UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

Quarterly Report Pursuant to Section 13 or 15(d)

of the Securities Exchange Act of 1934

For the quarterly period ended ~~September 30, 2021~~March 31, 2022

Commission File Number 001-18761

MONSTER BEVERAGE CORPORATION

(Exact name of registrant as specified in its charter)


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

1 Monster Way

Corona, California 92879

(Address of principal executive offices) (Zip code)

(951) 739 - 6200

(Registrant’s telephone number, including area code)

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


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

Indicate by check mark whether the registrant (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 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 every Interactive Data File required to be submitted 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 such files).

Yes X No __

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

Large accelerated filer	☒	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☐
		Emerging growth company	☐

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. ☐

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

Yes __ No X

The registrant had ~~529,139,115~~529,671,407 shares of common stock, par value $0.005 per share, outstanding as of ~~October~~April 29, ~~2021.~~2022.

Table of Contents

MONSTER BEVERAGE CORPORATION AND SUBSIDIARIES

~~SEPTEMBER 30, 2021~~MARCH 31, 2022

INDEX


		Page No.
Part I.	FINANCIAL INFORMATION	~~Page No.~~

Item 1.	Condensed Consolidated Financial Statements (Unaudited)

	Condensed Consolidated Balance Sheets as of ~~September 30, 2021~~March 31, 2022 and December 31, ~~2020~~2021	3

	Condensed Consolidated Statements of Income for the ~~Three-~~Three-Months Ended March 31, 2022 and ~~Nine-Months Ended September 30,~~ 2021 ~~and 2020~~	4

	Condensed Consolidated Statements of Comprehensive Income for the ~~Three-~~Three-Months Ended March 31, 2022 and ~~Nine-Months Ended September 30,~~ 2021 ~~and 2020~~	5

	Condensed Consolidated Statements of Stockholders’ Equity for the ~~Three-~~Three-Months Ended March 31, 2022 and ~~Nine-Months Ended September 30,~~ 2021 ~~and 2020~~	6

	Condensed Consolidated Statements of Cash Flows for the ~~Nine-Months~~Three-Months Ended ~~September 30,~~March 31, 2022 and 2021 ~~and 2020~~	7

	Notes to Condensed Consolidated Financial Statements	9

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	3132

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	4748

Item 4.	Controls and Procedures	4748

Part II.	OTHER INFORMATION

Item 1.	Legal Proceedings	4748

Item 1A.	Risk Factors	4748

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	4749

Item 3.	Defaults Upon Senior Securities	4749

Item 4.	Mine Safety Disclosures	4749

Item 5.	Other Information	4749

Item 6.	Exhibits	4850

	Signatures	4951

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, 2021~~MARCH 31, 2022 AND DECEMBER 31, ~~2020~~2021

(In Thousands, Except Par Value) (Unaudited)


	September 30,		December 31,		March 31,		December 31,
	2021		2020		2022		2021
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	1,712,671	$	1,180,413	$	1,014,786	$	1,326,462
Short-term investments		1,224,066		881,354		1,717,648		1,749,727
Accounts receivable, net		849,157		666,012		1,039,780		896,658
Inventories		471,553		333,085		821,132		593,357
Prepaid expenses and other current assets		95,607		55,358		110,327		82,668
Prepaid income taxes		30,619		24,733		39,993		33,238
Total current assets		4,383,673		3,140,955		4,743,666		4,682,110

INVESTMENTS		28,255		44,291		65,652		99,419
PROPERTY AND EQUIPMENT, net		309,574		314,656		407,391		313,753
DEFERRED INCOME TAXES, net		241,297		241,650		225,221		225,221
GOODWILL		1,331,643		1,331,643		1,411,928		1,331,643
OTHER INTANGIBLE ASSETS, net		1,066,083		1,059,046		1,232,113		1,072,386
OTHER ASSETS		88,883		70,475		101,488		80,252
Total Assets	$	7,449,408	$	6,202,716	$	8,187,459	$	7,804,784

LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES:
Accounts payable	$	396,229	$	296,800	$	438,256	$	404,263
Accrued liabilities		180,719		142,653		234,111		210,964
Accrued promotional allowances		232,394		186,658		270,785		211,461
Deferred revenue		45,278		45,429		42,540		42,530
Accrued compensation		54,507		55,015		37,551		65,459
Income taxes payable		23,113		23,433		21,118		30,399
Total current liabilities		932,240		749,988		1,044,361		965,076

DEFERRED REVENUE		245,621		264,436		238,241		243,249

OTHER LIABILITIES		26,550		27,432		38,185		29,508

COMMITMENTS AND CONTINGENCIES (Note 12)

STOCKHOLDERS’ EQUITY:
Common stock - $0.005 par value; 1,250,000 shares authorized; 639,851 shares issued and 529,132 shares outstanding as of September 30, 2021; 638,662 shares issued and 528,097 shares outstanding as of December 31, 2020		3,199		3,193
Common stock - $0.005 par value; 1,250,000 shares authorized; 640,528 shares issued and 529,642 shares outstanding as of March 31, 2022; 640,043 shares issued and 529,323 shares outstanding as of December 31, 2021						3,203		3,200
Additional paid-in capital		4,626,299		4,537,982		4,673,302		4,652,620
Retained earnings		7,488,235		6,432,074		8,103,752		7,809,549
Accumulated other comprehensive (loss) income		(43,495)		3,034
Common stock in treasury, at cost; 110,719 shares and 110,565 shares as of September 30, 2021 and December 31, 2020, respectively		(5,829,241)		(5,815,423)
Accumulated other comprehensive loss						(72,145)		(69,165)
Common stock in treasury, at cost; 110,886 shares and 110,720 shares as of March 31, 2022 and December 31, 2021, respectively						(5,841,440)		(5,829,253)
Total stockholders’ equity		6,244,997		5,160,860		6,866,672		6,566,951
Total Liabilities and Stockholders’ Equity	$	7,449,408	$	6,202,716	$	8,187,459	$	7,804,784

See accompanying notes to condensed consolidated financial statements.

Table of Contents

MONSTER BEVERAGE CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

FOR THE ~~THREE-~~THREE-MONTHS ENDED MARCH 31, 2022 AND ~~NINE-MONTHS ENDED SEPTEMBER 30,~~ 2021 ~~AND 2020~~

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


	Three-Months Ended				Nine-Months Ended				Three-Months Ended
	September 30,				September 30,				March 31,
	2021		2020		2021		2020		2022		2021

NET SALES	$	1,410,557	$	1,246,362	$	4,116,308	$	3,402,355	$	1,518,574	$	1,243,816

COST OF SALES		621,399		509,831		1,775,375		1,369,160		741,907		528,881

GROSS PROFIT		789,158		736,531		2,340,933		2,033,195		776,667		714,935

OPERATING EXPENSES		344,694		277,930		956,346		802,343		377,178		300,789

OPERATING INCOME		444,464		458,601		1,384,587		1,230,852		399,489		414,146

INTEREST and OTHER EXPENSE, net		2,290		4,568		2,179		5,491		7,300		759

INCOME BEFORE PROVISION FOR INCOME TAXES		442,174		454,033		1,382,408		1,225,361		392,189		413,387

PROVISION FOR INCOME TAXES		104,969		106,379		326,247		287,503		97,986		98,193

NET INCOME	$	337,205	$	347,654	$	1,056,161	$	937,858	$	294,203	$	315,194

NET INCOME PER COMMON SHARE:
Basic	$	0.64	$	0.66	$	2.00	$	1.77	$	0.56	$	0.60
Diluted	$	0.63	$	0.65	$	1.97	$	1.75	$	0.55	$	0.59

WEIGHTED AVERAGE NUMBER OF SHARES OF COMMON STOCK AND COMMON STOCK EQUIVALENTS:
Basic		528,997		527,637		528,618		530,194		529,405		528,195
Diluted		535,915		533,263		535,554		535,011		535,554		534,982

See accompanying notes to condensed consolidated financial statements.

Table of Contents

MONSTER BEVERAGE CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

FOR THE ~~THREE-~~THREE-MONTHS ENDED MARCH 31, 2022 AND ~~NINE-MONTHS ENDED SEPTEMBER 30,~~ 2021 ~~AND 2020~~

(In Thousands) (Unaudited)


	Three-Months Ended				Nine-Months Ended				Three-Months Ended
	September 30,				September 30,				March 31,
	2021		2020		2021		2020		2022		2021
Net income, as reported	$	337,205	$	347,654	$	1,056,161	$	937,858	$	294,203	$	315,194
Other comprehensive income (loss):
Change in foreign currency translation adjustment		(26,716)		21,217		(46,412)		(338)		1,079		(27,932)
Available-for-sale investments:
Change in net unrealized (losses) gains		43		(308)		(117)		196		(4,059)		24
Reclassification adjustment for net gains included in net income		—		—		—		—		—		—
Net change in available-for-sale investments		43		(308)		(117)		196		(4,059)		24
Other comprehensive income (loss)		(26,673)		20,909		(46,529)		(142)		(2,980)		(27,908)
Comprehensive income	$	310,532	$	368,563	$	1,009,632	$	937,716	$	291,223	$	287,286

See accompanying notes to condensed consolidated financial statements.

Table of Contents

MONSTER BEVERAGE CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

FOR THE ~~THREE-~~THREE-MONTHS ENDED MARCH 31, 2022 AND ~~NINE-MONTHS ENDED SEPTEMBER 30,~~ 2021 ~~AND 2020~~

(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, 2020

638,662

$
3,193

$
4,537,982

$
6,432,074

$
3,034

(110,565)

$
(5,815,423)

$
5,160,860
Stock-based compensation

0

0

17,949

0

0

0

0

17,949
Exercise of stock options

492

3

6,758

0

0

0

0

6,761
Unrealized gain, net on available-for-sale securities

0

0

0

0

24

0

0

24
Repurchase of common stock

0

0

0

0

0

(150)

(13,419)

(13,419)
Foreign currency translation

0

0

0

0

(27,932)

0

0

(27,932)
Net income

0

0

0

315,194

0

0

0

315,194
Balance, March 31, 2021

639,154

$
3,196

$
4,562,689

$
6,747,268

$
(24,874)

(110,715)

$
(5,828,842)

$
5,459,437
Stock-based compensation

0

0

16,921

0

0

0

0

16,921
Exercise of stock options

422

2

17,723

0

0

0

0

17,725
Unrealized loss, net on available-for-sale securities

0

0

0

0

(183)

0

0

(183)
Repurchase of common stock

0

0

0

0

0

(4)

(399)

(399)
Foreign currency translation

0

0

0

0

8,235

0

0

8,235
Net income

0

0

0

403,762

0

0

0

403,762
Balance, June 30, 2021

639,576

$
3,198

$
4,597,333

$
7,151,030

$
(16,822)

(110,719)

$
(5,829,241)

$
5,905,498
Stock-based compensation

0

0

16,293

0

0

0

0

16,293
Exercise of stock options

275

1

12,673

0

0

0

0

12,674
Unrealized gain, net on available-for-sale securities

0

0

0

0

43

0

0

43
Foreign currency translation

0

0

0

0

(26,716)

0

0

(26,716)
Net income

0

0

0

337,205

0

0

0

337,205
Balance, September 30, 2021

639,851

$
3,199

$
4,626,299

$
7,488,235

$
(43,495)

(110,719)

$
(5,829,241)

$
6,244,997


								Accumulated
								Other					Total
	Common stock			Additional		Retained		Comprehensive		Treasury stock			Stockholders’
	Shares	Amount		Paid-in Capital		Earnings		(Loss) Income		Shares	Amount		Equity
Balance, December 31, 2021	640,043	$	3,200	$	4,652,620	$	7,809,549	$	(69,165)	(110,720)	$	(5,829,253)	$	6,566,951
Stock-based compensation	—		—		16,175		—		—	—		—		16,175
Exercise of stock options	485		3		4,507		—		—	—		—		4,510
Unrealized loss, net on available-for-sale securities	—		—		—		—		(4,059)	—		—		(4,059)
Repurchase of common stock	—		—		—		—		—	(166)		(12,187)		(12,187)
Foreign currency translation	—		—		—		—		1,079	—		—		1,079
Net income	—		—		—		294,203		—	—		—		294,203
Balance, March 31, 2022	640,528	$	3,203	$	4,673,302	$	8,103,752	$	(72,145)	(110,886)	$	(5,841,440)	$	6,866,672


								Accumulated														Accumulated
								Other					Total									Other					Total
	Common stock			Additional		Retained		Comprehensive		Treasury stock			Stockholders’		Common stock			Additional		Retained		Comprehensive		Treasury stock			Stockholders’
	Shares	Amount		Paid-in Capital		Earnings		(Loss) Income		Shares	Amount		Equity		Shares	Amount		Paid-in Capital		Earnings		(Loss) Income		Shares	Amount		Equity
Balance, December 31, 2019	636,460	$	3,182	$	4,397,511	$	5,022,480	$	(32,387)	(99,762)	$	(5,219,505)	$	4,171,281
Balance, December 31, 2020															638,662	$	3,193	$	4,537,982	$	6,432,074	$	3,034	(110,565)	$	(5,815,423)	$	5,160,860
Stock-based compensation	—		—		17,098		—		—	—		—		17,098	0		0		17,949		0		0	0		0		17,949
Exercise of stock options	644		4		13,971		—		—	—		—		13,975	492		3		6,758		0		0	0		0		6,761
Unrealized gain, net on available-for-sale securities	—		—		—		—		304	—		—		304	0		0		0		0		24	0		0		24
Repurchase of common stock	—		—		—		—		—	(10,503)		(579,948)		(579,948)	0		0		0		0		0	(150)		(13,419)		(13,419)
Foreign currency translation	—		—		—		—		(30,599)	—		—		(30,599)	0		0		0		0		(27,932)	0		0		(27,932)
Net income	—		—		—		278,835		—	—		—		278,835	0		0		0		315,194		0	0		0		315,194
Balance, March 31, 2020	637,104	$	3,186	$	4,428,580	$	5,301,315	$	(62,682)	(110,265)	$	(5,799,453)	$	3,870,946
Stock-based compensation	—		—		15,936		—		—	—		—		15,936
Exercise of stock options	820		4		29,863		—		—	—		—		29,867
Unrealized gain, net on available-for-sale securities	—		—		—		—		200	—		—		200
Repurchase of common stock	—		—		—		—		—	(298)		(15,822)		(15,822)
Foreign currency translation	—		—		—		—		9,044	—		—		9,044
Net income	—		—		—		311,369		—	—		—		311,369
Balance, June 30, 2020	637,924	$	3,190	$	4,474,379	$	5,612,684	$	(53,438)	(110,563)	$	(5,815,275)	$	4,221,540
Stock-based compensation	—		—		17,668		—		—	—		—		17,668
Exercise of stock options	534		2		21,696		—		—	—		—		21,698
Unrealized loss, net on available-for-sale securities	—		—		—		—		(308)	—		—		(308)
Repurchase of common stock	—		—		—		—		—	(2)		(148)		(148)
Foreign currency translation	—		—		—		—		21,217	—		—		21,217
Net income	—		—		—		347,654		—	—		—		347,654
Balance, September 30, 2020	638,458	$	3,192	$	4,513,743	$	5,960,338	$	(32,529)	(110,565)	$	(5,815,423)	$	4,629,321
Balance, March 31, 2021															639,154	$	3,196	$	4,562,689	$	6,747,268	$	(24,874)	(110,715)	$	(5,828,842)	$	5,459,437

See accompanying notes to condensed consolidated financial statements.

Table of Contents

MONSTER BEVERAGE CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE ~~NINE-MONTHS~~THREE-MONTHS ENDED ~~SEPTEMBER 30,~~MARCH 31, 2022 AND 2021 ~~AND 2020~~

(In Thousands) (Unaudited)


	Nine-Months Ended				Three-Months Ended
	September 30,				March 31,
	2021		2020		2022		2021
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	1,056,161	$	937,858	$	294,203	$	315,194
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		40,716		45,879		14,599		12,825
Non-cash lease expense						1,481		952
Gain on disposal of property and equipment		(984)		(210)		(6)		(88)
Impairment of intangibles		—		7,000
Stock-based compensation		52,391		53,042		16,332		18,362
Deferred income taxes		353		—
Effect on cash of changes in operating assets and liabilities:
Effect on cash of changes in operating assets and liabilities net of acquisition:
Accounts receivable		(199,709)		(201,677)		(134,433)		(147,452)
Distributor receivables		228		341
Inventories		(149,414)		39,490		(208,673)		(39,546)
Prepaid expenses and other assets		(41,162)		(20,446)		(29,621)		(18,487)
Prepaid income taxes		(7,365)		11,460		(5,885)		(7,076)
Accounts payable		106,570		(9,724)		18,329		36,859
Accrued liabilities		34,085		53,501		20,603		32,441
Accrued promotional allowances		51,022		31,915		61,171		13,965
Accrued distributor terminations		5,302		(150)
Accrued compensation		(2,888)		(1,214)		(32,122)		(24,443)
Income taxes payable		(114)		17,969		(9,818)		(13,287)
Other liabilities		574		(562)		(596)		504
Deferred revenue		(17,784)		(15,236)		(5,915)		(5,250)
Net cash provided by operating activities		927,982		949,236
Net cash (used in) provided by operating activities						(351)		175,473

CASH FLOWS FROM INVESTING ACTIVITIES:
Sales of available-for-sale investments		1,016,556		795,858		504,808		325,751
Purchases of available-for-sale investments		(1,343,351)		(849,276)		(441,925)		(440,570)
Acquisition of CANarchy, net of cash						(330,356)		—
Purchases of property and equipment		(28,131)		(42,062)		(21,511)		(8,400)
Proceeds from sale of property and equipment		1,246		880		14		231
Additions to intangibles		(5,211)		(19,686)		(8,419)		(7,239)
Increase in other assets		(22,809)		(26,228)		(6,241)		(18,856)
Net cash used in investing activities		(381,700)		(140,514)		(303,630)		(149,083)

CASH FLOWS FROM FINANCING ACTIVITIES:
Payments on debt		(1,814)		(2,500)
Borrowings on debt						3,454		957
Issuance of common stock		37,160		65,540		4,510		6,761
Purchases of common stock held in treasury		(13,818)		(595,918)		(12,187)		(13,419)
Net cash provided by (used in) financing activities		21,528		(532,878)
Net cash used in financing activities						(4,223)		(5,701)

Effect of exchange rate changes on cash and cash equivalents		(35,552)		929		(3,472)		(22,223)

NET INCREASE IN CASH AND CASH EQUIVALENTS		532,258		276,773
NET DECREASE IN CASH AND CASH EQUIVALENTS						(311,676)		(1,534)
CASH AND CASH EQUIVALENTS, beginning of period		1,180,413		797,957		1,326,462		1,180,413
CASH AND CASH EQUIVALENTS, end of period	$	1,712,671	$	1,074,730	$	1,014,786	$	1,178,879

SUPPLEMENTAL INFORMATION:
Cash paid during the period for:
Interest	$	99	$	39	$	91	$	13
Income taxes	$	338,584	$	257,563	$	112,863	$	121,866

See accompanying notes to condensed consolidated financial statements.

