UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

QuarterlyReport Pursuant to Section 13 or 15(d)

of the Securities Exchange Act of 1934

For the quarterly period ended ~~September 30, 2017~~March 31, 2023

Commission File Number 001-18761

MONSTER BEVERAGE CORPORATION

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



Delaware	~~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 __

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 filer o☐
Non-accelerated filer ☐				Smaller reporting company ☐
~~Non-accelerated filer~~ o ~~(Do not check if smaller reporting company)~~				~~Smaller reporting~~Emerging growth company o☐

~~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~~1,046,711,932 shares of common stock, par value $0.005 per share, outstanding as of ~~October 26, 2017.~~April 28, 2023.

Table of Contents

MONSTER BEVERAGE CORPORATION AND SUBSIDIARIES

~~SEPTEMBER 30, 2017~~MARCH 31, 2023

INDEX


Part I.	FINANCIAL INFORMATION		Page No.

Item 1.	Condensed Consolidated Financial Statements (Unaudited)

	Condensed Consolidated Balance Sheets as of ~~September 30, 2017~~March 31, 2023 and December 31, ~~2016~~2022		3

	Condensed Consolidated Statements of Income for the ~~Three-~~Three-Months Ended March 31, 2023 and ~~Nine-Months Ended September 30, 2017 and 2016~~2022		4

	CondensedConsolidatedStatementsofComprehensiveIncomefor the ~~Three-~~ Three-MonthsEndedMarch 31, 2023and ~~Nine-Months Ended September 30, 2017 and 2016~~2022		5

	Condensed Consolidated Statements of Stockholders’ Equity for the Three-Months Ended March 31, 2023 and 2022		6

	Condensed Consolidated Statements of Cash Flows for the ~~Nine-Months~~Three-Months Ended ~~September 30, 2017~~March 31, 2023 and ~~2016~~2022	6	7

	Notes to Condensed Consolidated Financial Statements	8	9

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	28	32

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	46

~~Item 4.~~	~~Controls and Procedures~~	47

~~Part II.~~Item 4.	~~OTHER INFORMATION~~Controls and Procedures

~~Item 1.~~	~~Legal Proceedings~~	47

~~Item 1A.~~Part II.	~~Risk Factors~~OTHER INFORMATION	47

Item 2.1.	Legal Proceedings		48

Item 1A.	Risk Factors		48

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

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

Item 4.3.	~~Mine Safety Disclosures~~Defaults Upon Senior Securities		48

Item 5.4.	~~Other Information~~Mine Safety Disclosures		48

Item 6.5.	~~Exhibits~~Other Information		48

Item 6.	~~Signatures~~Exhibits		49

	Signatures		50

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, 2023 AND DECEMBER 31, ~~2016~~2022

(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~~


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

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

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

DEFERRED REVENUE		219,764		223,800

OTHER LIABILITIES		41,727		42,286

COMMITMENTS AND CONTINGENCIES (Note 11)

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

¹Stock Split - On February 28, 2023, the Company announced a two-for-one stock split of its common stock to be effected in the form of a 100% stock dividend. The stock dividend was issued on March 27, 2023 (the “Stock Split”). The accompanying ~~notes to~~ condensed consolidated financial ~~statements.~~

~~MONSTER BEVERAGE CORPORATION AND SUBSIDIARIES~~statements and notes thereto have been retroactively updated to reflect the Stock Split. See Note 1 for additional information.

~~CONDENSED CONSOLIDATED STATEMENTS OF INCOME~~

~~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, 2023 AND ~~NINE-MONTHS ENDED SEPTEMBER 30, 2017 AND 2016~~2022

~~(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,
	2023		2022

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

COST OF SALES		801,081		741,907

GROSS PROFIT		897,849		776,667

OPERATING EXPENSES		412,785		377,178

OPERATING INCOME		485,064		399,489

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

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

PROVISION FOR INCOME TAXES		100,116		97,986

NET INCOME	$	397,444	$	294,203

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

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

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

See accompanying notes to condensed consolidated financial statements.

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, 2023 AND ~~2016~~2022

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

See accompanying notes to condensed consolidated financial statements.

Table of Contents

MONSTER BEVERAGE CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

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

(In Thousands) (Unaudited)



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



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

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

See accompanying notes to condensed consolidated financial statements.

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, 2023 AND ~~2016~~2022

(In Thousands) (Unaudited) ~~(Continued)~~

~~SUPPLEMENTAL DISCLOSURE OF NON-CASH ITEMS~~


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

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

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

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

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

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

~~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 and 2016 were $6.0 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 million, respectively, related to additions to other intangible assets.~~

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

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, 2023 AND 2022

(In Thousands) (Unaudited) (Continued)

SUPPLEMENTAL DISCLOSURE OF NON-CASH ITEMS

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

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

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

See accompanying notes to condensed consolidated financial statements.

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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”)~~2022 for a summary of significant accounting policies utilized by the Company and its consolidated subsidiaries and other disclosures, which should be read in conjunction with this Quarterly Report on Form 10-Q (“Form 10-Q”).

The Company’s condensed consolidated financial statements included in this Form 10-Q have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and Securities and Exchange Commission (“SEC”) rules and regulations applicable to interim financial reporting. They do not include all the information and footnote disclosures normally included in annual financial statements prepared in accordance with GAAP. The information set forth in these interim condensed consolidated financial statements for the ~~three-~~three-months ended March 31, 2023 and ~~nine-months ended September 30, 2017 and 2016,~~2022, respectively, is unaudited and reflects all adjustments, which include only normal recurring adjustments and which in the opinion of management are necessary to make the interim condensed consolidated financial statements not misleading. Results of operations for periods covered by this report may not necessarily be indicative of results of operations for the full year.

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

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

2.~~RECENT ACCOUNTING PRONOUNCEMENTS~~

~~In May 2017,~~Stock Split – On February 28, 2023, the ~~Financial Accounting Standards Board~~Company announced a two-for-one stock split of the Company’s common stock to be effected in the form of a 100% stock dividend. The common stock dividend was issued on March 27, 2023 (the ~~“FASB”~~“Stock Split”) ~~issued Accounting Standards Update (“ASU”) No. 2017-09, “Compensation–~~and the Company’s common stock began trading at the split adjusted price on March 28, 2023. Accordingly, all per share amounts, average common stock outstanding, common stock outstanding, common stock repurchased and equity-based compensation presented in the condensed consolidated financial statements and notes have been adjusted retroactively, where applicable, to reflect the Stock ~~Compensation (Topic 718): Scope of Modification Accounting,” clarifying when a change~~Split. Stockholders’ equity has been retroactively adjusted, where applicable, to give effect to the ~~terms or conditions of a share-based payment award must be accounted~~Stock Split for ~~as a modification. The new guidance requires modification accounting if~~all periods presented by reclassifying the ~~fair~~par value ~~vesting condition or the classification~~ of the ~~award is not~~additional shares issued in connection with the ~~same immediately before~~Stock Split to Common Stock from Retained Earnings and ~~after a change to~~Additional Paid-in Capital.

Recent Accounting Pronouncements

There have been no changes in recently issued or adopted accounting pronouncements that would materially impact the ~~terms and conditions of the award. The new guidance is effective~~Company from those disclosed in our Annual Report on Form 10-K for the ~~Company on a prospective basis beginning on January 1, 2018, with early adoption permitted.~~ ~~The Company is currently evaluating the impact~~fiscal year ended December 31, 2022.

Table 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)

2.	REVENUE RECOGNITION

~~In October 2016, the FASB issued ASU No. 2016-16, “Income Taxes (Topic 740): Intra-Entity Transfers of Assets Other Than Inventory”,~~Revenues are accounted for 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,accordance 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 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,~~Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 606, “Revenue from Contracts with ~~Customers (Topic 606)”~~Consumers”. The Company has four operating and reportable segments: (i) Monster Energy® Drinks segment (“Monster Energy® Drinks”), which ~~supersedes previous~~is primarily comprised of the Company’s Monster Energy® drinks, Reign Total Body Fuel® high performance energy drinks, Monster® Tour Water^TM and Reign Storm® total wellness energy drinks, (ii) Strategic Brands segment (“Strategic Brands”), which is primarily comprised of the various energy drink brands acquired from The Coca-Cola Company (“TCCC”) in 2015 as well as the Company’s affordable energy brands, (iii) Alcohol Brands segment (“Alcohol Brands”), which is primarily comprised of the various craft beers and hard seltzers purchased as part of the acquisition of CANarchy Craft Brewery Collective LLC (“CANarchy”) on February 17, 2022 (the “CANarchy Transaction”) as well as The Beast Unleashed^TM flavored malt beverages (“FMBs”) and (iv) Other segment (“Other”), which is comprised of certain products sold by American Fruits and Flavors, LLC, a wholly-owned subsidiary of the Company, to independent third-party customers (the “AFF Third-Party Products”).

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

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

The Company’s Alcohol Brands segment primarily generates operating revenues by selling kegged and ready-to-drink canned beers, hard seltzers and FMBs primarily to beer distributors in the United States.

The majority of the Company’s revenue ~~recognition guidance. ASU No. 2014-09 requires that~~is recognized when it satisfies a ~~company recognize revenue at an amount that reflects the consideration to which the company expects to be entitled in exchange for~~single performance obligation by transferring ~~goods or services~~control of its products to a customer. ~~In applying~~Control is generally transferred when the ~~new guidance, a company will (i) identify~~Company’s products are either shipped or delivered based on the ~~contract(s) with a customer; (ii) identify~~terms contained within 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 deferralunderlying contracts or agreements. Certain of the ~~effective date. This new guidance is effective for the Company beginning January 1, 2018 and can be adopted using either~~Company’s bottlers/distributors may also perform 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 toseparate function as a ~~stage where there is sufficient information for a preliminary position of the impact~~co-packer on the Company’s ~~consolidated financial statements. Therefore,~~behalf. In such cases, control of the Company’s products passes to such bottlers/distributors when they notify the Company ~~is unable at this time to provide (i) qualitative financial statement disclosures~~that they have taken possession or transferred the relevant portion 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.Company’s finished goods. The Company’s ~~expects~~general payment terms are short-term in duration. The Company does not have significant financing components or payment terms. The Company did not have any material unsatisfied performance obligations as of March 31, 2023 and December 31, 2022.

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

Distribution expenses to ~~complete its evaluation by December 15, 2017.~~transport the Company’s products, where applicable, and warehousing expense after manufacture are accounted for within operating expenses.

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

●

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

●

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

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

●

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

●

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

●

discounted or free products;

●

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

●

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

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

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


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

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, 2023, the Company had $264.2 million of deferred revenue, which is included in current and long-term deferred revenue in the Company’s condensed consolidated balance sheet. As of December 31, 2022, the Company had $267.1 million of deferred revenue, which is included in current and long-term deferred revenue in the Company’s condensed consolidated balance sheet. During the three-months ended March 31, 2023 and 2022, $9.9 million and $10.0 million, respectively, of deferred revenue was recognized in net sales. See Note 10.

