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 June 30, ~~2021~~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 XNo __

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 ~~528,885,811~~526,885,495 shares of common stock, par value $0.005 per share, outstanding as of July ~~30, 2021.~~29, 2022.

Table of Contents

MONSTER BEVERAGE CORPORATION AND SUBSIDIARIES

JUNE 30, ~~2021~~2022

INDEX


Part I.	FINANCIAL INFORMATION	Page NoNo..

Item 1.	Condensed Consolidated Financial Statements (Unaudited)

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

	Condensed Consolidated Statements of Income for the Three- and Six-Months Ended June 30, ~~2021~~2022 and ~~2020~~2021	4

	Condensed Consolidated Statements of Comprehensive Income for the Three- and Six-Months Ended June 30, ~~2021~~2022 and ~~2020~~2021	5

	Condensed Consolidated Statements of Stockholders’ Equity for the Three- and Six-Months Ended June 30, ~~2021~~2022 and ~~2020~~2021	6

	Condensed Consolidated Statements of Cash Flows for the Six-Months Ended June 30, ~~2021~~2022 and ~~2020~~2021	7

	Notes to Condensed Consolidated Financial Statements	9

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	3134

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	4752

Item 4.	Controls and Procedures	4852

Part II.	OTHER INFORMATION

Item 1.	Legal Proceedings	4853

Item 1A.	Risk Factors	4853

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	4853

Item 3.	Defaults Upon Senior Securities	4854

Item 4.	Mine Safety Disclosures	4854

Item 5.	Other Information	4854

Item 6.	Exhibits	4954

	Signatures	5055

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 JUNE 30, ~~2021~~2022 AND DECEMBER 31, ~~2020~~2021

(In Thousands, Except Par Value) (Unaudited)


	June 30,		December 31,		June 30,		December 31,
	2021		2020		2022		2021
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	1,584,239	$	1,180,413	$	1,132,039	$	1,326,462
Short-term investments		968,952		881,354		1,337,792		1,749,727
Accounts receivable, net		909,169		666,012		1,175,587		896,658
Inventories		382,890		333,085		885,948		593,357
Prepaid expenses and other current assets		83,086		55,358		132,273		82,668
Prepaid income taxes		22,339		24,733		32,981		33,238
Total current assets		3,950,675		3,140,955		4,696,620		4,682,110

INVESTMENTS		91,033		44,291		64,119		99,419
PROPERTY AND EQUIPMENT, net		309,178		314,656		464,541		313,753
DEFERRED INCOME TAXES, net		241,297		241,650		203,287		225,221
GOODWILL		1,331,643		1,331,643		1,412,941		1,331,643
OTHER INTANGIBLE ASSETS, net		1,058,323		1,059,046		1,223,114		1,072,386
OTHER ASSETS		89,394		70,475		110,390		80,252
Total Assets	$	7,071,543	$	6,202,716	$	8,175,012	$	7,804,784

LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES:
Accounts payable	$	362,900	$	296,800	$	492,858	$	404,263
Accrued liabilities		172,498		142,653		209,154		210,964
Accrued promotional allowances		227,414		186,658		277,618		211,461
Deferred revenue		46,656		45,429		44,344		42,530
Accrued compensation		46,770		55,015		53,717		65,459
Income taxes payable		31,289		23,433		15,917		30,399
Total current liabilities		887,527		749,988		1,093,608		965,076

DEFERRED REVENUE		252,056		264,436		232,170		243,249

OTHER LIABILITIES		26,462		27,432		40,056		29,508

COMMITMENTS AND CONTINGENCIES (Note 12)

STOCKHOLDERS’ EQUITY:
Common stock - $0.005 par value; 1,250,000 shares authorized; 639,576 shares issued and 528,857 shares outstanding as of June 30, 2021; 638,662 shares issued and 528,097 shares outstanding as of December 31, 2020		3,198		3,193
Common stock - $0.005 par value; 1,250,000 shares authorized; 640,944 shares issued and 526,772 shares outstanding as of June 30, 2022; 640,043 shares issued and 529,323 shares outstanding as of December 31, 2021						3,205		3,200
Additional paid-in capital		4,597,333		4,537,982		4,707,569		4,652,620
Retained earnings		7,151,030		6,432,074		8,377,112		7,809,549
Accumulated other comprehensive (loss) income		(16,822)		3,034
Common stock in treasury, at cost; 110,719 shares and 110,565 shares as of June 30, 2021 and December 31, 2020, respectively		(5,829,241)		(5,815,423)
Accumulated other comprehensive loss						(152,957)		(69,165)
Common stock in treasury, at cost; 114,172 shares and 110,720 shares as of June 30, 2022 and December 31, 2021, respectively						(6,125,751)		(5,829,253)
Total stockholders’ equity		5,905,498		5,160,860		6,809,178		6,566,951
Total Liabilities and Stockholders’ Equity	$	7,071,543	$	6,202,716	$	8,175,012	$	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- AND SIX- MONTHS ENDED JUNE 30, ~~2021~~2022 AND ~~2020~~2021

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


	Three-Months Ended				Six-Months Ended				Three-Months Ended				Six-Months Ended
	June 30,				June 30,				June 30,				June 30,
	2021		2020		2021		2020		2022		2021		2022		2021

NET SALES	$	1,461,934	$	1,093,896	$	2,705,751	$	2,155,993	$	1,655,260	$	1,461,934	$	3,173,833	$	2,705,751

COST OF SALES		625,096		434,427		1,153,976		859,329		875,399		625,096		1,617,306		1,153,976

GROSS PROFIT		836,838		659,469		1,551,775		1,296,664		779,861		836,838		1,556,527		1,551,775

OPERATING EXPENSES		310,863		252,205		611,652		524,412		406,910		310,863		784,088		611,652

OPERATING INCOME		525,975		407,264		940,123		772,252		372,951		525,975		772,439		940,123

INTEREST and OTHER INCOME (EXPENSE), net		872		(1,796)		111		(923)
INTEREST and OTHER (EXPENSE) INCOME, net										(6,781)		872		(14,080)		111

INCOME BEFORE PROVISION FOR INCOME TAXES		526,847		405,468		940,234		771,329		366,170		526,847		758,359		940,234

PROVISION FOR INCOME TAXES		123,085		94,099		221,278		181,125		92,810		123,085		190,796		221,278

NET INCOME	$	403,762	$	311,369	$	718,956	$	590,204	$	273,360	$	403,762	$	567,563	$	718,956

NET INCOME PER COMMON SHARE:
Basic	$	0.76	$	0.59	$	1.36	$	1.11	$	0.52	$	0.76	$	1.07	$	1.36
Diluted	$	0.75	$	0.59	$	1.34	$	1.10	$	0.51	$	0.75	$	1.06	$	1.34

WEIGHTED AVERAGE NUMBER OF SHARES OF COMMON STOCK AND COMMON STOCK EQUIVALENTS:
Basic		528,653		526,911		528,425		531,486		528,617		528,653		529,009		528,425
Diluted		535,557		531,191		535,324		535,897		534,811		535,557		535,209		535,324

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- AND ~~SIX-MONTHS~~SIX- MONTHS ENDED JUNE 30, ~~2021~~2022 AND ~~2020~~2021

(In Thousands) (Unaudited)


	Three-Months Ended				Six-Months Ended				Three-Months Ended				Six-Months Ended
	June 30,				June 30,				June 30,				June 30,
	2021		2020		2021		2020		2022		2021		2022		2021
Net income, as reported	$	403,762	$	311,369	$	718,956	$	590,204	$	273,360	$	403,762	$	567,563	$	718,956
Other comprehensive income (loss):
Change in foreign currency translation adjustment		8,235		9,044		(19,696)		(21,555)		(79,707)		8,235		(78,628)		(19,696)
Available-for-sale investments:
Change in net unrealized (losses) gains		(183)		200		(160)		504		(1,105)		(183)		(5,164)		(160)
Reclassification adjustment for net gains included in net income		—		—		—		—		—		—		—		—
Net change in available-for-sale investments		(183)		200		(160)		504		(1,105)		(183)		(5,164)		(160)
Other comprehensive income (loss)		8,052		9,244		(19,856)		(21,051)		(80,812)		8,052		(83,792)		(19,856)
Comprehensive income	$	411,814	$	320,613	$	699,100	$	569,153	$	192,548	$	411,814	$	483,771	$	699,100

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- AND SIX-MONTHS ENDED JUNE 30, ~~2021~~2022 AND ~~2020~~2021

(In Thousands) (Unaudited)


								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, 2020	638,662	$	3,193	$	4,537,982	$	6,432,074	$	3,034	(110,565)	$	(5,815,423)	$	5,160,860
Stock-based compensation	—		—		17,949		—		—	—		—		17,949
Exercise of stock options	492		3		6,758		—		—	—		—		6,761
Unrealized gain, net on available-for-sale securities	—		—		—		—		24	—		—		24
Repurchase of common stock	—		—		—		—		—	(150)		(13,419)		(13,419)
Foreign currency translation	—		—		—		—		(27,932)	—		—		(27,932)
Net income	—		—		—		315,194		—	—		—		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
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	—		—		16,921		—		—	—		—		16,921	—		—		16,175		—		—	—		—		16,175
Exercise of stock options	422		2		17,723		—		—	—		—		17,725	485		3		4,507		—		—	—		—		4,510
Unrealized loss, net on available-for-sale securities	—		—		—		—		(183)	—		—		(183)	—		—		—		—		(4,059)	—		—		(4,059)
Repurchase of common stock	—		—		—		—		—	(4)		(399)		(399)	—		—		—		—		—	(166)		(12,187)		(12,187)
Foreign currency translation	—		—		—		—		8,235	—		—		8,235	—		—		—		—		1,079	—		—		1,079
Net income	—		—		—		403,762		—	—		—		403,762	—		—		—		294,203		—	—		—		294,203
Balance, June 30, 2021	639,576	$	3,198	$	4,597,333	$	7,151,030	$	(16,822)	(110,719)	$	(5,829,241)	$	5,905,498
Balance, March 31, 2022															640,528		3,203		4,673,302		8,103,752		(72,145)	(110,886)		(5,841,440)		6,866,672
Stock-based compensation															—		—		16,157		—		—	—		—		16,157
Exercise of stock options															416		2		18,110		—		—	—		—		18,112
Unrealized loss, net on available-for-sale securities															—		—		—		—		(1,105)	—		—		(1,105)
Repurchase of common stock															—		—		—		—		—	(3,286)		(284,311)		(284,311)
Foreign currency translation															—		—		—		—		(79,707)	—		—		(79,707)
Net income															—		—		—		273,360		—	—		—		273,360
Balance, June 30, 2022															640,944	$	3,205	$	4,707,569	$	8,377,112	$	(152,957)	(114,172)	$	(6,125,751)	$	6,809,178


								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		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
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	—		—		15,936		—		—	—		—		15,936	0		0		16,921		0		0	0		0		16,921
Exercise of stock options	820		4		29,863		—		—	—		—		29,867	422		2		17,723		0		0	0		0		17,725
Unrealized gain, net on available-for-sale securities	—		—		—		—		200	—		—		200
Unrealized loss, net on available-for-sale securities															0		0		0		0		(183)	0		0		(183)
Repurchase of common stock	—		—		—		—		—	(298)		(15,822)		(15,822)	0		0		0		0		0	(4)		(399)		(399)
Foreign currency translation	—		—		—		—		9,044	—		—		9,044	0		0		0		0		8,235	0		0		8,235
Net income	—		—		—		311,369		—	—		—		311,369	0		0		0		403,762		0	0		0		403,762
Balance, June 30, 2020	637,924	$	3,190	$	4,474,379	$	5,612,684	$	(53,438)	(110,563)	$	(5,815,275)	$	4,221,540
Balance, June 30, 2021															639,576	$	3,198	$	4,597,333	$	7,151,030	$	(16,822)	(110,719)	$	(5,829,241)	$	5,905,498

See accompanying notes to condensed consolidated financial statements.

Table of Contents

MONSTER BEVERAGE CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE SIX-MONTHS ENDED JUNE 30, ~~2021~~2022 AND ~~2020~~2021

(In Thousands) (Unaudited)


	Six-Months Ended				Six-Months Ended
	June 30,				June 30,
	2021		2020		2022		2021
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	718,956	$	590,204	$	567,563	$	718,956
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		27,489		32,057		30,432		25,499
Non-cash lease expense						3,222		1,990
Gain on disposal of property and equipment		(822)		(179)		(69)		(822)
Impairment of intangibles		—		4,000
Stock-based compensation		35,691		33,034		32,609		35,691
Deferred income taxes		353		—		21,934		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		(239,700)		(231,782)		(289,236)		(239,540)
Distributor receivables		160		188
Inventories		(52,541)		14,181		(299,076)		(52,541)
Prepaid expenses and other assets		(28,232)		(23,394)		(55,663)		(28,232)
Prepaid income taxes		2,452		7,245		(1,220)		2,452
Accounts payable		63,619		(6,772)		85,499		63,619
Accrued liabilities		29,883		31,691		(789)		29,883
Accrued promotional allowances		42,665		3,079		77,746		42,665
Accrued distributor terminations		—		(140)
Accrued compensation		(10,782)		(10,932)		(15,311)		(10,782)
Income taxes payable		7,696		8,278		(14,666)		7,696
Other liabilities		621		83		(3,211)		621
Deferred revenue		(10,922)		(10,383)		(9,101)		(10,922)
Net cash provided by operating activities		586,586		440,458		130,663		586,586

CASH FLOWS FROM INVESTING ACTIVITIES:
Sales of available-for-sale investments		660,965		719,616		1,409,707		660,965
Purchases of available-for-sale investments		(795,467)		(425,973)		(964,267)		(795,467)
Acquisition of CANarchy, net of cash						(329,472)		—
Purchases of property and equipment		(15,522)		(29,116)		(99,446)		(15,522)
Proceeds from sale of property and equipment		1,024		590		372		1,024
Additions to intangibles		(9,926)		(13,085)		(9,894)		(9,926)
Increase in other assets		(21,236)		(1,338)		(12,738)		(21,236)
Net cash (used in) provided by investing activities		(180,162)		250,694
Net cash used in investing activities						(5,738)		(180,162)

CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings of (payments on) debt		3,624		(1,680)
Borrowings on debt						4,924		3,624
Issuance of common stock		24,486		43,842		22,622		24,486
Purchases of common stock held in treasury		(13,818)		(595,770)		(296,499)		(13,818)
Net cash provided by (used in) financing activities		14,292		(553,608)
Net cash (used in) provided by financing activities						(268,953)		14,292

Effect of exchange rate changes on cash and cash equivalents		(16,890)		(14,175)		(50,395)		(16,890)

NET INCREASE IN CASH AND CASH EQUIVALENTS		403,826		123,369
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS						(194,423)		403,826
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	$	1,584,239	$	921,326	$	1,132,039	$	1,584,239

SUPPLEMENTAL INFORMATION:
Cash paid during the period for:
Interest	$	52	$	29	$	227	$	52
Income taxes	$	215,803	$	164,956	$	209,513	$	215,803

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 SIX-MONTHS ENDED JUNE 30, ~~2021~~2022 AND ~~2020~~2021

(In Thousands) (Unaudited) (Continued)

SUPPLEMENTAL DISCLOSURE OF NON-CASH ITEMS

Included in accrued liabilities as of June 30, 2022 and 2021 ~~and 2020~~ were ~~$1.3~~$3.4 million and ~~$12.6~~$1.3 million, respectively, related to net additions to other intangible assets.

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

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- and six-months ended June 30, ~~2021~~2022 and ~~2020,~~2021, respectively, is unaudited and reflects all adjustments, which include only normal recurring adjustments and which in the opinion of management are necessary to make the interim condensed consolidated financial statements not misleading. Results of operations for periods covered by this report may not necessarily be indicative of results of operations for the full year.

