alcoholic beverages may be impeded.

~~ITEM 2.~~~~UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS~~

ITEM 2.

UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

On February 28, 2017, the Company’s Board of Directors authorized a new share repurchase program for the purchase of up to $500.0 million of the Company’s outstanding common stock (the “February 2017 Repurchase Plan”). During the three-months ended ~~September 30, 2017, the Company purchased 4.5~~March 31, 2022, 0.2 million shares of common stock ~~at an average purchase price of $54.91 per share, for a total amount of $248.8 million (excluding broker commissions), under the February 2017 Repurchase Plan.~~

~~The following tabular summary reflects the Company’s repurchase activity during the quarter ended September 30. 2017.~~

Period

Total Number
of Shares
Purchased

Average Price
per Share¹

Total Number of
Shares Purchased
as Part of Publicly
Announced Plans
or Programs

Maximum Number (or
Approximate Dollar
Value) of Shares that
May Yet Be Purchased
Under the Plans or
Programs (In
thousands)²
Jul 1 - Jul 31

-

  $
-

-

  $
500,000
Aug 1 - Aug 31

902,683

  $
54.53

902,683

  $
450,760
Sept 1 - Sept 30

3,629,075

  $
55.00

4,531,758

  $
251,107
Total

4,531,758

~~¹Excluding broker commissions paid.~~

~~²Net of broker commissions paid.~~

~~During the three-months ended September 30, 2017, 892 shares~~ were purchased from employees in lieu of cash payments for options exercised or withholding taxes due for a total amount of ~~$0.05~~$12.2 million. ~~While such purchases are considered~~

On March 13, 2020, the Company’s Board of Directors authorized a share repurchase program for the purchase of up to $500.0 million of the Company’s outstanding common stock ~~repurchases, they are not counted as purchases against~~(the “March 2020 Repurchase Plan”). During the ~~Company’s authorized share~~three-months ended March 31, 2022, no shares were purchased by the Company under the March 2020 Repurchase Plan. As of May 6, 2022, $441.5 million remained available for repurchase ~~programs.~~under the March 2020 Repurchase Plan.

ITEM 3.DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4.MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5.OTHER INFORMATION

None.

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ITEM 6.EXHIBITS

31.1*
10.1*		Monster Beverage Corporation 2017 Compensation Plan for Non-Employee Directors as Amended and Restated on February 23, 2022.

31.1*		Certification of ~~Chief~~Co-Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

31.2*		Certification of Co-Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

31.3*		Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

32.1*		Certification of ~~Chief~~Co-Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

32.2*		Certification ~~by Chief Financial~~of Co-Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

32.3*		Certification by Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted

101*		The following financial information from Monster Beverage Corporation’s Quarterly Report on Form 10-Q for the quarter ended ~~September 30, 2017,~~March 31, 2022, formatted in ~~XBRL (eXtensible~~iXBRL (Inline eXtensible Business Reporting Language): (i) Condensed Consolidated Balance Sheets as of ~~September 30, 2017~~March 31, 2022 and December 31, ~~2016,~~2021, (ii) Condensed Consolidated Statements of Income for the ~~three-~~three -months ended March 31, 2022 and ~~nine-months ended September 30, 2017 and 2016,~~2021, (iii) Condensed Consolidated Statements of Comprehensive Income for the ~~three-~~three-months ended March 31, 2022 and ~~nine-months~~2021, (iv) Condensed Consolidated Statements of Stockholders’ Equity for the three-months ended ~~September 30, 2017~~March 31, 2022 and ~~2016, (iv)~~2021, (v) Condensed Consolidated Statements of Cash Flows for the ~~nine-months~~three-months ended ~~September 30, 2017~~March 31, 2022 and ~~2016,~~2021, and ~~(v)~~(vi) the Notes to Condensed Consolidated Financial Statements.

104*		The cover page from Monster Beverage Corporation’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2022, formatted in iXBRL (Inline eXtensible Business Reporting Language) and contained in Exhibit 101.