LEASES

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

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

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

The Company’s leases have remaining lease terms of less than one year to 11 years, some of which include options to extend the leases for up to five years, and some of which include options to terminate the leases within one year. The Company has elected not to recognize ROU assets and lease liabilities for short-term operating leases that have a term of 12 months or less.

The components of lease cost were comprised of the following:


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

Short-term lease cost		979		929

Variable lease cost		215		183

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

Total lease cost	$	3,798	$	2,936

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

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

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


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


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

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


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


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

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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, 2023 and December 31, 2022 were as follows:


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


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

The following table reconciles the undiscounted future lease payments for operating and finance leases to the operating and finance leases recorded in the Company’s condensed consolidated balance sheet at March 31, 2023:


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

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

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MONSTER BEVERAGE CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

4.	INVESTMENTS

The following table summarizes the Company’s investments at:

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, 2023													Cost		Gains		Losses		Value		Months		Months
Available-for-sale
Short-term:
Commercial paper	$	66,344	$	-	$	-	$	66,344	$	-	$	-	$	296,708	$	1	$	1	$	296,708	$	1	$	—
Certificates of deposit	50,677		-		-		50,677		-		-			12,630		—		—		12,630		—		—
Municipal securities	402,062		41		126		401,977		126		-			129,779		3		208		129,574		208		—
U.S. government agency securities	53,342		1		28		53,315		28		-			129,605		35		332		129,308		332		—
U.S. Treasuries	11,982		-		1		11,981		1		-
Variable rate demand notes	46,054		-		-		46,054		-		-
U.S. treasuries														744,403		156		2,180		742,379		2,180		—
Corporate bonds														72,536		15		122		72,429		122		—
Long-term:
Municipal securities	2,010		-		3		2,007		3		-
U.S. government agency securities	5,001		-		5		4,996		5		-			10,432		7		9		10,430		9		—
U.S. treasuries														28,996		9		34		28,971		34		—
Corporate bonds														1,753		—		2		1,751		2		—
Total	$	637,472	$	42	$	163	$	637,351	$	163	$	-	$	1,426,842	$	226	$	2,888	$	1,424,180	$	2,888	$	—

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

During the ~~three-~~three-months ended March 31, 2023 and ~~nine-months ended September 30, 2017 and 2016,~~2022, realized gains or losses recognized on the sale of investments were not significant.

The Company’s investments at ~~September 30, 2017~~March 31, 2023 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”)~~2022 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, 2023				December 31, 2022
									Amortized Cost		Fair Value		Amortized Cost		Fair Value
Less than 1 year:
Commercial paper	$	66,344	$	66,344	$	40,382	$	40,382	$	296,708	$	296,708	$	197,712	$	197,710
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			129,779		129,574		211,791		211,239
U.S. government agency securities	5,001		4,996		-		-			129,605		129,308		109,697		108,985
Certificates of deposit										12,630		12,630		10,078		10,078
U.S. treasuries										744,403		742,379		838,825		834,302
Corporate bonds										72,536		72,429		—		—
Due 1 -10 years:
U.S. treasuries										28,996		28,971		53,215		53,164
U.S. government agency securities										10,432		10,430		2,016		2,013
Variable rate demand notes	6,664		6,664		3,917		3,917			—		—		4,862		4,862
Corporate bonds										1,753		1,751		—		—
Due 11 - 20 years:
Variable rate demand notes	26,016		26,016		6,003		6,003			—		—		1,404		1,404
Due 21 - 30 years:
Variable rate demand notes	13,374		13,374		4,003		4,003
Total	$	637,472	$	637,351	$	223,144	$	222,948	$	1,426,842	$	1,424,180	$	1,429,600	$	1,423,757

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

5.	FAIR VALUE OF CERTAIN FINANCIAL ASSETS AND LIABILITIES

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

●

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

●

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

●

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

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

Table of Contents

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, 2023											Level 1		Level 2		Level 3		Total
Cash	$	330,758	$	-		$	-	$	330,758		$	886,785	$	—	$	—	$	886,785
Money market funds	69,273		-			-		69,273				713,009		—		—		713,009
Certificates of deposit	-		56,698			-		56,698				—		41,050		—		41,050
Commercial paper	-		81,708			-		81,708				—		310,774		—		310,774
Variable rate demand notes	-		46,054			-		46,054
Corporate bonds												—		74,180		—		74,180
Municipal securities	-		423,159			-		423,159				—		129,574		—		129,574
U.S. government agency securities	-		83,279			-		83,279				—		151,678		—		151,678
U.S. Treasuries	-		11,981			-		11,981
U.S. treasuries												—		789,790		—		789,790
Foreign currency derivatives	-		(339		)	-		(339		)		—		77		—		77
Total	$	400,031	$	702,540		$	-	$	1,102,571		$	1,599,794	$	1,497,123	$	—	$	3,096,917


Amounts included in:
Cash and cash equivalents	$	400,031	$	65,528		$	-	$	465,559		$	1,599,794	$	72,866	$	—	$	1,672,660
Short-term investments	-		630,348			-		630,348				—		1,383,028		—		1,383,028
Accounts receivable, net	-		174			-		174				—		382		—		382
Investments	-		7,003			-		7,003				—		41,152		—		41,152
Accrued liabilities	-		(513		)	-		(513		)		—		(305)		—		(305)
Total	$	400,031	$	702,540		$	-	$	1,102,571		$	1,599,794	$	1,497,123	$	—	$	3,096,917

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

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

All of the Company’s short-term and long-term investments are classified within Level 1 or Level 2 of the fair value hierarchy. The Company’s valuation of its Level 1 investments ~~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 no transfers between Level 1 and Level 2 measurements during the ~~nine-months~~three-months ended ~~September 30, 2017~~March 31, 2023, or during the ~~year ended~~year-ended December 31, ~~2016,~~2022, 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~~

6.	DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES

The Company is exposed to foreign currency exchange rate risks related primarily to its foreign business operations. During the ~~nine-months~~three-months ended ~~September 30, 2017~~March 31, 2023 and the ~~year ended~~year-ended December 31, ~~2016,~~2022, the Company entered into forward currency exchange contracts with financial institutions to create an economic hedge to specifically manage a portion of the foreign exchange risk exposure associated with certain consolidated subsidiaries’ non-functional currency denominated assets and liabilities. All foreign currency exchange contracts of the Company that were outstanding as of ~~September 30, 2017~~March 31, 2023 have terms of one month or less. The Company does not enter into forward currency exchange contracts for speculation or trading purposes.

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

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

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


March 31, 2023						March 31, 2023
Derivatives not designated as
hedging instruments under							Notional		Fair
ASC 815							Amount		Value		Balance Sheet Location
Assets:
Foreign currency exchange contracts:
Receive 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 CAD/pay USD							$	44,220	$	168	Accounts receivable, net
Receive USD/pay CLP	4,316		12		Accounts receivable, net			56,610		159	Accounts receivable, net


Receive USD/pay COP								15,493		37	Accounts receivable, net
Receive RSD/pay USD								4,560		18	Accounts receivable, net

Liabilities:
Foreign currency exchange contracts:
Receive USD/pay EUR	$	112,406	$	(434)	Accrued liabilities		$	48,377	$	(105)	Accrued liabilities
Receive USD/pay AUD	21,644		(1)		Accrued liabilities
Receive CAD/pay USD	11,269		(38)		Accrued liabilities
Receive USD/pay ZAR								4,117		(97)	Accrued liabilities
Receive USD/pay NZD								6,906		(32)	Accrued liabilities
Receive USD/pay CNY								18,642		(31)	Accrued liabilities
Receive USD/pay GBP								14,292		(24)	Accrued liabilities
Receive SGD/pay USD	3,770		(8)		Accrued liabilities			24,977		(10)	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
Receive AUD/pay USD								2,884		(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, 2016
Derivatives not designated as hedging instruments under FASB ASC 815-20	Notional Amount		Fair Value		Balance Sheet Location


December 31, 2022						December 31, 2022
Derivatives not designated as
hedging instruments under							Notional		Fair
ASC 815							Amount		Value		Balance Sheet Location
Assets:
Foreign currency exchange contracts:
Receive SGD/pay USD							$	15,883	$	398	Accounts receivable, net
Receive CAD/pay USD	$	22,314	$	173	Accounts receivable, net			34,467		106	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 MXN								12,430		88	Accounts receivable, net
Receive USD/pay GBP								43,551		118	Accounts receivable, net
Receive RSD/pay USD								3,513		112	Accounts receivable, net
Receive GBP/pay USD								34,716		100	Accounts receivable, net
Receive GBP/pay USD								4,321		31	Accounts receivable, net
Receive USD/pay COP	2,330		2		Accounts receivable, net			11,570		12	Accounts receivable, net



Liabilities:
Foreign currency exchange contracts:
Receive USD/pay GBP	$	7,718	$	(57)	Accrued liabilities
Receive USD/pay CLP							$	43,071	$	(2,549)	Accrued liabilities
Receive USD/pay EUR	29,621		(325)		Accrued liabilities			40,592		(1,377)	Accrued liabilities
Receive USD/pay CNY								12,460		(362)	Accrued liabilities
Receive USD/pay EUR								34,714		(295)	Accrued liabilities
Receive USD/pay NZD								4,093		(91)	Accrued liabilities
Receive USD/pay AUD	15,135		(74)		Accrued liabilities			1,271		(23)	Accrued liabilities
Receive USD/pay ZAR	20,405		(296)		Accrued liabilities			3,124		(1)	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 gains (losses) ~~gains~~ on derivative instruments in the condensed consolidated statements of income were as follows:

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

Amount of gain (loss)

recognized in income on

derivatives

Three-months ended

Derivatives not designated as

Location of gain (loss)

hedging instruments under

recognized in income on

March 31,

ASC 815

derivatives

2023

2022

Foreign currency exchange contracts

Interest and other income (expense), net

(2,172)

(882)

Interest and other income (expense), net

(7,852)

(4,019)

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)

7.	INVENTORIES

Inventories consist of the following at:


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

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~~

8.	PROPERTY AND EQUIPMENT, NET

Property and equipment consist of the following at:

	September 30, 2017		December 31, 2016

					March 31,		December 31,
					2023		2022
Land	$	47,373	$	46,596	$	139,922	$	139,798
Leasehold improvements	4,121		2,687			31,753		31,327
Furniture and fixtures	4,490		3,635			9,335		9,286
Office and computer equipment	13,702		11,701			22,532		22,386
Computer software	3,238		3,274			5,310		5,906
Equipment	143,435		114,230			255,991		244,739
Buildings	104,720		69,547			164,821		163,885
Vehicles	36,876		31,582			51,675		49,175
	357,955		283,252
Assets under construction						111,283		83,553
						792,622		750,055
Less: accumulated depreciation and amortization	(132,534)		(109,909)			(246,700)		(233,158)
	$	225,421	$	173,343
					$	545,922	$	516,897

Total depreciation and amortization expense ~~recorded~~ was ~~$9.4~~$14.8 million and ~~$7.5~~$13.1 million for the three-months ended ~~September 30, 2017~~March 31, 2023 and ~~2016,~~2022, 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)~~