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

Recent Accounting Pronouncements

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

2.	~~RECENT ACCOUNTING PRONOUNCEMENTS~~ACQUISITIONS

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 facilitates the Company’s entry into the alcohol beverage sector and brings the Cigar City^TM family of brands including Jai Alai® IPA and Florida Man^TM IPA, the Oskar Blues ^TM family of brands including Dale’s Pale Ale® and Wild Basin^TM Hard Seltzers, the Deep Ellum^TM family of brands including Dallas Blonde® and Deep Ellum^TM IPA, the Perrin Brewing^TM 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 for Income Taxes”,~~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)		6,000		—
Property and equipment, net		81,285		—
Inventory		18,300		—
Right-of -use assets		12,836		—
Operating lease liabilities		(12,836)		—
Working capital (excluding inventory)		(5,640)		—
Other		(770)		—
Goodwill		81,298		—
Cash		3,248		332,721
Total	$	332,721	$	332,721

The Company determined the fair values as ~~part~~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 book value of ~~its simplification initiative to reduce~~ the ~~cost and complexity~~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.

On May 5, 2022, the Company acquired certain real property and equipment in Norwalk, California for a purchase price of $62.5 million. The acquisition was treated as an asset acquisition for accounting purposes. The preliminary fair value allocations include $50.6 million for land, $10.0 million for building and $1.9 million for equipment. The Company intends to utilize the property as a manufacturing facility for certain of its 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)

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, ~~and~~ Reign Total Body Fuel® high performance energy drinks and True North® Pure Energy Seltzers, (ii) Strategic Brands segment (“Strategic Brands”), which is primarily comprised of the various energy drink brands acquired from The Coca-Cola Company (“TCCC”) 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 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.

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~~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 June 30, ~~2021~~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;

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MONSTER BEVERAGE CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

●

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

●

discounted or free products;

●

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

●

commissions to TCCC based on the Company’s sales to ~~certain~~ wholly-owned subsidiaries of TCCC (the “TCCC Subsidiaries”) and/or to ~~certain companies~~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.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

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

Disaggregation of Revenue

The following tables disaggregate the Company’s revenue by geographical markets and reportable segments:


	Three-Months Ended June 30, 2021										Three-Months Ended June 30, 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	$	895,362	$	269,807	$	118,934	$	82,991	$	1,367,094	$	973,674	$	308,839	$	116,788	$	138,389	$	1,537,690
Strategic Brands		49,388		27,875		7,006		2,666		86,935		38,368		29,171		7,477		4,126		79,142
Alcohol Brands												32,447		—		—		—		32,447
Other		7,905		—		—		—		7,905		5,981		—		—		—		5,981
Total Net Sales	$	952,655	$	297,682	$	125,940	$	85,657	$	1,461,934	$	1,050,470	$	338,010	$	124,265	$	142,515	$	1,655,260


	Three-Months Ended June 30, 2020										Three-Months Ended June 30, 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	$	746,946	$	129,921	$	112,832	$	37,987	$	1,027,686	$	895,362	$	269,807	$	118,934	$	82,991	$	1,367,094
Strategic Brands		41,155		12,794		5,186		431		59,566		49,388		27,875		7,006		2,666		86,935
Alcohol Brands												—		—		—		—		—
Other		6,644		—		—		—		6,644		7,905		—		—		—		7,905
Total Net Sales	$	794,745	$	142,715	$	118,018	$	38,418	$	1,093,896	$	952,655	$	297,682	$	125,940	$	85,657	$	1,461,934

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


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


	Six-Months Ended June 30, 2021
							Latin
							America
	U.S. and				Asia		and
Net Sales	Canada		EMEA¹		Pacific		Caribbean		Total
Monster Energy® Drinks	$	1,668,866	$	489,107	$	225,681	$	153,720	$	2,537,374
Strategic Brands		87,071		47,784		15,444		4,445		154,744
Alcohol Brands²		—		—		—		—		—
Other		13,633		—		—		—		13,633
Total Net Sales	$	1,769,570	$	536,891	$	241,125	$	158,165	$	2,705,751

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

Six-Months Ended June 30, 2021








Latin


America

U.S. and

and

Net Sales

Canada

EMEA¹

Asia Pacific

Caribbean

Total
Monster Energy®Drinks

$
1,668,866

$
489,107

$
225,681

$
153,720

$
2,537,374
Strategic Brands

87,071

47,784

15,444

4,445

154,744
Other

13,633

—

—

—

13,633
Total Net Sales

$
1,769,570

$
536,891

$
241,125

$
158,165

$
2,705,751

Six-Months Ended June 30, 2020








Latin


America

U.S. and

and

Net Sales

Canada

EMEA¹

Asia Pacific

Caribbean

Total
Monster Energy®Drinks

$
1,436,964

$
294,692

$
198,736

$
89,747

$
2,020,139
Strategic Brands

79,026

33,141

10,503

1,435

124,105
Other

11,749

—

—

—

11,749
Total Net Sales

$
1,527,739

$
327,833

$
209,239

$
91,182

$
2,155,993

¹²~~Europe, Middle East and Africa (“EMEA”)~~
Effectively from February 17, 2022 to June 30, 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)

Contract Liabilities

Amounts received from certain bottlers/distributors at inception of their distribution contracts or at the inception of certain sales/marketing programs are accounted for as deferred revenue. As of June 30, ~~2021,~~2022, the Company had ~~$298.7~~$276.5 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 June 30, 2022 and 2021, ~~and 2020, $10.4~~$10.1 million and ~~$10.5~~$10.4 million, respectively, of deferred revenue was recognized in net sales. See Note 11. During the six-months ended June 30, 2022 and 2021, ~~and 2020, $20.9~~$20.1 million and ~~$21.1~~$20.9 million, respectively, of deferred revenue was recognized in net sales. See Note 11.

LEASES

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

Leases are classified as either finance leases or operating leases based on criteria in ~~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.

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) income, net in the condensed consolidated statement of income.

The Company’s leases have remaining lease terms of less than one year to 1312 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

Six-Months

Six-Months

Ended June 30,

Ended June 30,

Ended June 30,

Ended June 30,


2021

2020

2021

2020
Operating lease cost

$
1,114

$
893

$
2,245

$
2,338

Short-term lease cost

1,182

877

2,135

1,584

Variable lease cost

185

160

347

322

Finance leases:

Amortization of ROU assets

122

186

256

334
Interest on lease liabilities

5

14

9

25
Finance lease cost

127

200

265

359

Total lease cost

$
2,608

$
2,130

$
4,992

$
4,603

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

Six-Months

Six-Months

Ended June 30,

Ended June 30,

2021

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

Operating cash outflows from operating leases

$
2,008

$
2,084
Operating cash outflows from finance leases

9

25
Financing cash outflows from finance leases

1,297

1,680

ROU assets obtained in exchange for lease obligations:

Finance leases

2,238

2,024
Operating leases

166

2,020

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

June 30, 2021


Real Estate

Equipment

Total

Balance Sheet Location
Operating leases

$
20,865

$
187

$
21,052

Other Assets
Finance leases

—

2,495

2,495

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

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~~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:~~

June 30, 2021


Operating Leases

Finance Leases
Accrued liabilities

$
2,976

$
1,742
Other liabilities

16,032

19
Total

$
19,008

$
1,761

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 June 30, 2021 and December 31, 2020 were as follows:~~

June 30, 2021


Operating Leases

Finance Leases

Weighted-average remaining lease term (years)

9.3

0.8

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 June 30, 2021:

Undiscounted Future Lease Payments

Operating Leases

Finance Leases
2021 (excluding the six-months ended June 30, 2021)

$
1,879

$
1,389
2022

3,180

367
2023

2,417

11
2024

1,892

3
2025

1,601

—
2026 and thereafter

11,588

—
Total lease payments

22,557

1,770
Less imputed interest

(3,549)

(9)
Total

$
19,008

$
1,761

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

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MONSTER BEVERAGE CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

5.	~~INVESTMENTS~~

The components of lease cost were comprised of the following:


	Three-Months		Three-Months		Six-Months		Six-Months
	Ended June 30,		Ended June 30,		Ended June 30,		Ended June 30,
	2022		2021		2022		2021
Operating lease cost	$	2,238	$	1,114	$	3,932	$	2,245

Short-term lease cost		939		1,182		1,869		2,135

Variable lease cost		195		185		378		347

Finance leases:
Amortization of ROU assets		148		122		275		256
Interest on lease liabilities		7		5		10		9
Finance lease cost		155		127		285		265

Total lease cost	$	3,527	$	2,608	$	6,464	$	4,992

~~The~~Supplemental cash flow information for the following ~~table summarizes~~periods:


	Six-Months		Six-Months
	Ended June 30,		Ended June 30,
	2022		2021
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash outflows from operating leases	$	3,682	$	2,008
Operating cash outflows from finance leases		10		9
Financing cash outflows from finance leases		1,179		1,297

ROU assets obtained in exchange for lease obligations:
Finance leases		1,561		2,238
Operating leases		18,339		166

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
June 30, 2021

Cost

Gains

Losses

Value

Months

Months
Available-for-sale

Short-term:

Commercial paper

$
186,912

$
—

$
—

$
186,912

$
—

$
—
Certificates of deposit

43,240

2

—

43,242

—

—
U.S. government agency securities

64,914

10

2

64,922

2

—
U.S. treasuries

673,912

35

71

673,876

71

—
Long-term:

U.S. government agency securities

29,659

—

8

29,651

8

—
U.S. treasuries

61,423

—

41

61,382

41

—
Total

$
1,060,060

$
47

$
122

$
1,059,985

$
122

$
—


	June 30, 2022
	Real Estate		Equipment		Total		Balance Sheet Location
Operating leases	$	36,965	$	479	$	37,444	Other Assets
Finance leases		—		2,204		2,204	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

$
—

~~During the three- and six-months ended June 30, 2021 and 2020, realized gains or losses recognized on the sale of investments were not significant.~~

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


	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

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:


	June 30, 2022
	Operating Leases		Finance Leases
Accrued liabilities	$	6,966	$	1,326
Other liabilities		29,601		56
Total	$	36,567	$	1,382


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

The weighted-average remaining lease terms and weighted-average discount rates for operating and finance leases at June 30, 2022 and December 31, 2021 were as follows:


	June 30, 2022
	Operating Leases		Finance Leases
Weighted-average remaining lease term (years)	7.2		0.9
Weighted-average discount rate	3.3	%	2.4	%


	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 June 30, 2022:

June 30, 2021

December 31, 2020


Amortized Cost

Fair Value

Amortized Cost

Fair Value
Less than 1 year:

Commercial paper

$
186,912

$
186,912

$
119,886

$
119,886
Municipal securities

—

—

9,083

9,083
U.S. government agency securities

64,914

64,922

81,521

81,531
Certificates of deposit

43,240

43,242

20,387

20,387
U.S. treasuries

673,912

673,876

650,386

650,467
Due 1 - 10 years:

U.S. treasuries

61,423

61,382

33,946

33,940
U.S. government agency securities

29,659

29,651

10,350

10,351
Total

$
1,060,060

$
1,059,985

$
925,559

$
925,645


	Undiscounted Future Lease Payments
	Operating Leases		Finance Leases
2022 (excluding the six-months ended June 30, 2022)	$	4,079	$	881
2023		7,448		476
2024		6,012		23
2025		4,528		17
2026		3,673		2
2027 and thereafter		15,659		—
Total lease payments		41,399		1,399
Less imputed interest		(4,832)		(17)
Total	$	36,567	$	1,382

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 thatJune 30, 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 table summarizes the Company’s investments at:


									Continuous		Continuous
			Gross		Gross				Unrealized		Unrealized
			Unrealized		Unrealized				Loss Position		Loss Position
	Amortized		Holding		Holding		Fair		less than 12		greater than
June 30, 2022	Cost		Gains		Losses		Value		Months		12 Months
Available-for-sale
Short-term:
Commercial paper	$	208,909	$	—	$	—	$	208,909	$	—	$	—
Certificates of deposit		34,554		—		—		34,554		—		—
Municipal securities		212,828		78		462		212,444		462
U.S. government agency securities		74,583		—		524		74,059		524		—
U.S. treasuries		812,871		—		5,045		807,826		5,045		—
Long-term:
U.S. treasuries		56,600		24		155		56,469		155		—
Municipal securities		1,263		2		—		1,265		—
U.S. government agency securities		6,417		1		33		6,385		33		—
Total	$	1,408,025	$	105	$	6,219	$	1,401,911	$	6,219	$	—


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

During the three- and six-months ended June 30, 2022 and 2021, realized gains or losses recognized on the sale of investments were not significant.

The Company’s investments at June 30, 2022 and December 31, 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)

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


	June 30, 2022				December 31, 2021
	Amortized Cost		Fair Value		Amortized Cost		Fair Value
Less than 1 year:
Commercial paper	$	208,909	$	208,909	$	334,077	$	334,077
Municipal securities		212,828		212,444		666		666
U.S. government agency securities		74,583		74,059		62,687		62,661
Certificates of deposit		34,554		34,554		44,502		44,502
U.S. treasuries		812,871		807,826		1,308,536		1,307,821
Due 1 – 10 years:
Municipal securities		1,263		1,265		—		—
U.S. treasuries		56,600		56,469		87,133		86,943
U.S. government agency securities		6,417		6,385		12,500		12,476
Total	$	1,408,025	$	1,401,911	$	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.

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

Table of Contents

MONSTER BEVERAGE CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

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


June 30, 2021	Level 1		Level 2		Level 3		Total
June 30, 2022									Level 1		Level 2		Level 3		Total
Cash	$	760,217	$	—	$	—	$	760,217	$	932,538	$	—	$	—	$	932,538
Money market funds		809,022		—		—		809,022		124,879		—		—		124,879
Certificates of deposit		—		43,242		—		43,242		—		34,554		—		34,554
Commercial paper		—		186,912		—		186,912		—		220,624		—		220,624
Municipal securities										—		218,435		—		218,435
U.S. government agency securities		—		94,573		—		94,573		—		92,664		—		92,664
U.S. treasuries		—		750,258		—		750,258		—		910,256		—		910,256
Foreign currency derivatives		—		291		—		291		—		558		—		558
Total	$	1,569,239	$	1,075,276	$	—	$	2,644,515	$	1,057,417	$	1,477,091	$	—	$	2,534,508

Amounts included in:
Cash and cash equivalents	$	1,569,239	$	15,000	$	—	$	1,584,239	$	1,057,417	$	74,622	$	—	$	1,132,039
Short-term investments		—		968,952		—		968,952		—		1,337,792		—		1,337,792
Accounts receivable, net		—		609		—		609		—		620		—		620
Investments		—		91,033		—		91,033		—		64,119		—		64,119
Accrued liabilities		—		(318)		—		(318)		—		(62)		—		(62)
Total	$	1,569,239	$	1,075,276	$	—	$	2,644,515	$	1,057,417	$	1,477,091	$	—	$	2,534,508


December 31, 2020	Level 1		Level 2		Level 3		Total
December 31, 2021									Level 1		Level 2		Level 3		Total
Cash	$	796,421	$	—	$	—	$	796,421	$	749,089	$	—	$	—	$	749,089
Money market funds		352,730		—		—		352,730		440,826		—		—		440,826
Certificates of deposit		—		23,137		—		23,137		—		44,502		—		44,502
Commercial paper		—		130,883		—		130,883		—		335,477		—		335,477
Municipal securities		—		9,083		—		9,083		—		2,428		—		2,428
U.S. government agency securities		—		91,882		—		91,882		—		75,137		—		75,137
U.S. treasuries		—		701,922		—		701,922		—		1,528,149		—		1,528,149
Foreign currency derivatives		—		(2,578)		—		(2,578)		—		(278)		—		(278)
Total	$	1,149,151	$	954,329	$	—	$	2,103,480	$	1,189,915	$	1,985,415	$	—	$	3,175,330

Amounts included in:
Cash and cash equivalents	$	1,149,151	$	31,262	$	—	$	1,180,413	$	1,189,915	$	136,547	$	—	$	1,326,462
Short-term investments		—		881,354		—		881,354		—		1,749,727		—		1,749,727
Accounts receivable, net		—		69		—		69		—		654		—		654
Investments		—		44,291		—		44,291		—		99,419		—		99,419
Accrued liabilities		—		(2,647)		—		(2,647)		—		(932)		—		(932)
Total	$	1,149,151	$	954,329	$	—	$	2,103,480	$	1,189,915	$	1,985,415	$	—	$	3,175,330

All of the Company’s short-term and long-term investments are classified within Level 1 or Level 2 of the fair value hierarchy. The Company’s valuation of its Level 1 investments is based on quoted market prices in active markets for identical securities. The Company’s valuation of its Level 2 investments is based on other observable inputs, specifically a market approach which utilizes valuation models, pricing systems, mathematical tools and other relevant information for the same or similar securities. The Company’s valuation of its Level 2 foreign currency exchange contracts is based on quoted market prices of the same or similar instruments, adjusted for counterparty risk. There were 0 transfers between Level 1 and Level 2 measurements during the six-months ended June 30, ~~2021,~~2022, or during the year-ended December 31, ~~2020,~~2021, and there were no changes in the Company’s valuation techniques.