* Filed herewith

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	MONSTER BEVERAGE CORPORATION
	Registrant


Date: ~~November 8, 2017~~ May 6, 2022	/s/ RODNEY C. SACKS
	Rodney C. Sacks
	Chairman of the Board of Directors
	and ~~Chief~~Co-Chief Executive Officer

Date: May 6, 2022	/s/ HILTON H. SCHLOSBERG
	Hilton H. Schlosberg
	Vice Chairman of the Board of Directors
	and Co-Chief Executive Officer

	Three-Months Ended				Nine-Months Ended
	September 30,				September 30,
	2017		2016		2017		2016

NET SALES	$	909,476	$	787,954	$	2,558,690	$	2,295,628

COST OF SALES	339,767		284,979		924,610		851,741

GROSS PROFIT	569,709		502,975		1,634,080		1,443,887

OPERATING EXPENSES	252,337		212,600		702,405		610,277

OPERATING INCOME	317,372		290,375		931,675		833,610

INTEREST and OTHER INCOME (EXPENSE), net	3,996		(1,037)		2,103		(651)

INCOME BEFORE PROVISION FOR INCOME TAXES	321,368		289,338		933,778		832,959

PROVISION FOR INCOME TAXES	102,624		97,695		314,422		293,221

NET INCOME	$	218,744	$	191,643	$	619,356	$	539,738

NET INCOME PER COMMON SHARE:
Basic	$	0.39	$	0.34	$	1.09	$	0.91
Diluted	$	0.38	$	0.33	$	1.07	$	0.89

WEIGHTED AVERAGE NUMBER OF SHARES OF COMMON STOCK AND COMMON STOCK EQUIVALENTS:
Basic	567,878		571,137		567,550		594,219
Diluted	578,368		583,293		577,964		606,279

	Three-Months Ended September 30,				Nine-Months Ended September 30,
	2017		2016		2017		2016
Net income, as reported	$	218,744	$	191,643	$	619,356	$	539,738
Other comprehensive income:
Change in foreign currency translation adjustment	1,329		(57)		7,641		7,344
Available-for-sale investments:
Change in net unrealized (losses) gains	(29)		-		75		-
Reclassification adjustment for net gains included in net income	-		-		-		-
Net change in available-for-sale investments	(29)		-		75		-
Other comprehensive income	1,300		(57)		7,716		7,344
Comprehensive income	$	220,044	$	191,586	$	627,072	$	547,082

	Nine-Months Ended
	September 30, 2017			September 30, 2016
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	619,356		$	539,738
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	35,104			29,874
Gain on disposal of property and equipment	(514)			(171)
Stock-based compensation	39,265			33,735
Deferred income taxes	1,862			(1,652)
Effect on cash of changes in operating assets and liabilities:
Accounts receivable	(70,865		)	(100,233)
TCCC Transaction receivable	125,000			-
Distributor receivables	1,605			(21,034)
Inventories	(46,700)			18,355
Prepaid expenses and other current assets	(9,210)			(8,805)
Prepaid income taxes	24,168			(136,899)
Accounts payable	24,653			21,795
Accrued liabilities	15,867			8,303
Accrued promotional allowances	42,064			23,411
Accrued distributor terminations	7,416			(5,466)
Accrued compensation	(3,230)			(346)
Income taxes payable	(4,142)			3,340
Other liabilities	819			-
Deferred revenue	(12,461)			16,757
Net cash provided by operating activities	790,057			420,702

CASH FLOWS FROM INVESTING ACTIVITIES:
Maturities of held-to-maturity investments	-			892,453
Sales of available-for-sale investments	358,107			2,993
Purchases of held-to-maturity investments	-			(378,254)
Purchases of available-for-sale investments	(768,276)			(24,405)
Purchases of property and equipment	(67,738)			(67,527)
Proceeds from sale of property and equipment	855			705
Purchases of AFF Assets, net	-			(688,485)
Increase in intangibles	(5,137)			(4,255)
(Increase) decrease in other assets	(1,216)			56
Net cash used in investing activities	(483,405)			(266,719)

CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments on debt	(1,878)			(1,731)
Issuance of common stock	26,776			10,615
Purchases of common stock held in treasury	(249,173)			(2,002,441)
Net cash used in financing activities	(224,275)			(1,993,557)

Effect of exchange rate changes on cash and cash equivalents	5,600			5,683

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS	87,977			(1,833,891)
CASH AND CASH EQUIVALENTS, beginning of period	377,582			2,175,417
CASH AND CASH EQUIVALENTS, end of period	$	465,559		$	341,526

SUPPLEMENTAL INFORMATION:
Cash paid during the period for:
Interest	$	55		$	54
Income taxes	$	293,980		$	429,371

	Monster Energy® Drinks		Strategic Brands		Other		Total
Balance at December 31, 2016	$	693,644	$	637,999	$	-	$	1,331,643
Acquisitions	-		-		-		-
Balance at September 30, 2017	$	693,644	$	637,999	$	-	$	1,331,643

	Currency Translation Losses		Unrealized (Gains) Losses on Available-for- Sale Securities		Total
Balance at December 31, 2016	$	23,056	$	193	$	23,249
Other comprehensive loss (gain) before reclassifications	-		-		-
Amounts reclassified from accumulated other comprehensive loss (gain)	-		-		-
Net current-period other comprehensive loss (gain)	(7,641)		(75)		(7,716)
Balance at September 30, 2017	$	15,415	$	118	$	15,533