8.9.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, 2023 and 2022 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, 2022	$	693,644	$	637,999	$	86,298	$	—	$	1,417,941
Acquisitions		—		—		—		—		—
Balance at March 31, 2023	$	693,644	$	637,999	$	86,298	$	—	$	1,417,941


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

Intangible assets consist of the following at:

	September 30, 2017		December 31, 2016

					March 31,		December 31,
					2023		2022
Amortizing intangibles	$	71,396	$	71,290	$	121,378	$	121,378
Accumulated amortization	(23,421)		(14,535)			(70,800)		(68,790)
	47,975		56,755
						50,578		52,588
Non-amortizing intangibles	985,506		975,880			1,172,020		1,167,822
	$	1,033,481	$	1,032,635
					$	1,222,598	$	1,220,410

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~~$2.0 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$1.5 million for the three-months ended ~~September 30, 2017~~March 31, 2023 and ~~2016,~~2022, 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, 2023:


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

10.	DISTRIBUTION AGREEMENTS

In the normal course of business, amounts received pursuant to new and/or amended distribution agreements entered into with certain bottlers/distributors, relating to the costs associated with terminating agreements with the Company’s prior distributors, or at the inception of certain sales/marketing programs are accounted for as deferred revenue and are recognized as revenue ratably over the anticipated life of the respective ~~distribution~~ agreement, generally 20 ~~years.~~years or program duration, as the case may be. Revenue recognized was ~~$11.4~~$9.9 million and ~~$8.4~~$10.0 million for the three-months ended ~~September 30, 2017~~March 31, 2023 and ~~2016,~~2022, 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.COMMITMENTS AND CONTINGENCIES~~

11.
COMMITMENTS AND CONTINGENCIES

The Company had purchase commitments aggregating approximately ~~$28.1~~$336.8 million at ~~September 30, 2017,~~March 31, 2023, which represented commitments made by the Company and its subsidiaries to various suppliers of raw materials for the production of its products. These obligations vary in terms, but are generally satisfied within one year.

The Company had contractual obligations aggregating approximately ~~$126.0~~$380.6 million at ~~September 30, 2017,~~March 31, 2023, 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, 2023, 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~~March 31, 2023, $1.1 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, 2023, $0.3 million of loss contingencies were included in the Company’s ~~condensed~~accompanying consolidated balance ~~sheet includes accrued~~sheet. As of December 31, 2022, no loss contingencies were included in the Company’s accompanying consolidated balance sheet.

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MONSTER BEVERAGE CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

On September 29, 2022, a jury in the U.S. District Court for the Central District of California (the “District Court”) awarded Monster Energy Company (“MEC”) approximately ~~$4.7 million.~~$293 million in damages in its false advertising and trade secrets case against Vital Pharmaceuticals, Inc. (“VPX”), the maker of Bang Energy. The jury found VPX and its former chief executive officer John H. Owoc to have falsely advertised the “Super Creatine” ingredient of Bang Energy and to have acted willfully and deliberately in violating the federal Lanham Act. The jury also found that VPX stole trade secrets and interfered with MEC’s contracts over shelf space with certain key vendors. On April 12, 2023, the District Court granted Monster’s motion for a permanent injunction which, among other things, enjoins VPX, Mr. Owoc, and others working in concert with them from falsely or deceptively claiming that BANG or any other beverages contain creatine or a form of creatine, requires them to remove all such advertising within 60 days, and requires VPX and Mr. Owoc to issue corrective statements to consumers and non-consumer partners, including retailers and distributors. The parties have completed briefing the remaining post-verdict issues, including MEC’s request for enhanced and punitive damages.

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

~~11.ACCUMULATED OTHER COMPREHENSIVE LOSS~~

On October 10, 2022, VPX, along with certain of its domestic subsidiaries and affiliates, filed for protection under Chapter 11 of the Bankruptcy Code in the Southern District of Florida. Due to such ongoing proceedings, VPX’s appeal of the District Court’s final judgment confirming the final arbitration award is stayed. While reserving all rights to appeal, VPX made its first royalty payment of $3.6 million on February 14, 2023, which is for sales of Bang Energy drink and other Bang-branded products from October 10, 2022 through December 31, 2022. This payment is subject to potential claw back if, among other things, the judgment and final arbitration award are overturned on appeal or VPX becomes administratively insolvent. In addition, per ASC 450 “Contingencies”, the Company will not recognize the September 2022 jury award or the April 2022 arbitration award until the awards are realized or realizable. As of May 5, 2023, the proceedings have yet to progress to a stage where there is sufficient information for an accurate timeline of when the awards, including any royalty payments received, will be realized or realizable, if at all.

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MONSTER BEVERAGE CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

12.	ACCUMULATED OTHER COMPREHENSIVE LOSS

Changes in accumulated other comprehensive loss by component, after tax, for the ~~nine-months~~three-months ended ~~September 30, 2017~~March 31, 2023 and 2022 are as follows:


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


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

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

13.	TREASURY STOCK

~~12.TREASURY STOCK~~

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

On ~~February 28, 2017,~~June 14, 2022, 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~~“June 2022 Repurchase Plan”). During the three-months ended ~~September 30, 2017,~~March 31, 2023, no shares were repurchased under the ~~Company purchased 4.5~~June 2022 Repurchase Plan. As of May 5, 2023, $182.8 million ~~shares~~remained available for repurchase under the June 2022 Repurchase Plan.

On November 2, 2022, the Company’s Board of Directors authorized a share repurchase program for the purchase of up to an additional $500.0 million of the Company’s outstanding common stock ~~at an average purchase price~~(the “November 2022 Repurchase Plan”). During the three-months ended March 31, 2023, no shares were repurchased under the November 2022 Repurchase Plan. As of ~~$54.91 per share,~~May 5, 2023, $500.0 million remained available for ~~a total~~repurchase under the November 2022 Repurchase Plan.

The aggregate amount of ~~$248.8~~the Company’s outstanding common stock that remains available for repurchase under all previously authorized repurchase plans is $682.8 million ~~(excluding broker commissions), under the February 2017 Repurchase Plan.~~

as of May 5, 2023.

During the three-months ended ~~September 30, 2017, 892~~March 31, 2023, 1.7 million shares of common stock were purchased from employees in lieu of cash payments for options exercised or withholding taxes due for a total amount of ~~$0.05~~$90.4 million. While such purchases are considered common stock repurchases, they are not counted as purchases against the Company’s authorized share repurchase programs. Such shares are included in common stock in treasury in the accompanying ~~condensed~~ consolidated balance sheet at ~~September 30, 2017.~~March 31, 2023.

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MONSTER BEVERAGE CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

~~13.STOCK-BASED COMPENSATION~~

14.	STOCK-BASED COMPENSATION

The Company has two stock-based compensation plans under which shares were available for grant at ~~September 30, 2017:~~March 31, 2023: (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~~$16.1 million and ~~$12.1~~$16.3 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, 2023 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 2016,2022, 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, 2023 and ~~2016~~2022 was ~~$2.5~~$25.9 million and $3.5 million, respectively. The excess tax benefit for tax deductions from non-qualified stock option exercises, disqualifying dispositions 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$0.4 million, respectively.

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 material in the aggregate.

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, 2023 were granted at prices based on the fair value of the Company’s common stock on the date of grant. The Company records compensation expense for ~~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,
					2023		2022
Dividend yield	0.0%	0.0%	0.0%	0.0%	0.0	%	0.0	%
Expected volatility	35.3%	36.3%	36.6%	36.1%	27.6	%	27.7	%
Risk-free interest rate	1.7%	1.1%	2.1%	1.4%	3.7	%	2.1	%
Expected term	5.9 years	6.4 years	6.1 years	6.3 years	6.3 years		6.0 years

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

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

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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 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
	Shares (in	Price Per		Term (in	Aggregate
Options	thousands)	Share		years)	Intrinsic Value
Outstanding at January 1, 2023	29,710	$	26.38	5.0	$	724,651
Granted 01/01/23 - 03/31/23	3,962	$	50.82
Exercised	(3,129)	$	11.62
Cancelled or forfeited	(73)	$	37.39
Outstanding at March 31, 2023	30,470	$	31.04	5.8	$	699,802
Vested and expected to vest in the future at March 31, 2023	29,381	$	30.58	5.6	$	688,532
Exercisable at March 31, 2023	19,309	$	24.79	4.0	$	564,190

The weighted-average grant-date fair value of options granted during the three-months ended ~~September 30, 2017~~March 31, 2023 and ~~2016~~2022 was ~~$20.61~~$18.23 per share and ~~$19.74~~$11.61 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, 2023 and ~~2016~~2022 was ~~$12.5~~$131.0 million and ~~$9.1~~$4.9 million, respectively. ~~The total intrinsic value of options exercised during the nine-months ended September 30, 2017 and 2016 was $53.4 million and $30.6 million, respectively.~~

~~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, 2023 and ~~2016~~2022 was ~~approximately $7.7~~$36.3 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~~$4.5 million, respectively.

At ~~September 30, 2017,~~March 31, 2023, there was ~~$91.8~~$125.2 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~~3.6 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, 2023	2,026	$	36.27
Granted 01/01/23 - 03/31/23¹	523	$	48.49
Vested	(576)	$	32.87
Forfeited/cancelled	(4)	$	32.80
Non-vested at March 31, 2023	1,969	$	40.52

~~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.

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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 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, 2023 and ~~2016~~2022 was ~~$46.65~~$50.83 and $36.73 per share, ~~and $44.71 per share,~~ respectively.

As of ~~September 30, 2017, 0.5~~March 31, 2023, 1.8 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, 2023, total unrecognized compensation expense relating to non-vested restricted stock ~~awards~~units and ~~non-vested restricted stock~~performance share units was ~~$17.3~~$53.6 million, which is expected to be recognized over a weighted-average period of ~~1.7~~1.9 years.

Other Share-Based Awards

The Company has granted other share-based awards to certain employees that are payable in cash. These awards are classified as liabilities and are valued based on the fair value of the award at the grant date and are remeasured at each reporting date until settlement, with compensation expense being recognized in proportion to the completed requisite service period up until date of settlement. At March 31, 2023, other share-based awards outstanding included grants that vest over three years payable in the first quarters of 2024, 2025 and 2026.

At March 31, 2023, there was $0.3 million of total unrecognized compensation expense related to nonvested other share-based awards granted to employees under the Company’s stock-based compensation plans. That cost is expected to be recognized over a weighted-average period of 1.4 years.

~~MONSTER BEVERAGE CORPORATION AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

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

~~14.INCOME TAXES~~

15.
INCOME TAXES

The following is a roll-forward of the Company’s total gross unrecognized tax benefits, not including interest and penalties, for the ~~nine-months~~three-months ended ~~September 30, 2017:~~March 31, 2023:

	~~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~~


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

The Company recognizes accrued interest and penalties related to unrecognized tax benefits in the provision for income taxes in the Company’s condensed consolidated financial statements. As of ~~September 30, 2017,~~March 31, 2023, the Company had approximately ~~$1.2~~$0.6 million in accrued interest and penalties related to unrecognized tax benefits. If the Company were to prevail on all uncertain tax positions, the resultant impact on the Company’s effective tax rate would not be significant. It is expected that any change in the amount of unrecognized tax benefits within the next 12 months will not be significant.