1719

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 the six-months ended June 30, ~~2021~~2022 and the year-ended December 31, ~~2020,~~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 June 30, ~~2021~~2022 have terms of one month or less. The Company does not enter into forward currency exchange contracts for speculation or trading purposes.

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


June 30, 2021
June 30, 2022						June 30, 2022
Derivatives not designated as
hedging instruments under	Notional		Fair				Notional		Fair
ASC 815-20	Amount		Value		Balance Sheet Location		Amount		Value		Balance Sheet Location
Assets:
Foreign currency exchange contracts:
Receive USD/pay GBP	$	40,272	$	245	Accounts receivable, net
Receive USD/pay EUR		36,902		135	Accounts receivable, net		$	39,939	$	391	Accounts receivable, net
Receive USD/pay COP		8,272		94	Accounts receivable, net			11,106		111	Accounts receivable, net
Receive USD/pay RUB		9,941		81	Accounts receivable, net
Receive USD/pay ZAR								6,495		77	Accounts receivable, net
Receive USD/pay GBP								11,453		14	Accounts receivable, net
Receive USD/pay NZD		2,185		21	Accounts receivable, net			3,386		14	Accounts receivable, net
Receive USD/pay DKK								2,070		11	Accounts receivable, net
Receive USD/pay AUD		1,441		16	Accounts receivable, net			1,520		1	Accounts receivable, net
Receive USD/pay DKK		1,560		13	Accounts receivable, net
Receive USD/pay ZAR		1,258		3	Accounts receivable, net
Receive USD/pay CNY		12,363		1	Accounts receivable, net
Receive USD/pay MXN								21,577		1	Accounts receivable, net

Liabilities:
Foreign currency exchange contracts:
Receive NOK/pay USD	$	9,782	$	(154)	Accrued liabilities
Receive CAD/pay USD							$	21,878	$	(45)	Accrued liabilities
Receive USD/pay CNY								12,219		(12)	Accrued liabilities
Receive RSD/pay USD		13,471		(133)	Accrued liabilities			1,233		(3)	Accrued liabilities
Receive SEK/pay USD		3,790		(28)	Accrued liabilities
Receive SGD/pay USD		14,945		(3)	Accrued liabilities			14,827		(2)	Accrued liabilities

1820

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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


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

Amount of (loss) gain

Amount of gain (loss)

recognized in income on

derivatives

Derivatives not designated as

Location of (loss) gain

Three-months ended

Location of gain (loss)

Three-months ended

hedging instruments under

recognized in income on

June 30,

recognized in income on

June 30,

ASC 815-20

derivatives

2021

2020

derivatives

2022

2021

Foreign currency exchange contracts

Interest and other income (expense), net

(1,528)

(2,235)

Interest and other (expense) income, net

743

(1,528)

Amount of (loss) gain

Amount of gain (loss)

recognized in income on

derivatives

Derivatives not designated as

Location of (loss) gain

Six-months ended

Location of gain (loss)

Six-months ended

hedging instruments under

recognized in income on

June 30,

recognized in income on

June 30,

ASC 815-20

derivatives

2021

2020

derivatives

2022

2021

Foreign currency exchange contracts

Interest and other income (expense), net

(5,398)

4,058

Interest and other (expense) income, net

(3,275)

(5,398)

8.	INVENTORIES

Inventories consist of the following at:


	June 30,		December 31,		June 30,		December 31,
	2021		2020		2022		2021
Raw materials	$	211,159	$	155,166	$	479,039	$	349,865
Work in process						1,556		—
Finished goods		171,731		177,919		405,353		243,492
	$	382,890	$	333,085	$	885,948	$	593,357

1921

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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:


	June 30,		December 31,		June 30,		December 31,
	2021		2020		2022		2021
Land	$	85,740	$	85,876	$	136,701	$	85,455
Leasehold improvements		11,938		11,524		30,930		11,845
Furniture and fixtures		8,199		8,271		9,196		8,274
Office and computer equipment		22,235		21,657		23,132		21,601
Computer software		7,142		6,945		7,478		8,383
Equipment		196,155		185,348		248,414		190,333
Buildings		157,555		156,616		198,282		167,243
Vehicles		45,120		43,173		47,570		45,404
		534,084		519,410		701,703		538,538
Less: accumulated depreciation and amortization		(224,906)		(204,754)		(237,162)		(224,785)
	$	309,178	$	314,656	$	464,541	$	313,753

Total depreciation and amortization expense recorded was ~~$11.6~~$13.8 million and ~~$12.3~~$11.6 million for the three-months ended June 30, ~~2021~~2022 and ~~2020,~~2021, respectively. Total depreciation and amortization expense recorded was ~~$23.3~~$26.9 million and ~~$24.7~~$23.3 million for the six-months ended June 30, ~~2021~~2022 and ~~2020,~~2021, respectively.

10. GOODWILL AND OTHER INTANGIBLE ASSETS

The following is a roll-forward of goodwill for the six-months ended June 30, ~~2021~~2022 and ~~2020~~2021 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		—		—		—		—		—		—		81,298		—		81,298
Balance at June 30, 2021	$	693,644	$	637,999	$	—	$	1,331,643
Balance at June 30, 2022									$	693,644	$	637,999	$	81,298	$	—	$	1,412,941


	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 June 30, 2020	$	693,644	$	637,999	$	—	$	1,331,643
Balance at June 30, 2021									$	693,644	$	637,999	$	—	$	—	$	1,331,643

Intangible assets consist of the following at:


	June 30,		December 31,		June 30,		December 31,
	2021		2020		2022		2021
Amortizing intangibles	$	66,875	$	66,875	$	121,371	$	66,872
Accumulated amortization		(59,025)		(56,801)		(64,771)		(61,227)
		7,850		10,074		56,600		5,645
Non-amortizing intangibles		1,050,473		1,048,972		1,166,514		1,066,741
	$	1,058,323	$	1,059,046	$	1,223,114	$	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 ~~$1.1~~$2.0 million and ~~$2.5~~$1.1 million for the three-months ended June 30, ~~2021~~2022 and ~~2020,~~June 30, 2021, respectively. Total amortization expense recorded was ~~$2.2~~$3.5 million and ~~$5.4~~$2.2 million for the six-months ended June 30, ~~2021~~2022 and ~~2020, respectively. The Company recorded an impairment charge of $1.0 million and $4.0 million on a Strategic Brand trademark in the three- and six-months ended~~ June 30, ~~2020,~~2021, respectively.

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


2021 (excluding the six-months ended June 30, 2021)	$	2,203
2022		4,405
2022 (excluding the six-months ended June 30, 2022)			$	4,019
2023		1,112		4,745
2024		14		3,647
2025		13		3,647
2026 and thereafter		103
2026				3,646
2027 and thereafter				36,896
	$	7,850	$	56,600

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~~$10.1 million and ~~$10.5~~$10.4 million for the three-months ended June 30, ~~2021~~2022 and ~~2020,~~2021, respectively. Revenue recognized was ~~$20.9~~$20.1 million and ~~$21.1~~$20.9 million for the six-months ended June 30, ~~2021~~2022 and ~~2020,~~2021, respectively.

12. COMMITMENTS AND CONTINGENCIES

The Company had purchase commitments aggregating approximately ~~$67.3~~$339.1 million at June 30, ~~2021,~~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 ~~$219.2~~$332.2 million at June 30, ~~2021,~~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 June 30, ~~2021,~~2022, the interest rate on borrowings under the line of credit was 5.5%. As of June 30, ~~2021, $5.0~~2022, $11.7 million was outstanding on this line of credit.

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

The Company evaluates, on a quarterly basis, developments in legal proceedings and other matters that could cause an increase or decrease in the amount of the liability that is accrued, if any, and any related insurance reimbursements. During the three-months ended June 30, 2021, the Company reversed amounts previously accrued in connection with an intellectual property claim brought by the descendants of Hubert Hansen, in relation to the Company’s use of the Hubert Hansen name prior to the transaction with The Coca-Cola Company, that closed in 2015. The prior adverse jury verdict was reversed on appeal during the three-months ended June 30, 2021 and remanded for new trial. As of June 30, ~~2021, 0~~2022, $0.2 million of 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)

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. Pursuant to the terms of the agreement between MEC and Orange Bang, the award and future royalties will be shared equally between MEC and Orange Bang. The arbitration arose from a settlement agreement that VPX entered into in 2010 with Orange Bang, a family-owned beverage business. Pursuant to the terms of that agreement, VPX is only permitted to use the Bang mark on “creatine-based” products or on Bang products that are marketed and sold only in the vitamin and dietary supplement sections of stores. On July 1, 2022, the court granted MEC and Orange Bang’s motion to confirm the arbitrator’s award and denied VPX’s motion to vacate the arbitrator’s award. MEC and Orange Bang have requested that the Court enter final judgment. On July 28, 2022, VPX filed a notice of appeal in the United States Court of Appeals for the Ninth Circuit. Per ASC 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 August 5, 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.

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

LOSS

Changes in accumulated other comprehensive ~~(loss) income~~loss by component, after tax, for the six-months ended June 30, ~~2021~~2022 and ~~2020~~2021 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		(19,696)		(160)		(19,856)		(78,628)		(5,164)		(83,792)
Amounts reclassified from accumulated other comprehensive (loss) income		—		—		—		0		0		0
Net current-period other comprehensive (loss) income		(19,696)		(160)		(19,856)		(78,628)		(5,164)		(83,792)
Balance at June 30, 2021	$	(16,746)	$	(76)	$	(16,822)
Balance at June 30, 2022							$	(146,837)	$	(6,120)	$	(152,957)


			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		(21,555)		504		(21,051)		(19,696)		(160)		(19,856)
Amounts reclassified from accumulated other comprehensive (loss) income		—		—		—		—		—		—
Net current-period other comprehensive (loss) income		(21,555)		504		(21,051)		(19,696)		(160)		(19,856)
Balance at June 30, 2020	$	(54,136)	$	698	$	(53,438)
Balance at June 30, 2021							$	(16,746)	$	(76)	$	(16,822)

14. TREASURY STOCK

On March 13, 2020, the Company’s Board of Directors authorized a ~~new~~ share repurchase program for the purchase of up to $500.0 million of the Company’s outstanding common stock (the “March 2020 Repurchase Plan”). During the three-months ended June 30, ~~2021, 0~~2022, the Company purchased approximately 3.3 million shares ~~were repurchased~~of common stock at an average purchase price of $86.53 per share, for a total amount of approximately $284.1 million (excluding broker commissions), under the March 2020 Repurchase Plan. Such shares are included in the common stock in treasury in the accompanying condensed balance sheet at June 30, 2022. As of August ~~6, 2021, $441.5~~5, 2022, $157.4 million remained available for repurchase under the March 2020 Repurchase Plan.

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MONSTER BEVERAGE CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

ended June 30, 2022, 0 shares were repurchased under the June 2022 Repurchase Plan. As of August 5, 2022, $500.0 million remained available for repurchase under the June 2022 Repurchase Plan.

During the three-months ended June 30, ~~2021, 4,265~~2022, 2,936 shares of common stock were purchased from employees in lieu of cash payments for options exercised or withholding taxes due for a total amount of ~~$0.4~~$0.3 million. While such purchases are considered common stock repurchases, they are not counted as purchases against the Company’s authorized share repurchase programs. Such shares are included in common stock in treasury in the accompanying condensed consolidated balance sheet at June 30, ~~2021.~~2022.

15. STOCK-BASED COMPENSATION

The Company has 2 stock-based compensation plans under which shares were available for grant at June 30, ~~2021:~~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.

~~Table of Contents~~

~~MONSTER BEVERAGE CORPORATION AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

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

The Company recorded ~~$17.3~~$16.3 million and ~~$15.9~~$17.3 million of compensation expense relating to outstanding options, restricted stock units, performance share units and other share-based awards during the three-months ended June 30, ~~2021~~2022 and ~~2020,~~2021, respectively. The Company recorded ~~$35.7~~$32.6 million and ~~$33.0~~$35.7 million of compensation expense relating to outstanding options, restricted stock units, performance share units and other share-based awards during the six-months ended June 30, 2022 and 2021, ~~and 2020,~~ respectively.

The tax benefit for tax deductions from non-qualified stock option exercises, disqualifying dispositions of incentive stock options and vesting of restricted stock units and performance share units for the three-months ended June 30, 2022 and 2021 ~~and 2020~~ was ~~$2.7~~$ 2.2 million and ~~$4.0~~$2.7 million, respectively. The tax benefit for tax deductions from non-qualified stock option exercises, disqualifying dispositions of incentive stock options and vesting of restricted stock units and performance share units for the six-months ended June 30, 2022 and 2021 was $2.7 million and ~~2020 was~~ $4.1 million, ~~and $5.7 million,~~ respectively.

Stock Options

Under the Company’s stock-based compensation plans, all stock options granted as of June 30, ~~2021~~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 June 30,

Six-Months Ended June 30,


2021

2020*

2021

2020

Dividend yield

0.0
%
—

0.0
%
0.0
%
Expected volatility

29.0
%
—

28.9
%
30.5
%
Risk-free interest rate

0.9
%
—

0.8
%
0.7
%
Expected term

5.9
years
—

5.8
years
5.8
years

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


	Three-Months Ended June 30,				Six-Months Ended June 30,
	2022		2021		2022		2021
Dividend yield	0.0	%	0.0	%	0.0	%	0.0	%
Expected volatility	27.8	%	29.0	%	27.7	%	28.9	%
Risk-free interest rate	3.0	%	0.9	%	2.1	%	0.8	%
Expected term	6.2 years		5.9 years		6.0 years		5.8 years

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

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

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

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

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-
		Weighted-		Average				Weighted-		Average
		Average		Remaining				Average		Remaining
	Number of	Exercise		Contractual	Aggregate		Number of	Exercise		Contractual	Aggregate
	Shares (in	Price Per		Term (in	Intrinsic		Shares	Price Per		Term (in	Intrinsic
Options	thousands)	Share		years)	Value		(in 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
Outstanding at January 1, 2022							13,860	$	48.19	5.1	$	663,148
Granted 01/01/22 – 03/31/22							2,489	$	73.96
Granted 04/01/22 – 06/30/22							8	$	88.05
Exercised	(570)	$	42.95				(520)	$	43.50
Cancelled or forfeited	(57)	$	61.56				(88)	$	74.32
Outstanding at June 30, 2021	14,374	$	48.09	5.6	$	621,788
Vested and expected to vest in the future at June 30, 2021	14,058	$	47.61	5.5	$	614,822
Exercisable at June 30, 2021	9,682	$	40.31	4.5	$	494,110
Outstanding at June 30, 2022							15,749	$	52.29	5.4	$	636,392
Vested and expected to vest in the future at June 30, 2022							15,308	$	51.67	5.3	$	628,074
Exercisable at June 30, 2022							10,569	$	42.99	3.9	$	525,344

The weighted-average grant-date fair value of options granted during the three-months ended June 30, 2022 and 2021 was $29.92 per share and $26.89 per ~~share. NaN options were granted during the three-months ended June 30, 2020.~~share, respectively. The weighted-average grant-date fair value of options granted during the six-months ended June 30, 2022 and 2021 was $23.23 per share and ~~2020 was~~ $25.79 per share, ~~and $18.78 per share,~~ respectively.