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MONSTER BEVERAGE CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE ~~NINE-MONTHS~~THREE-MONTHS ENDED ~~SEPTEMBER 30,~~MARCH 31, 2022 AND 2021 ~~AND 2020~~

(In Thousands) (Unaudited) (Continued)

SUPPLEMENTAL DISCLOSURE OF NON-CASH ITEMS

Included in accrued liabilities as of ~~September 30,~~March 31, 2022 and 2021 ~~and 2020~~ were ~~$13.0~~$11.3 million and ~~$14.3~~$7.8 million, respectively, ~~related to net additions to other intangible assets.~~

~~Included in accounts payable as of September 30, 2020 were available-for-sale short-term investment purchases of $20.3 million.~~

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

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

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

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

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, ~~2020~~2021 for a summary of significant accounting policies utilized by the Company and its consolidated subsidiaries and other disclosures, which should be read in conjunction with this Quarterly Report on Form 10-Q (“Form 10-Q”).

The Company’s condensed consolidated financial statements included in this Form 10-Q have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and Securities and Exchange Commission (“SEC”) rules and regulations applicable to interim financial reporting. They do not include all the information and footnote disclosures normally included in annual financial statements prepared in accordance with GAAP. The information set forth in these interim condensed consolidated financial statements for the ~~three-~~three-months ended March 31, 2022 and ~~nine-months ended September 30,~~ 2021, ~~and 2020,~~ respectively, is unaudited and reflects all adjustments, which include only normal recurring adjustments and which in the opinion of management are necessary to make the interim condensed consolidated financial statements not misleading. Results of operations for periods covered by this report may not necessarily be indicative of results of operations for the full year.

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

Recent Accounting Pronouncements

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

2.	~~RECENT ACCOUNTING PRONOUNCEMENTS~~ACQUISITIONS AND DIVESTITURES

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

~~In December 2019,~~The Company accounted for the CANarchy Transaction in accordance with Financial Accounting Standards Board ~~issued~~(“FASB”) Accounting Standards ~~Update~~Codification (“~~ASU”~~ASC”) ~~No. 2019-12, “Simplifying~~805 “Business Combinations”.

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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 ~~Accounting~~preliminary fair value allocations of the CANarchy Transaction:


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

The fair value analysis has yet to progress to a stage where there is sufficient information for ~~Income Taxes”,~~a definitive measurement of the respective fair values. Accordingly, the respective fair value allocations are preliminary and are based on valuations derived from estimated fair value assumptions used by management. The Company expects to complete its fair value analysis at a level of detail necessary to finalize the underlying fair value allocations as ~~part~~soon as practicable, but no later than twelve months from the closing of ~~its simplification initiative to reduce~~ the ~~cost and complexity~~CANarchy Transaction.

The Company determined the preliminary estimated fair values as follows:

●

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

●

Customer relationships – distributor method of the income approach

●

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

●

Property and equipment – cost approach

●

Inventory – comparative sales method and replacement cost method

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

The Company has determined goodwill in ~~accounting for income taxes. ASU No. 2019-12 removes certain exceptions related to the approach for intra-period tax allocation, the methodology for calculating income taxes in an interim period and~~accordance with ASC 805-30-30-1, “Business Combinations,” which requires the recognition of ~~deferred tax liabilities~~goodwill for ~~outside basis differences. ASU No. 2019-12 also amends other aspects~~the excess of the ~~guidance~~aggregate consideration over the net amounts of identifiable assets acquired and liabilities assumed as of the acquisition date.

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

In accordance with Regulation S-X, pro forma unaudited condensed financial information for the CANarchy Transaction has not been provided as the impact of ~~GAAP. The guidance was effective for interim and annual periods beginning after December 15, 2020, with early adoption permitted. The adoption of ASU No. 2019-12 did not have a material impact~~the transaction on the Company’s financial position, results of operations and ~~liquidity.~~liquidity was not material.

Table of Contents

MONSTER BEVERAGE CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

3.	REVENUE RECOGNITION

The Company has 34 operating and reportable segments: (i) Monster Energy® Drinks segment (“Monster Energy® Drinks”), which is primarily comprised of the Company’s Monster Energy® drinks, Reign Total Body Fuel® high performance energy drinks and True North^TM Pure Energy Seltzers, (ii) Strategic Brands segment (“Strategic Brands”), which is primarily comprised of the various energy drink brands acquired from The Coca-Cola Company (“TCCC”) in 2015 as well as the Company’s affordable energy brands, (iii) Alcohol Brands segment ("Alcohol Brands"), which is primarily comprised of the various craft beers and ~~(iii)~~hard seltzers purchased as part of the CANarchy Transaction on February 17, 2022 and (iv) Other segment (“Other”), which is comprised of certain products sold by American Fruits and Flavors, LLC, a wholly-owned subsidiary of the Company, to independent third-party customers (the ~~��AFF~~“AFF Third-Party Products”).

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

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

~~Table of Contents~~

~~MONSTER BEVERAGE CORPORATION AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Tabular Dollars~~The Company’s Alcohol Brands segment primarily generates operating revenues by selling kegged, and canned beer as well as hard seltzers primarily to distributors in ~~Thousands, Except Per Share Amounts) (Unaudited)~~the United States.

The majority of the Company’s revenue is recognized when it satisfies a single performance obligation by transferring control of its products to a customer. Control is generally transferred when the Company’s products are either shipped or delivered based on the terms contained within the underlying contracts or agreements. Certain of the Company’s bottlers/distributors may also perform a separate function as a co-packer on the Company’s behalf. In such cases, control of the Company’s products passes to such bottlers/distributors when they notify the Company that they have taken possession or transferred the relevant portion of the Company’s finished goods. The Company’s general payment terms are short-term in duration. The Company does not have significant financing components or payment terms. The Company did not have any material unsatisfied performance obligations as of ~~September 30, 2021~~March 31, 2022 and December 31, ~~2020.~~

2021.

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

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

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

●

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

●

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

●

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

●

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

Table of Contents

MONSTER BEVERAGE CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

●

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

●

discounted or free products;

●

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

●

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

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

Amounts received pursuant to new and/or amended distribution agreements entered into with certain bottlers/distributors relating to the costs associated with terminating the Company’s prior distributors, are accounted for as deferred revenue and recognized as revenue ratably over the anticipated life of the respective distribution agreements, generally over 20 years.

The Company also enters into license agreements that generate revenues associated with third-party sales of non-beverage products bearing the Company’s trademarks including, but not limited to, clothing, hats, t-shirts, jackets, helmets and automotive wheels.

Management believes that adequate provision has been made for cash discounts, returns and spoilage based on the Company’s historical experience.

1012

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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 September 30, 2021										Three-Months Ended March 31, 2022
	��						Latin										Latin
							America										America
	U.S. and						and				U.S. and						and
Net Sales	Canada		EMEA¹		Asia Pacific		Caribbean		Total		Canada		EMEA¹		Asia Pacific		Caribbean		Total
Monster Energy® Drinks	$	880,012	$	252,101	$	120,864	$	76,816	$	1,329,793	$	925,680	$	260,889	$	110,556	$	107,722	$	1,404,847
Strategic Brands		35,417		28,450		5,603		4,979		74,449		53,051		30,176		6,662		2,704		92,593
Alcohol Brands²												15,207		—		—		—		15,207
Other		6,315		—		—		—		6,315		5,927		—		—		—		5,927
Total Net Sales	$	921,744	$	280,551	$	126,467	$	81,795	$	1,410,557	$	999,865	$	291,065	$	117,218	$	110,426	$	1,518,574


	Three-Months Ended September 30, 2020										Three-Months Ended March 31, 2021
							Latin										Latin
							America										America
	U.S. and						and				U.S. and						and
Net Sales	Canada		EMEA¹		Asia Pacific		Caribbean		Total		Canada		EMEA¹		Asia Pacific		Caribbean		Total
Monster Energy® Drinks	$	786,960	$	206,947	$	120,589	$	48,924	$	1,163,420	$	773,504	$	219,300	$	106,747	$	70,729	$	1,170,280
Strategic Brands		46,005		19,192		6,658		2,469		74,324		37,683		19,909		8,438		1,779		67,809
Alcohol Brands²												—		—		—		—		—
Other		8,618		—		—		—		8,618		5,727		—		—		—		5,727
Total Net Sales	$	841,583	$	226,139	$	127,247	$	51,393	$	1,246,362	$	816,914	$	239,209	$	115,185	$	72,508	$	1,243,816

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

²Effectively from February 17, 2022 to March 31, 2022

Nine-Months Ended September 30, 2021








Latin


America

U.S. and

and

Net Sales

Canada

EMEA¹

Asia Pacific

Caribbean

Total
Monster Energy®Drinks

$
2,548,873

$
741,208

$
346,545

$
230,536

$
3,867,162
Strategic Brands

122,487

76,234

21,047

9,425

229,193
Other

19,953

—

—

—

19,953
Total Net Sales

$
2,691,313

$
817,442

$
367,592

$
239,961

$
4,116,308

Nine-Months Ended September 30, 2020








Latin


America

U.S. and

and

Net Sales

Canada

EMEA¹

Asia Pacific

Caribbean

Total
Monster Energy®Drinks

$
2,223,925

$
501,639

$
319,325

$
138,671

$
3,183,560
Strategic Brands

125,030

52,333

17,161

3,904

198,428
Other

20,367

—

—

—

20,367
Total Net Sales

$
2,369,322

$
553,972

$
336,486

$
142,575

$
3,402,355

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

~~Table of Contents~~

~~MONSTER BEVERAGE CORPORATION AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

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

Contract Liabilities

Amounts received from certain bottlers/distributors at inception of their distribution contracts or at the inception of certain sales/marketing programs are accounted for as deferred revenue. As of ~~September 30, 2021,~~March 31, 2022, the Company had ~~$290.9~~$280.8 million of deferred revenue, which is included in current and long-term deferred revenue in the Company’s condensed consolidated balance sheet. As of December 31, ~~2020,~~2021, the Company had ~~$309.9~~$285.8 million of deferred revenue, which is included in current and long-term deferred revenue in the Company’s condensed consolidated balance sheet. During the three-months ended ~~September 30,~~March 31, 2022 and 2021, ~~and 2020, $10.4~~$10.0 million and ~~$10.5 million, respectively, of deferred revenue was recognized in net sales. See Note 11. During the nine-months ended September 30, 2021 and 2020, $31.3 million and $31.6~~$10.4 million, respectively, of deferred revenue was recognized in net sales. See Note 11.

LEASES

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

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

Table of Contents

MONSTER BEVERAGE CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

Right-of-use (“ROU”) assets and lease liabilities are recognized at the lease commencement date based on the present value of lease payments over the lease term. As the Company’s leases generally do not provide an implicit rate, the Company uses its incremental borrowing rate based on the estimated rate of interest for collateralized borrowing over a similar term of the lease payments at the commencement date. ROU assets also include any lease payments made and exclude lease incentives. Lease terms include options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option.

Certain of the Company’s real estate leases contain variable lease payments, including payments based on an index or rate. Variable lease payments based on an index or rate are initially measured using the index or rate in effect at the lease commencement date. Additional payments based on the change in an index or rate, or payments based on a change in the Company’s portion of real estate taxes and insurance, are recorded as a period expense when incurred.

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

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

~~Table of Contents~~

~~MONSTER BEVERAGE CORPORATION AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

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

The components of lease cost were comprised of the following:

Three-Months

Three-Months

Nine-Months

Nine-Months

Ended September 30,

Ended September 30,

Ended September 30,

Ended September 30,


2021

2020

2021

2020
Operating lease cost

$
1,103

$
1,161

$
3,348

$
3,499

Short-term lease cost

1,235

856

3,370

2,440

Variable lease cost

185

242

532

564

Finance leases:

Amortization of ROU assets

138

177

394

511
Interest on lease liabilities

6

9

15

34
Finance lease cost

144

186

409

545

Total lease cost

$
2,667

$
2,445

$
7,659

$
7,048

~~Supplemental cash flow information for the following periods:~~

Nine-Months

Nine-Months

Ended September 30,

Ended September 30,

2021

2020
Cash paid for amounts included in the measurement of lease liabilities:

Operating cash outflows from operating leases

$
3,057

$
3,081
Operating cash outflows from finance leases

15

33
Financing cash outflows from finance leases

1,970

2,500

ROU assets obtained in exchange for lease obligations:

Finance leases

2,767

2,231
Operating leases

251

2,117

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

September 30, 2021


Real Estate

Equipment

Total

Balance Sheet Location
Operating leases

$
19,995

$
196

$
20,191

Other Assets
Finance leases

—

2,719

2,719

Property and Equipment, net

December 31, 2020


Real Estate

Equipment

Total

Balance Sheet Location
Operating leases

$
22,565

$
189

$
22,754

Other Assets
Finance leases

—

2,120

2,120

Property and Equipment, net

~~Table of Contents~~

~~MONSTER BEVERAGE CORPORATION AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

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

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

September 30, 2021


Operating Leases

Finance Leases
Accrued liabilities

$
2,849

$
1,571
Other liabilities

15,362

46
Total

$
18,211

$
1,617

December 31, 2020


Operating Leases

Finance Leases
Accrued liabilities

$
3,171

$
799
Other liabilities

17,342

24
Total

$
20,513

$
823

~~The weighted-average remaining lease terms and weighted-average discount rates for operating and finance leases at September 30, 2021 and December 31, 2020 were as follows:~~

September 30, 2021


Operating Leases

Finance Leases

Weighted-average remaining lease term (years)

9.2

0.7

Weighted-average discount rate

3.6
%
1.2
%

December 31, 2020


Operating Leases

Finance Leases

Weighted-average remaining lease term (years)

9.4

0.6

Weighted-average discount rate

3.6
%
1.9
%

The following table reconciles the undiscounted future lease payments for operating and finance leases to the operating and finance leases recorded in the Company’s condensed consolidated balance sheet at September 30, 2021:

Undiscounted Future Lease Payments

Operating Leases

Finance Leases
2021 (excluding the nine-months ended September 30, 2021)

$
892

$
713
2022

3,207

871
2023

2,423

21
2024

1,887

13
2025

1,600

8
2026 and thereafter

11,588

—
Total lease payments

21,597

1,626
Less imputed interest

(3,386)

(9)
Total

$
18,211

$
1,617

~~As of September 30, 2021, the Company did not have any significant additional operating or finance leases that have not yet commenced.~~


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

Short-term lease cost		929		953

Variable lease cost		183		162

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

Total lease cost	$	2,936	$	2,384

Table of Contents

MONSTER BEVERAGE CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

5.	~~INVESTMENTS~~

Supplemental cash flow information for the following periods:


	Three-Months		Three-Months
	Ended March 31,		Ended March 31,
	2022		2021
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash outflows from operating leases	$	1,652	$	991
Operating cash outflows from finance leases		3		4
Financing cash outflows from finance leases		592		689

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

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

Continuous

Continuous

Gross

Gross

Unrealized

Unrealized

Unrealized

Unrealized

Loss Position

Loss Position

Amortized

Holding

Holding

Fair

less than 12

greater than 12
September 30, 2021

Cost

Gains

Losses

Value

Months

Months
Available-for-sale

Short-term:

Commercial paper

$
292,094

$
—

$
—

$
292,094

$
—

$
—
Certificates of deposit

47,616

—

—

47,616

—

—
U.S. government agency securities

70,202

10

2

70,210

2

—
U.S. treasuries

814,178

30

62

814,146

62

—
Long-term:

U.S. government agency securities

1,416

—

—

1,416

—

—
U.S. treasuries

26,840

1

2

26,839

2

—
Total

$
1,252,346

$
41

$
66

$
1,252,321

$
66

$
—


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

Continuous

Continuous

Gross

Gross

Unrealized

Unrealized

Unrealized

Unrealized

Loss Position

Loss Position

Amortized

Holding

Holding

Fair

less than 12

greater than 12
December 31, 2020

Cost

Gains

Losses

Value

Months

Months
Available-for-sale

Short-term:

Commercial paper

$
119,886

$
—

$
—

$
119,886

$
—

$
—
Certificates of deposit

20,387

—

—

20,387

—

—
Municipal securities

9,083

—

—

9,083

—

—
U.S. government agency securities

81,521

13

3

81,531

3

—
U.S. treasuries

650,386

150

69

650,467

69

—
Long-term:

U.S. government agency securities

10,350

1

—

10,351

—

—
U.S. treasuries

33,946

1

7

33,940

7

—
Total

$
925,559

$
165

$
79

$
925,645

$
79

$
—


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

~~During~~Operating and finance lease liabilities recognized in the ~~three- and nine-months ended September 30, 2021 and 2020, realized gains or losses recognized on the sale of investments~~Company’s condensed consolidated balance sheets were ~~not significant.~~as follows at:


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

~~The Company’s investments at September 30, 2021 and December 31, 2020 carried investment grade credit ratings.~~


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

Table of Contents

MONSTER BEVERAGE CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

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


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


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

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

September 30, 2021

December 31, 2020


Amortized Cost

Fair Value

Amortized Cost

Fair Value
Less than 1 year:

Commercial paper

$
292,094

$
292,094

$
119,886

$
119,886
Municipal securities

—

—

9,083

9,083
U.S. government agency securities

70,202

70,210

81,521

81,531
Certificates of deposit

47,616

47,616

20,387

20,387
U.S. treasuries

814,178

814,146

650,386

650,467
Due 1 - 10 years:

U.S. treasuries

26,840

26,839

33,946

33,940
U.S. government agency securities

1,416

1,416

10,350

10,351
Total

$
1,252,346

$
1,252,321

$
925,559

$
925,645


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

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

~~ASC 820 provides a framework for measuring fair value and requires disclosures regarding fair value measurements. ASC 820 defines fair value as the price that would be received on the sale~~As of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. ASC 820 also establishes a fair value hierarchy that requires an entity to maximize the use of observable inputs, where available. The three levels of inputs required by the standard thatMarch 31, 2022, the Company ~~uses to measure fair value are summarized below.~~did not have any significant additional operating or finance leases that have not yet commenced.