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

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. The Company’s ~~2012~~2019 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~~2018 through ~~2016~~2021 tax years.

Table of Contents

~~15.EARNINGS PER SHARE~~MONSTER BEVERAGE CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

16.	EARNINGS PER SHARE

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

Three-Months Ended

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


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

~~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, 2023 and ~~2016,~~2022, options and awards outstanding totaling ~~5.9~~2.6 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 1.73.2 million shares, respectively, were excluded from the calculations as their effect would have been antidilutive.

17.	SEGMENT INFORMATION

~~16.SEGMENT INFORMATION~~

The Company has ~~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, Monster® Tour Water^TMand ~~Mutant® Super Soda~~Reign Storm® total wellness energy drinks, (ii) Strategic Brands segment, ~~(“Strategic Brands”),~~ which is primarily comprised of the various energy drink brands acquired from ~~The Coca-Cola Company (“TCCC”)~~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 as well as The Beast Unleashed^TM FMBs 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 and gas 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 and gas 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.

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.

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.

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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 net revenues derived from the Company’s reportable segments and other financial information related thereto for the ~~three-~~three-months ended March 31, 2023 and ~~nine-months ended September 30, 2017 and 2016 are~~2022 were as follows:

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

									Three-Months Ended
									March 31,
									2023		2022
Net sales:
Monster Energy® Drinks(1)	$	827,690	$	710,130	$	2,311,521	$	2,075,511
Monster Energy® Drinks¹									$	1,561,669	$	1,404,847
Strategic Brands	76,586		72,138		230,255		207,990			86,357		92,593
Alcohol Brands²										46,290		15,207
Other	5,200		5,686		16,914		12,127			4,614		5,927
Corporate and unallocated	-		-		-		-			—		—
	$	909,476	$	787,954	$	2,558,690	$	2,295,628
									$	1,698,930	$	1,518,574

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

									Three-Months Ended
									March 31,
									2023		2022
Operating Income:
Monster Energy® Drinks(1) (2)	$	333,210	$	308,493	$	968,864	$	874,822
Monster Energy® Drinks¹									$	560,819	$	454,563
Strategic Brands	42,663		40,075		137,945		127,169			51,771		57,195
Alcohol Brands²										(6,883)		(4,953)
Other	1,451		1,186		4,585		1,528			(293)		1,127
Corporate and unallocated	(59,952)		(59,379)		(179,719)		(169,909)			(120,350)		(108,443)
	$	317,372	$	290,375	$	931,675	$	833,610
									$	485,064	$	399,489

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

									Three-Months Ended
									March 31,
									2023		2022
Income before tax:
Monster Energy® Drinks(1) (2)	$	333,065	$	308,612	$	968,716	$	875,024
Monster Energy® Drinks¹									$	561,674	$	455,134
Strategic Brands	42,663		40,073		137,931		127,141			51,788		57,254
Alcohol Brands²										(6,867)		(5,606)
Other	1,451		1,186		4,585		1,528			(293)		1,137
Corporate and unallocated	(55,811)		(60,533)		(177,454)		(170,734)			(108,742)		(115,730)
	$	321,368	$	289,338	$	933,778	$	832,959
									$	497,560	$	392,189

(1)

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

(2)

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


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

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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

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, 2023 include ~~$37.9~~$80.3 million of payroll costs, of which ~~$13.3~~$15.7 million was attributable to stock-based compensation expenses (see Note ~~13,~~14 “Stock-Based Compensation”), as well as ~~$11.9~~$22.1 million attributable to professional service expenses, including accounting and legal costs, and ~~$10.1~~$18.0 million of other operating expenses.

Corporate and unallocated expenses for the three-months ended ~~September 30, 2016~~March 31, 2022 include ~~$33.2~~$68.1 million of payroll costs, of which ~~$12.1~~$16.2 million was attributable to stock-based compensation expenses (see Note ~~13,~~14 “Stock-Based Compensation”), as well as ~~$16.9~~$26.4 million attributable to professional service expenses, including accounting and legal costs, and ~~$9.3~~$13.9 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 accounted for approximately ~~14%~~13% and ~~41%~~12% of the Company’s net sales for the three-months ended ~~September 30, 2017~~March 31, 2023 and ~~2016,~~2022, respectively. ~~The TCCC Subsidiaries~~

Coca-Cola Consolidated, Inc. accounted for approximately 21% and 43% of the Company’s 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 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, LLC accounted for approximately 14%10% and 9% of the Company’s net sales for the three-months ended ~~September 30, 2017~~March 31, 2023 and ~~2016,~~2022, respectively. ~~CCBCC Operations,~~

Reyes Coca-Cola Bottling, LLC accounted for approximately ~~13%~~9% and 8%10% of the Company’s net sales for the ~~nine-months~~three-months ended ~~September 30, 2017~~March 31, 2023 and ~~2016,~~2022, 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~~$622.9 million and ~~$190.8~~$553.4 million for the three-months ended ~~September 30, 2017~~March 31, 2023 and ~~2016,~~2022, respectively. ~~Net~~Such sales ~~to customers outside the United States amounted to $698.9 million~~were approximately 37% and ~~$540.2 million~~36% of net sales for the ~~nine-months~~three-months ended ~~September 30, 2017~~March 31, 2023 and ~~2016,~~2022, respectively.

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

~~17.RELATED PARTY TRANSACTIONS~~


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

18.	RELATED PARTY TRANSACTIONS

TCCC controls approximately ~~18%~~19.5% 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 $15.7 million and $18.4 million for the three-months ended March 31, 2023 and 2022, respectively, and are ~~accounted for~~included as a reduction to ~~revenue~~net sales.

TCCC commissions, based on sales to TCCC independent bottlers/distributors, were $8.8 million and $11.0 million for the three-months ended March 31, 2023 and 2022, respectively, and are ~~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, 2023 and ~~2016~~2022 were ~~$130.7~~$35.1 million and ~~$321.9~~$31.8 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~~

Table 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.Contents

MONSTER BEVERAGE CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

The Company also purchases concentrates from TCCC which are then sold to ~~both~~certain of the ~~TCCC Affiliates and the TCCC Subsidiaries.~~Company’s bottlers/distributors. Concentrate purchases from TCCC were ~~$7.6~~$6.5 million and ~~$6.2~~$8.5 million for the three-months ended ~~September 30, 2017~~March 31, 2023 and ~~2016,~~2022, 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~~$7.4 million and ~~$2.2~~$9.2 million for the three-months ended ~~September 30, 2017~~March 31, 2023 and ~~2016,~~2022, 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~~were as follows at:

	September 30, 2017		December 31, 2016


					March 31,		December 31,
					2023		2022
Accounts receivable, net	$	85,896	$	151,756	$	128,697	$	88,169
TCCC transaction receivable	$	-	$	125,000
Accounts payable	$	(60,350)	$	(41,210)	$	(36,703)	$	(35,467)
Accrued promotional allowances	$	(22,641)	$	(27,056)	$	(10,833)	$	(11,222)
Accrued liabilities					$	(23,569)	$	(14,733)

~~Two directors and officers~~One 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~~both the three-months ended ~~September 30, 2017~~March 31, 2023 and ~~2016~~2022 was $1.1 million.

During the three-months ended March 31, 2022, the Company occasionally chartered a private aircraft that is indirectly owned by Mr. Rodney C. Sacks, Co-Chief Executive Officer and Chairman of the Board of Directors. On certain occasions, Mr. Sacks was accompanied by guests and other Company personnel when using such aircraft for business travel. During the three-months ended March 31, 2022, the Company incurred costs of $0.08 million, an amount the Company believes is commensurate with market rates for comparable travel. No amounts were ~~$0.6 million. Expenses~~ incurred ~~with such company in connection with promotional materials purchased~~by the Company during the ~~nine-months~~three-months ended ~~September 30, 2017~~March 31, 2023.

In December 2018, the Company and ~~2016 were $2.0 million~~a director of the Company entered into a 50-50 partnership that purchased land, and ~~$0.9 million, respectively.~~real property thereon, in Kona, Hawaii for the purpose of producing coffee products. This partnership meets the definition of a Variable Interest Entity (“VIE”) for which the Company has determined that it is the primary beneficiary. Therefore, the Company consolidates the VIE in the accompanying condensed consolidated financial statements. The aggregate carrying values of the VIE’s assets and liabilities, after elimination of any intercompany transactions and balances, as well as the results of operations for all periods presented, are not material to the Company’s condensed consolidated financial statements.

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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, hard seltzers and flavored malt beverages (“FMBs”).

~~Acquisitions and Divestitures~~

Stock Split

On ~~April 1, 2016,~~February 28, 2023, we completed our acquisition of flavor supplier and long-time business partner American Fruits & Flavors (“AFF”), in an asset acquisition that brought our primary flavor supplier in-house, secured the intellectual propertyannounced a two-for-one stock split of our ~~most important flavors~~common stock to be effected in ~~perpetuity~~the form of a 100% stock dividend (the “Stock Split”). The common stock dividend was issued on March 27, 2023 and ~~further enhanced~~ our ~~flavor development~~common stock began trading at the split adjusted price on March 28, 2023. Accordingly, all per share amounts, average common stock outstanding, common stock outstanding, common stock repurchased and ~~global flavor footprint capabilities (the “AFF Transaction”). Pursuant~~equity-based compensation presented in this Form 10-Q have been adjusted retroactively, where applicable, to reflect the ~~terms of the AFF Transaction, we purchased AFF for $688.5 million in cash.~~Stock Split.

Pricing Actions

We accounted for the AFF Transaction in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 805 “Business Combinations”. Inventory purchased under the AFF Transaction was recorded at fair value. Raw material cost savings from the AFF Transaction were approximately $27.7 million and $23.3 millionimplemented a price increase effective September 1, 2022 in the ~~three-months ended September 30, 2017~~United States and ~~2016, respectively. Raw material cost savings from~~implemented price increases at various times in certain international markets during 2022 and the ~~AFF Transaction were approximately $79.7 million and $24.4 million~~first quarter of 2023 (the “Pricing Actions”), all of which positively impacted gross profit margins in the ~~nine-months ended September 30, 2017~~first quarter of 2023.

Gross Profit Margins

In the third 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,fourth quarters of 2022 as well as the ~~inventory acquired in the AFF Transaction which was recorded at fair value, were not recognized through cost of goods sold until the end of the second~~first quarter of ~~2016.~~

~~Distributor Terminations~~

~~In accordance with ASC No. 420 “Exit or Disposal Cost Obligations”,~~2023, we ~~expense distributor termination costs~~experienced an improvement in ~~the period in which the written notification~~our gross profit margins on a quarterly sequential basis. Gross profit as a percentage of ~~termination occurs. We incurred termination costs of $15.9 million and $4.7 million~~net sales for the three-months ended March 31, 2023, December 31, 2022 and September 30, ~~2017~~2022 were 52.8%, 51.8% and ~~2016, respectively, related~~51.3%, respectively. This improvement was primarily attributable to ~~the distribution rights transferred to The Coca-Cola Company’s (“TCCC”) distribution network. We incurred termination~~(i) Pricing Actions, (ii) a reduction in certain freight-in 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.