The total intrinsic value of options exercised during the three-months ended June 30, 2022 and 2021 ~~and 2020~~ was ~~$21.0~~$18.0 million and ~~$25.3~~$21.0 million, respectively. The total intrinsic value of options exercised during the six-months ended June 30, 2022 and 2021 was $22.9 million and ~~2020 was~~ $28.2 million, ~~and $36.2 million,~~ respectively.

Cash received from option exercises under all plans for the three-months ended June 30, 2022 and 2021 ~~and 2020~~ was ~~$17.7~~$18.1 million and ~~$29.9~~$17.7 million, respectively. Cash received from option exercises under all plans for the six-months ended June 30, 2022 and 2021 was $22.6 million and ~~2020 was~~ $24.5 million, ~~and $43.8 million,~~ respectively.

At June 30, ~~2021,~~2022, there was ~~$68.0~~$86.1 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 ~~2.4~~3.2 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.

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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 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
Non-vested at January 1, 2022				910	$	69.02
Granted 01/01/22 - 03/31/22¹				484	$	71.88
Granted 04/01/22 - 06/30/22				15	$	87.52
Vested	(344)	$	62.27	(381)	$	64.24
Forfeited/cancelled	(4)	$	60.15	(9)	$	71.54
Non-vested at June 30, 2021	917	$	68.89
Non-vested at June 30, 2022				1,019	$	72.42

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 June 30, 2022 and 2021 was $87.52 and ~~2020 was~~ $92.14 ~~and $71.72~~ per share, respectively. The weighted-average grant-date fair value of restricted stock units and/or performance share units granted during the six-months ended June 30, 2022 and 2021 was $73.95 and ~~2020 was~~ $89.12 ~~and $62.78~~ per share, respectively.

As of June 30, ~~2021, 0.9~~2022, 1.0 million of restricted stock units and performance share units are expected to vest over their respective terms.

At June 30, ~~2021,~~2022, total unrecognized compensation expense relating to non-vested restricted stock units and performance share units was ~~$46.4~~$50.6 million, which is expected to be recognized over a weighted-average period of ~~2.2~~2.1 years.

Other Share-Based Awards

The Company has granted other share-based awards to certain employees that are payable in cash. These awards are classified as liabilities and are valued based on the fair value of the award at the grant date and are remeasured at each reporting date until settlement, with compensation expense being recognized in proportion to the completed requisite service period up until date of settlement. At June 30, ~~2021,~~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 June 30, ~~2021,~~2022, there was ~~$1.6~~$0.3 million of total unrecognized compensation expense related to nonvested other share-based awards granted to employees under the Company’s stock-based compensation plans. That cost is expected to be recognized over a weighted-average period of ~~1.1~~0.5 years.

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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 six-months ended June 30, ~~2021:~~2022:


	Gross Unrecognized Tax		Gross Unrecognized
	Benefits		Tax Benefits
Balance at December 31, 2020	$	742
Balance at December 31, 2021			$	0
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 June 30, 2021	$	389
Increases for tax positions related to the prior years				2,008
Balance at June 30, 2022			$	2,008

The Company recognizes accrued interest and penalties related to unrecognized tax benefits in the provision for income taxes in the Company’s condensed consolidated financial statements. As of June 30, ~~2021,~~2022, the Company had approximately ~~$0.1~~$0.3 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~~2018 through ~~2020~~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 ~~2016~~2017 through ~~2020~~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		Six-Months Ended		Three-Months Ended		Six-Months Ended
	June 30,		June 30,		June 30,		June 30,
	2021	2020	2021	2020	2022	2021	2022	2021
Weighted-average shares outstanding:
Basic	528,653	526,911	528,425	531,486	528,617	528,653	529,009	528,425
Dilutive	6,904	4,280	6,899	4,411	6,194	6,904	6,200	6,899
Diluted	535,557	531,191	535,324	535,897	534,811	535,557	535,209	535,324

For the three-months ended June 30, ~~2021~~2022 and ~~2020,~~2021, options and awards outstanding totaling ~~1.0~~3.5 million shares and ~~4.7~~1.0 million shares, respectively, were excluded from the calculations as their effect would have been antidilutive. For the six-months ended June 30, ~~2021~~2022 and ~~2020,~~2021, options and awards outstanding totaling ~~0.6~~2.5 million shares and ~~4.9~~0.6 million shares, respectively, were excluded from the calculations as their effect would have been antidilutive.

18. SEGMENT INFORMATION

The Company has 34 operating and reportable segments: (i) Monster Energy® Drinks segment, which is primarily comprised of the Company’s Monster Energy® drinks, ~~and~~ 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 ~~(iii)~~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.

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MONSTER BEVERAGE CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

The Company’s 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.

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

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

Corporate and unallocated amounts that do not relate to a reportable segment have been allocated to “Corporate & Unallocated.” No asset information, other than goodwill and other intangible assets, has been provided 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 six-months ended June 30, 2021 and 2020 are as follows:~~

Three-Months Ended

Six-Months Ended

June 30,

June 30,


2021

2020

2021

2020
Net sales:

Monster Energy® Drinks⁽¹⁾

$
1,367,094

$
1,027,686

$
2,537,374

$
2,020,140
Strategic Brands

86,935

59,566

154,744

124,104
Other

7,905

6,644

13,633

11,749
Corporate and unallocated

—

—

—

—

$
1,461,934

$
1,093,896

$
2,705,751

$
2,155,993

Three-Months Ended

Six-Months Ended

June 30,

June 30,


2021

2020

2021

2020
Operating Income:

Monster Energy® Drinks⁽¹⁾

$
547,269

$
453,388

$
1,012,088

$
864,528
Strategic Brands

54,074

37,692

99,214

74,411
Other

2,230

1,626

4,024

2,412
Corporate and unallocated

(77,598)

(85,442)

(175,203)

(169,099)

$
525,975

$
407,264

$
940,123

$
772,252

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

Three-Months Ended

Six-Months Ended

June 30,

June 30,


2021

2020

2021

2020
Income before tax:

Monster Energy® Drinks⁽¹⁾

$
547,619

$
453,418

$
1,012,587

$
864,596
Strategic Brands

54,080

37,692

99,221

74,411
Other

2,230

1,626

4,024

2,412
Corporate and unallocated

(77,082)

(87,268)

(175,598)

(170,090)

$
526,847

$
405,468

$
940,234

$
771,329

The net revenues derived from the Company’s reportable segments and other financial information related thereto for the three- and six-months ended June 30, 2022 and 2021 are as follows:


	Three-Months Ended				Six-Months Ended
	June 30,				June 30,
	2022		2021		2022		2021
Net sales:
Monster Energy® Drinks¹	$	1,537,690	$	1,367,094	$	2,942,536	$	2,537,374
Strategic Brands		79,142		86,935		171,735		154,744
Alcohol Brands²		32,447		—		47,654		—
Other		5,981		7,905		11,908		13,633
Corporate and unallocated		—		—		—		—
	$	1,655,260	$	1,461,934	$	3,173,833	$	2,705,751


	Three-Months Ended				Six-Months Ended
	June 30,				June 30,
	2022		2021		2022		2021
Operating Income:
Monster Energy® Drinks¹	$	441,719	$	547,269	$	896,282	$	1,012,088
Strategic Brands		41,500		54,074		98,695		99,214
Alcohol Brands²		(4,657)		—		(9,611)		—
Other		1,034		2,230		2,161		4,024
Corporate and unallocated		(106,645)		(77,598)		(215,088)		(175,203)
	$	372,951	$	525,975	$	772,439	$	940,123


	Three-Months Ended				Six-Months Ended
	June 30,				June 30,
	2022		2021		2022		2021
Income before tax:
Monster Energy® Drinks¹	$	442,407	$	547,619	$	897,540	$	1,012,587
Strategic Brands		41,509		54,080		98,763		99,221
Alcohol Brands²		(3,890)		—		(9,496)		—
Other		1,025		2,230		2,162		4,024
Corporate and unallocated		(114,881)		(77,082)		(230,610)		(175,598)
	$	366,170	$	526,847	$	758,359	$	940,234

(1)

Includes $~~10.4~~10.1 million and $~~10.5~~10.4 million for the ~~three- months~~three-months ended June 30, ~~2021~~2022 and ~~2020,~~2021, respectively, related to the recognition of deferred revenue. Includes $~~20.9~~20.1 million and $~~21.1~~20.9 million for the six-months ended June 30, ~~2021~~2022 and ~~2020,~~2021, respectively, related to the recognition of deferred revenue.

(2)	Effectively from February 17, 2022 to June 30, 2022.


	Three-Months Ended				Six-Months Ended				Three-Months Ended				Six-Months Ended
	June 30,				June 30,				June 30,				June 30,
	2021		2020		2021		2020		2022		2021		2022		2021
Depreciation and amortization:
Monster Energy® Drinks	$	8,816	$	9,322	$	17,838	$	18,974	$	8,102	$	8,816	$	16,262	$	17,838
Strategic Brands		285		1,675		549		3,705		242		285		475		549
Alcohol Brands										3,683		—		5,966		—
Other		1,126		1,194		2,252		2,358		1,113		1,126		2,224		2,252
Corporate and unallocated		2,447		2,574		4,860		5,053		2,682		2,447		5,505		4,860
	$	12,674	$	14,765	$	25,499	$	30,090	$	15,822	$	12,674	$	30,432	$	25,499

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MONSTER BEVERAGE CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

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

Corporate and unallocated expenses for the three-months ended June 30, 2021 include $61.2 million of payroll costs, of which $17.3 million was attributable to stock-based compensation expenses (see Note 15 “Stock-Based Compensation”), as well as $21.0 million attributable to professional service expenses, including accounting and legal costs, and $12.3 million of other operating expenses. Corporate and unallocated expenses for the ~~three- months~~three-months ended June 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 ~~three-months~~six-months ended June 30, ~~2020~~2022 include ~~$56.5~~$138.1 million of payroll costs, of which ~~$15.9~~$32.2 million was attributable to stock-based compensation expenses (see Note 15 “Stock-Based Compensation”), as well as ~~$17.1~~$43.3 million attributable to professional service expenses, including accounting and legal costs, and ~~$11.8~~$33.7 million of other operating expenses.

Corporate and unallocated expenses for the six-months ended June 30, 2021 include $126.3 million of payroll costs, of which $35.6 million was attributable to stock-based compensation expenses (see Note 15 “Stock-Based Compensation”), as well as $41.4 million attributable to professional service expenses, including accounting and legal costs, and $24.4 million of other operating expenses. Corporate and unallocated expenses for the six-months ended June 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 six-months ended June 30, 2020 include $111.8 million of payroll costs, of which $33.0 million was attributable to stock-based compensation expenses (see Note 15 “Stock-Based Compensation”), as well as $33.5 million attributable to professional service expenses, including accounting and legal costs, and $23.8 million of other operating expenses.

Coca-Cola ~~Consolidated, Inc.~~Europacific Partners (formerly Coca-Cola European Partners) accounted for approximately ~~11%~~14% and ~~13%~~12% of the Company’s net sales for the three-months ended June 30, ~~2021~~2022 and ~~2020,~~2021, respectively. Coca-Cola ~~Consolidated, Inc.~~Europacific Partners accounted for approximately ~~11%~~13% and 12% of the Company’s net sales for the six-months ended June 30, ~~2021~~2022 and ~~2020,~~2021, respectively.

~~Reyes~~ Coca-Cola ~~Bottling, LLC~~Consolidated, Inc. accounted for approximately 11% of the Company’s net sales for both the three-months ended June 30, ~~2021~~2022 and ~~2020. Reyes~~2021. Coca-Cola ~~Bottling, LLC~~Consolidated, Inc. accounted for approximately 10% and 11% of the Company’s net sales for the six-months ended June 30, ~~2021~~2022 and ~~2020,~~2021, respectively.

Reyes Coca-Cola ~~Europacific Partners (formerly Coca-Cola European Partners)~~Bottling, LLC accounted for approximately ~~12%~~9% and 8%11% of the Company’s net sales for the three-months ended June 30, 2022 and 2021, ~~and 2020,~~ respectively. Reyes Coca-Cola ~~Europacific Partners~~Bottling, LLC accounted for approximately ~~12%~~9% and 9%10% of the Company’s net sales for the six-months ended June 30, 2022 and 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)~~

Net sales to customers outside the United States amounted to ~~$546.3~~$649.0 million and ~~$328.3~~$546.3 million for the three-months ended June 30, ~~2021~~2022 and ~~2020,~~2021, respectively. Such sales were approximately ~~37%~~39% and ~~30%~~37% of net sales for the three-months ended June 30, ~~2021~~2022 and ~~2020,~~2021, respectively. Net sales to customers outside the United States amounted to ~~$1.0~~$1.20 billion and ~~$685.1 million~~$1.01 billion for the six-months ended June 30, ~~2021~~2022 and ~~2020,~~2021, respectively. Such sales were approximately ~~37%~~38% and ~~32%~~37% of net sales for the six-months ended June 30, 2022 and 2021, ~~and 2020,~~ respectively.

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


	June 30,		December 31,		June 30,		December 31,
	2021		2020		2022		2021
Goodwill and other intangible assets:
Monster Energy® Drinks	$	1,406,319	$	1,406,646	$	1,420,967	$	1,420,503
Strategic Brands		975,957		974,132		976,832		978,032
Alcohol Brands						234,956		—
Other		7,690		9,911		3,300		5,494
Corporate and unallocated		—		—		—		—
	$	2,389,966	$	2,390,689	$	2,636,055	$	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 $20.1 million and $10.7 million for the three-months ended June 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 $36.2 million and $22.1 million for the six-months ended June 30, 2021 and 2020, respectively, and are included as a reduction to net sales.

TCCC commissions, based on sales to certain TCCC independent bottlers/distributors, were $8.1 million and $5.4 million for the three-months ended June 30, 2021 and 2020, respectively, and are included in operating expenses. TCCC commissions, based on sales to certain TCCC independent bottlers/distributors, were $13.6 million and $9.8 million for the six-months ended June 30, 2021 and 2020, respectively, and are included in operating expenses.

Net sales to the TCCC Subsidiaries for the three-months ended June 30, 2021 and 2020 were $27.0 million and $14.2 million, respectively. Net sales to the TCCC Subsidiaries for the six-months ended June 30, 2021 and 2020 were $54.1 million and $33.6 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 $7.7 million and $6.5 million for the three-months ended June 30, 2021 and 2020, respectively. Concentrate purchases from TCCC were $14.1 million and $10.8 million for the six-months ended June 30, 2021 and 2020, respectively.