●

~~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)

5.	INVESTMENTS

The following ~~tables present the fair value of~~table summarizes 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~~investments at:

September 30, 2021

Level 1

Level 2

Level 3

Total
Cash

$
703,969

$
—

$
—

$
703,969
Money market funds

632,233

—

—

632,233
Certificates of deposit

—

47,616

—

47,616
Commercial paper

—

292,094

—

292,094
U.S. government agency securities

—

71,626

—

71,626
U.S. treasuries

—

1,217,454

—

1,217,454
Foreign currency derivatives

—

(217)

—
��

(217)
Total

$
1,336,202

$
1,628,573

$
—

$
2,964,775

Amounts included in:

Cash and cash equivalents

$
1,336,202

$
376,469

$
—

$
1,712,671
Short-term investments

—

1,224,066

—

1,224,066
Accounts receivable, net

—

157

—

157
Investments

—

28,255

—

28,255
Accrued liabilities

—

(374)

—

(374)
Total

$
1,336,202

$
1,628,573

$
—

$
2,964,775


									Continuous		Continuous
			Gross		Gross				Unrealized		Unrealized
			Unrealized		Unrealized				Loss Position		Loss Position
	Amortized		Holding		Holding		Fair		less than 12		greater than 12
March 31, 2022	Cost		Gains		Losses		Value		Months		Months
Available-for-sale
Short-term:
Commercial paper	$	276,413	$	—	$	—	$	276,413	$	—	$	—
Certificates of deposit		37,010		—		—		37,010		—		—
Municipal securities		168,958		2		482		168,478		482
U.S. government agency securities		78,831		—		342		78,489		342		—
U.S. treasuries		1,161,042		—		3,784		1,157,258		3,784		—
Long-term:
U.S. government agency securities		21,455		—		158		21,297		158		—
Municipal securities		5,284				18		5,266		18
U.S. treasuries		39,313		—		224		39,089		224		—
Total	$	1,788,306	$	2	$	5,008	$	1,783,300	$	5,008	$	—

December 31, 2020

Level 1

Level 2

Level 3

Total
Cash

$
796,421

$
—

$
—

$
796,421
Money market funds

352,730

—

—

352,730
Certificates of deposit

—

23,137

—

23,137
Commercial paper

—

130,883

—

130,883
Municipal securities

—

9,083

—

9,083
U.S. government agency securities

—

91,882

—

91,882
U.S. treasuries

—

701,922

—

701,922
Foreign currency derivatives

—

(2,578)

—

(2,578)
Total

$
1,149,151

$
954,329

$
—

$
2,103,480

Amounts included in:

Cash and cash equivalents

$
1,149,151

$
31,262

$
—

$
1,180,413
Short-term investments

—

881,354

—

881,354
Accounts receivable, net

—

69

—

69
Investments

—

44,291

—

44,291
Accrued liabilities

—

(2,647)

—

(2,647)
Total

$
1,149,151

$
954,329

$
—

$
2,103,480


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

~~All~~During the three-months ended March 31, 2022 and 2021, realized gains or losses recognized on the sale of ~~the Company’s short-term and long-term~~ investments ~~are classified within Level 1 or Level 2 of the fair value hierarchy.~~ were not significant.

The Company’s ~~valuation of its Level 1~~ investments is based on quoted market prices in active markets for identical securities. The Company’s valuation of its Level 2 investments is based on other observable inputs, specifically a market approach which utilizes valuation models, pricing systems, mathematical toolsat March 31, 2022 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 0 transfers between Level 1 and Level 2 measurements during the nine-months ended September 30, 2021, or during the year-ended December 31, ~~2020, and there were no changes in the Company’s valuation techniques.~~

2021 carried investment grade credit ratings.

Table of Contents

MONSTER BEVERAGE CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

7.	~~DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES~~

The ~~Company is exposed to foreign currency exchange rate risks related primarily to its foreign business operations. During~~following table summarizes the nine-months ended September 30, 2021 and the year-ended December 31, 2020, the Company entered into forward currency exchange contracts with financial institutions to create an economic hedge to specifically manage a portionunderlying contractual maturities 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, 2021 have terms of one month or less. The Company does not enter into forward currency exchange contracts for speculation or trading purposes.

~~The Company has not designated its foreign currency exchange contracts as hedge transactions under ASC 815. Therefore, gains and losses on the~~ Company’s foreign currency exchange contracts are recognized in interest and other (expense) income, 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~~investments at:

September 30, 2021
Derivatives not designated as

hedging instruments under

Notional

Fair

ASC 815-20

Amount

Value

Balance Sheet Location
Assets:

Foreign currency exchange contracts:

Receive USD/pay GBP

$
24,581

$
68

Accounts receivable, net
Receive USD/pay DKK

4,174

45

Accounts receivable, net
Receive SGD/pay USD

16,478

23

Accounts receivable, net
Receive USD/pay NZD

3,880

21

Accounts receivable, net

Liabilities:

Foreign currency exchange contracts:

Receive RSD/pay USD

$
12,381

$
(147)

Accrued liabilities
Receive USD/pay COP

8,594

(81)

Accrued liabilities
Receive USD/pay RUB

8,947

(69)

Accrued liabilities
Receive USD/pay CNY

12,334

(56)

Accrued liabilities
Receive USD/pay ZAR

3,657

(19)

Accrued liabilities
Receive EUR/pay USD

233

(1)

Accrued liabilities
Receive AUD/pay USD

218

(1)

Accrued liabilities


	March 31, 2022				December 31, 2021
	Amortized Cost		Fair Value		Amortized Cost		Fair Value
Less than 1 year:
Commercial paper	$	276,413	$	276,413	$	334,077	$	334,077
Municipal securities		168,958		168,478		666		666
U.S. government agency securities		78,831		78,489		62,687		62,661
Certificates of deposit		37,010		37,010		44,502		44,502
U.S. treasuries		1,161,042		1,157,258		1,308,536		1,307,821
Due 1 - 10 years:
U.S. treasuries		39,313		39,089		87,133		86,943
Municipal securities		5,284		5,266		—		—
U.S. government agency securities		21,455		21,297		12,500		12,476
Total	$	1,788,306	$	1,783,300	$	1,850,101	$	1,849,146

6.	FAIR VALUE OF CERTAIN FINANCIAL ASSETS AND LIABILITIES

ASC 820 provides a framework for measuring fair value and requires disclosures regarding fair value measurements. ASC 820 defines fair value as the price that would be received on the sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. ASC 820 also establishes a fair value hierarchy that requires an entity to maximize the use of observable inputs, where available. The three levels of inputs required by the standard that the Company uses to measure fair value are summarized below.

●

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

●

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

●

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

Table of Contents

MONSTER BEVERAGE CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

December 31, 2020
Derivatives not designated as

hedging instruments under

Notional

Fair

FASB ASC 815-20

Amount

Value

Balance Sheet Location
Assets:

Foreign currency exchange contracts:

Receive SGD/pay USD

$
18,713

$
41

Accounts receivable, net
Receive RSD/pay USD

10,127

28

Accounts receivable, net

Liabilities:

Foreign currency exchange contracts:

Receive EUR/pay USD

$
1,298,899

$
(1,768)

Accrued liabilities
Receive USD/pay GBP

35,256

(416)

Accrued liabilities
Receive USD/pay AUD

8,508

(130)

Accrued liabilities
Receive USD/pay ZAR

2,403

(106)

Accrued liabilities
Receive USD/pay COP

5,436

(93)

Accrued liabilities
Receive USD/pay CNY

12,344

(50)

Accrued liabilities
Receive USD/pay RUB

7,780

(40)

Accrued liabilities
Receive NOK/pay USD

4,411

(18)

Accrued liabilities
Receive USD/pay NZD

2,290

(13)

Accrued liabilities
Receive SEK/pay USD

2,275

(10)

Accrued liabilities
Receive USD/pay DKK

3,151

(3)

Accrued 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.

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


March 31, 2022	Level 1		Level 2		Level 3		Total
Cash	$	748,324	$	—	$	—	$	748,324
Money market funds		138,161		—		—		138,161
Certificates of deposit		—		38,411		—		38,411
Commercial paper		—		290,410		—		290,410
Municipal securities		—		202,667		—		202,667
U.S. government agency securities		—		99,786		—		99,786
U.S. treasuries		—		1,280,327		—		1,280,327
Foreign currency derivatives		—		(4,483)		—		(4,483)
Total	$	886,485	$	1,907,118	$	—	$	2,793,603

Amounts included in:
Cash and cash equivalents	$	886,485	$	128,301	$	—	$	1,014,786
Short-term investments		—		1,717,648		—		1,717,648
Accounts receivable, net		—		239		—		239
Investments		—		65,652		—		65,652
Accrued liabilities		—		(4,722)		—		(4,722)
Total	$	886,485	$	1,907,118	$	—	$	2,793,603


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

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

All of the Company’s short-term and long-term investments are classified within Level 1 or Level 2 of the fair value hierarchy. The ~~net (losses) gains~~Company’s valuation of its Level 1 investments is based on ~~derivative~~quoted market prices in active markets for identical securities. The Company’s valuation of its Level 2 investments is based on other observable inputs, specifically a market approach which utilizes valuation models, pricing systems, mathematical tools and other relevant information for the same or similar securities. The Company’s valuation of its Level 2 foreign currency exchange contracts is based on quoted market prices of the same or similar instruments, adjusted for counterparty risk. There were 0 transfers between Level 1 and Level 2 measurements during the three-months ended March 31, 2022, or during the year-ended December 31, 2021, and there were no changes in the ~~condensed consolidated statements of income were as follows:~~Company’s valuation techniques.

Amount of (loss) gain

recognized in income on

derivatives
Derivatives not designated as

Location of (loss) gain

Three-months ended
hedging instruments under

recognized in income on

September 30,

September 30,
ASC 815-20

derivatives

2021

2020
Foreign currency exchange contracts

Interest and other expense, net

$
(308)

$
260

Table of Contents

MONSTER BEVERAGE CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

Amount of (loss) gain

recognized in income on

derivatives
Derivatives not designated as

Location of (loss) gain

Nine-months ended
hedging instruments under

recognized in income on

September 30,

September 30,
ASC 815-20

derivatives

2021

2020
Foreign currency exchange contracts

Interest and other expense, net

$
(5,706)

$
4,318

8.7.	~~INVENTORIES~~DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES

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

~~Inventories~~The Company has not designated its foreign currency exchange contracts as hedge transactions under ASC 815. Therefore, gains and losses on the Company’s foreign currency exchange contracts are recognized in interest and other (expense) income, 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,

December 31,


2021

2020
Raw materials

$
284,711

$
155,166
Finished goods

186,842

177,919

$
471,553

$
333,085


March 31, 2022
Derivatives not designated as
hedging instruments under	Notional		Fair
ASC 815-20	Amount		Value		Balance Sheet Location
Assets:
Foreign currency exchange contracts:
Receive RSD/pay USD	$	9,913	$	138	Accounts receivable, net
Receive SGD/pay USD		16,662		88	Accounts receivable, net
Receive USD/pay CNY		12,353		13	Accounts receivable, net

Liabilities:
Foreign currency exchange contracts:
Receive USD/pay RUB	$	5,382	$	(3,888)	Accrued liabilities
Receive USD/pay EUR		19,061		(317)	Accrued liabilities
Receive USD/pay ZAR		5,398		(281)	Accrued liabilities
Receive USD/pay NZD		4,095		(64)	Accrued liabilities
Receive USD/pay DKK		3,335		(59)	Accrued liabilities
Receive USD/pay COP		10,097		(51)	Accrued liabilities
Receive USD/pay GBP		19,410		(34)	Accrued liabilities
Receive USD/pay AUD		871		(28)	Accrued liabilities

1920

Table of Contents

MONSTER BEVERAGE CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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


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

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

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


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

8.	INVENTORIES

Inventories consist of the following at:


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

Table of Contents

MONSTER BEVERAGE CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

9.	PROPERTY AND EQUIPMENT, NET

Property and equipment consist of the following at:


	September 30,		December 31,		March 31,		December 31,
	2021		2020		2022		2021
Land	$	85,553	$	85,876	$	86,522	$	85,455
Leasehold improvements		11,638		11,524		31,272		11,845
Furniture and fixtures		8,218		8,271		9,185		8,274
Office and computer equipment		21,845		21,657		23,026		21,601
Computer software		8,016		6,945		8,085		8,383
Equipment		199,683		185,348		251,184		190,333
Buildings		161,507		156,616		186,371		167,243
Vehicles		44,810		43,173		47,603		45,404
		541,270		519,410		643,248		538,538
Less: accumulated depreciation and amortization		(231,696)		(204,754)		(235,857)		(224,785)
	$	309,574	$	314,656	$	407,391	$	313,753

Total depreciation and amortization expense recorded was ~~$11.3~~$13.1 million and $11.7 million for the three-months ended ~~September 30,~~March 31, 2022 and 2021, ~~and 2020, respectively. Total depreciation and amortization expense recorded was $34.5 million and $36.4 million for the nine-months ended September 30, 2021 and 2020,~~ respectively.

10. GOODWILL AND OTHER INTANGIBLE ASSETS

The following is a roll-forward of goodwill for the ~~nine-months~~three-months ended ~~September 30,~~March 31, 2022 and 2021 ~~and 2020~~ by reportable segment:


	Monster								Monster
	Energy®		Strategic						Energy®		Strategic		Alcohol
	Drinks		Brands		Other		Total		Drinks		Brands		Brands		Other		Total
Balance at December 31, 2020	$	693,644	$	637,999	$	—	$	1,331,643
Balance at December 31, 2021									$	693,644	$	637,999	$	—	$	—	$	1,331,643
Acquisitions		—		—		—		—		—		—		80,285		—		80,285
Balance at September 30, 2021	$	693,644	$	637,999	$	—	$	1,331,643
Balance at March 31, 2022									$	693,644	$	637,999	$	80,285	$	—	$	1,411,928


	Monster								Monster
	Energy®		Strategic						Energy®		Strategic		Alcohol
	Drinks		Brands		Other		Total		Drinks		Brands		Brands		Other		Total
Balance at December 31, 2019	$	693,644	$	637,999	$	—	$	1,331,643
Balance at December 31, 2020									$	693,644	$	637,999	$	—	$	—	$	1,331,643
Acquisitions		—		—		—		—		0		0		0		0		0
Balance at September 30, 2020	$	693,644	$	637,999	$	—	$	1,331,643
Balance at March 31, 2021									$	693,644	$	637,999	$	—	$	—	$	1,331,643

Intangible assets consist of the following at:


	September 30,		December 31,		March 31,		December 31,
	2021		2020		2022		2021
Amortizing intangibles	$	66,875	$	66,875	$	121,372	$	66,872
Accumulated amortization		(60,126)		(56,801)		(62,761)		(61,227)
		6,749		10,074		58,611		5,645
Non-amortizing intangibles		1,059,334		1,048,972		1,173,502		1,066,741
	$	1,066,083	$	1,059,046	$	1,232,113	$	1,072,386

2022

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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 $1.5 million and $1.1 million for ~~both~~ the three-months ended ~~September 30,~~March 31, 2022 and March 31, 2021, ~~and September 30, 2020. Total amortization expense recorded was $3.3 million and $6.5 million for the nine-months ended September 30, 2021 and 2020,~~ respectively. ~~The Company recorded an impairment charge of $3.0 million and $7.0 million on a Strategic Brand trademark in the three- and nine-months ended September 30, 2020, respectively.~~

The following is the future estimated amortization expense related to amortizing intangibles as of ~~September 30, 2021:~~March 31, 2022:


2021 (excluding the nine-months ended September 30, 2021)	$	1,101
2022		4,405
2022 (excluding the three-months ended March 31, 2022)			$	6,029
2023		1,112		4,745
2024		14		3,647
2025		13		3,647
2026 and thereafter		104
2026				3,646
2027 and thereafter				36,897
	$	6,749	$	58,611

11. DISTRIBUTION AGREEMENTS

In the normal course of business, amounts received pursuant to new and/or amended distribution agreements entered into with certain bottlers/distributors, relating to the costs associated with terminating agreements with the Company’s prior distributors, or at the inception of certain sales/marketing programs are accounted for as deferred revenue and are recognized as revenue ratably over the anticipated life of the respective agreement, generally 20 years or program duration, as the case may be. Revenue recognized was ~~$10.4~~$10.0 million and ~~$10.5~~$10.4 million for the three-months ended ~~September 30,~~March 31, 2022 and 2021, ~~and 2020, respectively. Revenue recognized was $31.3 million and $31.6 million for the nine-months ended September 30, 2021 and 2020,~~ respectively.

12. COMMITMENTS AND CONTINGENCIES

The Company had purchase commitments aggregating approximately ~~$130.0~~$384.1 million at ~~September 30, 2021,~~March 31, 2022, which represented commitments made by the Company and its subsidiaries to various suppliers of raw materials for the production of its products. These obligations vary in terms, but are generally satisfied within one year.

The Company had contractual obligations aggregating approximately ~~$212.7~~$335.4 million at ~~September 30, 2021,~~March 31, 2022, which related primarily to sponsorships and other marketing activities.

The Company has a credit facility with HSBC Bank (China) Company Limited, Shanghai Branch, of $15.0 million. At ~~September 30, 2021,~~March 31, 2022, the interest rate on borrowings under the line of credit was 5.5%. As of ~~September 30, 2021, $0.2~~March 31, 2022, $9.9 million was outstanding on this line of credit.

Litigation — From time to time in the normal course of business, the Company is named in litigation, including labor and employment matters, personal injury matters, consumer class actions, intellectual property matters and claims from prior distributors. Although it is not possible to predict the ultimate outcome of such litigation, based on the facts known to the Company, management believes that such litigation in aggregate will likely not have a material adverse effect on the Company’s financial position or results of operations.