(iii) decreased aluminum can costs.

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®~~● Punch Monster®	·~~Ultra®~~● Ultra Energy®
·~~Punch~~● Juice Monster®	·●Play® and Power Play® (stylized)
·~~Juice Monster®~~● Monster Hydro® Energy Water	·~~Gladiator®~~● Relentless®
·~~Übermonster®~~● Monster Hydro® Super Sport	·~~Relentless®~~● BPM®
·~~BU®~~● Monster Super Fuel®	·~~Samurai®~~● BU®
·~~Mutant® Super Soda~~● Monster Dragon Tea®	·~~BPM®~~● Gladiator®
·~~Monster Hydro~~TM● Reign Total Body Fuel®	·~~Monster Energy Ultra®~~● Samurai®
·~~Espresso Monster~~TM● Reign Inferno® Thermogenic Fuel	● Live+®
● Reign Storm®	● Predator®
● True North®	● Fury®

Table of Contents

~~Our Monster Energy®~~We also develop, market, sell and distribute craft beers, FMBs and hard seltzers under a number of brands, including Jai Alai® IPA, Florida Man^TM IPA, Dale’s Pale Ale®, Wild Basin^TM Hard Seltzers, Dallas Blonde®, Deep Ellum^TM IPA, Perrin Brewing Company^TM Black Ale, Hop Rising® Double IPA, Wasatch® Apricot Hefeweizen, The Beast Unleashed^TM and a host of other brands.

We also develop, market, sell and distribute still and sparkling waters under the Monster® Tour Water^TM brand ~~energy drinks, which represented 90.5% and 89.8% of our net sales for the three-months ended September 30, 2017 and 2016, respectively, primarily include the following:~~name.

·~~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~~our Monster Energy® drinks, ~~Monster Hydro~~TMReign Total Body Fuel® high performance energy drinks, Monster® Tour Water^TMand ~~Mutant® Super Soda~~Reign Storm® total wellness energy drinks, (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 our 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 our acquisition of CANarchy Craft Brewery Collective LLC (“CANarchy”) on February 17, 2022 (the “CANarchy Transaction”) as well as The Beast Unleashed^TM FMBs and (iv) Other segment (“Other”), which is comprised of certain products sold by ~~AFF~~American Fruits and Flavors LLC (“AFF”), a wholly-owned subsidiary of the Company, to independent third-party customers (the “AFF Third-Party Products”).

During the three-months ended ~~September 30, 2017,~~March 31, 2023, 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, 2023, 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:

●

Burn® Watermelon Zero Sugar

●

Java Monster® Café Latte

●

Monster Energy® Nitro Cosmic Peach^TM

●

Monster Energy® Ultra Strawberry Dreams^TM

●

Monster Energy® Zero Sugar

●

Monster® Reserve Kiwi Strawberry

●

Monster® Tour Water^TM Deep Well Water

●

Monster® Tour Water^TM Sparkling Deep Well Water

●

Nalu® Cassis Lavender

●

Nalu® Strawberry Rhubarb

●

Rehab® Monster® Wild Berry Tea

●

Reign Storm® Harvest Grape

●

Reign Storm® Kiwi Blend

●

Reign Storm® Peach Nectarine

●

Reign Storm® Valencia Orange

●

Relentless® Watermelon Zero Sugar

●

The Beast Unleashed^TM Mean Green^TM

●

The Beast Unleashed^TM Peach Perfect^TM

●

The Beast Unleashed^TM Scary Berries^TM

●

The Beast Unleashed^TM White Haze^TM

●

Ultra Energy® Citrus Peach

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, 2023, 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~~$1.70 billion for the three-months ended ~~September 30, 2017~~March 31, 2023 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~~$52.0 million for the three-months ended ~~September 30, 2017. Net changes in foreign currency exchange rates had a favorable impact on~~March 31, 2023.

The vast majority of our net sales inare derived from our Monster Energy® Drinks segment. Net sales of our Monster Energy® Drinks segment were $1.56 billion for the three-months ended March 31, 2023. Net sales of our Strategic Brands segment ~~of approximately $1.1~~were $86.4 million for the three-months ended ~~September 30, 2017.~~

~~Our~~March 31, 2023. 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 $46.3 million for the three-months ended March 31, 2023. 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 from time to time to maximize their visibility~~Other segment were $4.6 million for the three-months ended March 31, 2023.

Table of Contents

Our Monster Energy® Drinks segment represented 91.9% and ~~identification, wherever they may be placed in stores, which we continue to reevaluate from time to time.~~

92.5% of our net sales for the three-months ended March 31, 2023 and 2022, respectively. Our Strategic Brands segment represented 5.1% and 6.1% of our net sales for the three-months ended March 31, 2023 and 2022, respectively. Our Alcohol Brands Segment represented 2.7% and 1.0% of our net sales for the three-months ended March 31, 2023 and 2022, respectively. Our Other segment represented 0.3% and 0.4% of our net sales for the three-months ended March 31, 2023 and 2022, respectively.

Our growth strategy includes further developing our domestic markets, expanding our international ~~business.~~business and growing our business into 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 $622.9 million for the three-months ended ~~September 30, 2017 and 2016, respectively.~~March 31, 2023, an increase of approximately $69.5 million, or 12.6% higher than net sales to customers outside of the United States of $553.4 million for the three-months ended March 31, 2022. Such sales were approximately ~~29%~~37% and ~~24%~~36% of net sales for the three-months ended ~~September 30, 2017~~March 31, 2023 and ~~2016,~~2022, respectively. Net changes in foreign currency exchange rates had ~~a favorable~~an unfavorable impact on net sales to customers outside of the United States of approximately ~~$0.7~~$52.0 million for the three-months ended ~~September 30, 2017.~~

March 31, 2023. Net sales to customers outside the United States, on a foreign currency adjusted basis, increased 21.9% for the three-months ended March 31, 2023.

Our non-alcohol customers are primarily full service beverage bottlers/distributors, retail grocery and specialty chains, wholesalers, club stores, mass merchandisers, convenience and gas chains, ~~food service~~foodservice customers, value stores, e-commerce retailers and the military. Our alcohol customers are primarily beer distributors who in turn sell to retailers within the alcohol distribution system. Percentages of our gross ~~sales~~billings to our various customer types for the ~~three-~~three-months ended March 31, 2023 and ~~nine-months ended September 30, 2017 and 2016~~2022 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,
	2023		2022
U.S. full service bottlers/distributors	48	%	49	%
International full service bottlers/distributors	38	%	39	%
Club stores and e-commerce retailers	9	%	9	%
Retail grocery, direct convenience, specialty chains and wholesalers	2	%	2	%
Alcohol, value stores and other	3	%	1	%

Our non-alcohol 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%~~Amazon.com, Inc.

Our alcohol customers include J.J. Taylor Distributing, Ben E. Keith, Reyes Beer Division, Sheehan Family Companies, 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. Admiral Beverage.

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 13% and 12% of our net sales for the three-months ended March 31, 2023 and 2022, respectively.

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

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

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Results of Operations

The following table sets forth key statistics for the ~~three-~~three-months ended March 31, 2023 and ~~nine-months ended September 30, 2017 and 2016.~~2022.


	Three-Months Ended						Percentage
(In thousands, except per share amounts)	March 31,						Change
	2023			2022			23 vs. 22
Net sales¹	$	1,698,930		$	1,518,574		11.9	%
Cost of sales		801,081			741,907		8.0	%
Gross profit*¹		897,849			776,667		15.6	%
Gross profit as a percentage of net sales		52.8	%		51.1	%

Operating expenses		412,785			377,178		9.4	%
Operating expenses as a percentage of net sales		24.3	%		24.8	%

Operating income¹		485,064			399,489		21.4	%
Operating income as a percentage of net sales		28.6	%		26.3	%

Interest and other income (expense), net		12,496			(7,300)		(271.2)	%

Income before provision for income taxes¹		497,560			392,189		26.9	%

Provision for income taxes		100,116			97,986		2.2	%

Income taxes as a percentage of income before taxes		20.1	%		25.0	%

Net income	$	397,444		$	294,203		35.1	%
Net income as a percentage of net sales		23.4	%		19.4	%

Net income per common share:
Basic	$	0.38		$	0.28		36.9	%
Diluted	$	0.38		$	0.27		36.6	%

Energy drink case sales (in thousands) (in 192‑ounce case equivalents)		182,444			168,793		8.1	%

(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%

¹Includes ~~$11.4~~$9.9 million and ~~$8.4~~$10.0 million for the three-months ended ~~September 30, 2017~~March 31, 2023 and ~~2016,~~2022, 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~~March 31, 2023 Compared to the Three-Months Ended ~~September 30, 2016.~~March 31, 2022.

Net Sales

Net Sales. Net sales were ~~$909.5 million~~$1.70 billion for the three-months ended ~~September 30, 2017,~~March 31, 2023, an increase of approximately ~~$121.5~~$180.4 million, or ~~15.4%~~11.9% higher than net sales of ~~$788.0 million~~$1.52 billion for the three-months ended ~~September 30, 2016. The increase in net~~March 31, 2022. Net sales increased primarily due to increased worldwide sales by volume of our Monster ~~Energy®~~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 decreasedemand, as well as due to ~~net sales for the three-months ended September 30, 2017.~~

Pricing Actions in certain markets. Net changes in foreign currency exchange rates had an unfavorable impact on net sales ~~in the Monster Energy® Drinks segment~~ of approximately ~~$0.4~~$52.0 million for the three-months ended ~~September 30, 2017.~~March 31, 2023. Net ~~changes in~~sales on a foreign currency ~~exchange rates had a favorable impact on net~~adjusted basis increased 15.3% for the three-months ended March 31, 2023.

Table of Contents

Net sales ~~in the Strategic Brands segment of approximately $1.1~~were $583.7 million and $518.7 million for the three-months ended ~~September 30, 2017.~~

~~Case sales,~~March 31, 2023 and 2022, respectively, in ~~192-ounce case equivalents, were 96.2 million cases for~~EMEA, Asia Pacific, Latin America and 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.

Caribbean.