Certain TCCC Subsidiaries also contract manufacture certain of the Company’s energy drinks. Such contract manufacturing expenses were $6.6 million and $2.2 million for the three-months ended June 30, 2021 and 2020, respectively. Such contract manufacturing expenses were $14.0 million and $6.2 million for the six-months ended June 30, 2021 and 2020, respectively.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

19. RELATED PARTY TRANSACTIONS

TCCC controls approximately 19.4% 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 $10.1 million and $20.1 million for the three-months ended June 30, 2022 and 2021, 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 $28.5 million and $36.2 million for the six-months ended June 30, 2022 and 2021, respectively, and are included as a reduction to net sales.

TCCC commissions, based on sales to TCCC independent bottlers/distributors, were $7.8 million and $8.1 million for the three-months ended June 30, 2022 and 2021, respectively, and are included in operating expenses. TCCC commissions, based on sales to TCCC independent bottlers/distributors, were $18.8 million and $13.6 million for the six-months ended June 30, 2022 and 2021, respectively, and are included in operating expenses.

Net sales to the TCCC Subsidiaries for the three-months ended June 30, 2022 and 2021 were $26.5 million and $27.0 million, respectively. Net sales to the TCCC Subsidiaries for the six-months ended June 30, 2022 and 2021 were $58.3 million and $54.1 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 $6.5 million and $7.7 million for the three-months ended June 30, 2022 and 2021, respectively. Concentrate purchases from TCCC were $15.0 million and $14.1 million for the six-months ended June 30, 2022 and 2021, respectively.

Certain TCCC Subsidiaries also contract manufacture certain of the Company’s energy drinks. Such contract manufacturing expenses were $4.8 million and $6.6 million for the three-months ended June 30, 2022 and 2021, respectively. Such contract manufacturing expenses were $14.0 million for both the six-months ended June 30, 2022 and 2021.

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


	June 30,		December 31,		June 30,		December 31,
	2021		2020		2022		2021
Accounts receivable, net	$	57,207	$	44,925	$	135,977	$	94,647
Accounts payable	$	(36,687)	$	(30,792)	$	(37,832)	$	(35,248)
Accrued promotional allowances	$	(6,332)	$	(5,834)	$	(2,761)	$	(4,536)
Accrued liabilities	$	(25,578)	$	(15,446)	$	(18,253)	$	(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 $74.2 million. No portion of such amounts have been recognized in the Company’s condensed consolidated financial statements at June 30, 2022. The Company disputes any material 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 June 30, 2022 and 2021 ~~and 2020~~ were ~~$1.4~~$2.3 million and ~~$0.8~~$1.4 million, respectively. Expenses incurred with such company in connection with promotional materials purchased during the six-months ended June 30, 2022 and 2021 were $3.4 million and ~~2020 were~~ $1.8 million, ~~and $1.5 million,~~ 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)

During the six-months ended June 30, 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 six-months ended June 30, 2022, the Company incurred costs of $0.08 million, amounts the Company believes are commensurate with market rates for comparable travel. NaN amounts were incurred by the Company during the three-months ended June 30, 2022.

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 June 30, 2021, the Company recorded an equity loss of $0.08 million. During the~~three- and six-months ended June 30, ~~2021,~~2022, the Company recorded an equity ~~loss~~losses of ~~$0.12 million.~~$0.06 million and $0.09 million, respectively. As of June 30, ~~2021,~~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.

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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 facilitates our entry into the alcohol beverage sector and brings the Cigar City^TM family of brands including Jai Alai® IPA and Florida Man^TM IPA, the Oskar Blues^TM family of brands including Dale’s Pale Ale® and Wild Basin^TM Hard Seltzers, the Deep Ellum^TM family of brands including Dallas Blonde® and Deep Ellum^TM IPA, the Perrin Brewing^TM 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 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 second 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 ~~ensuring~~endeavoring to maintain the integrity of our supply chain. Despite the ongoing impact of the COVID-19 pandemic, we achieved record second quarter net ~~sales.~~sales in 2022.

~~We have recently seen a resurgence of~~As countries continue to combat the COVID-19 pandemic, ~~including new variants, in many of~~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 ~~countries~~COVID-19 pandemic may continue to impact our business and ~~territories in which we operate, which could impact customer demand.~~

supply chain.

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.

Table of Contents

Distribution and Supply Chain

~~As of~~Since 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~~beginning of the COVID-19 ~~pandemic. Our~~pandemic and the subsequent increased demand for our energy drinks, we prioritized ensuring product availability for our customers and consumers. This strategic direction has remained in place throughout the global supply chain ~~remains largely intact. Depending on~~challenges and disruptions, despite adversely impacting our profitability. We continue to stand by our strategy to ensure product availability and solidify the ~~duration~~continued long-term growth of ~~any COVID-19 pandemic related issues,~~our brands.

In the second quarter of 2022, we ~~may experience~~experienced a significant increase in cost of sales, resulting in a material ~~disruptions~~decrease in both gross profit and gross profit as a percentage of net sales, relative to the comparative 2021 second quarter. The increase in cost of sales was primarily due to (i) increased freight rates and fuel costs, including costs relating to the importation of aluminum cans, (ii) increased ingredient and other input costs, including secondary packaging materials and increased co-packing fees, (iii) increased aluminum can costs attributable to higher aluminum commodity pricing, (iv) geographical and product sales mix and (v) production inefficiencies. 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 as the pandemic continues.~~

chain.

We continue to implement measures to mitigate our increased product and distribution costs through pricing actions and reductions in promotions. In addition, we are ~~experiencing shortages in our aluminum can requirements in North America and Europe, given our volume growth and the current supply constraints in the aluminum can industry. As~~implementing a ~~result, we have not been able to fully satisfy demand~~price increase effective September 1, 2022 in the United States and ~~EMEA~~are planning price increases in certain international markets in the ~~2021~~ second ~~quarter. We have taken steps to source additional quantities~~half of aluminum cans from the United States, South America and Asia, however, logistical issues, including shortages of shipping containers and port of entry congestion could delay the ongoing international supply of aluminum cans. Logistical issues in relation to the importation of certain other raw materials and ingredients continue to impact supply. To meet increased consumer demand, we experienced freight inefficiencies in the United States and in Europe, which resulted in increased cost of sales as well as increased operating expenses in the 2021 first and second quarters. Furthermore, we are continuing to experience freight inefficiencies as well as significant increases in domestic and international freight costs, and like other beverage companies, are incurring increased aluminum can and other costs in the current environment.2022.

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.

~~Table of Contents~~

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~~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^TM IPA, Dale’s Pale Ale®, Wild Basin^TM Hard Seltzers, Dallas Blonde®, Deep Ellum^TM IPA, Perrin Brewing^TM Black Ale, Hop Rising® Double IPA, Juicy IPA, Wasatch® Apricot Hefeweizen and a host of other brands.

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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, ~~and~~ Reign Total Body Fuel® high performance energy drinks and True North® 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~~the AFF Third-Party ~~Products”).~~

Products.

During the three-months ended June 30, ~~2021,~~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 June 30, ~~2021,~~2022, we sold the following new products to our ~~bottlers/distributors:~~

customers:

●

~~BPM® Mango~~Mother® Lava Guava

●

Nalu® ~~Hibiscus Rooibos~~Melon Splash

●

~~Play® Zero Raspberry~~

●

~~Predator® Mango Mayhem~~

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 June 30, ~~2021,~~2022, either individually or in aggregate, did not have a material adverse impact on our financial position, results of operations or liquidity.

Our net sales of ~~$1.46~~$1.66 billion for the three-months ended June 30, ~~2021~~2022 represented record sales for our second fiscal quarter. Net changes in foreign currency exchange rates had ~~a favorable~~an unfavorable impact on net sales of approximately ~~$38.6~~$53.4 million for the three-months ended June 30, ~~2021. The adverse impact of the COVID-19 pandemic on our net sales was more pronounced in the comparative 2020 second quarter.~~

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 ~~$1.37~~$1.54 billion for the three-months ended June 30, ~~2021.~~2022. Net sales of our Strategic Brands segment were ~~$86.9~~$79.1 million for the three-months ended June 30, ~~2021.~~2022. Net sales of our Alcohol Brands segment were $32.4 million for the three-months ended June 30, 2022. Net sales of our Other segment were $6.0 million for the three-months ended June 30, 2022. Our Monster Energy® Drinks segment represented ~~93.5%~~92.9% and ~~93.9%~~93.5% of our net sales for the three-months ended June 30, ~~2021~~2022 and ~~2020,~~2021, respectively. Our Strategic Brands segment represented ~~5.9%~~4.8% and ~~5.4%~~5.9% of our net sales for the three-months ended June 30, ~~2021~~2022 and ~~2020,~~2021, respectively. Our ~~Other segment~~Alcohol Segment represented ~~0.6% and 0.7%~~2.0% of our net sales for the three-months ended June 30, 2022. Our Other segment represented 0.3% and 0.6% of our net sales for the three-months ended June 30, 2022 and 2021, ~~and 2020,~~ respectively.

~~Table of Contents~~

Our growth strategy includes further developing our domestic markets, expanding our international ~~business.~~business and growing our business into new sectors, such as the alcohol beverage sector. Net sales to customers outside the United States were ~~$546.3~~$649.0 million for the three-months ended June 30, ~~2021,~~2022, an increase of approximately ~~$217.9~~$102.7 million, or ~~66.4%~~18.8% higher than net sales to customers outside of the United States of ~~$328.3~~$546.3 million for the three-months ended June 30, ~~2020.~~2021. Such sales were approximately ~~37%~~39% and ~~30%~~37% of net sales for the three-months ended June 30, 2022 and 2021, ~~and 2020,~~ respectively. Net changes in foreign currency exchange rates had an unfavorable impact on net sales to customers outside of the United States of approximately $53.4 million for the three-months ended June 30, 2022. Net sales to customers outside the United States, on a foreign currency adjusted basis, increased 28.6% for the three-months ended June 30, 2022. On February 17, 2022, the Company completed the CANarchy Transaction which facilitates the Company’s entry into 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-months ended June 30, ~~2021~~2022 and ~~2020~~2021 are reflected below. Such information includes sales made by us directly to the customer types concerned, which include our full service beverage bottlers/distributors in the United States. Such full service beverage bottlers/distributors in turn sell certain of our products to some of the same customer types listed below. We limit our description of our customer types to include only our sales to our full service bottlers/distributors without reference to such bottlers/distributors’ sales to their own customers.


	Three-Months Ended				Six-Months Ended				Three-Months Ended				Six-Months Ended
	June 30,				June 30,				June 30,				June 30,
	2021		2020		2021		2020		2022		2021		2022		2021
U.S. full service bottlers/distributors	51	%	58	%	51	%	56	%	46	%	51	%	47	%	51	%
International full service bottlers/distributors	39	%	31	%	39	%	33	%	41	%	39	%	40	%	39	%
Club stores and e-commerce retailers	8	%	9	%	8	%	9	%	9	%	8	%	9	%	8	%
Retail grocery, direct convenience, specialty chains and wholesalers	1	%	1	%	1	%	1	%	2	%	1	%	2	%	1	%
Direct value stores and other	1	%	1	%	1	%	1	%	2	%	1	%	2	%	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 ~~Consolidated, Inc.~~Europacific Partners (formerly Coca-Cola European Partners) accounted for approximately ~~11%~~14% and ~~13%~~12% of our net sales for the three-months ended June 30, ~~2021~~2022 and ~~2020,~~2021, respectively. Coca-Cola ~~Consolidated, Inc.~~Europacific Partners accounted for approximately ~~11%~~13% and 12% of our net sales for the six-months ended June 30, ~~2021~~2022 and ~~2020,~~2021, respectively.

~~Reyes~~ Coca-Cola ~~Bottling, LLC~~Consolidated, Inc. accounted for approximately 11% of our net sales for the both the three-months ended June 30, ~~2021~~2022 and ~~2020. Reyes~~2021. Coca-Cola ~~Bottling, LLC~~Consolidated, Inc. accounted for approximately 10% and 11% of our net sales for the six-months ended June 30, ~~2021~~2022 and ~~2020,~~2021, respectively.

Reyes Coca-Cola ~~Europacific Partners~~Bottling, LLC accounted for approximately ~~12%~~9% and 8%11% of our net sales for the three-months ended June 30, 2022 and 2021, ~~and 2020,~~ respectively. Reyes Coca-Cola ~~Europacific Partners~~Bottling, LLC accounted for approximately ~~12%~~9% and 9%10% of our net sales for the six-months ended June 30, 2022 and 2021, ~~and 2020,~~ respectively.

3337

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Results of Operations

The following table sets forth key statistics for the three- and six-months ended June 30, ~~2021~~2022 and ~~2020.~~2021.


	Three-Months Ended						Percentage		Six-Months Ended						Percentage		Three-Months Ended						Percentage		Six-Months Ended						Percentage
(In thousands, except per share amounts)	June 30,						Change		June 30,						Change		June 30,						Change		June 30,						Change
	2021			2020			21 vs. 20		2021			2020			21 vs. 20		2022			2021			22 vs. 21		2022			2021			22 vs. 21
Net sales¹	$	1,461,934		$	1,093,896		33.6	%	$	2,705,751		$	2,155,993		25.5	%	$	1,655,260		$	1,461,934		13.2	%	$	3,173,833		$	2,705,751		17.3	%
Cost of sales		625,096			434,427		43.9	%		1,153,976			859,329		34.3	%		875,399			625,096		40.0	%		1,617,306			1,153,976		40.2	%
Gross profit*¹		836,838			659,469		26.9	%		1,551,775			1,296,664		19.7	%		779,861			836,838		(6.8)	%		1,556,527			1,551,775		0.3	%
Gross profit as a percentage of net sales		57.2	%		60.3	%				57.4	%		60.1	%				47.1	%		57.2	%				49.0	%		57.4	%

Operating expenses		310,863			252,205		23.3	%		611,652			524,412		16.6	%		406,910			310,863		30.9	%		784,088			611,652		28.2	%
Operating expenses as a percentage of net sales		21.3	%		23.1	%				22.6	%		24.3	%				24.6	%		21.3	%				24.7	%		22.6	%

Operating income¹		525,975			407,264		29.1	%		940,123			772,252		21.7	%		372,951			525,975		(29.1)	%		772,439			940,123		(17.8)	%
Operating income as a percentage of net sales		36.0	%		37.2	%				34.7	%		35.8	%				22.5	%		36.0	%				24.3	%		34.7	%

Interest and other income (expense) net		872			(1,796)		(148.6)	%		111			(923)		(112.0)	%
Interest and other (expense) income, net																		(6,781)			872		(877.6)	%		(14,080)			111		(12,784.7)	%

Income before provision for income taxes¹		526,847			405,468		29.9	%		940,234			771,329		21.9	%		366,170			526,847		(30.5)	%		758,359			940,234		(19.3)	%

Provision for income taxes		123,085			94,099		30.8	%		221,278			181,125		22.2	%		92,810			123,085		(24.6)	%		190,796			221,278		(13.8)	%

Income taxes as a percentage of income before taxes		23.4	%		23.2	%				23.5	%		23.5	%				25.3	%		23.4	%				25.2	%		23.5	%

Net income	$	403,762		$	311,369		29.7	%	$	718,956		$	590,204		21.8	%	$	273,360		$	403,762		(32.3)	%	$	567,563		$	718,956		(21.1)	%
Net income as a percentage of net sales		27.6	%		28.5	%				26.6	%		27.4	%				16.5	%		27.6	%				17.9	%		26.6	%

Net income per common share:
Basic	$	0.76		$	0.59		29.2	%	$	1.36		$	1.11		22.5	%	$	0.52		$	0.76		(32.3)	%	$	1.07		$	1.36		(21.1)	%
Diluted	$	0.75		$	0.59		28.6	%	$	1.34		$	1.10		21.9	%	$	0.51		$	0.75		(32.2)	%	$	1.06		$	1.34		(21.0)	%

Case sales (in thousands) (in 192‑ounce case equivalents)		161,450			116,960		38.0	%		300,017			232,559		29.0	%		184,197			161,450		14.1	%		352,990			300,017		17.7	%

¹Includes ~~$10.4~~$10.1 million and ~~$10.5~~$10.4 million for the three-months ended June 30, ~~2021~~2022 and ~~2020,~~2021, respectively, related to the recognition of deferred revenue. Includes ~~$20.9~~$20.1 million and ~~$21.1~~$20.9 million for the six-months ended June 30, ~~2021~~2022 and ~~2020,~~2021, 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 June 30, ~~2021~~2022 Compared to the Three-Months Ended June 30, ~~2020.~~2021.