Options	Number of Shares (In thousands)	Weighted- Average Exercise Price Per Share		Weighted- Average Remaining Contractual Term (In years)	Aggregate Intrinsic Value
Outstanding at January 1, 2017	22,643	$	23.55	5.8	$	474,739
Granted 01/01/17 - 03/31/17	1,319	$	45.94
Granted 04/01/17 - 06/30/17	26	$	49.71
Granted 07/01/17 - 09/30/17	12	$	56.08
Exercised	(1,643)	$	16.30
Cancelled or forfeited	(391)	$	39.32
Outstanding at September 30, 2017	21,966	$	25.20	5.4	$	659,989
Vested and expected to vest in the
future at September 30, 2017	20,870	$	24.26	5.2	$	646,739
Exercisable at September 30, 2017	13,030	$	14.29	3.4	$	533,683

	Number of Shares (in thousands)	Weighted Average Grant-Date Fair Value
Non-vested at January 1, 2017	556	$	39.95
Granted 01/01/17- 03/31/17	252	$	46.27
Granted 04/01/17- 06/30/17	23	$	50.86
Granted 07/01/17- 09/30/17	-	$	-
Vested	(289)	$	37.64
Forfeited/cancelled	(2)	$	20.69
Non-vested at September 30, 2017	540	$	44.67

(In thousands, except per share amounts)	Three-Months Ended September 30,				Percentage Change	Nine-Months Ended September 30,				Percentage Change
	2017		2016		17 vs. 16	2017		2016		17 vs. 16
Net sales1	$	909,476	$	787,954	15.4%	$	2,558,690	$	2,295,628	11.5%
Cost of sales	339,767		284,979		19.2%	924,610		851,741		8.6%
Gross profit*1	569,709		502,975		13.3%	1,634,080		1,443,887		13.2%

Gross profit as a percentage of net sales1	62.6%		63.8%			63.9%		62.9%

Operating expenses2	252,337		212,600		18.7%	702,405		610,277		15.1%

Operating expenses as a percentage of net sales	27.7%		27.0%			27.5%		26.6%

Operating income1,2	317,372		290,375		9.3%	931,675		833,610		11.8%
Operating income as a percentage of net sales	34.9%		36.9%			36.4%		36.3%

Interest and other income (expense), net	3,996		(1,037)		(485.3%)	2,103		(651)		(423.0%)

Income before provision for income taxes1,2	321,368		289,338		11.1%	933,778		832,959		12.1%

Provision for income taxes	102,624		97,695		5.0%	314,422		293,221		7.2%

Income taxes as a percentage of income before taxes	31.9%		33.8%			33.7%		35.2%

Net income1,2	$	218,744	$	191,643	14.1%	$	619,356	$	539,738	14.8%
Net income as a percentage of net sales	24.1%		24.3%			24.2%		23.5%

Net income per common share:
Basic	$	0.39	$	0.34	14.8%	$	1.09	$	0.91	20.1%
Diluted	$	0.38	$	0.33	15.1%	$	1.07	$	0.89	20.4%

Case sales (in thousands)
(in 192-ounce case equivalents)	96,184		82,767		16.2%	273,409		242,994		12.5%

(In thousands, except average	Three-Months Ended				Nine-Months Ended
net sales per case)	September 30,				September 30,
	2017		2016		2017		2016
Net sales1	$	909,476	$	787,954	$	2,558,690	$	2,295,628
Less: AFF third-party sales	(5,200)		(5,686)		(16,914)		(12,127)
Adjusted net sales2	$	904,276	$	782,268	$	2,541,776	$	2,283,501
Case sales by segment:
Monster Energy® Drinks	78,330		66,870		220,433		192,887
Strategic Brands	17,854		15,897		52,976		50,107
Other2	-		-		-		-
Total case sales	96,184		82,767		273,409		242,994
Average net sales per case	$	9.40	$	9.45	$	9.30	$	9.40

Period	Total Number of Shares Purchased	Average Price per Share¹		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	Maximum Number (or Approximate Dollar Value) of Shares that May Yet Be Purchased Under the Plans or Programs (In thousands)²
Jul 1 - Jul 31	-	$	-	-	$	500,000
Aug 1 - Aug 31	902,683	$	54.53	902,683	$	450,760
Sept 1 - Sept 30	3,629,075	$	55.00	4,531,758	$	251,107
Total	4,531,758