The Company evaluates, on a quarterly basis, developments in legal proceedings and other matters that could cause an increase or decrease in the amount of the liability that is accrued, if any, and any related insurance reimbursements. As of ~~September 30, 2021,~~March 31, 2022, 0 loss contingencies were included in the Company’s condensed consolidated balance sheet.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

13. ACCUMULATED OTHER COMPREHENSIVE ~~(LOSS) INCOME~~

LOSS

Changes in accumulated other comprehensive ~~(loss) income~~loss by component, after tax, for the ~~nine-months~~three-months ended ~~September 30,~~March 31, 2022 and 2021 ~~and 2020~~ are as follows:


			Unrealized						Unrealized
	Currency		Gains (Losses)				Currency		Losses on
	Translation		on Available-for-				Translation		Available-for-
	Gains (Losses)		Sale Securities		Total		Losses		Sale Securities		Total
Balance at December 31, 2020	$	2,950	$	84	$	3,034
Balance at December 31, 2021							$	(68,209)	$	(956)	$	(69,165)
Other comprehensive (loss) income before reclassifications		(46,412)		(117)		(46,529)		1,079		(4,059)		(2,980)
Amounts reclassified from accumulated other comprehensive (loss) income		0		0		0		0		0		0
Net current-period other comprehensive (loss) income		(46,412)		(117)		(46,529)		1,079		(4,059)		(2,980)
Balance at September 30, 2021	$	(43,462)	$	(33)	$	(43,495)
Balance at March 31, 2022							$	(67,130)	$	(5,015)	$	(72,145)


			Unrealized						Unrealized
	Currency		Gains (Losses)				Currency		Gains on
	Translation		on Available-for-				Translation		Available-for-
	Losses		Sale Securities		Total		Losses		Sale Securities		Total
Balance at December 31, 2019	$	(32,581)	$	194	$	(32,387)
Balance at December 31, 2020							$	2,950	$	84	$	3,034
Other comprehensive (loss) income before reclassifications		(338)		196		(142)		(27,932)		24		(27,908)
Amounts reclassified from accumulated other comprehensive (loss) income		—		—		—		—		—		—
Net current-period other comprehensive (loss) income		(338)		196		(142)		(27,932)		24		(27,908)
Balance at September 30, 2020	$	(32,919)	$	390	$	(32,529)
Balance at March 31, 2021							$	(24,982)	$	108	$	(24,874)

14. TREASURY STOCK

On March 13, 2020, the Company’s Board of Directors authorized a share repurchase program for the purchase of up to $500.0 million of the Company’s outstanding common stock (the “March 2020 Repurchase Plan”). During the three-months ended ~~September 30, 2021,~~March 31, 2022, 0 shares were repurchased under the March 2020 Repurchase Plan. As of ~~November 5, 2021,~~May 6, 2022, $441.5 million remained available for repurchase under the March 2020 Repurchase Plan.

During the three-months ended ~~September 30, 2021, 0~~March 31, 2022, 0.2 million shares of common stock were purchased from employees in lieu of cash payments for options exercised or withholding taxes ~~due.~~due for a total amount of $12.2 million.

15. STOCK-BASED COMPENSATION

The Company has 2 stock-based compensation plans under which shares were available for grant at ~~September 30, 2021:~~March 31, 2022: (i) the Monster Beverage Corporation 2020 Omnibus Incentive Plan, including the Monster Beverage Corporation Deferred Compensation Plan as a sub-plan thereunder, and (ii) the Monster Beverage Corporation 2017 Compensation Plan for Non-Employee Directors as Amended and Restated on February 23, 2022, including the Monster Beverage Corporation Deferred Compensation Plan for Non-Employee Directors as a sub-plan thereunder.

The Company recorded ~~$16.7~~$16.3 million and ~~$19.5~~$18.4 million of compensation expense relating to outstanding options, restricted stock units, performance share units and other share-based awards during the three-months ended ~~September 30,~~March 31, 2022 and 2021, respectively.

The tax benefit for tax deductions from non-qualified stock option exercises, disqualifying dispositions of incentive stock options and ~~2020, respectively. The Company recorded $52.4 million and $53.0 million~~vesting of ~~compensation expense relating to outstanding options,~~ restricted stock units and performance share units for the three-months ended March 31, 2022 and ~~other share-based awards during the nine-months ended September 30,~~ 2021 was $0.4 million and ~~2020,~~$1.4 million, respectively.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

The tax benefit for tax deductions from non-qualified stock option exercises, disqualifying dispositions of incentive stock options and vesting of restricted stock units and performance share units for the three-months ended September 30, 2021 and 2020 was $2.0 million and $3.5 million, respectively. The tax benefit for tax deductions from non-qualified stock option exercises, disqualifying dispositions of incentive stock options and vesting of restricted stock units and performance share units for the nine-months ended September 30, 2021 and 2020 was $6.1 million and $9.2 million, respectively.

Stock Options

Under the Company’s stock-based compensation plans, all stock options granted as of ~~September 30, 2021~~March 31, 2022 were granted at prices based on the fair value of the Company’s common stock on the date of grant. The Company records compensation expense for stock options based on the estimated fair value of the options on the date of grant using the Black-Scholes-Merton option pricing formula with the assumptions included in the table below. The Company uses historical data to determine the exercise behavior, volatility and forfeiture rate of the options.

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

Three-Months Ended September 30,

Nine-Months Ended September 30,


2021

2020*

2021

2020

Dividend yield

0.0
%
—

0.0
%
0.0
%
Expected volatility

28.3
%
—

28.9
%
30.5
%
Risk-free interest rate

0.7
%
—

0.8
%
0.7
%
Expected term

5.8
years
—

5.8
years
5.8
years

*~~NaN~~ ~~options were granted during the three-months ended September 30, 2020.~~


	Three-Months Ended March 31,
	2022		2021
Dividend yield	0.0	%	0.0	%
Expected volatility	27.7	%	28.9	%
Risk-free interest rate	2.1	%	0.8	%
Expected term	6.0 years		5.8 years

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

Risk-Free Interest Rate: The risk-free interest rate is based on the U.S. treasury zero-coupon yield curve in effect at the time of grant for the expected term of the option.

Expected Term: The Company’s expected term represents the weighted-average period that the Company’s stock options are expected to be outstanding. The expected term is based on the expected time to post-vesting exercise of options by employees. The Company uses historical exercise patterns of previously granted options to derive employee behavioral patterns used to forecast expected exercise patterns.

The following table summarizes the Company’s activities with respect to its stock option plans as follows:


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

The weighted-average grant-date fair value of options granted during the three-months ended March 31, 2022 and 2021 was $23.21 per share and $25.78 per share, respectively.

The total intrinsic value of options exercised during the three-months ended March 31, 2022 and 2021 was $4.9 million and $7.2 million, respectively.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

~~The following table summarizes the Company’s activities with respect to its stock option plans as follows:~~

Weighted-

Weighted-

Average

Average

Remaining

Number of

Exercise

Contractual

Aggregate

Shares (in

Price Per

Term (in

Intrinsic
Options

thousands)

Share

years)

Value
Outstanding at January 1, 2021

13,973

$
44.93

5.7

$
664,432
Granted 01/01/21 - 03/31/21

1,015

$
88.95

Granted 04/01/21 - 06/30/21

13

$
91.36

Granted 07/01/21 - 09/30/21

23

$
95.33

Exercised

(845)

$
43.97

Cancelled or forfeited

(92)

$
62.23

Outstanding at September 30, 2021

14,087

$
48.17

5.3

$
573,070
Vested and expected to vest in the future at September 30, 2021

13,815

$
47.73

5.3

$
568,055
Exercisable at September 30, 2021

9,428

$
40.18

4.2

$
458,668

The weighted-average grant-date fair value of options granted during the three-months ended September 30, 2021 was $26.90 per share. NaN options were granted during the three-months ended September 30, 2020. The weighted-average grant-date fair value of options granted during the nine-months ended September 30, 2021 and 2020 was $25.81 per share and $18.78 per share, respectively.

The total intrinsic value of options exercised during the three-months ended September 30, 2021 and 2020 was $14.0 million and $22.5 million, respectively. The total intrinsic value of options exercised during the nine-months ended September 30, 2021 and 2020 was $42.2 million and $58.8 million, respectively.

Cash received from option exercises under all plans for the three-months ended ~~September 30,~~March 31, 2022 and 2021 ~~and 2020~~ was ~~$12.7~~$4.5 million and ~~$21.7 million, respectively. Cash received from option exercises under all plans for the nine-months ended September 30, 2021 and 2020 was $37.2 million and $65.5~~$6.8 million, respectively.

At ~~September 30, 2021,~~March 31, 2022, there was ~~$59.7~~$95.4 million of total unrecognized compensation expense related to non-vested options granted to employees under the Company’s stock-based compensation plans. That cost is expected to be recognized over a weighted-average period of ~~2.2~~3.4 years.

Restricted Stock Units and Performance Share Units

The cost of stock-based compensation for restricted stock units and performance share units is measured based on the closing fair market value of the Company’s common stock at the date of grant. In the event that the Company has the option and intent to settle a restricted stock unit or performance share unit in cash, the award is classified as a liability and revalued at each balance sheet date.

~~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 table summarizes the Company’s activities with respect to non-vested restricted stock units and performance share units as follows:


		Weighted			Weighted
	Number of	Average		Number of	Average
	Shares (in	Grant-Date		Shares (in	Grant-Date
	thousands)	Fair Value		thousands)	Fair Value
Non-vested at January 1, 2021	947	$	60.52
Granted 01/01/21 - 03/31/21¹	304	$	86.28
Granted 04/01/21 - 06/30/21	14	$	92.14
Granted 07/01/21 - 09/30/21	1	$	89.84
Non-vested at January 1, 2022				910	$	69.02
Granted 01/01/22 - 03/31/22¹				484	$	71.88
Vested	(344)	$	62.27	(371)	$	64.15
Forfeited/cancelled	(7)	$	59.96	(2)	$	59.67
Non-vested at September 30, 2021	915	$	68.94
Non-vested at March 31, 2022				1,021	$	72.17

¹The grant activity for performance share units is recorded based on the target performance level earning 100% of target performance share units. The actual number of performance share units earned could range from 0% to 200% of target depending on the achievement of pre-established performance goals.

The weighted-average grant-date fair value of restricted stock units and/or performance share units granted during the three-months ended ~~September 30,~~March 31, 2022 and 2021 was $73.45 and 2020 was $89.84 and $71.76 per share, respectively. The weighted-average grant-date fair value of restricted stock units and/or performance share units granted during the nine-months ended September 30, 2021 and 2020 was $89.12 and $62.79$88.96 per share, respectively.

As of ~~September 30, 2021,~~March 31, 2022, 0.9 million of restricted stock units and performance share units are expected to vest over their respective terms.

At ~~September 30, 2021,~~March 31, 2022, total unrecognized compensation expense relating to non-vested restricted stock units and performance share units was ~~$40.0~~$56.7 million, which is expected to be recognized over a weighted-average period of ~~2.0~~2.4 years.

Other Share-Based Awards

The Company has granted other share-based awards to certain employees that are payable in cash. These awards are classified as liabilities and are valued based on the fair value of the award at the grant date and are remeasured at each reporting date until settlement, with compensation expense being recognized in proportion to the completed requisite service period up until date of settlement. At ~~September 30, 2021,~~March 31, 2022, other share-based awards outstanding included grants that vest over three years payable in the first quarters of ~~2022,~~ 2023, 2024 and ~~2024.~~

2025.

At ~~September 30, 2021,~~March 31, 2022, there was ~~$1.2~~$0.5 million of total unrecognized compensation expense related to nonvested other share-based awards granted to employees under the Company’s stock-based compensation plans. That cost is expected to be recognized over a weighted-average period of ~~1.1~~0.8 years.

~~Table of Contents~~

~~MONSTER BEVERAGE CORPORATION AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

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

~~16. INCOME TAXES~~

~~The following is a roll-forward of the Company’s total gross unrecognized tax benefits, not including interest and penalties, for the nine-months ended September 30, 2021:~~

Gross Unrecognized Tax

Benefits
Balance at December 31, 2020

$
742
Additions for tax positions related to the current year

0
Additions for tax positions related to the prior years

0
Decreases for tax positions related to the prior years

(353)
Balance at September 30, 2021

$
389

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, 2021, the Company had approximately $0.1 million in accrued interest and penalties related to unrecognized tax benefits. If the Company were to prevail on all uncertain tax positions, the resultant impact on the Company’s effective tax rate would not be significant. It is expected that any change in the amount of unrecognized tax benefits within the next 12 months will not be significant.

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

The Company is in various stages of examination with certain states and certain foreign jurisdictions, including the United Kingdom and Ireland. The Company’s 2017 through 2020 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 2016 through 2020 tax years.

~~17. EARNINGS PER SHARE~~

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

Three-Months Ended

Nine-Months Ended

September 30,

September 30,


2021

2020

2021

2020
Weighted-average shares outstanding:

Basic

528,997

527,637

528,618

530,194
Dilutive

6,918

5,626

6,936

4,817
Diluted

535,915

533,263

535,554

535,011

For the three-months ended September 30, 2021 and 2020, options and awards outstanding totaling 1.0 million shares and 0.6 million shares, respectively, were excluded from the calculations as their effect would have been antidilutive. For the nine-months ended September 30, 2021 and 2020, options and awards outstanding totaling 0.8 million shares and 4.2 million shares, respectively, were excluded from the calculations as their effect would have been antidilutive.

~~18. SEGMENT INFORMATION~~

~~The Company has 3~~ ~~operating~~ and reportable segments: (i) Monster Energy® Drinks segment, which is primarily comprised of the Company’s Monster Energy® drinks, Reign Total Body Fuel® high performance energy drinks and True North^TM Pure Energy Seltzers, (ii) Strategic Brands segment, which is primarily comprised of the various energy drink brands acquired from TCCC in 2015 as well as the Company’s affordable energy brands, and (iii) Other segment, which is comprised of the AFF Third-Party 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)

16. INCOME TAXES

As of March 31, 2022, the Company does not have unrecognized tax benefits. In addition, the Company’s policy is to recognize accrued interest and penalties related to unrecognized tax benefits in the provision for income taxes in the Company’s condensed consolidated financial statements. It is expected that any change in the amount of unrecognized tax benefits within the next 12 months will not be significant.

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

The Company is in various stages of examination with certain states and certain foreign jurisdictions, including the United Kingdom and Ireland. The Company’s 2018 through 2021 U.S. federal income tax returns are subject to examination by the IRS. The Company’s state income tax returns are subject to examination for the 2017 through 2021 tax years.

17. EARNINGS PER SHARE

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


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

For the three-months ended March 31, 2022 and 2021, options and awards outstanding totaling 1.6 million shares and 0.2 million shares, respectively, were excluded from the calculations as their effect would have been antidilutive.

18. SEGMENT INFORMATION

The Company has 4 operating and reportable segments: (i) Monster Energy® Drinks segment, which is primarily comprised of the Company’s Monster Energy® drinks, Reign Total Body Fuel® high performance energy drinks and True North^® Pure Energy Seltzers, (ii) Strategic Brands segment, which is primarily comprised of the various energy drink brands acquired from TCCC in 2015 as well as the Company’s affordable energy brands, (iii) Alcohol Brands segment, which is primarily comprised of the various craft beers and hard seltzers purchased as part of the CANarchy Transaction on February 17, 2022 and (iv) Other segment, which is comprised of the AFF Third-Party Products.

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

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

Corporate and unallocated amounts that do not relate to a reportable segment have been allocated to “Corporate & Unallocated.” No asset information, other than goodwill and other intangible assets, has been provided in the Company’s reportable segments, as management does not measure or allocate such assets on a segment basis.

~~The net revenues derived from the Company’s reportable segments and other financial information related thereto for the three- and nine-months ended September 30, 2021 and 2020 are as follows:~~

Three-Months Ended

Nine-Months Ended

September 30,

September 30,


2021

2020

2021

2020
Net sales:

Monster Energy® Drinks⁽¹⁾

$
1,329,793

$
1,163,419

$
3,867,162

$
3,183,559
Strategic Brands

74,449

74,325

229,193

198,429
Other

6,315

8,618

19,953

20,367
Corporate and unallocated

—

—

—

—

$
1,410,557

$
1,246,362

$
4,116,308

$
3,402,355

Three-Months Ended

Nine-Months Ended

September 30,

September 30,


2021

2020

2021

2020
Operating Income:

Monster Energy® Drinks⁽¹⁾

$
500,641

$
502,392

$
1,512,633

$
1,366,920
Strategic Brands

40,184

43,875

139,398

118,287
Other

1,146

2,368

5,266

4,780
Corporate and unallocated

(97,507)

(90,034)

(272,710)

(259,135)

$
444,464

$
458,601

$
1,384,587

$
1,230,852

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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,


2021

2020

2021

2020
Income before tax:

Monster Energy® Drinks⁽¹⁾

$
500,929

$
502,500

$
1,513,421

$
1,367,096
Strategic Brands

40,198

43,876

139,419

118,287
Other

1,144

2,368

5,264

4,780
Corporate and unallocated

(100,097)

(94,711)

(275,696)

(264,802)

$
442,174

$
454,033

$
1,382,408

$
1,225,361

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

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

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

The net revenues derived from the Company’s reportable segments and other financial information related thereto for the three-months ended March 31, 2022 and 2021 are as follows:


	Three-Months Ended
	March 31,
	2022		2021
Net sales:
Monster Energy® Drinks¹	$	1,404,847	$	1,170,280
Strategic Brands		92,593		67,809
Alcohol Brands²		15,207		—
Other		5,927		5,727
Corporate and unallocated		—		—
	$	1,518,574	$	1,243,816


	Three-Months Ended
	March 31,
	2022		2021
Operating Income:
Monster Energy® Drinks¹	$	454,563	$	464,819
Strategic Brands		57,195		45,140
Alcohol Brands²		(4,953)		—
Other		1,127		1,793
Corporate and unallocated		(108,443)		(97,606)
	$	399,489	$	414,146


	Three-Months Ended
	March 31,
	2022		2021
Income before tax:
Monster Energy® Drinks¹	$	455,134	$	464,968
Strategic Brands		57,254		45,140
Alcohol Brands²		(5,606)		—
Other		1,137		1,793
Corporate and unallocated		(115,730)		(98,514)
	$	392,189	$	413,387

(1)

Includes $~~10.4~~10.0 million and $~~10.5~~10.4 million for the ~~three- months~~three-months ended ~~September 30,~~March 31, 2022 and 2021, ~~and 2020, respectively, related to the recognition of deferred revenue. Includes~~ ~~$31.3~~ ~~million and~~ ~~$31.6~~ ~~million for the nine-months ended September 30, 2021 and 2020,~~ respectively, related to the recognition of deferred revenue.