Net Sales

Net Sales.Net sales were $1.66 billion for the three-months ended June 30, 2022, an increase of approximately $193.3 million, or 13.2% higher than net sales of $1.46 billion for the three-months ended June 30, ~~2021, an increase of approximately $368.0 million, or 33.6% higher than net sales of $1.09 billion for the three-months ended June 30, 2020.~~2021. Net changes in foreign currency exchange rates had ~~a favorable~~an unfavorable impact on net sales of approximately ~~$38.6~~$53.4 million for the three-months ended June 30, ~~2021.~~2022. Net sales on a foreign currency adjusted basis increased 16.9% for the three-months ended June 30, 2022.

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Net sales for the Monster Energy® Drinks segment were $1.54 billion for the three-months ended June 30, 2022, an increase of approximately $170.6 million, or 12.5% higher than net sales of $1.37 billion for the three-months ended June 30, ~~2021, an increase of approximately $339.4 million, or 33.0% higher than net sales of $1.03 billion for the three-months ended June 30, 2020.~~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. To a lesser extent, net sales for the Monster Energy® Drinks segment increased due to pricing actions and reductions in promotions in certain markets. Net changes in foreign currency exchange rates had ~~a favorable~~an unfavorable impact on net sales for the Monster Energy® Drinks segment of approximately ~~$35.5~~$49.4 million for the three-months ended June 30, ~~2021.~~2022. Net sales for the Monster Energy® Drinks segment on a foreign currency adjusted basis increased 16.1% for the three-months ended June 30, 2022.

~~Table of Contents~~

Net sales for the Strategic Brands segment were $79.1 million for the three-months ended June 30, 2022, a decrease of approximately $7.8 million, or 9.0% lower than net sales of $86.9 million for the three-months ended June 30, ~~2021, an increase of approximately $27.4 million, or 45.9% higher than net sales of $59.6 million for the three-months ended June 30, 2020.~~2021. Net sales for the Strategic Brands segment ~~increased~~decreased primarily due to ~~increased worldwide~~decreased sales by volume of our NOS®~~, Burn®~~ and Full Throttle® brand energy drinks. The decrease was partially offset by increased sales by volume of our Predator® brand energy ~~drinks as a result of increased consumer demand.~~drinks. Net changes in foreign currency exchange rates had ~~a favorable~~an unfavorable impact on net sales of approximately ~~$3.1~~$4.0 million for the Strategic Brands segment for the three-months ended June 30, ~~2021.~~2022. Net sales for the Strategic Brands segment on a foreign currency adjusted basis decreased 4.3% for the three-months ended June 30, 2022.

Net sales for the Alcohol Brands segment were $32.4 million for the three-months ended June 30, 2022. There were no comparative 2021 net sales for the Alcohol Brands segment as the Company completed its acquisition of CANarchy in February 2022.

Net sales for the Other segment were $6.0 million for the three-months ended June 30, 2022, a decrease of approximately $1.9 million, or 24.4% lower than net sales of $7.9 million for the three-months ended June 30, ~~2021, an increase of approximately $1.3~~2021.

Case sales for our energy drink products, in 192-ounce case equivalents, were 184.2 million ~~or 19.0% higher than net sales of $6.6 million~~cases for the three-months ended June 30, ~~2020.~~

~~Case~~2022, an increase of approximately 22.7 million cases or 14.1% higher than case sales ~~in 192-ounce case equivalents, were~~of 161.5 million cases for the three-months ended June 30, ~~2021, an increase of approximately 44.5 million cases or 38.0% higher than case sales of 117.0 million cases for the three-months ended June 30, 2020.~~2021. The overall average net sales per case ~~(excluding net sales of AFF Third-Party Products of $7.9 million and $6.6 million~~decreased to $8.78 for the three-months ended June 30, ~~2021 and 2020, respectively, as these sales do not have unit case equivalents) decreased to $9.01 for the three-months ended June 30, 2021,~~2022, which was ~~3.1%~~2.5% lower than the average net sales per case of ~~$9.30~~$9.01 for the three-months ended June 30, ~~2020. The decrease~~2021. Net changes in foreign currency exchange rates had an unfavorable impact on the overall average net sales per case ~~was primarily~~for the ~~result of geographical~~three-months ended June 30, 2022.

Barrel sales ~~mix.~~for our craft beers and hard seltzers, in 31 US gallon equivalents, were 0.1 million barrels for the three-months ended June 30, 2022.

Gross Profit

~~Gross Profit.~~ Gross profit was $779.9 million for the three-months ended June 30, 2022, a decrease of approximately $57.0 million, or 6.8% lower than the gross profit of $836.8 million for the three-months ended June 30, ~~2021, an increase of approximately $177.4 million, or 26.9% higher than the gross profit of $659.5 million for the three-months ended June 30, 2020.~~2021. The ~~increase~~decrease in gross profit dollars was primarily the result of the ~~$368.0~~$250.3 million increase in ~~net~~cost of sales for the three-months ended June 30, ~~2021.~~

2022.

Gross profit as a percentage of net sales decreased to 47.1% for the three-months ended June 30, 2022 from 57.2% for the three-months ended June 30, ~~2021 from 60.3% for the three-months ended June 30, 2020.~~2021. The decrease for the three-months ended June 30, ~~2021~~2022 was primarily the result of increased freight rates and fuel costs, including costs relating to the importation of aluminum cans, increased ingredient and other input costs, including secondary packaging materials, as well as increased co-packing fees, increased aluminum can costs attributable to higher aluminum commodity pricing, geographical and product sales mix, and ~~increased input costs (mainly increased raw material freight-in costs and aluminum can costs).~~production inefficiencies.

Operating Expenses.

Total operating expenses were $406.9 million for the three-months ended June 30, 2022, an increase of approximately $96.0 million, or 30.9% higher than total operating expenses of $310.9 million for the three-months ended June 30, ~~2021, an increase~~2021.

Table of ~~approximately $58.7 million, or 23.3% higher than total operating expenses of $252.2 million for the three-months ended June 30, 2020. As a percentage of net sales,~~Contents

The comparative operating expenses for the three-months ended June 30, 2021 ~~were 21.3% as compared to 23.1% for~~included a $16.9 million reversal of amounts previously accrued in connection with an intellectual property claim. In addition, the ~~three-months ended June 30, 2020. The~~ increase in operating expenses was primarily due to increased out-bound fuel, freight and warehouse costs of ~~$25.7~~$23.2 million, increased payroll expenses of ~~$10.5~~$18.5 million (of which ~~$1.3~~$6.5 million was related to ~~an increase in stock-based compensation)~~CANarchy), increased expenditures of $4.0 million for professional service expenses, including accounting and legal costs and increased costs of $3.1 million for travel and entertainment. In addition, largely due to a significant reduction in the comparative operating expenses for the three-months ended June 30, 2020 due to the COVID-19 pandemic, we experienced increased expenditures of $13.6$10.6 million for sponsorships and endorsements, increased expenditures of $10.1 million for travel and entertainment, as well as increased expenditures of ~~$13.8~~$8.5 million for other marketing expenses, including social media and digital marketing, point of sale and sampling ~~premiums and merchandise displays~~programs during the three-months ended June 30, ~~2021. The increase in operating expenses~~2022. In addition, CANarchy related depreciation and amortization was $2.4 million for the three-months ended June 30, ~~2021, was partially offset by $16.9 million due~~2022. Operating expenses as a percentage of net sales for the three-months ended June 30, 2022 were 24.6% as compared to 21.3% for the ~~reversal~~three-months ended June 30, 2021. Operating expenses as a percentage of ~~amounts previously accrued in connection with an intellectual property claim.~~net sales for the three-months ended June 30, 2019 (pre COVID-19) were 25.6%.

Operating Income

~~Operating Income.~~Operating income was $373.0 million for the three-months ended June 30, 2022, a decrease of approximately $153.0 million, or 29.1% lower than operating income of $526.0 million for the three-months ended June 30, ~~2021, an increase of approximately $118.7 million, or 29.1% higher than operating income of $407.3 million for the three-months ended June 30, 2020.~~2021. Operating income as a percentage of net sales decreased to 22.5% for the three-months ended June 30, 2022 from 36.0% for the three-months ended June 30, ~~2021 from 37.2%~~2021. Operating income for the three-months ended June 30, ~~2020.~~ 2022 decreased primarily as a result of the decrease in the gross profit as a percentage of net sales as well as the increase in operating expenses.

Operating income was ~~$123.1~~$82.8 million and ~~$64.3~~$123.1 million for the three-months ended June 30, ~~2021~~2022 and ~~2020,~~2021, 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 $441.7 million for the three-months ended June 30, 2022, a decrease of approximately $105.5 million, or 19.3% lower than operating income of $547.3 million for the three-months ended June 30, ~~2021, an increase of approximately $93.9 million, or 20.7% higher than operating income of $453.4 million for the three-months ended June 30, 2020.~~2021. The ~~increase~~decrease in operating income for the Monster Energy® Drinks segment was primarily the result of ~~the $339.4 million~~a decrease in gross profit as a percentage of net sales as well as an increase in ~~net sales for the three-months ended June 30, 2021.~~operating expenses.

Operating income for the Strategic Brands segment, exclusive of corporate and unallocated expenses, was $41.5 million for the three-months ended June 30, 2022, a decrease of approximately $12.6 million, or 23.3% lower than operating income of $54.1 million for the three-months ended June 30, ~~2021, an increase of approximately $16.4 million, or 43.5% higher than operating income of $37.7 million for the three-months ended June 30, 2020.~~2021. The ~~increase~~decrease in operating income for the Strategic Brands segment was primarily the result of ~~the $27.4 million increase~~a decrease in net sales as well as a decrease in gross profit as a percentage of net sales.

~~Table~~Operating loss for the Alcohol Brands segment, exclusive of ~~Contents~~corporate and unallocated expenses, was $4.7 million for the three-months ended June 30, 2022.

Operating income for the Other segment, exclusive of corporate and unallocated expenses, was $1.0 million for the three-months ended June 30, 2022, a decrease of approximately $1.3 million, or 55.5% lower than operating income of $2.2 million for the three-months ended June 30, ~~2021, an increase of approximately $0.6 million, or 37.2% higher than operating income of $1.6 million for the three-months ended June 30, 2020.~~2021.

Interest and Other (Expense) Income, net.

Interest and other non-operating (expense) income, net, was ~~$0.9~~($6.8) million for the three-months ended June 30, ~~2021,~~2022, as compared to interest and other non-operating (expense) income, net, of ($1.8) million for the three-months ended June 30, 2020. Foreign currency transaction losses were $1.8 million and $1.5 million for the three-months ended June 30, 2021 and 2020, respectively. Interest income was $1.1 million and $0.9 million for the three-months ended June 30, 2021. Foreign currency transaction losses were $8.3 million and $1.8 million for the three-months ended June 30, 2022 and 2021, respectively. Interest income was $3.8 million and ~~2020,~~$1.1 million for the three-months ended June 30, 2022 and 2021, respectively.

Provision for Income Taxes.

Provision for income taxes was $92.8 million for the three-months ended June 30, 2022, a decrease of $30.3 million, or 24.6% lower than the provision for income taxes of $123.1 million for the three-months ended June 30, ~~2021, an increase of $29.0 million, or 30.8% higher than the provision for income taxes of $94.1 million for the three-months ended June 30, 2020.~~2021. The effective combined federal, state and foreign tax rate increased to ~~23.4%~~25.3% from ~~23.2%~~23.4% for the three-months ended June 30, 2022 and 2021, ~~and 2020,~~ respectively. The increase in the effective tax rate was primarily attributable to an increase in the effective state income tax rate as well as an increase in the net losses in certain foreign jurisdictions which have lower tax rates compared to the United States.

Table of Contents

Net Income.

Net income was $273.4 million for the three-months ended June 30, 2022, a decrease of $130.4 million, or 32.3% lower than net income of $403.8 million for the three-months ended June 30, ~~2021, an increase of 92.4 million, or 29.7% higher than net income of $311.4 million for the three-months ended June 30, 2020.~~2021. The ~~increase~~decrease in net income for the three-months ended June 30, ~~2021~~2022 was primarily due to the ~~$177.4 million increase~~decrease in the gross profit ~~for~~percentage of net sales as well as the ~~three-months ended June 30, 2021, partially offset by the $58.7 million~~ increase in operating ~~expenses and the $29.0 million increase in the provision for incomes taxes.~~expenses.

~~Results of Operations for the~~ Six-Months Ended June 30, ~~2021~~2022 Compared to the Six-Months Ended June 30, ~~2020.~~2021.

Net Sales

Net Sales. Net sales were $3.17 billion for the six-months ended June 30, 2022, an increase of approximately $468.1 million, or 17.3% higher than net sales of $2.71 billion for the six-months ended June 30, ~~2021, an increase of approximately $549.8 million, or 25.5% higher than net sales of $2.16 billion for the six-months ended June 30, 2020.~~2021. Net changes in foreign currency exchange rates had ~~a favorable~~an unfavorable impact on net sales of approximately ~~$47.9~~$86.3 million for the six-months ended June 30, ~~2021.~~

2022. Net sales on a foreign currency adjusted basis increased 20.5% for the six-months ended June 30, 2022.

Net sales for the Monster Energy® Drinks segment were $2.94 billion for the six-months ended June 30, 2022, an increase of approximately $405.2 million, or 16.0% higher than net sales of $2.54 billion for the six-months ended June 30, ~~2021, an increase of approximately $517.2 million, or 25.6% higher than net sales of $2.02 billion for the six-months ended June 30, 2020.~~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 ~~$44.8~~$79.0 million for the six-months ended June 30, ~~2021.~~

2022. Net sales for the Monster Energy® Drinks segment on a foreign currency adjusted basis increased 19.1% for the six-months ended June 30, 2022.

Net sales for the Strategic Brands segment were $171.7 million for the six-months ended June 30, 2022, an increase of approximately $17.0 million, or 11.0% higher than net sales of $154.7 million for the six-months ended June 30, ~~2021, an increase of approximately $30.6 million, or 24.7% higher than net sales of $124.1 million for the six-months ended June 30, 2020.~~2021. Net sales for the Strategic Brands segment increased primarily due to increased worldwide sales by volume of our ~~NOS®,~~ Predator® ~~and Mother®~~ 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 ~~$3.1~~$7.3 million for the Strategic Brands segment for the six-months ended June 30, ~~2021.~~2022. Net sales for the Strategic Brands segment on a foreign currency adjusted basis increased 15.7% for the six-months ended June 30, 2022.

Net sales for the Alcohol Brands segment were $47.7 million for the six-months ended June 30, 2022 (effectively from February 17 to June 30, 2022).

Net sales for the Other segment were $11.9 million for the six-months ended June 30, 2022, a decrease of approximately $1.7 million, or 12.7% lower than net sales of $13.6 million for the six-months ended June 30, ~~2021, an increase of approximately $1.9~~2021.

