UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

Quarterly Report Pursuant to Section 13 or 15(d)

of the Securities Exchange Act of 1934

For the quarterly period ended ~~September~~June 30, ~~2022~~2023

Commission File Number 001-18761

MONSTER BEVERAGE CORPORATION

(Exact name of registrant as specified in its charter)



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

1 Monster Way

Corona, California 92879

(Address of principal executive offices) (Zip code)

(951) 739 - 6200

(Registrant’s telephone number, including area code)

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


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

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

Yes X No __

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

Yes X No __

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


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

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

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

Yes __ No X

The registrant had ~~521,743,612~~1,047,518,325 shares of common stock, par value $0.005 per share, outstanding as of ~~October~~July 31, ~~2022.~~2023.

Table of Contents

MONSTER BEVERAGE CORPORATION AND SUBSIDIARIES

~~SEPTEMBER~~JUNE 30, ~~2022~~2023

INDEX


Part I.	FINANCIAL INFORMATION	Page No.

Item 1.	Condensed Consolidated Financial Statements (Unaudited)

	Condensed Consolidated Balance Sheets as of ~~September~~June 30, ~~2022~~2023 and December 31, ~~2021~~2022	3

	Condensed Consolidated Statements of Income for the Three- and ~~Nine-Months Ended September~~Six-months ended June 30, ~~2022~~2023 and ~~2021~~2022	4

	Condensed Consolidated Statements of Comprehensive Income for the Three- and Six-monthsendedJune 30, 2023 and ~~Nine-MonthsEndedSeptember30,~~ 2022~~and2021~~	5

	Condensed Consolidated Statements of Stockholders’ Equity for the Three- and ~~Nine-Months Ended September~~Six-months ended June 30, ~~2022~~2023 and ~~2021~~2022	6

	Condensed Consolidated Statements of Cash Flows for the ~~Nine-Months Ended September~~Six-Months ended June 30, ~~2022~~2023 and ~~2021~~2022	7

	Notes to Condensed Consolidated Financial Statements	9

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	3533

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	5351

Item 4.	Controls and Procedures	5351

Part II.	OTHER INFORMATION

Item 1.	Legal Proceedings	5452

Item 1A.	Risk Factors	5452

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	5452

Item 3.	Defaults Upon Senior Securities	5552

Item 4.	Mine Safety Disclosures	5552

Item 5.	Other Information	5552

Item 6.	Exhibits	5553

	Signatures	5654

Table of Contents

PART I – FINANCIAL INFORMATION

ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

MONSTER BEVERAGE CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

AS OF ~~SEPTEMBER~~JUNE 30, ~~2022~~2023 AND DECEMBER 31, ~~2021~~2022

(In Thousands, Except Par Value) (Unaudited)


	September 30,		December 31,		June 30,		December 31,
	2022		2021		2023		2022
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	1,303,048	$	1,326,462	$	1,869,774	$	1,307,141
Short-term investments		1,346,781		1,749,727		1,417,239		1,362,314
Accounts receivable, net		1,051,642		896,658		1,333,004		1,016,203
Inventories		862,977		593,357		846,812		935,631
Prepaid expenses and other current assets		112,294		82,668		148,750		109,823
Prepaid income taxes		19,949		33,238		38,534		33,785
Total current assets		4,696,691		4,682,110		5,654,113		4,764,897

INVESTMENTS		72,373		99,419		62,248		61,443
PROPERTY AND EQUIPMENT, net		485,550		313,753		576,645		516,897
DEFERRED INCOME TAXES, net		195,511		225,221		177,039		177,039
GOODWILL		1,412,941		1,331,643		1,417,941		1,417,941
OTHER INTANGIBLE ASSETS, net		1,225,826		1,072,386		1,224,100		1,220,410
OTHER ASSETS		115,913		80,252		151,252		134,478
Total Assets	$	8,204,805	$	7,804,784	$	9,263,338	$	8,293,105

LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES:
Accounts payable	$	520,198	$	404,263	$	568,613	$	444,265
Accrued liabilities		198,692		210,964		198,656		172,991
Accrued promotional allowances		281,650		211,461		283,647		255,631
Deferred revenue		42,608		42,530		42,765		43,311
Accrued compensation		61,426		65,459		56,195		72,463
Income taxes payable		17,143		30,399		12,704		13,317
Total current liabilities		1,121,717		965,076		1,162,580		1,001,978

DEFERRED REVENUE		226,294		243,249		215,039		223,800

OTHER LIABILITIES		41,034		29,508		44,255		42,286

COMMITMENTS AND CONTINGENCIES (Note 12)
COMMITMENTS AND CONTINGENCIES (Note 11)