Three-Months Ended

Nine-Months Ended

September 30,

September 30,


2021

2020

2021

2020
Depreciation and amortization:

Monster Energy® Drinks

$
8,477

$
8,713

$
26,315

$
27,687
Strategic Brands

283

227

832

3,932
Other

1,122

1,136

3,373

3,495
Corporate and unallocated

2,474

2,741

7,334

7,794

$
12,356

$
12,817

$
37,854

$
42,908

Corporate and unallocated expenses for the three-months ended September 30, 2021 include $63.4 million of payroll costs, of which $16.7 million was attributable to stock-based compensation expenses (see Note 15 “Stock-Based Compensation”), as well as $19.3 million attributable to professional service expenses, including accounting and legal costs, and $14.8 million of other operating expenses. Corporate and unallocated expenses for the three-months ended September 30, 2020 include $61.7 million of payroll costs, of which $19.2 million was attributable to stock-based compensation expenses (see Note 15 “Stock-Based Compensation”), as well as $16.7 million attributable to professional service expenses, including accounting and legal costs, and $11.6 million of other operating expenses.

Corporate and unallocated expenses for the nine-months ended September 30, 2021 include $189.7 million of payroll costs, of which $52.2 million was attributable to stock-based compensation expenses (see Note 15 “Stock-Based Compensation”), as well as $60.6 million attributable to professional service expenses, including accounting and legal costs, and $22.4 million of other operating expenses. Corporate and unallocated expenses for the nine-months ended September 30, 2021, were partially offset by $16.9 million due to the reversal of amounts previously accrued in connection with an intellectual property claim. Corporate and unallocated expenses for the nine-months ended September 30, 2020 include $173.5 million of payroll costs, of which $52.7 million was attributable to stock-based compensation expenses (see Note 15 “Stock-Based Compensation”), as well as $50.1 million attributable to professional service expenses, including accounting and legal costs, and $35.5 million of other operating expenses.

Coca-Cola Europacific Partners (formerly Coca-Cola European Partners) accounted for approximately 12% and 11% of the Company’s net sales for the three-months ended September 30, 2021 and 2020, respectively. Coca-Cola Europacific Partners accounted for approximately 12% and 10% of the Company’s net sales for the nine-months ended September 30, 2021 and 2020, respectively.

Coca-Cola Consolidated, Inc. accounted for approximately 11% and 12% of the Company’s net sales for the three-months ended September 30, 2021 and 2020, respectively. Coca-Cola Consolidated, Inc. accounted for approximately 11% and 12% of the Company’s net sales for the nine-months ended September 30, 2021 and 2020, respectively.

Reyes Coca-Cola Bottling, LLC accounted for approximately 10% and 11% of the Company’s net sales for the three-months ended September 30, 2021 and 2020, respectively. Reyes Coca-Cola Bottling, LLC accounted for approximately 10% and 11% of the Company’s net sales for the nine-months ended September 30, 2021 and 2020, respectively.

(2)

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

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MONSTER BEVERAGE CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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


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

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

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

Coca-Cola Europacific Partners (formerly Coca-Cola European Partners) accounted for approximately 12% and 11% of the Company’s net sales for the three-months ended March 31, 2022 and 2021, respectively.

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

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

Net sales to customers outside the United States amounted to ~~$527.4~~$553.4 million and ~~$444.5~~$459.4 million for the three-months ended ~~September 30,~~March 31, 2022 and 2021, ~~and 2020,~~ respectively. Such sales were approximately ~~37%~~36% and ~~36%~~37% of net sales for three-months ended ~~September 30,~~March 31, 2022 and 2021, ~~and 2020,~~ respectively. Net sales to customers outside the United States amounted to $1.53 billion and $1.13 billion for the nine-months ended September 30, 2021 and 2020, respectively. Such sales were approximately 37% and 33% of net sales for the nine-months ended September 30, 2021 and 2020, respectively.

Goodwill and other intangible assets for the Company’s reportable segments as of ~~September 30, 2021~~March 31, 2022 and December 31, ~~2020~~2021 are as follows:


	September 30,		December 31,		March 31,		December 31,
	2021		2020		2022		2021
Goodwill and other intangible assets:
Monster Energy® Drinks	$	1,414,190	$	1,406,646	$	1,425,023	$	1,420,503
Strategic Brands		976,944		974,132		979,268		978,032
Alcohol Brands						235,353		—
Other		6,592		9,911		4,397		5,494
Corporate and unallocated		—		—		—		—
	$	2,397,726	$	2,390,689	$	2,644,041	$	2,404,029

~~19. RELATED PARTY TRANSACTIONS~~

TCCC controls approximately 19.3% of the voting interests of the Company. The TCCC Subsidiaries, the TCCC Related Parties and certain TCCC independent bottlers/distributors purchase and distribute the Company’s products in domestic and certain international markets. The Company also pays TCCC a commission based on certain sales within the TCCC distribution network.

TCCC commissions, based on sales to the TCCC Subsidiaries and the TCCC Related Parties, were $23.6 million and $15.7 million for the three-months ended September 30, 2021 and 2020, respectively, and are included as a reduction to net sales. TCCC commissions, based on sales to the TCCC Subsidiaries and the TCCC Related Parties, were $59.9 million and $37.7 million for the nine-months ended September 30, 2021 and 2020, respectively, and are included as a reduction to net sales.

TCCC commissions, based on sales to TCCC independent bottlers/distributors, were $9.1 million and $5.5 million for the three-months ended September 30, 2021 and 2020, respectively, and are included in operating expenses. TCCC commissions, based on sales to certain TCCC independent bottlers/distributors, were $22.6 million and $15.2 million for the nine-months ended September 30, 2021 and 2020, respectively, and are included in operating expenses.

Net sales to the TCCC Subsidiaries for the three-months ended September 30, 2021 and 2020 were $30.3 million and $21.5 million, respectively. Net sales to the TCCC Subsidiaries for the nine-months ended September 30, 2021 and 2020 were $84.4 million and $55.2 million, respectively.

The Company also purchases concentrates from TCCC which are then sold to certain of the Company’s bottlers/distributors. Concentrate purchases from TCCC were $7.1 million and $6.8 million for the three-months ended September 30, 2021 and 2020, respectively. Concentrate purchases from TCCC were $21.3 million and $17.6 million for the nine-months ended September 30, 2021 and 2020, respectively.

Certain TCCC Subsidiaries also contract manufacture certain of the Company’s energy drinks. Such contract manufacturing expenses were $6.8 million and $5.1 million for the three-months ended September 30, 2021 and 2020, respectively. Such contract manufacturing expenses were $20.8 million and $11.3 million for the nine-months ended September 30, 2021 and 2020, 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)

19. RELATED PARTY TRANSACTIONS

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

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

Net sales to the TCCC Subsidiaries for the three-months ended March 31, 2022 and 2021 were $31.8 million and $27.1 million, respectively.

The Company also purchases concentrates from TCCC which are then sold to certain of the Company’s bottlers/distributors. Concentrate purchases from TCCC were $8.5 million and $6.4 million for the three-months ended March 31, 2022 and 2021, respectively.

Certain TCCC Subsidiaries also contract manufacture certain of the Company’s energy drinks. Such contract manufacturing expenses were $9.2 million and $7.4 million for the three-months ended March 31, 2022 and 2021, respectively.

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


	September 30,		December 31,		March 31,		December 31,
	2021		2020		2022		2021
Accounts receivable, net	$	83,144	$	44,925	$	115,497	$	94,647
Accounts payable	$	(34,991)	$	(30,792)	$	(37,629)	$	(35,248)
Accrued promotional allowances	$	(5,677)	$	(5,834)	$	(7,254)	$	(4,536)
Accrued liabilities	$	(19,591)	$	(15,446)	$	(35,849)	$	(26,616)

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

NaN director of the Company through certain trusts, and a family member of one director are the principal owners of a company that provides promotional materials to the Company. Expenses incurred with such company in connection with promotional materials purchased during the three-months ended ~~September 30,~~March 31, 2022 and 2021 ~~and 2020~~ were ~~$1.0~~$1.1 million and $0.4 million, respectively. ~~Expenses~~

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 ~~such company~~market rates for comparable travel.

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MONSTER BEVERAGE CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Tabular Dollars in ~~connection with promotional materials purchased during the nine-months ended September 30, 2021 and 2020 were $2.7 million and $1.9 million, respectively.~~Thousands, Except Per Share Amounts) (Unaudited)

In December 2018, the Company and a director of the Company entered into a 50-50 partnership that purchased land, and real property thereon, in Kona, Hawaii for the purpose of producing coffee products. The Company’s initial 50% contribution of $1.9 million was accounted for as an equity investment. During the three-months ended ~~September 30, 2021,~~March 31, 2022, the Company recorded an equity loss of ~~$0.04 million. During the nine-months ended September 30, 2021, the Company recorded an equity loss of $0.16 million.~~$0.03 million As of ~~September 30, 2021,~~March 31, 2022, the Company’s equity investment is ~~$1.4~~$1.3 million and is included in other assets (non-current) in the accompanying condensed consolidated balance sheet. At March 31, 2022 and December 31, 2021, the Company had $6.1 million and $3.4 million, respectively, in loans receivable from the partnership.

20.SUBSEQUENT EVENTS

In April 2022, Monster Energy Company (“MEC”) and Orange Bang, Inc. (“Orange Bang”) filed a joint motion in the United States District Court for the Central District of California to confirm a final arbitration award against Vital Pharmaceuticals, Inc. (“VPX”) that awarded MEC and Orange Bang $175.0 million and a 5% royalty on all future sales of VPX’s Bang Energy drink and other Bang-branded products as well as certain fees and costs. The arbitration arose from a settlement agreement that VPX entered into in 2010 with Orange Bang, a family-owned beverage business. Pursuant to the terms of that agreement, VPX is only permitted to use the Bang mark on “creatine-based” products or on Bang products that are marketed and sold only in the vitamin and dietary supplement sections of stores. MEC agreed to help Orange Bang defend its rights in exchange for half of any recovery. Upon examining evidence presented at the arbitration, the arbitrator found that Super Creatine is not creatine and that VPX’s Bang products are not creatine based and, therefore, don’t comply with the agreement between Orange Bang and VPX. The motion is scheduled for hearing in the 2022 second quarter. Per ASC No. 450 “Contingencies”, the Company will not recognize the award or royalties until such time as they are realized or realizable. The award and royalties will be realized or realizable when VPX has no remaining potential for appeal or reversal of the decision and all contingencies have been resolved. As of May 6, 2022, the proceedings have yet to progress to a stage where there is sufficient information for an accurate timeline of when the awards will be realized or realizable, if at all.

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

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

Our Business

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

CANarchy Acquisition

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

Russia-Ukraine Conflict

During the first quarter of fiscal 2022, the Russia-Ukraine conflict did not have a material impact on our financial position, results of operations and liquidity. Net sales in Russia and Ukraine combined were approximately 1.1% of our total net sales for the twelve months ended December 31, 2021.We will continue to monitor future developments relative to this conflict and its potential impacts.

The COVID – 19 Pandemic

The COVID-19 pandemic has directly and indirectly impacted our business. The duration and severity of this impact will depend on future developments that are highly uncertain and cannot be accurately predicted, including new information regarding the COVID-19 pandemic, as well as the emergence of new variants, the actions taken to limit its spread and the economic impact on local, regional, national and international markets. See “Part I, Item 1A – Risk Factors” in our Form 10-K.”

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

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

sales in 2022.

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

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

As of the date of this filing, we do not foresee a material impact on the ability of our co-packers to manufacture and our bottlers/distributors to distribute our products as a result of the COVID-19 pandemic. Depending on the duration of any COVID-19 pandemic related issues, we may experience material disruptions in our supply chain as the pandemic continues.

The consequences of the COVID-19 pandemic, including those on human capital, have resulted in cost increases, labor shortages and general input shortages, which have significantly impacted our cost base and our ability to meet increased demand.

During the three-months ended September 30, 2021, we procured additional quantities of aluminum cans from suppliers in the United States, South America and Asia in response to increased consumer demand. However, we continued to experience shortages in our aluminum can requirements in the United States and EMEA.

In addition, we continued to experience additional supply chain challenges, including, freight inefficiencies, trucking availability, shortages of shipping containers, port of entry congestion, insufficient co-packing capacity and delays in the receipt of certain ingredients, in the United States and EMEA. As a result, we were not able to fully satisfy increased demand for our products in these regions during the three-months ended September 30, 2021.

During the three-months ended September 30, 2021, we continued to experience increased aluminum can costs, attributable to higher aluminum commodity pricing as well as the costs of importing aluminum cans. In addition, we experienced increased ingredient and other input costs, including shipping and freight, labor, trucking, fuel, co-packing fees, secondary packaging materials and increased outbound freight costs, which resulted in increased costs of sales and increased operating costs. We continue to address the increased costs, some of which are likely to be transitory, through reductions in promotions and other pricing actions.

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Distribution and Supply Chain

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

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

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

Liquidity and Capital Resources

As of the date of this filing, we expect to maintain substantial liquidity as we manage through the current environment as described in the “Liquidity and Capital Resources” section below.

Overview

We develop, market, sell and distribute energy drink beverages and concentrates for energy drink beverages, primarily under the following brand names:

● Monster Energy®	● NOS®
● Monster Energy Ultra®	● Full Throttle®
● Monster Rehab®	● Burn®
● Monster ~~MAXX®~~Energy ® Nitro	● Mother®
● Java Monster®	● Nalu®
● Muscle Monster®	● Ultra Energy®
● Espresso Monster®	● Play® and Power Play® (stylized)
● Punch Monster®	● Relentless®
● Juice Monster®	● BPM®
● Monster Hydro® Energy Water	● BU®
● Monster Hydro® Super Sport	● Gladiator®
● Monster HydroSport Super Fuel®	● Samurai®
● Monster Super Fuel®	● Live+®
● Monster Dragon Tea®	● Predator®
● Reign Total Body Fuel®	● Fury®
● Reign Inferno® Thermogenic Fuel	● True ~~North~~^TMNorth®

We also develop, market, sell and distribute craft beers and hard seltzers under a number of brands, including, Jai Alai IPA, Florida Man IPA, Dale’s Pale Ale, Wild Basin Hard Seltzers, Dallas Blonde, Deep Ellum IPA, Black Ale, Hop Rising Double IPA, Juicy IPA, Apricot Hefeweizen and a host of other brands.

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

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During the three-months ended ~~September 30, 2021,~~March 31, 2022, we continued to expand our existing energy drink portfolio by adding additional products to our portfolio in a number of countries and further developed our distribution markets. During the three-months ended ~~September 30, 2021,~~March 31, 2022, we sold the following new products to our customers:

●

Java Monster® ~~(stylized) Reserve~~Cold Brew Latte

●

Java Monster® Cold Brew Sweet Black

●

Juice Monster® Aussie Style Lemonade^TM

●

Monster Energy® Ultra Peachy Keen®

●

Rehab® Monster® Watermelon

●

~~Monster® (stylized) Reserve White Pineapple~~Reign Total Body Fuel® Reignbow Sherbet

●

~~True North~~^TM ~~Pure Energy Seltzer Black Cherry~~

●

~~True North~~^TM ~~Pure Energy Seltzer Cucumber Lime~~

●

~~True North~~^TM ~~Pure Energy Seltzer Grapefruit Lemonade~~

●

~~True North~~^TM ~~Pure Energy Seltzer Mandarin Yuzu~~

●

~~True North~~^TM ~~Pure Energy Seltzer~~Live+® Watermelon ~~Mist~~

●

~~True North~~^TM ~~Pure Energy Seltzer White Peach Pear~~

●

Mother® ~~Zero Sugar Razzle Berry~~Kiwi Sublime

●

Play® Peach

●

Predator® ~~Malt Smash~~Peach

●

Predator® Red Apple

●

Relentless® Peach

●

Relentless® Raspberry

In the normal course of business, we discontinue certain products and/or product lines. Those products or product lines discontinued in the three-months ended ~~September 30, 2021,~~March 31, 2022, either individually or in aggregate, did not have a material adverse impact on our financial position, results of operations or liquidity.

~~Table of Contents~~

Our net sales of ~~$1.41~~$1.52 billion for the three-months ended ~~September 30, 2021~~March 31, 2022 represented record sales for our ~~third~~first fiscal quarter. Net changes in foreign currency exchange rates had ~~a favorable~~an unfavorable impact on net sales of approximately ~~$16.4~~$32.9 million for the three-months ended ~~September 30, 2021.~~

March 31, 2022.

The vast majority of our net sales are derived from our Monster Energy® Drinks segment. Net sales of our Monster Energy® Drinks segment were ~~$1.33~~$1.40 billion for the three-months ended ~~September 30, 2021.~~March 31, 2022. Net sales of our Strategic Brands segment were ~~$74.4~~$92.6 million for the three-months ended ~~September 30, 2021.~~March 31, 2022. Net sales of our Alcohol Brands segment were $15.2 million for the three-months ended March 31, 2022. Net sales of our Other segment were $5.9 million for the three-months ended March 31, 2022. Our Monster Energy® Drinks segment represented ~~94.3%~~92.5% and ~~93.3%~~94.1% of our net sales for the three-months ended ~~September 30,~~March 31, 2022 and 2021, ~~and 2020,~~ respectively. Our Strategic Brands segment represented ~~5.3%~~6.1% and ~~6.0%~~5.5% of our net sales for the three-months ended ~~September 30,~~March 31, 2022 and 2021, ~~and 2020,~~ respectively. Our ~~Other segment~~Alcohol Segment represented ~~0.4% and 0.7%~~1.0% of our net sales for the three-months ended ~~September 30, 2021~~March 31, 2022 (effectively from February 17 to March 31, 2022). Our Other segment represented 0.4% of our net sales for both the three-months ended March 31, 2022 and ~~2020, respectively.~~

2021.