Case sales for our energy drink products, in 192-ounce case equivalents, were 353.0 million ~~or 16.0% higher than net sales of $11.7 million~~cases for the six-months ended June 30, ~~2020.~~

~~Case~~2022, an increase of approximately 53.0 million cases or 17.7% higher than case sales ~~in 192-ounce case equivalents, were~~of 300.0 million cases for the six-months ended June 30, ~~2021, an increase of approximately 67.5 million cases or 29.0% higher than case sales of 232.6 million cases for the six-months ended June 30, 2020.~~2021. The overall average net sales per case ~~(excluding net sales of AFF Third-Party Products of $13.6 million and $11.7 million~~decreased to $8.82 for the six-months ended June 30, ~~2021 and 2020, respectively, as these sales do not have unit case equivalents) decreased to $8.97 for the six-months ended June 30, 2021,~~2022, which was ~~2.7%~~1.7% lower than the average net sales per case of ~~$9.22~~$8.97 for the six-months ended June 30, ~~2020. The decrease~~2021. Net changes in foreign currency exchange rates had an unfavorable impact on the overall average net sales per case ~~was primarily~~for the ~~result of geographical~~six-months ended June 30, 2022.

Barrel sales ~~mix.~~for our craft beers and hard seltzers, in 31 US gallon equivalents, were 0.15 million barrels for the six-months ended June 30, 2022.

Gross Profit

~~Gross Profit.~~Gross profit was $1.56 billion for the six-months ended June 30, 2022, an increase of approximately $0.01 billion, or 0.3% higher than gross profit of $1.55 billion for the six-months ended June 30, 2021, an increase of approximately $255.1 million, or 19.7% higher than the gross profit of $1.30 billion for the six-months ended June 30, 2020. The increase in gross profit dollars was primarily the result of the $549.8 million increase in net sales for the six-months ended June 30, 2021.

Gross profit as a percentage of net sales decreased to 49.0% for the six-months ended June 30, 2022 from 57.4% for the six-months ended June 30, ~~2021 from 60.1% for the six-months ended June 30, 2020.~~2021. The decrease for the six-months ended June 30, ~~2021~~2022 was primarily the result of increased freight rates and fuel costs, including costs relating to the importation of aluminum cans, increased ingredient and other input costs, including secondary packaging materials, increased aluminum can costs attributable to higher aluminum commodity pricing, increased co-packing fees, production inefficiencies and geographical sales ~~mix and increased input costs (mainly increased raw material freight-in costs and aluminum can costs).~~ mix.

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Operating Expenses.

Total operating expenses were $784.1 million for the six-months ended June 30, 2022, an increase of approximately $172.4 million, or 28.2% higher than total operating expenses of $611.7 million for the six-months ended June 30, ~~2021, an increase of approximately $87.2 million, or 16.6% higher than total operating expenses of $524.4 million for the six-months ended June 30, 2020. As a percentage of net sales,~~2021.

The comparative operating expenses for the six-months ended June 30, 2021 ~~were 22.6% as compared to 24.3% for~~included a $16.9 million reversal of amounts previously accrued in connection with an intellectual property claim. In addition, the ~~six-months ended June 30, 2020. The~~ increase in operating expenses was primarily due to increased out-bound freight and warehouse costs of ~~$41.3~~$50.3 million, increased payroll expenses of ~~$24.2~~$28.5 million (of which ~~$2.2~~$9.3 million was related to ~~an increase in stock-based compensation)~~CANarchy), increased expenditures of ~~$15.8~~$22.7 million for travel and entertainment, increased expenditures of $15.9 million for sponsorships and endorsements as well as increased expenditures of ~~$8.4~~$19.1 million for other marketing expenses, including social media and digital marketing, commissions, point of sale and ~~increased expenditures of $8.2~~sampling during the six-months ended June 30, 2022. In addition, CANarchy related depreciation and amortization was $3.9 million ~~for professional service expenses, including accounting and legal costs. The increase in operating expenses~~ for the six-months ended June 30, ~~2021, was partially offset by $16.9 million due~~2022. Operating expenses as a percentage of net sales for the six-months ended June 30, 2022 were 24.7% as compared to 22.6% for the ~~reversal~~six-months ended June 30, 2021. Operating expenses as a percentage of ~~amounts previously accrued in connection with an intellectual property claim.~~net sales for the six-months ended June 30, 2019 (pre COVID-19) were 22.6%.

Operating Income

~~Operating Income.~~Operating income was $772.4 million for the six-months ended June 30, 2022, a decrease of approximately $167.7 million, or 17.8% lower than operating income of $940.1 million for the six-months ended June 30, ~~2021, an increase of approximately $167.9 million, or 21.7% higher than operating income of $772.3 million for the six-months ended June 30, 2020.~~2021. Operating income as a percentage of net sales decreased to 24.3% for the six-months ended June 30, 2022 from 34.7% for the six-months ended June 30, ~~2021 from 35.8%~~2021. Operating income for the six-months ended June 30, ~~2020.~~ 2022 decreased primarily as a result of the decrease in the gross profit as a percentage of net sales as well as the increase in operating expenses.

Operating income was ~~$219.9~~$154.4 million and ~~$137.5~~$219.9 million for the six-months ended June 30, ~~2021~~2022 and ~~2020,~~2021, 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 $896.3 million for the six-months ended June 30, 2022, a decrease of approximately $115.7 million, or 11.4% lower than operating income of $1.01 billion for the six-months ended June 30, ~~2021, an increase of approximately $147.6 million, or 17.1% higher than operating income of $864.5 million for the six-months ended June 30, 2020.~~2021. The ~~increase~~decrease in operating income for the Monster Energy® Drinks segment was primarily the result of ~~the $517.2 million~~a decrease in gross profit as a percentage of net sales as well as an increase in ~~net sales for the six-months ended June 30, 2021.~~

operating expenses.

Operating income for the Strategic Brands segment, exclusive of corporate and unallocated expenses, was $98.7 million for the six-months ended June 30, 2022, a decrease of approximately $0.5 million, or 0.5% lower than operating income of $99.2 million for the six-months ended June 30, ~~2021, an increase of approximately $24.8 million, or 33.3% higher than operating income of $74.4 million for the six-months ended June 30, 2020.~~2021. The ~~increase~~decrease in operating income for the Strategic Brands segment was primarily the result of ~~the $30.6 million~~a decrease in gross profit as a percentage of net sales as well as an increase in ~~net~~operating expenses.

Operating loss for the Alcohol Brands segment, exclusive of corporate and unallocated expenses, was $9.6 million for the six-months ended June 30, 2022. Inventory purchased as part of the CANarchy Transaction was recorded at fair value. The inventory acquired was subsequently sold in the six-months ended June 30, 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 $4.0 million during the six-months ended June 30, 2022 as a result. As of June 30, 2022, all purchased inventory recorded at fair value had been sold.

Operating income for the Other segment, exclusive of corporate and unallocated expenses, was $2.2 million for the six-months ended June 30, 2022, a decrease of approximately $2.0 million, or 47.5% lower than operating income of $4.0 million for the six-months ended June 30, ~~2021, an increase of approximately $1.6 million, or 66.8% higher than operating income of $2.4 million for the six-months ended June 30, 2020.~~2021.

Interest and Other (Expense) Income, net.

Interest and other non-operating (expense) income, net, was ~~$0.1~~($14.1) million for the six-months ended June 30, ~~2021,~~2022, as compared to interest and other non-operating (expense) income, net, of ~~($0.9)~~$0.1 million for the six-months ended June 30, ~~2020.~~2021. Foreign currency transaction losses were ~~$2.6~~$16.7 million and ~~$4.4~~$2.6 million for the six-months ended June 30, ~~2021~~2022 and ~~2020,~~2021, respectively. Interest income was ~~$2.2~~$5.3 million and ~~$5.7~~$2.2 million for the six-months ended June 30, 2022 and 2021, ~~and 2020,~~ respectively.

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Provision for Income Taxes.

Provision for income taxes was $190.8 million for the six-months ended June 30, 2022, a decrease of $30.5 million, or 13.8% lower than the provision for income taxes of $221.3 million for the six-months ended June 30, ~~2021, an increase of $40.2 million, or 22.2% higher than the provision for income taxes of $181.1 million for the six-months ended June 30, 2020.~~2021. The effective combined federal, state and foreign tax rate ~~was~~increased to 25.2% from 23.5% for ~~both~~ the six-months ended June 30, 2022 and 2021, ~~and 2020.~~respectively. The increase in the effective tax rate was primarily attributable to an increase in the effective state income tax rate as well as an increase in the net losses in certain foreign jurisdictions which have lower tax rates compared to the United States.

Net Income.

Net income was $567.6 million for the six-months ended June 30, 2022, a decrease of $151.4 million, or 21.1% lower than net income of $719.0 million for the six-months ended June 30, ~~2021, an increase of $128.8 million, or 21.8% higher than net income of $590.2 million for the six-months ended June 30, 2020.~~2021. The ~~increase~~decrease in net income for the six-months ended June 30, ~~2021~~2022 was primarily due to the ~~$255.1 million increase~~decrease in the gross profit ~~for~~percentage of net sales as well as the ~~six-months ended June 30, 2021, partially offset by the $87.2 million~~ increase in operating ~~expenses and the $40.2 million increase in the provision for incomes taxes.~~expenses.

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”.~~Metrics.”

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Non-GAAP Financial Measures and Other Key Metrics

Gross Billings**

~~Three-Months Ended~~Gross billings were $1.91 billion for the three-months ended June 30, ~~2021 Compared to the Three-Months Ended June 30, 2020.~~

~~Gross Billings**.~~ ~~Gross~~2022, an increase of approximately $210.5 million, or 12.4% higher than gross billings ~~were~~of $1.69 billion for the three-months ended June 30, ~~2021, an increase of approximately $430.9 million, or 34.1% higher than gross billings of $1.26 billion for the three-months ended June 30, 2020.~~2021. Net changes in foreign currency exchange rates had ~~a favorable~~an unfavorable impact on gross billings of approximately ~~$48.8~~$63.9 million for the three-months ended June 30, ~~2021.~~

2022.

Gross billings for the Monster Energy® Drinks segment were $1.78 billion for the three-months ended June 30, 2022, an increase of approximately $188.3 million, or 11.9% higher than gross billings of $1.59 billion for the three-months ended June 30, ~~2021, an increase of approximately $398.8 million, or 33.5% higher than gross billings of $1.19 billion for the three-months ended June 30, 2020.~~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 ~~$45.7~~$59.9 million for the three-months ended June 30, ~~2021.~~

2022.

Gross billings for the Strategic Brands segment were $89.9 million for the three-months ended June 30, 2022, a decrease of $8.8 million, or 8.9% lower than gross billings of $98.7 million for the three-months ended June 30, ~~2021, an increase of $30.8 million, or 45.5% higher than gross billings of $67.8 million for the three-months ended June 30, 2020.~~2021. Net changes in foreign currency exchange rates had an ~~favorable~~unfavorable impact on gross billings in the Strategic Brands segment of approximately ~~$3.1~~$4.0 million for the three-months ended June 30, ~~2021.~~2022.

Gross billings for the Alcohol Brands segment were $32.9 million for the three-months ended June 30, 2022.

Gross billings for the Other segment were $6.0 million for the three-months ended June 30, 2022, a decrease of $1.9 million, or 24.4% lower than gross billings of $7.9 million for the three-months ended June 30, ~~2021, an increase of $1.3 million, or 19.1% higher than gross billings of $6.6 million for the three-months ended June 30, 2020.~~

2021.

Promotional allowances, commissions and other expenses, as described in the footnote below, were ~~$243.1~~$259.9 million for the three-months ended June 30, ~~2021,~~2022, an increase of ~~$62.8~~$16.8 million, or ~~34.8%~~6.9% higher than promotional allowances, commissions and other expenses of ~~$180.4~~$243.1 million for the three-months ended June 30, ~~2020.~~2021. Promotional allowances, commissions and other expenses as a percentage of gross billings decreased to ~~12.8%~~13.6% from ~~13.0%~~14.3% for the three-months ended June 30, ~~2021~~2022 and ~~2020,~~2021, respectively.

~~Six-Months Ended June 30, 2021 Compared to the Six-Months Ended June 30, 2020.~~

~~Gross Billings**.~~Gross billings were $3.65 billion for the six-months ended June 30, 2022, an increase of approximately $504.4 million, or 16.0% higher than gross billings of $3.14 billion for the six-months ended June 30, ~~2021, an increase of approximately $655.4 million, or 26.3% higher than gross billings of $2.49 billion for the six-months ended June 30, 2020.~~2021. Net changes in foreign currency exchange rates had ~~a favorable~~an unfavorable impact on gross billings of approximately ~~$62.6~~$102.2 million for the six-months ended June 30, ~~2021.~~2022.

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Gross billings for the Monster Energy® Drinks segment were $3.39 billion for the six-months ended June 30, 2022, an increase of approximately $440.7 million, or 14.9% higher than gross billings of $2.95 billion for the six-months ended June 30, ~~2021, an increase of approximately $617.7 million, or 26.4% higher than gross billings of $2.34 billion for the six-months ended June 30, 2020.~~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 ~~$59.5~~$94.9 million for the six-months ended June 30, ~~2021.~~

2022.

Gross billings for the Strategic Brands segment were $194.1 million for the six-months ended June 30, 2022, an increase of $17.1 million, or 9.7% higher than gross billings of $177.0 million for the six-months ended June 30, ~~2021, an increase of $35.8 million, or 25.4% higher than gross billings of $141.2 million for the six-months ended June 30, 2020.~~2021. Net changes in foreign currency exchange rates had ~~a favorable~~an unfavorable impact on gross billings in the Strategic Brands segment of approximately ~~$3.1~~$7.3 million for the six-months ended June 30, ~~2021.~~2022.

Gross billings for the Alcohol Brands segment were $48.4 million for the six-months ended June 30, 2022.

Gross billings for the Other segment were $11.9 million for the six-months ended June 30, 2022, a decrease of $1.7 million, or 12.7% lower than gross billings of $13.6 million for the six-months ended June 30, ~~2021, an increase of $1.9 million, or 16.1% higher than gross billings of $11.7 million for the six-months ended June 30, 2020.~~

2021.

Promotional allowances, commissions and other expenses, as described in the footnote below, were ~~$459.8~~$495.3 million for the six-months ended June 30, ~~2021,~~2022, an increase of ~~$105.4~~$35.5 million, or ~~29.8%~~7.7% higher than promotional allowances, commissions and other expenses of ~~$354.3~~$459.8 million for the six-months ended June 30, ~~2020.~~2021. Promotional allowances, commissions and other expenses as a percentage of gross billings ~~increased~~decreased to ~~13.1%~~13.6% from ~~13.0%~~14.6% for the six-months ended June 30, 2022 and 2021, ~~and 2020,~~ respectively.

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**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.

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			Six-Months Ended			Percentage		Three-Months Ended				Percentage			Six-Months Ended			Percentage
	June 30,				Change		June 30,				Change		June 30,				Change		June 30,				Change
(In thousands)	2021		2020		21 vs. 20		2021		2020		21 vs. 20		2022		2021		22 vs. 21		2022		2021		22 vs. 21
Gross Billings	$	1,694,644	$	1,263,756	34.1	%	$	3,144,680	$	2,489,259	26.3	%	$	1,905,150	$	1,694,644	12.4	%	$	3,649,077	$	3,144,680	16.0	%
Deferred Revenue		10,439		10,521	(0.8)	%		20,879		21,078	(0.9)	%		10,051		10,439	(3.7)	%		20,071		20,879	(3.9)	%
Less: Promotional allowances, commissions and other expenses***		243,149		180,381	34.8	%		459,808		354,344	29.8	%		259,941		243,149	6.9	%		495,315		459,808	7.7	%
Net Sales	$	1,461,934	$	1,093,896	33.6	%	$	2,705,751	$	2,155,993	25.5	%	$	1,655,260	$	1,461,934	13.2	%	$	3,173,833	$	2,705,751	17.3	%

***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 non-alcohol bottlers/distributors or retail customers including, but not limited to the following: (i) discounts granted off list prices to support price promotions to end-consumers by retailers; (ii) reimbursements given to 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

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numerous bottlers/distributors and/or retailers are executed through separate agreements in the ordinary course of business. These agreements generally provide for one or more of the arrangements described above and are of varying durations, ranging from one week to one year. The primary drivers of our promotional and other allowance activities for our energy drink products for the ~~three-months~~three- and six-months ended June 30, ~~2021~~2022 and ~~2020~~2021 were (i) to increase sales volume and trial, (ii) to address market conditions, and (iii) to secure shelf and display space at retail. Promotional and other allowances for our Alcohol Brands segment primarily include price promotions where permitted.