Net sales for the Monster Energy® Drinks segment were ~~$827.7 million~~$1.56 billion for the three-months ended ~~September 30, 2017,~~March 31, 2023, an increase of approximately ~~$117.6~~$156.8 million, or ~~16.6%~~11.2% higher than net sales of ~~$710.1 million~~$1.40 billion for the three-months ended ~~September 30, 2016.~~

March 31, 2022. 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 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, 2016demand as well as due 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.
Pricing Actions in certain markets. Net changes in foreign currency exchange rates had an unfavorable impact on net sales infor the Monster Energy® Drinks segment of approximately ~~$13.4~~$49.0 million for the ~~nine-months~~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 $2.2 million for the nine-months ended September 30, 2017.
Case sales, in 192-ounce case equivalents, were 273.4 million cases for the nine-months ended September 30, 2017, an increase of approximately 30.4 million cases or 12.5% higher than case sales of 243.0 million cases for the nine-months ended September 30, 2016. The overall average net sales per case (excluding net sales of AFF Third-Party Products of $16.9 million and $12.1 million for the nine-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, which was 1.1% lower than the average net sales per case of $9.40 for the nine-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, 2023. Net sales for the Monster Energy® Drinks segment ~~were $2,311.5 million~~on a foreign currency adjusted basis increased 14.6% for the ~~nine-months~~three-months ended ~~September 30, 2017, an increase of approximately $236.0 million, or 11.4% higher than net sales of $2,075.5 million for the nine-months ended September 30, 2016.~~
March 31, 2023.
Net sales for the Strategic Brands segment were ~~$230.3~~$86.4 million for the ~~nine-months~~three-months ended ~~September 30, 2017,~~March 31, 2023, a decrease of approximately $6.2 million, or 6.7% lower than net sales of $92.6 million for the three-months ended March 31, 2022. Net sales for the Strategic Brands segment decreased primarily due to decreased sales by volume of our NOS® and Full Throttle® brand energy drinks. Net changes in foreign currency exchange rates had an unfavorable impact on net sales of approximately $3.0 million for the Strategic Brands segment for the three-months ended March 31, 2023. Net sales for the Strategic Brands segment on a foreign currency adjusted basis decreased 3.5% for the three-months ended March 31, 2023. Net sales of concentrates within the Strategic Brands segment tend to have more pronounced fluctuations from period to period as compared to net sales of our finished goods within the Monster Energy Drinks® segment.
Net sales for the Alcohol Brands segment were $46.3 million for the three-months ended March 31, 2023, an increase of approximately ~~$22.3~~$31.1 million, or ~~10.7%~~204.4% higher than net sales of ~~$208.0~~$15.2 million for the ~~nine-months~~three-months ended ~~September 30, 2016.~~
March 31, 2022. The comparative 2022 net sales for the Alcohol Brands segment were effectively from February 17, 2022 to March 31, 2022, as we completed the CANarchy Transaction on February 17, 2022. Net sales of The Beast Unleashed^TM FMBs, launched during the 2023 first quarter, were $20.5 million for the three-months ended March 31, 2023.
Net sales for the Other segment were ~~$16.9~~$4.6 million for the ~~nine-months~~three-months ended ~~September 30, 2017,~~March 31, 2023, a decrease of approximately $1.3 million, or 22.2% lower than net sales of $5.9 million for the three-months ended March 31, 2022.
Case sales for our energy drink products, in 192-ounce case equivalents, were 182.4 million cases for the three-months ended March 31, 2023, an increase of approximately ~~$4.8~~13.6 million cases or ~~39.5%~~8.1% higher than case sales of 168.8 million cases for the three-months ended March 31, 2022. The overall average net sales ~~of $12.1 million (effectively from April 1, 2016~~per case increased to ~~September 30, 2016)~~$9.03 for the ~~nine-months~~three-months ended ~~September 30, 2016.~~
~~Gross Profit.~~ ~~Gross profit~~March 31, 2023, which was ~~$1,634.1 million~~1.8% higher than the average net sales per case of $8.87 for the ~~nine-months~~three-months ended ~~September 30, 2017,~~March 31, 2022.
Barrel sales for our craft beers, hard seltzers and FMBs, in 31 U.S. gallon equivalents, were 0.15 million barrels for the three-months ended March 31, 2023, an increase of approximately ~~$190.2~~0.10 million barrels or 224.7% higher than barrel sales of 0.05 million barrels for the three-months ended March 31, 2022.
Gross Profit
Gross profit was $897.8 million for the three-months ended March 31, 2023, an increase of approximately $121.2 million, or ~~13.2%~~15.6% higher than the gross profit of ~~$1,443.9~~$776.7 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, 2022. The increase in gross profit dollars was primarily the result of the ~~$229.5~~$180.4 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~~March31, 2023.
Gross profit as a percentage of net sales increased to 52.8% for the three-months ended March 31, 2023 from 51.1% for the ~~AFF Transaction~~.three-months ended March 31, 2022. The increase in gross profit as a percentage of net sales for the three-months ended March 31, 2023 was primarily ~~attributable to raw material cost savings from~~ the ~~AFF Transaction~~ ~~and changes~~result of Pricing Actions in ~~domestic product sales mix, which were partially offset by geographical sales mix (our foreign operations generally have lower~~certain markets, decreased freight-in costs as well as decreased aluminum can costs. Adversely impacting gross profit ~~margins)~~as a percentage of gross profit were increased ingredient and ~~increases~~other input costs, including secondary packaging materials and increased promotions in ~~other costs.~~certain markets.
Operating Expenses.
Total operating expenses were ~~$702.4~~$412.8 million for the ~~nine-months~~three-months ended ~~September 30, 2017,~~March 31, 2023, an increase of approximately ~~$92.1~~$35.6 million, or ~~15.1%~~9.4% higher than total operating expenses of ~~$610.3~~$377.2 million for the ~~nine-months~~three-months ended ~~September 30, 2016.~~ March 31, 2022.

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The increase in operating expenses was primarily due to increased selling and marketing expenses of $18.7 million, including merchandise displays, allocated trade development, premiums and sponsorship and endorsements, increased warehouse costs of $9.9 million, as well as increased payroll expenses of ~~$29.6~~$21.9 million (of which ~~$5.5~~$6.3 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.CANarchy). The increase in operating expenses was partially offset by ~~decreased expenditures~~a decrease in out-bound fuel and freight expenses of ~~$13.8~~$16.0 million for ~~professional service fees, including legal~~the three-months ended March 31, 2023. Operating expenses as a percentage of net sales for the three-months ended March 31, 2023 were 24.3% as compared to 24.8% for the three-months ended March 31, 2022.

Operating Income

Operating income was $485.1 million for the three-months ended March 31, 2023, an increase of approximately $85.6 million, or 21.4% higher than operating income of $399.5 million for the three-months ended March 31, 2022. Operating income as a percentage of net sales increased to 28.6% for the three-months ended March 31, 2023 from 26.3% for the three-months ended March 31, 2022. The increase in operating income was primarily the result of an increase in net sales, as well as an increase in gross profit as a percentage of net sales.

Operating income was $93.7 million and ~~accounting costs.~~$71.5 million for the three-months ended March 31, 2023 and 2022, 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~~$560.8 million for the ~~nine-months~~three-months ended ~~September 30, 2017,~~March 31, 2023, an increase of approximately ~~$94.0~~$106.3 million, or ~~10.7%~~23.4% higher than ~~contribution margin~~operating income of ~~$874.8~~$454.6 million for the ~~nine-months~~three-months ended ~~September 30, 2016.~~March 31, 2022. The increase in ~~contribution margin~~operating income for the Monster Energy® Drinks segment was primarily the result of ~~the $229.5 million~~an increase in net sales ~~of our Monster Energy® brand energy drinks~~ as well as an~~approximately $55.2 million~~ increase in r~~aw material cost savings for the nine-months ended September 30, 2017 from the AFF Transaction~~.gross profit as a percentage of net sales.

~~Contribution margin~~Operating income for the Strategic Brands segment, exclusive of corporate and unallocated expenses, was ~~$137.9~~$51.8 million for the ~~nine-months~~three-months ended ~~September 30, 2017, an increase~~March 31, 2023, a decrease of approximately ~~$10.8~~$5.4 million, or ~~8.5% higher~~9.5% lower than ~~contribution margin~~operating income of ~~$127.2~~$57.2 million for the ~~nine-months~~three-months ended ~~September 30, 2016.~~March 31, 2022. The ~~increase~~decrease in ~~contribution margin~~operating income for the Strategic Brands segment was primarily ~~due to an increase~~the result of a decrease in net sales.

Operating loss for the Alcohol Brands segment, exclusive of corporate and unallocated expenses, was $6.9 million for the three-months ended March 31, 2023, an increase of approximately $1.9 million, or 39.0% higher than operating loss of $5.0 million for the three-months ended March 31, 2022 (effectively from February 17, 2022 to March 31, 2022). The operating losses for the three-months ended March 31, 2023 were primarily due to expenses and infrastructure investments for the expansion of the Alcohol Brands segment.

~~Contribution margin~~Operating (loss) income for the Other segment, exclusive of corporate and unallocated expenses, was ~~$4.6~~($0.3) million for the ~~nine-months~~three-months ended ~~September 30, 2017, an increase~~March 31, 2023, as compared to operating income of ~~approximately $3.1 million, or 200.1% higher than contribution margin of $1.5~~$1.1 million for the ~~nine-months~~three-months ended ~~September 30, 2016.~~

~~Operating Income.~~ ~~Operating income was $931.7 million~~March 31, 2022. The operating loss for the ~~nine-months~~three months ended ~~September 30, 2017, an increase~~March 31, 2023 was primarily the result of ~~approximately $98.1 million, or 11.8% higher than operating income of $833.6 million for~~ the ~~nine-months ended September 30, 2016. Operating income~~decrease in gross profit 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.sales.

Interest and Other Income (Expense), net.

Interest and other non-operating income (expense), net, was ~~$2.1~~$12.5 million for the ~~nine-months~~three-months ended ~~September 30, 2017,~~March 31, 2023, as compared to interest and other non-operating income (expense), net, of ($~~0.7)~~7.3) million for the ~~nine-months~~three-months ended ~~September 30, 2016.~~March 31, 2022. Foreign currency transaction losses were ~~$2.0~~$11.2 million and ~~$4.3~~$8.4 million for the ~~nine-months~~three-months ended ~~September 30, 2017~~March 31, 2023 and ~~2016,~~2022, respectively. Interest income was ~~$4.5~~$23.5 million and ~~$3.5~~$1.5 million for the ~~nine-months~~three-months ended ~~September 30, 2017~~March 31, 2023 and ~~2016,~~2022, respectively.

Provision for Income Taxes.

Provision for income taxes was ~~$314.4~~$100.1 million for the ~~nine-months~~three-months ended ~~September 30, 2017,~~March 31, 2023, an increase of ~~$21.2~~$2.1 million, or ~~7.2%~~2.2% higher than the provision for income taxes of ~~$293.2~~$98.0 million for the ~~nine-months~~three-months ended ~~September 30, 2016.~~March 31, 2022. The effective combined federal, state and foreign tax rate decreased to ~~33.7%~~20.1% from ~~35.2%~~25.0% for the ~~nine-months~~three-months ended ~~September 30, 2017~~March 31, 2023 and ~~2016,~~2022, respectively. The decrease in the effective tax rate was primarily attributable to the increase in the stock compensation deduction in the three-months ended March 31, 2023.