Our growth strategy includes expanding our international ~~business.~~business and expanding our business in new sectors, such as the alcohol beverage sector. Net sales to customers outside the United States were ~~$527.4~~$553.4 million for the three-months ended ~~September 30, 2021,~~March 31, 2022, an increase of approximately ~~$82.9~~$94.0 million, or ~~18.7%~~20.4% higher than net sales to customers outside of the United States of ~~$444.5~~$459.4 million for the three-months ended ~~September 30, 2020.~~March 31, 2021. Such sales were approximately ~~37%~~36% and ~~36%~~37% of net sales for the three-months ended ~~September 30,~~March 31, 2022 and 2021, ~~and 2020,~~ respectively. On February 17, 2022, the Company completed the CANarchy Transaction which allowed the Company to enter the alcohol beverage sector.

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Our customers are primarily full service beverage bottlers/distributors, retail grocery and specialty chains, wholesalers, club stores, mass merchandisers, convenience chains, foodservice customers, value stores, e-commerce retailers and the military. Percentages of our gross billings to our various customer types for the ~~three-~~three-months ended March 31, 2022 and ~~nine-months ended September 30,~~ 2021 ~~and 2020~~ 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				Nine-Months Ended				Three-Months Ended
	September 30,				September 30,				March 31,
	2021		2020		2021		2020		2022		2021
U.S. full service bottlers/distributors	51	%	53	%	51	%	55	%	49	%	50	%
International full service bottlers/distributors	39	%	37	%	39	%	35	%	39	%	38	%
Club stores and e-commerce retailers	8	%	8	%	9	%	8	%	9	%	10	%
Retail grocery, direct convenience, specialty chains and wholesalers	1	%	1	%	1	%	1	%	2	%	1	%
Direct value stores and other	1	%	1	%	0	%	1	%	1	%	1	%

Our customers include Coca-Cola Canada Bottling Limited, Coca-Cola Consolidated, Inc., Coca-Cola Bottling Company United, Inc., Reyes Coca-Cola Bottling, ~~LLC, Great Lakes Coca-Cola Distribution,~~ 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 network bottlers, Asahi Soft Drinks, Co., Ltd., Wal-Mart, Inc. (including Sam’s Club), Costco Wholesale Corporation and Amazon.com, Inc. A decision by any large customer to decrease amounts purchased from us or to cease carrying our products could have a material adverse effect on our financial condition and ~~consolidated~~ results of operations.

Coca-Cola Europacific Partners accounted for approximately 12% and 11% of our net sales for the three-months ended ~~September 30,~~March 31, 2022 and 2021, ~~and 2020,~~ respectively. ~~Coca-Cola Europacific Partners accounted for approximately 12% and 10% of our net sales for the nine-months ended September 30, 2021 and 2020, respectively.~~

Coca-Cola Consolidated, Inc. accounted for approximately ~~11%~~9% and 12% of our net sales for the three-months ended ~~September 30,~~March 31, 2022 and 2021, ~~and 2020,~~ respectively. ~~Coca-Cola Consolidated, Inc. accounted for approximately 11% and 12% of our net sales for the nine-months ended September 30, 2021 and 2020, respectively.~~

Reyes Coca-Cola Bottling, LLC accounted for approximately 10% and ~~11%~~9% of our net sales for the three-months ended ~~September 30,~~March 31, 2022 and 2021, ~~and 2020,~~ respectively. ~~Reyes Coca-Cola Bottling, LLC accounted for approximately 10% and 11% of our net sales for the nine-months ended September 30, 2021 and 2020, respectively.~~

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Results of Operations

The following table sets forth key statistics for the ~~three-~~three-months ended March 31, 2022 and ~~nine-months ended September 30, 2021 and 2020.~~2021.


	Three-Months Ended						Percentage		Nine-Months Ended						Percentage		Three-Months Ended						Percentage
(In thousands, except per share amounts)	September 30,						Change		September 30,						Change		March 31,						Change
	2021			2020			21 vs. 20		2021			2020			21 vs. 20		2022			2021			22 vs. 21
Net sales¹	$	1,410,557		$	1,246,362		13.2	%	$	4,116,308		$	3,402,355		21.0	%	$	1,518,574		$	1,243,816		22.1	%
Cost of sales		621,399			509,831		21.9	%		1,775,375			1,369,160		29.7	%		741,907			528,881		40.3	%
Gross profit*¹		789,158			736,531		7.1	%		2,340,933			2,033,195		15.1	%		776,667			714,935		8.6	%
Gross profit as a percentage of net sales		55.9	%		59.1	%				56.9	%		59.8	%				51.1	%		57.5	%

Operating expenses		344,694			277,930		24.0	%		956,346			802,343		19.2	%		377,178			300,789		25.4	%
Operating expenses as a percentage of net sales		24.4	%		22.3	%				23.2	%		23.6	%				24.8	%		24.2	%

Operating income¹		444,464			458,601		(3.1)	%		1,384,587			1,230,852		12.5	%		399,489			414,146		(3.5)	%
Operating income as a percentage of net sales		31.5	%		36.8	%				33.6	%		36.2	%				26.3	%		33.3	%

Interest and other expense, net		2,290			4,568		(49.9)	%		2,179			5,491		(60.3)	%		7,300			759		861.8	%

Income before provision for income taxes¹		442,174			454,033		(2.6)	%		1,382,408			1,225,361		12.8	%		392,189			413,387		(5.1)	%

Provision for income taxes		104,969			106,379		(1.3)	%		326,247			287,503		13.5	%		97,986			98,193		(0.2)	%

Income taxes as a percentage of income before taxes		23.7	%		23.4	%				23.6	%		23.5	%				25.0	%		23.8	%

Net income	$	337,205		$	347,654		(3.0)	%	$	1,056,161		$	937,858		12.6	%	$	294,203		$	315,194		(6.7)	%
Net income as a percentage of net sales		23.9	%		27.9	%				25.7	%		27.6	%				19.4	%		25.3	%

Net income per common share:
Basic	$	0.64		$	0.66		(3.3)	%	$	2.00		$	1.77		12.9	%	$	0.56		$	0.60		(6.9)	%
Diluted	$	0.63		$	0.65		(3.5)	%	$	1.97		$	1.75		12.5	%	$	0.55		$	0.59		(6.8)	%

Case sales (in thousands) (in 192‑ounce case equivalents)		159,975			139,922		14.3	%		459,991			372,481		23.5	%		168,793			138,566		21.8	%

¹¹Includes ~~$10.4~~$10.0 million and ~~$10.5~~$10.4 million for the three-months ended ~~September 30,~~March 31, 2022 and 2021, ~~and 2020,~~ respectively, related to the recognition of deferred revenue. ~~Includes $31.3 million and $31.6 million for the nine-months ended September 30, 2021 and 2020, respectively, related to the recognition of deferred revenue.~~

*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, 2021 Compared to the Three-Months Ended September 30, 2020.~~

Net Sales

Net Sales. Net sales were ~~$1.41~~$1.52 billion for the three-months ended ~~September 30, 2021,~~March 31, 2022, an increase of approximately ~~$164.2~~$274.8 million, or ~~13.2%~~22.1% higher than net sales of ~~$1.25~~$1.24 billion for the three-months ended ~~September 30, 2020.~~March 31, 2021. Net changes in foreign currency exchange rates had ~~a favorable~~an unfavorable impact on net sales of approximately ~~$16.4~~$32.9 million for the three-months ended ~~September 30, 2021.~~March 31, 2022.

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Net sales for the Monster Energy® Drinks segment were ~~$1.33~~$1.40 billion for the three-months ended ~~September 30, 2021,~~March 31, 2022, an increase of approximately ~~$166.4~~$234.6 million, or ~~14.3%~~20.0% higher than net sales of ~~$1.16~~$1.17 billion for the three-months ended ~~September 30, 2020.~~March 31, 2021. Net sales for the Monster Energy® Drinks segment increased primarily due to increased worldwide sales by volume of our Monster Energy® brand energy drinks as a result of increased consumer ~~demand.~~demand, as well as sales of our True North® Pure Energy Seltzers (introduced in August 2021). Net changes in foreign currency exchange rates had ~~a favorable~~an unfavorable impact on net sales for the Monster Energy® Drinks segment of approximately ~~$15.4~~$29.6 million for the three-months ended ~~September 30, 2021.~~March 31, 2022.

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Net sales for the Strategic Brands segment were ~~$74.4~~$92.6 million for the three-months ended ~~September 30, 2021,~~March 31, 2022, an increase of approximately ~~$0.1~~$24.8 million, or ~~0.2%~~36.6% higher than net sales of ~~$74.3~~$67.8 million for the three-months ended ~~September 30, 2020. Shortages of NOS® concentrate negatively impacted net~~March 31, 2021. Net sales for the ~~three-months ended September 30, 2021.~~Strategic Brands segment increased primarily due to increased worldwide sales by volume of our NOS® and Predator® brand energy drinks as a result of increased consumer demand. Net changes in foreign currency exchange rates had ~~a favorable~~an unfavorable impact on net sales of approximately ~~$1.0~~$3.3 million for the Strategic Brands segment for the three-months ended ~~September 30, 2021.~~March 31, 2022.

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

Net sales for the Other segment were ~~$6.3~~$5.9 million for the three-months ended ~~September 30, 2021, a decrease~~March 31, 2022, an increase of approximately ~~$2.3~~$0.2 million, or ~~26.7% lower~~3.5% higher than net sales of ~~$8.6~~$5.7 million for the three-months ended ~~September 30, 2020.~~

March 31, 2021.

Case sales for our energy drink products, in 192-ounce case equivalents, were ~~160.0~~168.8 million cases for the three-months ended ~~September 30, 2021,~~March 31, 2022, an increase of approximately ~~20.1~~30.2 million cases or ~~14.3%~~21.8% higher than case sales of ~~139.9~~138.6 million cases for the three-months ended ~~September 30, 2020.~~March 31, 2021. The overall average net sales per case ~~(excluding net sales of AFF Third-Party Products of $6.3 million and $8.6 million~~decreased to $8.87 for the three-months ended ~~September 30, 2021 and 2020, respectively, as these sales do not have unit case equivalents) decreased to $8.78 for the three-months ended September 30, 2021,~~March 31, 2022, which was ~~0.8%~~0.7% lower than the average net sales per case of ~~$8.85~~$8.94 for the three-months ended ~~September 30, 2020.~~March 31, 2021.

Barrel sales for our craft beers and hard seltzers, in 31 US gallon equivalents, were 0.05 million barrels for the three-months ended March 31, 2022.

Gross ~~Profit.~~Profit

Gross profit was ~~$789.2~~$776.7 million for the three-months ended ~~September 30, 2021,~~March 31, 2022, an increase of approximately ~~$52.6~~$61.7 million, or ~~7.1%~~8.6% higher than the gross profit of ~~$736.5~~$714.9 million for the three-months ended ~~September 30, 2020.~~March 31, 2021. The increase in gross profit dollars was primarily the result of the ~~$164.2~~$274.8 million increase in net sales for the three-months ended ~~September 30, 2021.~~

March 31, 2022.

Gross profit as a percentage of net sales decreased to ~~55.9%~~51.1% for the three-months ended ~~September 30, 2021~~March 31, 2022 from ~~59.1%~~57.5% for the three-months ended ~~September 30, 2020.~~March 31, 2021. The decrease for the three-months ended ~~September 30, 2021~~March 31, 2022 was primarily the result of increased freight rates and fuel costs, including costs relating to the importation of aluminum cans, increased aluminum can costs attributable to higher aluminum commodity pricing, ~~as well as the~~increased ingredient and other input costs, ~~of importing aluminum cans, logistical costs~~including secondary packaging materials, increased co-packing fees, production inefficiencies and geographical sales mix.

In addition, gross profit as a percentage of net sales for the three-months ended March 31, 2022 was adversely impacted by the CANarchy Transaction. Inventory purchased as part of the CANarchy Transaction was recorded at fair value. The purchased inventory was subsequently sold in the three-months ended March 31, 2022 and was recognized through cost of goods sold at fair value (purchased cost), resulting in no recognized gross profits on the associated sales. Gross profit was negatively impacted by approximately $3.8 million during the three-months ended March 31, 2022 as a result.

Operating Expenses.

Total operating expenses were ~~$344.7~~$377.2 million for the three-months ended ~~September 30, 2021,~~March 31, 2022, an increase of approximately ~~$66.8~~$76.4 million, or ~~24.0%~~25.4% higher than total operating expenses of ~~$277.9~~$300.8 million for the three-months ended ~~September 30, 2020.~~

March 31, 2021.

The increase in operating expenses was primarily due to increased out-bound freight and warehouse costs of ~~$22.0~~$27.0 million, increased expenditures of $12.6 million for travel and entertainment, increased payroll expenses of ~~$6.4~~$10.0 million, increased expenditures of ~~$5.3 million for distributor terminations, increased expenditures of $2.4~~$6.3 million for professional service expenses, including accounting and legal costs ($3.6 million related to the CANarchy Transaction), increased expenditures of $5.6 million for commissions and increased ~~costs~~expenditures of ~~$2.7~~$5.3 million for ~~travel~~sponsorships and ~~entertainment. In addition, largely due to~~endorsements. Operating expenses as a ~~significant reduction in the comparative operating expenses~~percentage of net sales for the three-months ended ~~September 30, 2020 due~~March 31, 2022 were 24.8% as compared to ~~the COVID-19 pandemic, we experienced increased expenditures of $11.4 million~~24.2% for ~~sponsorships and endorsements, as well as increased expenditures of $12.7 million for other marketing expenses, including social media and digital marketing during~~ the three-months ended ~~September 30,~~March 31, 2021. Operating expenses as a percentage of net sales for the three-months ended ~~September 30, 2021 were 24.4% as compared to 22.3% for the three-months ended September 30, 2020. Operating expenses as a percentage of net sales for the three-months ended September 30,~~March 31, 2019 (pre COVID-19) were ~~24.5%~~27.7%.

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Operating Income

~~Operating Income.~~Operating income was ~~$444.5~~$399.5 million for the three-months ended ~~September 30, 2021,~~March 31, 2022, a decrease of approximately ~~$14.1~~$14.7 million, or ~~3.1%~~3.5% lower than operating income of ~~$458.6~~$414.1 million for the three-months ended ~~September 30, 2020.~~March 31, 2021. Operating income as a percentage of net sales decreased to ~~31.5%~~26.3% for the three-months ended ~~September 30, 2021~~March 31, 2022 from ~~36.8%~~33.3% for the three-months ended ~~September 30, 2020.~~March 31, 2021. Operating income for the three-months ended ~~September 30, 2021~~March 31, 2022 decreased primarily as a result of the decrease in the gross profit as a percentage of net sales as well as the increase in operating ~~expenses, primarily increased sales and marketing expenses and increased out-bound freight and warehouse costs.~~expenses. Operating income was ~~$105.9~~$71.5 million and ~~$99.8~~$96.8 million for the three-months ended ~~September 30,~~March 31, 2022 and 2021, ~~and 2020,~~ respectively, for our operations in EMEA, Asia Pacific, Latin America and the Caribbean.

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Operating income for the Monster Energy® Drinks segment, exclusive of corporate and unallocated expenses, was ~~$500.6~~$454.6 million for the three-months ended ~~September 30, 2021,~~March 31, 2022, a decrease of approximately ~~$1.8~~$10.3 million, or ~~0.3%~~2.2% lower than operating income of ~~$502.4~~$464.8 million for the three-months ended ~~September 30, 2020.~~March 31, 2021. The decrease in operating income for the Monster Energy® Drinks segment was primarily the result of a decrease in gross profit as a percentage of net sales as well as an increase in operating expenses.

Operating income for the Strategic Brands segment, exclusive of corporate and unallocated expenses, was ~~$40.2~~$57.2 million for the three-months ended ~~September 30, 2021, a decrease~~March 31, 2022, an increase of approximately ~~$3.7~~$12.1 million, or ~~8.4% lower~~26.7% higher than operating income of ~~$43.9~~$45.1 million for the three-months ended ~~September 30, 2020.~~March 31, 2021. The ~~decrease~~increase in operating income for the Strategic Brands segment was primarily the result of an increase in net sales.

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

result. As of March 31, 2022, all purchased inventory recorded at fair value had been sold.

Operating income for the Other segment, exclusive of corporate and unallocated expenses, was $1.1 million for the three-months ended ~~September 30, 2021,~~March 31, 2022, a decrease of approximately ~~$1.2~~$0.7 million, or ~~51.6%~~37.5% lower than operating income of ~~$2.4~~$1.8 million for the three-months ended ~~September 30, 2020.~~March 31, 2021.

Interest and Other Expense,net.

Interest and other non-operating expense, net, was ~~$2.3~~$7.3 million for the three-months ended ~~September 30, 2021,~~March 31, 2022, as compared to interest and other non-operating expense, net, of ~~$4.6~~$0.8 million for the three-months ended ~~September 30, 2020.~~March 31, 2021. Foreign currency transaction losses were ~~$2.9~~$8.4 million and ~~$4.8~~$0.8 million for the three-months ended ~~September 30,~~March 31, 2022 and 2021, ~~and 2020,~~ respectively. Interest income was ~~$0.8~~$1.5 million and ~~$1.5~~$1.1 million for the three-months ended ~~September 30,~~March 31, 2022 and 2021, ~~and 2020,~~ respectively.

Provision for IncomeTaxes.

Provision for income taxes was ~~$105.0~~$98.0 million for the three-months ended ~~September 30, 2021,~~March 31, 2022, a decrease of ~~$1.4~~$0.2 million, or ~~1.3%~~0.2% lower than the provision for income taxes of ~~$106.4~~$98.2 million for the three-months ended ~~September 30, 2020.~~March 31, 2021. The effective combined federal, state and foreign tax rate increased to ~~23.7%~~25.0% from ~~23.4%~~23.8% for the three-months ended ~~September 30,~~March 31, 2022 and 2021, ~~and 2020,~~ respectively. The increase in effective tax rate was primarily attributable to the increase in the net losses in certain foreign subsidiaries that have no related income tax benefits as a result of the prior establishment of valuation allowances on their deferred tax assets.

Net Income.

Net income was ~~$337.2~~$294.2 million for the three-months ended ~~September 30, 2021,~~March 31, 2022, a decrease of ~~10.4~~$21.0 million, or ~~3.0%~~6.7% lower than net income of ~~$347.7~~$315.2 million for the three-months ended ~~September 30, 2020.~~March 31, 2021. The decrease in net income for the three-months ended ~~September 30, 2021~~March 31, 2022 was primarily due to the decrease in the gross profit percentage of net sales as well as the increase in operating expenses.