Sales

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

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

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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				Six-Months Ended				Three-Months Ended				Six-Months Ended
	June 30,				June 30,				June 30,				June 30,
(In thousands, except average net sales per case)	2021		2020		2021		2020		2022		2021		2022		2021
Net sales	$	1,461,934	$	1,093,896	$	2,705,751	$	2,155,993	$	1,655,260	$	1,461,934	$	3,173,833	$	2,705,751
Less: AFF third-party sales		(7,905)		(6,644)		(13,633)		(11,749)
Less: Alcohol Brands segment sales										(32,447)		—		(47,654)		—
Less: Other segment sales										(5,981)		(7,905)		(11,908)		(13,633)
Adjusted net sales¹	$	1,454,029	$	1,087,252	$	2,692,118	$	2,144,244	$	1,616,832	$	1,454,029	$	3,114,271	$	2,692,118

Case sales by segment:
Case sales by segment:¹
Monster Energy® Drinks		137,102		101,046		255,038		199,298		156,146		137,102		296,272		255,038
Strategic Brands		24,348		15,914		44,979		33,261		28,051		24,348		56,718		44,979
Other		—		—		—		—
Total case sales		161,450		116,960		300,017		232,559		184,197		161,450		352,990		300,017
Average net sales per case	$	9.01	$	9.30	$	8.97	$	9.22
Average net sales per case - Energy Drinks									$	8.78	$	9.01	$	8.82	$	8.97

¹Excludes Alcohol Brands segment (effectively from February 17, 2022 to June 30, 2022) and Other segment net sales, of $7.9 million and $6.6 million for the three-months ended June 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 Other segment net sales of $13.6 million and $11.7 million for the six-months ended June 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.

Net changes in foreign currency exchange rates had an unfavorable impact on the overall average net sales per case for the three- and six-months ended June 30, 2022.

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 0.1 million and 0.15 million for the three- and six-months ended June 30, 2022, respectively.

See Item 2, “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Results of Operations” for additional information related to the 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 six-months ended June 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.

At June 30, ~~2021,~~2022, we had ~~$1.58~~$1.13 billion in cash and cash equivalents, ~~$969.0 million~~$1.34 billion in short-term investments and ~~$91.0~~$64.1 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

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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 $1.13 billion of cash and cash equivalents held at June 30, 2022, $537.2 million was held by our foreign subsidiaries. No short-term or long-term investments were held by our foreign subsidiaries at June 30, 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 June 30, ~~2022.~~2023. However, future business opportunities may cause a change in this estimate.

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 six-months ended June 30, 2022 and 2021 (in thousands):


Net cash provided by (used in):
	2022		2021
Operating activities	$	130,663	$	586,586
Investing activities	$	(5,738)	$	(180,162)
Financing activities	$	(268,953)	$	14,292

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Cash flows provided by operating activities.Cash provided by operating activities was ~~$586.6~~$130.7 million for the six-months ended June 30, ~~2021,~~2022, as compared with cash provided by operating activities of ~~$440.5~~$586.6 million for the six-months ended June 30, ~~2020.~~2021.

For the six-months ended June 30, 2022, cash provided by operating activities was primarily attributable to net income earned of $567.6 million and adjustments for certain non-cash expenses, consisting of $32.6 million of stock-based compensation and $30.4 million of depreciation and amortization. For the six-months ended June 30, 2022, cash provided by operating activities also increased due to an $85.5 million increase in accounts payable, a $77.7 million increase in accrued promotional allowances and a $21.9 million decrease in deferred income taxes. For the six-months ended June 30, 2022, cash used in operating activities was primarily attributable to a $299.1 million increase in inventories, a $289.2 million increase in accounts receivable, a $15.3 million decrease in accrued compensation, a $55.7 million increase in prepaid expenses and other assets, a $14.7 million decrease in income taxes payable, a $9.1 million decrease in deferred revenue, a $3.2 million decrease in other liabilities and a $1.2 million increase in prepaid income taxes.

For the six-months ended June 30, 2021, cash provided by operating activities was primarily attributable to net income earned of $719.0 million and adjustments for certain non-cash expenses, consisting of $35.7 million of stock-based compensation and ~~$27.5~~$25.5 million of depreciation and amortization. For the six-months ended June 30, 2021, cash provided by operating activities also increased due to a $63.6 million increase in accounts payable, a $42.7 million increase in accrued promotional allowances, a $29.9 million increase in accrued liabilities, a $7.7 million increase in income taxes payable and a $2.5 million decrease in prepaid income taxes. For the six-months ended June 30, 2021, cash used in operating activities was primarily attributable to a ~~$239.7~~$239.5 million increase in accounts receivable, a $52.5 million increase in inventories, a $28.2 million increase in prepaid expenses and other assets, a $10.9 million decrease in deferred revenue and a $10.8 million decrease in accrued compensation.

For the six-months ended June 30, 2020, cash provided by operating activities was primarily attributable to net income earned of $590.2 million and adjustments for certain non-cash expenses, consisting of $33.0 million of stock-based compensation, $32.1 million of depreciation and amortization and $4.0 million of intangible asset impairment. For the six-months ended June 30, 2020, cash provided by operating activities also increased due to a $31.7 million increase in accrued liabilities, a $14.2 million decrease in inventories, an $8.3 million increase in income tax payable, a $7.2 million decrease in prepaid income taxes and a $3.1 million increase in accrued promotional allowance. For the six-months ended June 30, 2020, cash used in operating activities was primarily attributable to a $231.8 million increase in accounts receivable, a $23.4 million increase in prepaid expenses and other assets, a $10.9 million decrease in accrued compensation, a $10.4 million decrease in deferred revenue and a $6.8 million decrease in accounts payable.

Cash flows ~~(used in) provided by~~used in investing activities. Cash used in investing activities was $5.7 million for the six-months ended June 30, 2022 as compared to cash used in investing activities of $180.2 million for the six-months ended June 30, ~~2021 as compared to cash provided by investing activities of $250.7 million for the six-months ended June 30, 2020.~~

2021.

For both the six-months ended June 30, ~~2021~~2022 and ~~2020,~~2021, cash provided by investing activities was primarily attributable to sales of available-for-sale investments. For ~~both~~ the six-months ended June 30, ~~2021 and 2020,~~2022, cash used in investing activities ~~was primarily attributable~~included $329.5 million

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

Cash flow (used in) provided by ~~(used in)~~ financing activities. Cash used in financing activities was $269.0 million for the six-months ended June 30, 2022 as compared to cash provided by financing activities ~~was~~of $14.3 million for the six-months ended June 30, ~~2021 as compared to cash used in financing activities of $553.6 million for the six-months ended June 30, 2020.~~2021. The cash used in financing activities for both the six-months ended June 30, ~~2021~~2022 and ~~2020~~2021 was primarily the result of the repurchases of our common stock. The cash provided by financing activities for both the six-months ended June 30, ~~2021,~~2022, and ~~2020~~2021 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.borrowings on debt.

Of our $1.58 billion of cash and cash equivalents held at June 30, 2021, $539.7 million was held by our foreign subsidiaries. No short-term or long-term investments were held by our foreign subsidiaries at June 30, 2021.

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The following represents a summary of the Company’s contractual commitments and related scheduled maturities as of June 30, ~~2021:~~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	$	219,205	$	156,735	$	61,224	$	1,246	$	—	$	332,240	$	261,886	$	70,354	$	—	$	—
Finance Leases		1,770		1,751		19		—		—		1,399		1,342		48		9		—
Operating Leases		22,557		3,575		4,863		3,332		10,787		41,399		7,978		11,886		7,663		13,872
Purchase Commitments²		67,344		67,344		—		—		—		339,061		320,678		15,059		3,324		—
	$	310,876	$	229,405	$	66,106	$	4,578	$	10,787	$	714,099	$	591,884	$	97,347	$	10,996	$	13,872

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~~$2.0 million of unrecognized tax benefits have been recorded as liabilities as of June 30, ~~2021.~~2022. It is expected that the amount of unrecognized tax benefits will not significantly change within the next 12 months. As of June 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~~There have been no changes in recently issued or adopted accounting pronouncements that would materially impact the ~~Notes to Condensed Consolidated Financial Statements - Note 2. Recent Accounting Pronouncements,~~Company from those disclosed in ~~Part I, Item 1, of this Quarterly~~our Annual Report on Form ~~10-Q.~~10-K for the fiscal year ended December 31, 2021.

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Inflation

~~We believe inflation did not have~~Inflation had a ~~significant~~negative impact on our results of operations for the ~~periods presented.~~three- and six-months ended June 30, 2022, leading to increased cost of sales and operating expenses. To mitigate the impact of inflation, we are implementing a price increase effective September 1, 2022 in the United States and are planning price increases in certain international markets in the second half of 2022.

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.

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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;

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

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

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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;

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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;

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~~The impact on consumer demand of the recent resurgence of the COVID-19 pandemic, including new variants, in many of the countries and territories in which we operate;~~

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

●

~~Delays~~The impact of vaccine mandates on our business and supply chain, including our ability to recruit and/or retain employees, and disruptions in the ~~availability~~business of our co-packers, bottlers/distributors and/or ~~administration and/or acceptance of vaccines may prolong the COVID-19 pandemic;~~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;

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

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

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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;

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●

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;

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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;

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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;

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●

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;

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

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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;

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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;

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

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~~Our ability to absorb, reduce or pass on to our bottlers/distributors increases in commodity costs generally as well as increases in freight costs;~~

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

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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;

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

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Changes in accounting standards may affect our reported profitability;

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

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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;

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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;

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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;

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Intellectual property injunctions;

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Unfavorable resolution of tax matters;

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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;

●

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

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●

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;

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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);

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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;

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●

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;

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Our ability to implement and/or maintain price ~~increases;~~increases, including through reductions in promotional allowances;

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

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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;

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

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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;

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

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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;

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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;

●

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;

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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;

●

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;

●

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

●

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

●

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;

●

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

●

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

●

The effects of retailer consolidation on our business 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;

●

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

●

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

●

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

●

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

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

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

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

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

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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 June 30, ~~2021,~~2022, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II - OTHER INFORMATION

ITEM 1.LEGAL PROCEEDINGS

The information required by this Item is incorporated herein by reference to the Notes to Condensed Consolidated Financial Statements - Note 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, 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~~10-K, as updated and supplemented in “Part II, Item 1A – Risk Factors” in our Quarterly Report on Form 10-Q for the quarter ended March 31, 2022. If any of these risks occur or continue to occur, our business, reputation, financial condition and/or operating results could be materially adversely affected. We also note that the risk factors ~~disclosed~~described in our Form ~~10-K.~~10-K and in our Quarterly Report on Form 10-Q for the quarter ended March 31, 2022 are not the only risks facing our Company, and such additional risks or uncertainties that we currently deem to be immaterial or are unknown to us could negatively impact our business, operations, or financial results.

ITEM 2.

UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

During the three-months ended June 30, 2021, 4,265 shares of common stock were purchased from employees in lieu of cash payments for options exercised or withholding taxes due for a total amount of $0.4 million. While such purchases are considered common stock repurchases, they are not counted as purchases against our authorized share repurchase programs. Such shares are included in common stock in treasury in the accompanying condensed consolidated balance sheet at June 30, 2021.

On March 13, 2020, the Company’s Board of Directors authorized a ~~new~~ share repurchase program for the purchase of up to $500.0 million of the Company’s outstanding common stock (the “March 2020 Repurchase Plan”). During the three-months ended June 30, ~~2021, no~~2022, the Company purchased approximately 3.3 million shares ~~were purchased by the Company~~of common stock at an average purchase price of $86.53 per share, for a total amount of approximately $284.1 million (excluding broker commissions) under the March 2020 Repurchase Plan. Such shares are included in the common stock in treasury in the accompanying condensed balance sheet at June 30, 2022. As of August ~~6, 2021, $441.5~~5, 2022, $157.4 million remained available for repurchase under the March 2020 Repurchase Plan.

On June 14, 2022, the Company’s Board of Directors authorized a share repurchase program for the purchase of up to an additional $500.0 million of the Company’s outstanding common stock (the “June 2022 Repurchase Plan”). During the three-months ended June 30, 2022, no shares were repurchased under the June 2022 Repurchase Plan. As of August 5, 2022, $500.0 million remained available for repurchase under the June 2022 Repurchase Plan.

The following tabular summary reflects the Company’s repurchase activity during the quarter ended June 30, 2022:


					Maximum Number (or
				Total Number of	Approximate Dollar
				Shares Purchased	Value) of Shares that
	Total Number			as Part of Publicly	May Yet Be Purchased
	of Shares	Average Price		Announced Plans	Under the Plans or Programs (In
Period	Purchased	per Share¹		or Programs	thousands)²
April 1 – April 30, 2022	—	$	—	—	$	441,528
May 1 – May 31, 2022	2,637,125	$	86.81	2,637,125	$	212,567
June 1 – June 30, 2022	645,600	$	85.40	645,600	$	157,426
June 14, 2022 authorization					$	657,426

¹Excluding broker commissions paid.

²Net of broker commissions paid.

During the three-months ended June 30, 2022, 2,936 shares of common stock were purchased from employees in lieu of cash payments for options exercised or withholding taxes due for a total amount of $0.3 million. While such purchases are considered common stock repurchases, they are not counted as purchases against the Company’s authorized share repurchase programs. Such shares are included in common stock in treasury in the accompanying condensed consolidated balance sheet at June 30, 2022.

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ITEM 3.DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4.MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5.OTHER INFORMATION

None.

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ITEM 6.EXHIBITS

31.1*		Certification of 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 June 30, ~~2021,~~2022, formatted in iXBRL (Inline eXtensible Business Reporting Language): (i) Condensed Consolidated Balance Sheets as of June 30, ~~2021~~2022 and December 31, ~~2020,~~2021, (ii) Condensed Consolidated Statements of Income for the ~~three- and~~three-and six-months ended June 30, ~~2021~~2022 and ~~2020,~~2021, (iii) Condensed Consolidated Statements of Comprehensive Income for the three- and six-months ended June 30, ~~2021~~2022 and ~~2020,~~2021, (iv) Condensed Consolidated Statements of Stockholders’ Equity for the three- and six-months ended June 30, ~~2021~~2022 and ~~2020,~~2021, (v) Condensed Consolidated Statements of Cash Flows for the six-months ended June 30, ~~2021~~2022 and ~~2020,~~2021, 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 June 30, ~~2021,~~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: August 6~~, 2021~~5, 2022	/s/ RODNEY C. SACKS
	Rodney C. Sacks
	Chairman of the Board of Directors
	and Co-Chief Executive Officer

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

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	Six-Months Ended June 30, 2020
							Latin
							America
	U.S. and						and
Net Sales	Canada		EMEA¹		Asia Pacific		Caribbean		Total
Monster Energy®Drinks	$	1,436,964	$	294,692	$	198,736	$	89,747	$	2,020,139
Strategic Brands		79,026		33,141		10,503		1,435		124,105
Other		11,749		—		—		—		11,749
Total Net Sales	$	1,527,739	$	327,833	$	209,239	$	91,182	$	2,155,993