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Net Income

Net income was $397.4 million for the three-months ended March 31, 2023, an increase of $103.2 million, or 35.1% higher than net income of $294.2 million for the three-months ended March 31, 2022. The increase in net income for the three-months ended March 31, 2023 was primarily due to the increase in ~~profits earned by foreign subsidiaries~~net sales, the increase in ~~lower tax jurisdictions relative to~~ the ~~United States~~gross profit percentage of net sales as well as the ~~increase~~decrease in ~~equity compensation deductions.~~

~~Net Income~~~~. Net income was $619.4 million for~~ the nine-months ended September 30, 2017, an increase of $79.6 million, or 14.8% higher than net income 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.
effective combined federal, state and foreign tax rate.
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 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~~$1.96 billion for the three-months ended ~~September 30, 2017,~~March 31, 2023, an increase of approximately ~~$128.8~~$211.1 million, or ~~14.1%~~12.1% higher than gross ~~sales~~billings of ~~$913.3 million~~$1.74 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, 2022. Net changes in foreign currency exchange rates had an unfavorable impact on gross ~~sales in~~billings of approximately $60.9 million for the three-months ended March 31, 2023.
Gross billings for the Monster Energy® Drinks segment ~~of approximately $0.8 million~~were $1.80 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, 2023, an increase of approximately ~~$1.1~~$186.4 million, or 11.5% higher than gross billings of $1.62 billion for the three-months ended ~~September 30, 2017.~~
March 31, 2022. 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 decreasedemand as well as due to ~~net sales for the nine-months ended September 30, 2017. Promotional and other allowances, as described~~Pricing Actions 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.
certain markets. 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~~$58.0 million for the ~~nine-months~~three-months ended ~~September 30, 2017.~~March 31, 2023.
Gross billings for the Strategic Brands segment were $98.7 million for the three-months ended March 31, 2023, a decrease of $5.5 million, or 5.3% lower than gross billings of $104.3 million for the three-months ended March 31, 2022. Gross Billings for the Strategic Brands segment decreased primarily due to decreased sales by volume of our NOS® and Full Throttle® brand energy drinks. 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~~$2.9 million for the ~~nine-months~~three-months ended ~~September 30, 2017.~~March 31, 2023.
Gross billings for the Alcohol Brands segment were $47.0 million for the three-months ended March 31, 2023, an increase of approximately $31.6 million, or 205.0% higher than net sales of $15.4 million for the three-months ended March 31, 2022. The comparative 2022 gross billings for the Alcohol Brands segment were effectively from February 17, 2022 to March 31, 2022 as we completed the CANarchy Transaction on February 17, 2022. Gross Billings of The Beast Unleashed^TM FMBs, launched during the 2023 first quarter, were $20.7 million for the three-months ended March 31, 2023.
Gross billings for the Other segment were $4.6 million for the three-months ended March 31, 2023, a decrease of $1.3 million, or 22.2% lower than gross billings of $5.9 million for the three-months ended March 31, 2022.
Promotional allowances, commissions and other expenses, as described in the footnote below, were $266.1 million for the three-months ended March 31, 2023, an increase of $30.7 million, or 13.0% higher than promotional allowances, commissions and other expenses of $235.4 million for the three-months ended March 31, 2022. Promotional allowances, commissions and other expenses as a percentage of gross billings increased to 13.6% from 13.5% for the three-months ended March 31, 2023 and 2022, respectively.

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**Gross ~~sales~~Billings represent amounts invoiced to customers net of cash discounts, returns and excise taxes. 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.

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

(In thousands)

March 31,

Change

2023

2022

23 vs. 22

Gross Billings

$
1,955,039

$
1,743,927

12.1
%
Deferred Revenue

9,946

10,020

(0.7)
%
Less: Promotional allowances, commissions and other expenses***

266,055

235,373

13.0
%
Net Sales

$
1,698,930

$
1,518,574

11.9
%
(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 non-alcohol 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. Promotional and other allowances for our Alcohol Brands segment primarily include price promotions where permitted.
Sales
The ~~primary drivers~~table below discloses selected quarterly data regarding sales for the three-months ended March 31, 2023 and 2022, respectively. Data from any one or more quarters or periods is not necessarily indicative of annual results or continuing trends.
Sales of our ~~promotional and other allowance activities for~~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 ~~three- and nine-months ended September 30, 2017 and 2016 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~~
~~Cash flows provided~~number of unit cases (or unit case equivalents) of finished products or concentrates as if converted into finished products sold 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~~us.

Table of ~~$420.7 million for the nine-months ended September 30, 2016.~~Contents

~~For the nine-months ended September 30, 2017, cash provided by operating activities was primarily attributable to net income earned~~Our quarterly results 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~~reflect seasonal trends that are primarily the result of increased demand in the ~~repurchases~~warmer months of the year. 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 are less seasonal than the seasonality expected from 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/distributors, changes in the sales mix of our ~~common stock. The cash flows provided by financing activities~~products and changes in advertising and promotional expenses.

Three-Months Ended
(In thousands, except average net sales per case)

March 31,

2023

2022
Net sales

$
1,698,930

$
1,518,574
Less: Alcohol Brands segment sales

(46,290)

(15,207)
Less: Other segment sales

(4,614)

(5,927)
Adjusted net sales¹

$
1,648,026

$
1,497,440

Case sales by segment:¹

Monster Energy® Drinks

151,071

140,126
Strategic Brands

31,373

28,667
Total case sales

182,444

168,793
Average net sales per case - Energy Drinks

$
9.03

$
8.87

¹Excludes Alcohol Brands segment and Other segment net sales.
Net changes in foreign currency exchange rates had an unfavorable impact on the overall average net sales per case for ~~both~~ the ~~nine-months~~three-months ended ~~September 30, 2017,~~March 31, 2023.
Sales of our alcohol products are expressed in barrel volume. A “Barrel” means a unit of measurement equal to 31 U.S. gallons. Barrel sales were 0.15 million and ~~2016 was primarily attributable~~0.05 million for the three-months ended March 31, 2023 and 2022, respectively.
See Item 2, “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Results of Operations” for additional information related to the ~~issuance of our common stock.~~increase in sales.
Liquidity and Capital Resources
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,~~March 31, 2023, we had ~~$465.6 million~~$1.67 billion in cash and cash equivalents, $1.38 billion in short-term investments and ~~$637.4~~$41.2 million in ~~short and~~ long-term ~~investments. We have historically invested these amounts in U.S. Treasury bills,~~investments, including certificates of deposit, commercial paper, U.S. government agency securities, ~~and~~ municipal securities, ~~commercial paper, certificates of deposit, variable rate demand notes~~U.S. treasuries and ~~money market funds meeting certain criteria.~~corporate bonds. 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~~$1.67 billion of cash and cash equivalents held at ~~September 30, 2017, $268.8~~March 31, 2023, $779.1 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.
March 31, 2023.
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 ~~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~~(exclusive of ~~real property,~~common stock repurchases) are likely to be less than ~~$100.0~~$200.0 million through ~~September 30, 2018.~~March 31, 2024. However, future business opportunities may cause a change in this estimate.

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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.

The following summarizes our cash flows for the three-months ended March 31, 2023 and 2022 (in thousands):

Net cash provided by (used in):

2023

2022
Operating activities

$
424,475

$
(351)
Investing activities

$
(52,766)

$
(303,630)
Financing activities

$
(6,049)

$
(4,223)

Cash flows provided by (used in) operating activities. Cash provided by operating activities was $424.5 million for the three-months ended March 31, 2023, as compared with cash used in operating activities of ($0.4) million for the three-months ended March 31, 2022.
For the three-months ended March 31, 2023, cash provided by operating activities was primarily attributable to net income earned of $397.4 million and adjustments for certain non-cash expenses, consisting of $19.0 million of depreciation and amortization and non-cash lease expense, and $16.1 million of stock-based compensation. For the three-months ended March 31, 2023, cash provided by operating activities also increased due to a $51.1 million increase in accounts payable, a $48.3 million increase in accrued promotional allowances, a $41.6 million increase in income taxes payable, a $35.5 million decrease in inventories, a $14.2 million increase in accrued liabilities, a $4.0 million decrease in prepaid income taxes and a $1.3 million decrease in prepaid expenses and other assets. For the three-months ended March 31, 2023, cash used in operating activities was primarily attributable to a $167.5 million increase in accounts receivable, a $30.3 million decrease in accrued compensation and a $5.0 million decrease in deferred revenue.
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.
Cash flows used in investing activities. Cash used in investing activities was $52.8 million for the three-months ended March 31, 2023 as compared to cash used in investing activities of $303.6 million for the three-months ended March 31, 2022.
For both the three-months ended March 31, 2023 and 2022, 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 net of cash acquired, related to the CANarchy Transaction. For both the three-months ended March 31, 2023 and 2022, cash used in investing activities was primarily attributable to purchases of available-for-sale investments. To a lesser extent, for both the three-months ended March 31, 2023 and 2022, 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 construction 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 $6.0 million for the three-months ended March 31, 2023 as compared to cash used in financing activities of $4.2 million for the three-months ended March 31, 2022. The cash used in financing activities for both the three-months ended March31, 2023 and 2022 was primarily the result of the repurchases of our common stock. The cash provided by financing activities for both the three-months ended March31, 2023, and 2022 was primarily attributable to the issuance of our common stock under our stock-based compensation plans.

The following represents a summary of the Company’s contractual commitments and related scheduled maturities as of ~~September 30, 2017:~~March 31, 2023:

Payments due by period (in thousands)




Less than

1‑3

3‑5

More than
Obligations

Total

1 year

years

years

5 years
Contractual Obligations¹

$
380,587

$
291,735

$
81,618

$
7,234

$
—
Finance Leases

2,493

2,459

34

—

—
Operating Leases

40,005

8,758

11,791

7,837

11,619
Purchase Commitments²

336,845

332,774

4,071

—

—

$
759,930

$
635,726

$
97,514

$
15,071

$
11,619

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

¹1Contractual obligations include our obligations related to sponsorships and other commitments.
²2Purchase 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~~$3.8 million of unrecognized tax benefits have been recorded as liabilities as of ~~September 30, 2017.~~March 31, 2023. It is expected that the amount of unrecognized tax benefits will not significantly change within the next 12 months. As of ~~September 30, 2017,~~March 31, 2023, we had ~~$1.2~~$0.6 million of accrued interest and penalties related to unrecognized tax benefits.
~~Sales~~
The table below discloses selected quarterly data regarding sales for the three- and nine-months ended September 30, 2017 and 2016, respectively. Data from any one or more quarters or periods is not necessarily indicative of annual results or continuing trends.
Sales of beverages 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.
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 distributors, changes in the sales mix of our products and changes in advertising and promotional expenses.
(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

1Includes $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.
2Excludes 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 $16.9 million and $12.1 million for the nine-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.
~~See Item 2, “Management’s Discussion and Analysis of Financial Condition and Results of Operations - Our Business” for additional information related to the increase in sales.~~
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~~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~~2022 (“Form 10-K”).
Recent Accounting Pronouncements
~~In May 2017, the FASB~~There have been no 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 for as a modification. The new guidance requires modification~~adopted 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 forpronouncements that would materially impact the Company from those disclosed in our Annual Report 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 accountedForm 10-K 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 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 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, 2022.
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, 2023, leading to increased cost of sales and operating expenses.