~~Results of Operations for the Nine-Months Ended September 30, 2021 Compared to the Nine-Months Ended September 30, 2020.~~

~~Net Sales.~~ Net sales were $4.12 billion for the nine-months ended September 30, 2021, an increase of approximately $714.0 million, or 21.0% higher than net sales of $3.40 billion for the nine-months ended September 30, 2020. Net changes in foreign currency exchange rates had a favorable impact on net sales of approximately $64.3 million for the nine-months ended September 30, 2021.

Net sales for the Monster Energy® Drinks segment were $3.87 billion for the nine-months ended September 30, 2021, an increase of approximately $683.6 million, or 21.5% higher than net sales of $3.18 billion for the nine-months ended September 30, 2020. Net sales for the Monster Energy® Drinks segment increased primarily due to increased worldwide sales by volume of our Monster Energy® brand energy drinks as a result of increased consumer demand. Net changes in foreign currency exchange rates had a favorable impact on net sales for the Monster Energy® Drinks segment of approximately $60.2 million for the nine-months ended September 30, 2021.

Net sales for the Strategic Brands segment were $229.2 million for the nine-months ended September 30, 2021, an increase of approximately $30.8 million, or 15.5% higher than net sales of $198.4 million for the nine-months ended September 30, 2020. Net sales for the Strategic Brands segment increased primarily due to increased worldwide sales by volume of our, Predator®, Burn® and Mother® brand energy drinks as a result of increased consumer demand. Shortages of NOS® concentrate negatively impacted net sales for the nine-months ended September 30, 2021.Net changes in foreign currency exchange rates had a favorable impact on net sales of approximately $4.1 million for the Strategic Brands segment for the nine-months ended September 30, 2021.

Net sales for the Other segment were $20.0 million for the nine-months ended September 30, 2021, a decrease of approximately $0.4 million, or 2.0% lower than net sales of $20.4 million for the nine-months ended September 30, 2020.

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Case sales, in 192-ounce case equivalents, were 460.0 million cases for the nine-months ended September 30, 2021, an increase of approximately 87.5 million cases or 23.5% higher than case sales of 372.5 million cases for the nine-months ended September 30, 2020. The overall average net sales per case (excluding net sales of AFF Third-Party Products of $20.0 million and $20.4 million for the nine-months ended September 30, 2021 and 2020, respectively, as these sales do not have unit case equivalents) decreased to $8.91 for the nine-months ended September 30, 2021, which was 1.9% lower than the average net sales per case of $9.08 for the nine-months ended September 30, 2020. The decrease in the average net sales per case was primarily the result of geographical sales mix.

~~Gross Profit.~~ Gross profit was $2.34 billion for the nine-months ended September 30, 2021, an increase of approximately $307.7 million, or 15.1% higher than the gross profit of $2.03 billion for the nine-months ended September 30, 2020. The increase in gross profit dollars was primarily the result of the $714.0 million increase in net sales for the nine-months ended September 30, 2021.

Gross profit as a percentage of net sales decreased to 56.9% for the nine-months ended September 30, 2021 from 59.8% for the nine-months ended September 30, 2020. The decrease for the nine-months ended September 30, 2021 was primarily the result of increased aluminum can costs attributable to higher aluminum commodity pricing, as well as the costs of importing aluminum cans, logistical costs and geographical sales mix.

~~Operating Expenses~~. Total operating expenses were $956.3 million for the nine-months ended September 30, 2021, an increase of approximately $154.0 million, or 19.2% higher than total operating expenses of $802.3 million for the nine-months ended September 30, 2020. As a percentage of net sales, operating expenses for the nine-months ended September 30, 2021 were 23.2% as compared to 23.6% for the nine-months ended September 30, 2020. The increase in operating expenses was primarily due to increased out-bound freight and warehouse costs of $63.3 million, increased payroll expenses of $30.6 million, increased expenditures of $27.2 million for sponsorships and endorsements, increased expenditures of $14.1 million for social media and digital marketing, and increased expenditures of $10.6 million for professional service expenses, including accounting and legal costs. The increase in operating expenses for the nine-months ended September 30, 2021, was partially offset by $16.9 million due to the reversal of amounts previously accrued in connection with an intellectual property claim.

~~Operating Income.~~ Operating income was $1.38 billion for the nine-months ended September 30, 2021, an increase of approximately $153.7 million, or 12.5% higher than operating income of $1.23 billion for the nine-months ended September 30, 2020. Operating income as a percentage of net sales decreased to 33.6% for the nine-months ended September 30, 2021 from 36.2% for the nine-months ended September 30, 2020. Operating income was $325.8 million and $237.3 million for the nine-months ended September 30, 2021 and 2020, respectively, for our operations in EMEA, Asia Pacific, Latin America and the Caribbean.

Operating income for the Monster Energy® Drinks segment, exclusive of corporate and unallocated expenses, was $1.51 billion for the nine-months ended September 30, 2021, an increase of approximately $145.7 million, or 10.7% higher than operating income of $1.37 billion for the nine-months ended September 30, 2020. The increase in operating income for the Monster Energy® Drinks segment was primarily the result of the $683.6 million increase in net sales for the nine-months ended September 30, 2021.

Operating income for the Strategic Brands segment, exclusive of corporate and unallocated expenses, was $139.4 million for the nine-months ended September 30, 2021, an increase of approximately $21.1 million, or 17.8% higher than operating income of $118.3 million for the nine-months ended September 30, 2020. The increase in operating income for the Strategic Brands segment was primarily the result of the $30.8 million increase in net sales.

Operating income for the Other segment, exclusive of corporate and unallocated expenses, was $5.3 million for the nine-months ended September 30, 2021, an increase of approximately $0.5 million, or 10.1% higher than operating income of $4.8 million for the nine-months ended September 30, 2020.

~~Interest and Other Expense, net~~. Interest and other non-operating expense, net, was $2.2 million for the nine-months ended September 30, 2021, as compared to interest and other non-operating expense, net, of $5.5 million for the nine-months ended September 30, 2020. Foreign currency transaction losses were $5.5 million and $9.2 million for the nine-months ended September 30, 2021 and 2020, respectively. Interest income was $3.1 million and $6.9 million for the nine-months ended September 30, 2021 and 2020, respectively.

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~~Provision for Income~~~~Taxes~~. Provision for income taxes was $326.2 million for the nine-months ended September 30, 2021, an increase of $38.7 million, or 13.5% higher than the provision for income taxes of $287.5 million for the nine-months ended September 30, 2020. The effective combined federal, state and foreign tax rate was 23.6% and 23.5% for the nine-months ended September 30, 2021 and 2020, respectively.

~~Net Income~~. Net income was $1.06 billion for the nine-months ended September 30, 2021, an increase of $118.3 million, or 12.6% higher than net income of $937.9 million for the nine-months ended September 30, 2020. The increase in net income for the nine-months ended September 30, 2021 was primarily due to the $307.7 million increase in gross profit for the nine-months ended September 30, 2021, partially offset by the $154.0 million increase in operating expenses and the $38.7 million increase in the provision for income taxes.

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

~~Three-Months Ended September 30, 2021 Compared to the Three-Months Ended September 30, 2020.~~

Gross Billings**.

Gross billings were ~~$1.65~~$1.74 billion for the three-months ended ~~September 30, 2021,~~March 31, 2022, an increase of approximately ~~$194.1~~$293.9 million, or ~~13.4%~~20.3% higher than gross billings of $1.45 billion for the three-months ended ~~September 30, 2020.~~March 31, 2021. Net changes in foreign currency exchange rates had ~~a favorable~~an unfavorable impact on gross billings of approximately ~~$21.5~~$38.3 million for the three-months ended ~~September 30, 2021.~~

March 31, 2022.

Gross billings for the Monster Energy® Drinks segment were ~~$1.55~~$1.62 billion for the three-months ended ~~September 30, 2021,~~March 31, 2022, an increase of approximately ~~$196.2~~$252.4 million, or ~~14.5%~~18.5% higher than gross billings of ~~$1.36~~$1.37 billion for the three-months ended ~~September 30, 2020.~~March 31, 2021. Gross billings for the Monster Energy® Drinks segment increased primarily due to increased worldwide sales by volume of our Monster Energy® brand energy drinks as a result of increased consumer demand. Net changes in foreign currency exchange rates had ~~a favorable~~an unfavorable impact on gross billings for the Monster Energy® Drinks segment of approximately ~~$20.5~~$35.1 million for the three-months ended ~~September 30, 2021.~~

March 31, 2022.

Gross billings for the Strategic Brands segment were ~~$88.5~~$104.3 million for the three-months ended ~~September 30, 2021,~~March 31, 2022, an increase of ~~$0.3~~$25.9 million, or ~~0.3%~~33.1% higher than gross billings of ~~$88.2~~$78.4 million for the three-months ended ~~September 30, 2020. Shortages of NOS® concentrate negatively impacted gross billings for the three-months ended September 30,~~March 31, 2021. Net changes in foreign currency exchange rates had ~~a favorable~~an unfavorable impact on gross billings in the Strategic Brands segment of approximately ~~$1.0~~$3.3 million for the three-months ended ~~September 30, 2021.~~March 31, 2022.

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

Gross billings for the Other segment were ~~$6.3~~$5.9 million for the three-months ended ~~September 30, 2021, a decrease~~March 31, 2022, an increase of ~~$2.3~~$0.2 million, or ~~26.7% lower~~3.5% higher than gross billings of ~~$8.6~~$5.7 million for the three-months ended ~~September 30, 2020.~~

March 31, 2021.

Promotional allowances, commissions and other expenses, as described in the footnote below, were ~~$247.9~~$235.4 million for the three-months ended ~~September 30, 2021,~~March 31, 2022, an increase of ~~$29.8~~$18.7 million, or ~~13.7%~~8.6% higher than promotional allowances, commissions and other expenses of ~~$218.1~~$216.7 million for the three-months ended ~~September 30, 2020.~~March 31, 2021. Promotional allowances, commissions and other expenses as a percentage of gross billings decreased to ~~13.2%~~13.5% from ~~13.6%~~14.9% for the three-months ended ~~September 30,~~March 31, 2022 and 2021, ~~and 2020,~~ respectively.

~~Nine-Months Ended September 30, 2021 Compared to the Nine-Months Ended September 30, 2020.~~

~~Gross Billings**.~~ Gross billings were $4.79 billion for the nine-months ended September 30, 2021, an increase of approximately $849.6 million, or 21.5% higher than gross billings of $3.94 billion for the nine-months ended September 30, 2020. Net changes in foreign currency exchange rates had a favorable impact on gross billings of approximately $84.1 million for the nine-months ended September 30, 2021.

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Gross billings for the Monster Energy® Drinks segment were $4.51 billion for the nine-months ended September 30, 2021, an increase of approximately $813.9 million, or 22.0% higher than gross billings of $3.69 billion for the nine-months ended September 30, 2020. Gross billings for the Monster Energy® Drinks segment increased primarily due to increased worldwide sales by volume of our Monster Energy® brand energy drinks as a result of increased consumer demand. Net changes in foreign currency exchange rates had a favorable impact on gross billings for the Monster Energy® Drinks segment of approximately $80.0 million for the nine-months ended September 30, 2021.

Gross billings for the Strategic Brands segment were $265.5 million for the nine-months ended September 30, 2021, an increase of $36.1 million, or 15.7% higher than gross billings of $229.4 million for the nine-months ended September 30, 2020. Shortages of NOS® concentrate negatively impacted gross billings for the nine-months ended September 30, 2021. Net changes in foreign currency exchange rates had a favorable impact on gross billings in the Strategic Brands segment of approximately $4.1 million for the nine-months ended September 30, 2021.

Gross billings for the Other segment were $20.0 million for the nine-months ended September 30, 2021, a decrease of $0.4 million, or 2.0% lower than gross billings of $20.4 million for the nine-months ended September 30, 2020.

Promotional allowances, commissions and other expenses, as described in the footnote below, were $707.7 million for the nine-months ended September 30, 2021, an increase of $135.3 million, or 23.6% higher than promotional allowances, commissions and other expenses of $572.4 million for the nine-months ended September 30, 2020. Promotional allowances as a percentage of gross billings decreased to 13.1% from 13.2% for the nine-months ended September 30, 2021 and 2020, respectively.

**Gross Billings represent amounts invoiced to customers net of cash discounts and returns. Gross billings are used internally by management as an indicator of and to monitor operating performance, including sales performance of particular products, salesperson performance, product growth or declines and is useful to investors in evaluating overall Company performance. The use of gross 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 billings provides a useful measure of our operating performance. The use of gross 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 billings may not be comparable to similarly titled measures used by other companies, as gross billings has been defined by our internal reporting practices. In addition, gross 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.

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


	Three-Months Ended				Percentage			Nine-Months Ended			Percentage		Three-Months Ended				Percentage
	September 30,				Change		September 30,				Change		March 31,				Change
(In thousands)	2021		2020		21 vs. 20		2021		2020		21 vs. 20		2022		2021		22 vs. 21
Gross Billings	$	1,648,048	$	1,453,905	13.4	%	$	4,792,728	$	3,943,164	21.5	%	$	1,743,927	$	1,450,036	20.3	%
Deferred Revenue		10,386		10,521	(1.3)	%		31,265		31,599	(1.1)	%		10,020		10,440	(4.0)	%
Less: Promotional allowances, commissions and other expenses***		247,877		218,064	13.7	%		707,685		572,408	23.6	%		235,373		216,660	8.6	%
Net Sales	$	1,410,557	$	1,246,362	13.2	%	$	4,116,308	$	3,402,355	21.0	%	$	1,518,574	$	1,243,816	22.1	%

***Although the expenditures described in this line item are determined in accordance with GAAP and meet GAAP requirements, the presentation thereof does not conform 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 our bottlers/distributors or retail customers including, but not limited to the following: (i) discounts granted off list prices to support price promotions to end-consumers by retailers; (ii) reimbursements given to 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) our agreed share of fees given to bottlers/distributors and/or directly to retailers for advertising, in-store marketing and promotional activities; (iv) our agreed share of slotting, shelf space allowances and other fees given directly to retailers, club stores and/or wholesalers; (v) incentives given to our bottlers/distributors and/or retailers for achieving or exceeding certain predetermined sales goals; (vi) discounted or free products; (vii) contractual fees given to our bottlers/distributors related to sales made by us direct to certain customers that fall within the bottlers’/distributors’ sales territories; and (viii) certain commissions based on sales to our 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. Our promotional allowance programs for our energy drink products with 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,

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ranging from one week to one year. The primary drivers of our promotional and other allowance activities for our energy drink products for the three-months ended ~~September 30,~~March 31, 2022 and 2021 ~~and 2020~~ were (i) to increase sales volume and trial, (ii) to address market conditions, and (iii) to secure shelf and display space at retail.

Sales

The table below discloses selected quarterly data regarding sales for the ~~three-~~three-months ended March 31, 2022 and ~~nine-months ended September 30,~~ 2021, ~~and 2020,~~ respectively. Data from any one or more quarters or periods is not necessarily indicative of annual results or continuing trends.

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

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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/distributors, changes in the sales mix of our products and changes in advertising and promotional expenses. The COVID-19 pandemic including new variants may also have an impact on consumer behavior and change the seasonal fluctuation of our business.


	Three-Months Ended				Nine-Months Ended				Three-Months Ended
	September 30,				September 30,				March 31,
(In thousands, except average net sales per case)	2021		2020		2021		2020		2022		2021
Net sales	$	1,410,557	$	1,246,362	$	4,116,308	$	3,402,355	$	1,518,574	$	1,243,816
Less: AFF third-party sales		(6,316)		(8,618)		(19,953)		(20,367)
Less: Alcohol Brands segment sales										(15,207)		—
Less: Other segment sales										(5,927)		(5,727)
Adjusted net sales¹	$	1,404,241	$	1,237,744	$	4,096,355	$	3,381,988	$	1,497,440	$	1,238,089

Case sales by segment:
Case sales by segment:¹
Monster Energy® Drinks		133,177		117,805		388,214		317,103		140,126		117,936
Strategic Brands		26,798		22,117		71,777		55,378		28,667		20,630
Other		—		—		—		—
Total case sales		159,975		139,922		459,991		372,481		168,793		138,566
Average net sales per case	$	8.78	$	8.85	$	8.91	$	9.08
Average net sales per case - Energy Drinks									$	8.87	$	8.94

¹Excludes ~~certain~~Alcohol Brands segment (effectively from February 17, 2022 to March 31, 2022) and Other segment net sales, of $6.3 million and $8.6 million for the three-months ended September 30, 2021 and 2020, 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 certain Other segment net sales of $20.0 million and $20.4 million for the nine-months ended September 30, 2021 and 2020, respectively, comprised of net sales of AFF Third-Party Products to independent third-party customers, as these sales do not have unit case equivalents.

Sales of our Alcohol products are expressed in barrel volume. A “Barrel” means a unit of measurement equal to 31 US gallons. Barrel sales were 0.05 million for the three-months ended March 31, 2022.

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

Liquidity and Capital Resources

Cash and cash equivalents, short-term and long-term investments. We believe that cash available from operations, including our cash resources and access to credit, will be sufficient for our working capital needs, including purchase commitments for raw materials and inventory, increases in accounts receivable, payments of tax liabilities, expansion and development needs, purchases of capital assets, purchases of equipment, purchases of real property and purchases of shares of our common stock, through at least the next 12 months. Our sources and uses of cash were not materially impacted by the COVID-19 pandemic in the nine-months ended September 30, 2021 and, to date, we have not identified any material liquidity deficiencies as a result of the COVID-19 pandemic. Based on the information currently available to us, we do not expect the impact of the COVID-19 pandemic to have a material impact on our liquidity. We will continue to monitor and assess the impact the COVID-19 pandemic may have on our business, financial condition and/or operating results.