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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,” “estimates” 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 cost increases to our bottlers/distributors and/or ~~all~~consumers;
● The impact of rising costs, interest rates and inflation on the discretionary income of our consumers;
● Uncertainties associated with an economic slowdown or recession that could negatively impact the financial condition of our customers and could result in a reduced demand for our products;
● The impact of the ~~benefits from~~military conflict in Ukraine, including supply chain disruptions, volatility in commodity and energy prices, increased economic uncertainty and escalating geopolitical tensions;
● Fluctuations in growth and/or growth rates (positive or negative) of the ~~TCCC transaction~~domestic and international energy drink categories generally, including in the convenience and gas channel (which is our largest channel) and the ~~AFF Transaction;~~
impact on demand for our products resulting from deteriorating economic conditions and/or financial uncertainties;
·
●
The ~~effect~~impact of temporary or permanent facility closures, production slowdowns and disruptions in operations experienced by our suppliers, and/or bottlers/distributors, and/or co-packers, and/or breweries, including any material disruptions on the production and distribution of our products;
● The consolidation of co-packers leading us to increasingly rely on fewer co-packing groups, certain of which account for a large percentage of our co-packing capacity for our Monster Energy® drinks;
● The impact of logistical issues and delays, including shortages of shipping containers and port of entry congestion;
● The human and economic consequences of a material reemergence of COVID-19, including new variants, as well as the measures that may be taken by governments and businesses (including the Company and its suppliers, bottlers/distributors, co-packers, and other service providers) and the public at large to limit the spread of COVID-19, including, but not limited to, lockdowns, labor issues, delays, and/or decreased sponsorship, endorsement, sampling, and/or innovation activities, which may have an adverse impact on our business and operations;
● 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;
● 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 non-alcohol 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;

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●

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”), the Bureau of Alcohol, Tobacco, Firearms and Explosives (the “ATF”), 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, but not limited to, 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 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, the ATF 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, including litigation directed at the energy and alcohol beverage industries generally or at the Company in particular;

●

Intellectual property injunctions;

●

Unfavorable resolution of possible 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, ~~obesity~~including, but not limited to; changes in demand for different packages, sizes and ~~other~~configurations; changes due to perceived health concerns ~~including concerns relating to certain~~such as obesity, ingredients in our products or packaging, and alcohol abuse; changes due to product safety concerns and/or ~~from~~changes due to decreased consumer discretionary spending power;
·
● Adverse publicity surrounding obesity, alcohol consumption, and other 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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●

Our ability to meet or comply with sustainability-related expectations, standards, and regulations, including forthcoming rules set forth by the SEC and European Commission;

●

Changes in demand that are weather or season 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 poor or 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), or unforeseen economic and political changes and local or international catastrophic events;

●

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 any of our brands, 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 alcohol beverage sector;

●

The inherent operational risks presented by the alcohol beverage industry that may not be adequately covered by insurance or lead to litigation relating to alcohol marketing, advertising, or distribution practices, alcohol abuse problems and other health consequences arising from excessive consumption of or other misuse of alcohol, including death;

●

Our ability to successfully integrate acquired ~~from TCCC;~~

businesses or assets;

●

The impact of criticism of our ~~energy drink~~ products and/or the energy drink ~~market~~and/or alcohol beverage markets generally and/or legislation enacted (whether as a result of such criticism or otherwise) that restricts the marketing or sale of energy drinks and/or alcohol beverages (including prohibiting the sale of energy and/or alcohol drinks at certain establishments or pursuant to certain governmental programs), ~~limit~~limits caffeine or alcohol 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 and/or alcohol 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 and/or alcohol 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~~ATF 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 and/or alcohol 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 or kegs, 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;

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●

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

drinks, 24-ounce aluminum cap cans, 19.2-ounce cans and 550ml BRE aluminum cans with resealable ends;

●

Limitations in procuring sufficient quantities of aluminum cans;

●

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 and gas 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, including, but not limited to, substantial competition in the alcohol beverage market from new entrants, consolidations by competitors and retailers, and other competitive activities;
·
●
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~~ ●
Possible product recalls and/or ~~international catastrophic events;~~
·
~~Possible recalls~~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;
·
●
The failure of our bottlers and/or co-packers to manufacture our products on a timely basis or at all;
● 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 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

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~~Recruitment~~●

Succession plans for and/or the recruitment and retention of senior management, other key employees and our employee base in general.

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, 2023 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, 2023, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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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.~~11. Commitments and Contingencies: ~~Legal Proceedings~~Litigation in Part I, Item 1, of this Quarterly Report on Form 10-Q.

ITEM 1A.RISK FACTORS
~~Our risk factors are~~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, 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~~If any of these risks occur or continue to occur, our business, reputation, financial condition and/or operating results could be materially adversely affected. We also note that the risk factors ~~disclosed~~described in this report and our Form ~~10-K.~~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.

~~ITEM 2.~~~~UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS~~
ITEM 2.
UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
On March 10, 2023, the Company retired 170.0 million shares (stock split adjusted) of treasury stock owned by the Company. The retired treasury stock had a carrying value of approximately $4.69 billion. The Company’s accounting policy upon the formal retirement of treasury stock is to deduct its par value from common stock and to reflect any excess of cost over par as a deduction from retained earnings.
On ~~February 28, 2017,~~June 14, 2022, 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~~“June 2022 Repurchase Plan”). During the three-months ended ~~September 30, 2017,~~March 31, 2023, no shares were repurchased under the ~~Company purchased 4.5~~June 2022 Repurchase Plan. As of May 5, 2023, $182.8 million remained available for repurchase under the June 2022 Repurchase Plan.
On November 2, 2022, the Company’s Board of Directors authorized a share repurchase program for the purchase of up to an additional $500.0 million of the Company’s outstanding common stock (the “November 2022 Repurchase Plan”). During the three-months ended March 31, 2023, no shares were repurchased under the November 2022 Repurchase Plan. As of May 5, 2023, $500.0 million remained available for repurchase under the November 2022 Repurchase Plan.
The aggregate amount of the Company’s outstanding common stock that remains available for repurchase under all previously authorized repurchase plans is $682.8 million as of May 5, 2023.
During the three-months ended March 31, 2023, 1.7 million shares of common stock ~~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~~$90.4 million. While such purchases are considered common stock repurchases, they are not counted as purchases against the Company’s authorized share repurchase programs. Such shares are included in common stock in treasury in the accompanying consolidated balance sheet at March 31, 2023.

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*

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, 2023, formatted in ~~XBRL (eXtensible~~iXBRL (Inline eXtensible Business Reporting Language): (i) Condensed Consolidated Balance Sheets as of ~~September 30, 2017~~March 31, 2023 and December 31, ~~2016,~~2022, (ii) Condensed Consolidated Statements of Income for the ~~three-~~three-months ended March 31, 2023 and ~~nine-months ended September 30, 2017 and 2016,~~2022, (iii) Condensed Consolidated Statements of Comprehensive Income for the ~~three-~~three-months ended March 31, 2023 and ~~nine-months~~2022, (iv) Condensed Consolidated Statements of Stockholders’ Equity for the three-months ended ~~September 30, 2017~~March 31, 2023 and ~~2016, (iv)~~2022, (v) Condensed Consolidated Statements of Cash Flows for the ~~nine-months~~three-months ended ~~September 30, 2017~~March 31, 2023 and ~~2016,~~2022, 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, 2023, 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 5, 2023
/s/ RODNEY C. SACKS

Rodney C. Sacks

Chairman of the Board of Directors

and ~~Chief~~Co-Chief Executive Officer

Date: May 5, 2023
/s/ HILTON H. SCHLOSBERG

Hilton H. Schlosberg

Vice Chairman of the Board of Directors

and Co-Chief Executive Officer

49

	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%


	Three-Months Ended				Percentage
(In thousands)	March 31,				Change
	2023		2022		23 vs. 22
Gross Billings	$	1,955,039	$	1,743,927	12.1	%
Deferred Revenue		9,946		10,020	(0.7)	%
Less: Promotional allowances, commissions and other expenses***		266,055		235,373	13.0	%
Net Sales	$	1,698,930	$	1,518,574	11.9	%


	Three-Months Ended
(In thousands, except average net sales per case)	March 31,
	2023		2022
Net sales	$	1,698,930	$	1,518,574
Less: Alcohol Brands segment sales		(46,290)		(15,207)
Less: Other segment sales		(4,614)		(5,927)
Adjusted net sales¹	$	1,648,026	$	1,497,440

Case sales by segment:¹
Monster Energy® Drinks		151,071		140,126
Strategic Brands		31,373		28,667
Total case sales		182,444		168,793
Average net sales per case - Energy Drinks	$	9.03	$	8.87


Net cash provided by (used in):
	2023		2022
Operating activities	$	424,475	$	(351)
Investing activities	$	(52,766)	$	(303,630)
Financing activities	$	(6,049)	$	(4,223)


	Payments due by period (in thousands)
			Less than		1‑3		3‑5		More than
Obligations	Total		1 year		years		years		5 years
Contractual Obligations¹	$	380,587	$	291,735	$	81,618	$	7,234	$	—
Finance Leases		2,493		2,459		34		—		—
Operating Leases		40,005		8,758		11,791		7,837		11,619
Purchase Commitments²		336,845		332,774		4,071		—		—
	$	759,930	$	635,726	$	97,514	$	15,071	$	11,619

(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

·	~~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 non-alcohol 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;

·	~~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;

·	~~Unforeseen economic and political changes and local~~ ●	Possible product recalls and/or ~~international catastrophic events;~~
·	~~Possible recalls~~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;

·	~~The failure of our bottlers and/or contract 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

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

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, 2023, formatted in ~~XBRL (eXtensible~~iXBRL (Inline eXtensible Business Reporting Language): (i) Condensed Consolidated Balance Sheets as of ~~September 30, 2017~~March 31, 2023 and December 31, ~~2016,~~2022, (ii) Condensed Consolidated Statements of Income for the ~~three-~~three-months ended March 31, 2023 and ~~nine-months ended September 30, 2017 and 2016,~~2022, (iii) Condensed Consolidated Statements of Comprehensive Income for the ~~three-~~three-months ended March 31, 2023 and ~~nine-months~~2022, (iv) Condensed Consolidated Statements of Stockholders’ Equity for the three-months ended ~~September 30, 2017~~March 31, 2023 and ~~2016, (iv)~~2022, (v) Condensed Consolidated Statements of Cash Flows for the ~~nine-months~~three-months ended ~~September 30, 2017~~March 31, 2023 and ~~2016,~~2022, 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, 2023, formatted in iXBRL (Inline eXtensible Business Reporting Language) and contained in Exhibit 101.

	MONSTER BEVERAGE CORPORATION
	Registrant


Date: ~~November 8, 2017~~May 5, 2023	/s/ RODNEY C. SACKS
	Rodney C. Sacks
	Chairman of the Board of Directors
	and ~~Chief~~Co-Chief Executive Officer

Date: May 5, 2023	/s/ HILTON H. SCHLOSBERG
	Hilton H. Schlosberg
	Vice Chairman of the Board of Directors
	and Co-Chief Executive Officer