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At ~~September 30, 2021,~~March 31, 2022, we had ~~$1.71~~$1.01 billion in cash and cash equivalents, ~~$1.22~~$1.72 billion in short-term investments and ~~$28.3~~$65.7 million in long-term investments, including certificates of deposit, commercial paper, U.S. government agency securities, municipal securities and U.S. treasuries. We maintain our investments for cash management purposes and not for purposes of speculation. Our risk management policies emphasize credit quality (primarily based on short-term ratings by nationally recognized statistical organizations) in selecting and maintaining our investments. We regularly assess market risk of our investments and believe our current policies and investment practices adequately limit those risks. However, certain of these investments are subject to general credit, liquidity, market and interest rate risks. These market risks associated with our investment portfolio may have an adverse effect on our future results of operations, liquidity and financial condition.

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

We believe that cash available from operations, including our cash resources and access to credit, will be sufficient for our working capital needs, including purchase commitments for raw materials and inventory, increases in accounts receivable, payments of tax liabilities, expansion and development needs, purchases of capital assets, purchases of equipment, purchases of real property and purchases of shares of our common stock, through at least the next 12 months. Based on our current plans, at this time we estimate that capital expenditures (exclusive of common stock repurchases) are likely to be less than $200.0 million through ~~September 30, 2022.~~March 31, 2023. 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, 2022 and 2021 (in thousands):


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

Cash flows (used in) provided by operating activities. Cash ~~provided by~~used in operating activities was ~~$928.0~~($0.4) million for the ~~nine-months~~three-months ended ~~September 30, 2021,~~March 31, 2022, as compared with cash provided by operating activities of ~~$949.2~~$175.5 million for the ~~nine-months~~three-months ended ~~September 30, 2020.~~

March 31, 2021.

For the ~~nine-months~~three-months ended ~~September 30,~~March 31, 2022, cash provided by operating activities was primarily attributable to net income earned of $294.2 million and adjustments for certain non-cash expenses, consisting of $16.3 million of stock-based compensation and $14.6 million of depreciation and amortization. For the three-months ended March 31, 2022, cash provided by operating activities also increased due to a $61.2 million increase in accrued promotional allowances, a $20.6 million increase in accrued liabilities and an $18.3 million increase in accounts payable. For the three-months ended March 31, 2022, cash used in operating activities was primarily attributable to a $208.7 million increase in inventories, a $134.4 million increase in accounts receivable, a $32.1 million decrease in accrued compensation, a $29.6 million increase in prepaid expenses and other assets, a $9.8 million decrease in income taxes payable, a $5.9 million increase in prepaid income taxes and a $5.9 million decrease in deferred revenue.

For the three-months ended March 31, 2021, cash provided by operating activities was primarily attributable to net income earned of ~~$1.06 billion~~$315.2 million and adjustments for certain non-cash expenses, consisting of ~~$52.4~~$18.4 million of stock-based compensation and ~~$40.7~~$12.8 million of depreciation and amortization. For the ~~nine-months~~three-months ended ~~September 30,~~March 31, 2021, cash provided by operating activities also increased due to a ~~$106.6~~$36.9 million increase in accounts payable, a ~~$51.0 million increase in accrued promotional allowances, a $34.1~~$32.4 million increase in accrued liabilities and a ~~$5.3~~$14.0 million increase in accrued ~~distributor terminations.~~promotional allowances. For the ~~nine-months~~three-months ended ~~September 30,~~March 31, 2021, cash used in operating activities was primarily attributable to a ~~$199.7~~$147.5 million increase in accounts receivable, a ~~$149.4~~$39.5 million increase in inventories, a ~~$41.2~~$24.4 million decrease in accrued compensation, an $18.5 million increase in prepaid expenses and other assets, a ~~$17.8~~$13.3 million decrease in ~~deferred revenue,~~income taxes payable, a ~~$7.4~~$7.1 million increase in prepaid income taxes and a ~~$2.9 million decrease in accrued compensation.~~

For the nine-months ended September 30, 2020, cash provided by operating activities was primarily attributable to net income earned of $937.9 million and adjustments for certain non-cash expenses, consisting of $53.0 million of stock-based compensation, $45.9 million of depreciation and amortization and $7.0 million of intangible asset impairment. For the nine-months ended September 30, 2020, cash provided by operating activities also increased due to a $53.5 million increase in accrued liabilities, a $39.5 million decrease in inventories, a $31.9 million increase in accrued promotional allowances, an $18.0 million increase in income taxes payable and an $11.5 million decrease in prepaid income taxes. For the nine-months ended September 30, 2020, cash used in operating activities was primarily attributable to a $201.7 million increase in accounts receivable, a $20.4 million increase in prepaid expenses and other assets, a $15.2$5.3 million decrease in deferred ~~revenue, a $9.7 million decrease in accounts payable and a $1.2 million decrease in accrued compensation.~~

revenue.

Cash flows used in investing activities. Cash used in investing activities was ~~$381.7~~$306.6 million for the ~~nine-months~~three-months ended ~~September 30, 2021~~March 31, 2022 as compared to cash used in investing activities of ~~$140.5~~$149.1 million for the ~~nine-months~~three-months ended ~~September 30, 2020.~~

March 31, 2021.

For both the ~~nine-months~~three-months ended ~~September 30,~~March 31, 2022 and 2021, ~~and 2020,~~ cash provided by investing activities was primarily attributable to sales of available-for-sale investments. For the three-months ended March 31, 2022, cash used in investing activities included $330.4 million related to the CANarchy Transaction. For both the ~~nine-months~~three-months ended ~~September 30,~~March 31, 2022 and 2021, ~~and 2020,~~ cash used in investing activities was ~~primarily~~ attributable to purchases of available-for-sale investments. ~~For~~To a lesser extent, for both the ~~nine-months~~three-months ended ~~September 30,~~March 31, 2022 and 2021, ~~and 2020,~~ cash used in investing activities also included the acquisitions of fixed assets consisting of vans and promotional vehicles, coolers and other equipment to support our marketing and promotional activities, production equipment, furniture and fixtures, office and computer equipment, computer software, equipment used for sales and administrative activities, certain leasehold improvements, as well as acquisitions of and/or improvements to real property. We expect to continue to use a portion of our cash in excess of our requirements for operations for purchasing short-term and long-term investments, leasehold improvements, the acquisition of capital equipment (specifically, vans, trucks and promotional vehicles, coolers, other promotional equipment, merchandise displays, warehousing racks as well as items of production equipment required to produce certain of our existing and/or new products) to develop our brand in international markets and for other corporate purposes. From time to time, we may also use cash to purchase additional real property related to our beverage business and/or acquire compatible businesses.

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Cash flow ~~provided by (used in)~~used in financing activities.Cash ~~provided by~~used in financing activities was ~~$21.5~~$4.2 million for the ~~nine-months~~three-months ended ~~September 30, 2021~~March 31, 2022 as compared to cash used in financing activities of ~~$532.9~~$5.7 million for the ~~nine-months~~three-months ended ~~September 30, 2020.~~March 31, 2021. The cash used in financing activities for both the ~~nine-months~~three-months ended ~~September 30,~~March 31, 2022 and 2021 ~~and 2020~~ was primarily the result of the repurchases of our common stock. The cash provided by financing activities for both the ~~nine-months~~three-months ended ~~September 30,~~March 31, 2022, and 2021 ~~and 2020~~ was primarily attributable to the issuance of our common stock under our stock-based compensation ~~plans.~~

~~Purchases of inventories, increases in accounts receivable~~plans 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.

Of our $1.71 billion of cash and cash equivalents held at September 30, 2021, $568.4 million was held by our foreign subsidiaries. No short-term or long-term investments were held by our foreign subsidiaries at September 30, 2021.

borrowings on debt.

The following represents a summary of the Company’s contractual commitments and related scheduled maturities as of ~~September 30, 2021:~~March 31, 2022:


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

Contractual Obligations¹	$	212,653	$	147,014	$	65,315	$	324	$	—	$	335,356	$	255,348	$	79,935	$	73	$	—
Finance Leases		1,626		1,579		37		10		—		1,251		1,214		31		6		—
Operating Leases		21,597		3,412		4,548		3,269		10,368		37,268		7,277		11,160		6,924		11,907
Purchase Commitments²		129,980		129,980		—		—		—		384,111		377,290		6,537		284		—
	$	365,856	$	281,985	$	69,900	$	3,603	$	10,368	$	757,986	$	641,129	$	97,663	$	7,287	$	11,907

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

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

~~In addition, approximately $0.4 million of~~No unrecognized tax benefits have been recorded as liabilities as of ~~September 30, 2021.~~March 31, 2022. It is expected that the amount of unrecognized tax benefits will not significantly change within the next 12 months. ~~As of September 30, 2021, we had $0.1 million of accrued interest and penalties related to unrecognized tax benefits.~~

Critical Accounting Policies and Estimates

Our consolidated financial statements are prepared in accordance with GAAP. GAAP requires us to make estimates and assumptions that affect the reported amounts in our consolidated financial statements. Critical accounting estimates are those that management believes are the most important to the portrayal of our financial condition and results and require the most difficult, subjective or complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain and that have had, or are reasonably likely to have, a material impact on our financial condition or results of operations. Judgments and uncertainties may result in materially different amounts being reported under different conditions or using different assumptions. There have been no material changes to our critical accounting policies or estimates from the information provided in “Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Part II, Item 8 – Financial Statements and Supplementary Data – Note 1 – Organization and Summary of Significant Accounting Policies”, included in our Annual Report on Form 10-K for the fiscal year ended December 31, ~~2020~~2021 (“Form 10-K”).

Recent Accounting Pronouncements

~~The information required by this Item is incorporated herein by reference to the Notes to Condensed Consolidated Financial Statements - Note 2. Recent Accounting Pronouncements,~~There have been no material changes in ~~Part I, Item 1, of this Quarterly~~recently issued or adopted accounting pronouncements from those disclosed in our Annual Report on Form ~~10-Q.~~

10-K for the fiscal year ended December 31, 2021.

Inflation

~~We believe inflation~~Inflation had a negative impact on our results of operations for the ~~three- and nine-months~~three-months ended ~~September 30, 2021.~~

March 31, 2022.

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Forward-Looking Statements

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

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

●

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

●

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

●

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

●

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

●

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

●

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

●

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

●

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

●

~~Delays in the availability and/or administration and/or acceptance of vaccines may prolong the COVID-19 pandemic;~~

●

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

●

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

●

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

●

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

●

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

●

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

●

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

●

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

●

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

●

We have extensive commercial arrangements with TCCC and, as a result, our future performance is substantially dependent on the success of our relationship with TCCC;

●

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

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●

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

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●

Our ability to maintain relationships with TCCC system bottlers/distributors and manage their ongoing commitment to focus on our products;

●

Disruption in distribution channels and/or decline in sales due to the termination and/or insolvency of existing and/or new domestic and/or international bottlers/distributors;

●

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

●

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

●

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

●

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

●

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

●

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

●

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

●

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

●

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

●

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

●

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

●

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

●

Changes in accounting standards may affect our reported profitability;

●

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

●

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

●

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

●

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

●

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

●

Intellectual property injunctions;

●

Unfavorable resolution of tax matters;

●

Uncertainty and volatility in the domestic and global economies, including risk of counterparty default or failure;

●

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

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

●

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

●

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

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Changes in demand that are weather related and/or for other reasons, including changes in product category and/or package consumption and changes in cost and availability of certain key ingredients including aluminum cans, as well as disruptions to the supply chain, as a result of climate change and extreme weather conditions;

●

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

●

The impact on our business of competitive products and pricing pressures and our ability to gain or maintain our share of sales in the marketplace as a result of actions by competitors, including unsubstantiated and/or misleading claims, false advertising claims and tortious interference, as well as competitors selling misbranded products;

●

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

●

Our ability to implement and/or maintain price ~~increases;~~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 our Strategic Brands and Alcohol Brands;

●

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

●

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

●

Our ability to successfully integrate CANarchy and other acquired businesses or assets;

●

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

●

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

●

Our ability to satisfy all criteria set forth in any model energy drink guidelines, including, without limitation, those adopted by the American Beverage Association, of which we are a member, and/or any international beverage associations and the impact of our failure to satisfy such guidelines may have on our business;

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

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

●

Any shortages that may be experienced in the procurement of containers and/or other raw materials including, without limitation, flavors, flavor ingredients, supplement ingredients, aluminum cans generally, PET containers used for our Monster Hydro® energy drinks, 24-ounce aluminum cap cans and 550ml BRE aluminum cans with resealable ends;

●

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

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

●

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

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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;

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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;

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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;

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The effectiveness of sales and/or marketing efforts by us and/or by the bottlers/distributors of our products, most of whom distribute products that may be regarded as competitive with our products;

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

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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;

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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;

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The effects of retailer consolidation on our business and our ability to successfully adapt to the rapidly changing retail landscape;

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

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The effects of bottler/distributor consolidation on our business;

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

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

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

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Possible product recalls and/or reformulations of certain of our products and/or market withdrawals of certain of our products due to defective and/or non-compliant formulas or production in one or more jurisdictions;

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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;

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

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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;

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Volatility of stock prices which may restrict stock sales, stock purchases or other opportunities as well as negatively impact the motivation of equity award grantees;

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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;

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

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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, as well as cybersecurity incidents involving data shared with third parties; and

●

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

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

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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

There have been no material changes in our market risks during the three-months ended ~~September 30, 2021~~March 31, 2022 compared with the disclosures in Part II, Item 7A of our Form 10-K.

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures – Under the supervision and with the participation of the Company’s management, including our Co-Chief Executive 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 Co-Chief Executive 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, 2021,~~March 31, 2022, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II - OTHER INFORMATION

ITEM 1.LEGAL PROCEEDINGS

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

ITEM 1A.RISK FACTORS

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

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

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

ITEM 2.

UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

During the three-months ended ~~September 30, 2021, no~~March 31, 2022, 0.2 million shares of common stock were purchased from employees in lieu of cash payments for options exercised or withholding taxes ~~due.~~

due for a total amount of $12.2 million.

On March 13, 2020, the Company’s Board of Directors authorized a share repurchase program for the purchase of up to $500.0 million of the Company’s outstanding common stock (the “March 2020 Repurchase Plan”). During the three-months ended ~~September 30, 2021,~~March 31, 2022, no shares were purchased by the Company under the March 2020 Repurchase Plan. As of ~~November 5, 2021,~~May 6, 2022, $441.5 million remained available for repurchase under the March 2020 Repurchase Plan.

ITEM 3.DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4.MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5.OTHER INFORMATION

None.

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ITEM 6.EXHIBITS


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

31.1*		Certification of 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 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 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, 2021,~~March 31, 2022, formatted in iXBRL (Inline eXtensible Business Reporting Language): (i) Condensed Consolidated Balance Sheets as of ~~September 30, 2021~~March 31, 2022 and December 31, ~~2020,~~2021, (ii) Condensed Consolidated Statements of Income for the ~~three-~~three -months ended March 31, 2022 and ~~nine-months ended September 30,~~ 2021, ~~and 2020,~~ (iii) Condensed Consolidated Statements of Comprehensive Income for the ~~three-~~three-months ended March 31, 2022 and ~~nine-months ended September 30,~~ 2021, ~~and 2020,~~ (iv) Condensed Consolidated Statements of Stockholders’ Equity for the ~~three-~~three-months ended March 31, 2022 and ~~nine-months ended September 30,~~ 2021, ~~and 2020,~~ (v) Condensed Consolidated Statements of Cash Flows for the ~~nine-months~~three-months ended ~~September 30,~~March 31, 2022 and 2021, ~~and 2020,~~ and (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 ~~September 30, 2021,~~March 31, 2022, formatted in iXBRL (Inline eXtensible Business Reporting Language) and contained in Exhibit 101.

* Filed herewith

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SIGNATURES

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

	MONSTER BEVERAGE CORPORATION
	Registrant


Date: ~~November 5~~May 6, 2022~~, 2021~~	/s/ RODNEY C. SACKS
	Rodney C. Sacks
	Chairman of the Board of Directors
	and Co-Chief Executive Officer

Date: ~~November 5, 2021~~May 6, 2022	/s/ HILTON H. SCHLOSBERG
	Hilton H. Schlosberg
	Vice Chairman of the Board of Directors
	and Co-Chief Executive Officer

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


	Nine-Months Ended September 30, 2020
							Latin
							America
	U.S. and						and
Net Sales	Canada		EMEA¹		Asia Pacific		Caribbean		Total
Monster Energy®Drinks	$	2,223,925	$	501,639	$	319,325	$	138,671	$	3,183,560
Strategic Brands		125,030		52,333		17,161		3,904		198,428
Other		20,367		—		—		—		20,367
Total Net Sales	$	2,369,322	$	553,972	$	336,486	$	142,575	$	3,402,355


	Three-Months		Three-Months		Nine-Months		Nine-Months
	Ended September 30,		Ended September 30,		Ended September 30,		Ended September 30,
	2021		2020		2021		2020
Operating lease cost	$	1,103	$	1,161	$	3,348	$	3,499

Short-term lease cost		1,235		856		3,370		2,440

Variable lease cost		185		242		532		564

Finance leases:
Amortization of ROU assets		138		177		394		511
Interest on lease liabilities		6		9		15		34
Finance lease cost		144		186		409		545

Total lease cost	$	2,667	$	2,445	$	7,659	$	7,048


	September 30, 2021
	Real Estate		Equipment		Total		Balance Sheet Location
Operating leases	$	19,995	$	196	$	20,191	Other Assets
Finance leases		—		2,719		2,719	Property and Equipment, net


	December 31, 2020
	Real Estate		Equipment		Total		Balance Sheet Location
Operating leases	$	22,565	$	189	$	22,754	Other Assets
Finance leases		—		2,120		2,120	Property and Equipment, net


		Amount of (loss) gain
		recognized in income on
		derivatives
Derivatives not designated as	Location of (loss) gain	Three-months ended
hedging instruments under	recognized in income on	September 30,		September 30,
ASC 815-20	derivatives	2021		2020
Foreign currency exchange contracts	Interest and other expense, net	$	(308)	$	260


	Three-Months Ended September 30,			Nine-Months Ended September 30,
	2021		2020*	2021		2020
Dividend yield	0.0	%	—	0.0	%	0.0	%
Expected volatility	28.3	%	—	28.9	%	30.5	%
Risk-free interest rate	0.7	%	—	0.8	%	0.7	%
Expected term	5.8	years	—	5.8	years	5.8	years


	Gross Unrecognized Tax
	Benefits
Balance at December 31, 2020	$	742
Additions for tax positions related to the current year		0
Additions for tax positions related to the prior years		0
Decreases for tax positions related to the prior years		(353)
Balance at September 30, 2021	$	389