STOCKHOLDERS’ EQUITY:
Common stock - $0.005 par value; 1,250,000 shares authorized; 641,245 shares issued and 523,965 shares outstanding as of September 30, 2022; 640,043 shares issued and 529,323 shares outstanding as of December 31, 2021		3,206		3,200
STOCKHOLDERS’ EQUITY¹:
Common stock - $0.005 par value; 5,000,000 shares authorized; 1,118,269 shares issued and 1,047,485 shares outstanding as of June 30, 2023; 1,283,688 shares issued and 1,044,600 shares outstanding as of December 31, 2022						5,591		6,418
Additional paid-in capital		4,736,141		4,652,620		4,869,791		4,776,804
Retained earnings		8,699,499		7,809,549		5,120,063		9,001,173
Accumulated other comprehensive loss		(224,455)		(69,165)		(155,725)		(159,073)
Common stock in treasury, at cost; 117,280 shares and 110,720 shares as of September 30, 2022 and December 31, 2021, respectively		(6,398,631)		(5,829,253)
Common stock in treasury, at cost; 70,784 shares and 239,088 shares as of June 30, 2023 and December 31, 2022, respectively						(1,998,256)		(6,600,281)
Total stockholders’ equity		6,815,760		6,566,951		7,841,464		7,025,041
Total Liabilities and Stockholders’ Equity	$	8,204,805	$	7,804,784	$	9,263,338	$	8,293,105

¹Stock Split - On February 28, 2023, the Company announced a two-for-one stock split of its common stock to be effected in the form of a 100% stock dividend. The stock dividend was issued on March 27, 2023 (the “Stock Split”). The accompanying condensed consolidated financial statements and notes thereto have been retroactively updated to reflect the Stock Split. See Note 1 for additional information.

See accompanying notes to condensed consolidated financial statements.

Table of Contents

MONSTER BEVERAGE CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

FOR THE THREE- AND ~~NINE- MONTHS~~SIX-MONTHS ENDED ~~SEPTEMBER~~JUNE 30, ~~2022~~2023 AND ~~2021~~2022

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


	Three-Months Ended				Nine-Months Ended				Three-Months Ended				Six-Months Ended
	September 30,				September 30,				June 30,				June 30,
	2022		2021		2022		2021		2023		2022		2023		2022

NET SALES	$	1,624,286	$	1,410,557	$	4,798,119	$	4,116,308	$	1,854,961	$	1,655,260	$	3,553,891	$	3,173,833

COST OF SALES		790,561		621,399		2,407,867		1,775,375		880,739		875,399		1,681,820		1,617,306

GROSS PROFIT		833,725		789,158		2,390,252		2,340,933		974,222		779,861		1,872,071		1,556,527

OPERATING EXPENSES		415,795		344,694		1,199,883		956,346		450,417		406,910		863,201		784,088

OPERATING INCOME		417,930		444,464		1,190,369		1,384,587		523,805		372,951		1,008,870		772,439

INTEREST and OTHER INCOME (EXPENSE), net		2,149		(2,290)		(11,932)		(2,179)		15,159		(6,781)		27,653		(14,080)

INCOME BEFORE PROVISION FOR INCOME TAXES		420,079		442,174		1,178,437		1,382,408		538,964		366,170		1,036,523		758,359

PROVISION FOR INCOME TAXES		97,692		104,969		288,487		326,247		125,093		92,810		225,208		190,796

NET INCOME	$	322,387	$	337,205	$	889,950	$	1,056,161	$	413,871	$	273,360	$	811,315	$	567,563

NET INCOME PER COMMON SHARE:
NET INCOME PER COMMON SHARE¹:
Basic	$	0.61	$	0.64	$	1.68	$	2.00	$	0.40	$	0.26	$	0.78	$	0.54
Diluted	$	0.60	$	0.63	$	1.66	$	1.97	$	0.39	$	0.26	$	0.77	$	0.53

WEIGHTED AVERAGE NUMBER OF SHARES OF COMMON STOCK AND COMMON STOCK EQUIVALENTS:
WEIGHTED AVERAGE NUMBER OF SHARES OF COMMON STOCK AND COMMON STOCK EQUIVALENTS¹:
Basic		526,797		528,997		528,263		528,618		1,047,065		1,057,233		1,045,993		1,058,017
Diluted		533,300		535,915		534,599		535,554		1,060,093		1,069,622		1,059,667		1,070,418

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

See accompanying notes to condensed consolidated financial statements.

Table of Contents

MONSTER BEVERAGE CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

FOR THE THREE- AND ~~NINE- MONTHS~~SIX-MONTHS ENDED ~~SEPTEMBER~~JUNE 30, ~~2022~~2023 AND ~~2021~~2022

(In Thousands) (Unaudited)


	Three-Months Ended				Nine-Months Ended				Three-Months Ended				Six-Months Ended
	September 30,				September 30,				June 30,				June 30,
	2022		2021		2022		2021		2023		2022		2023		2022
Net income, as reported	$	322,387	$	337,205	$	889,950	$	1,056,161	$	413,871	$	273,360	$	811,315	$	567,563
Other comprehensive income (loss):
Change in foreign currency translation adjustment		(68,822)		(26,716)		(147,450)		(46,412)		(5,775)		(79,707)		2,206		(78,628)
Available-for-sale investments:
Change in net unrealized (losses) gains		(2,675)		43		(7,840)		(117)
Reclassification adjustment for net gains included in net income		—		—		—		—
Net change in available-for-sale investments		(2,675)		43		(7,840)		(117)
Change in net unrealized gains (losses)										(773)		(1,105)		2,408		(5,164)
Net losses on commodity derivatives										(1,266)		—		(1,266)		—
Other comprehensive income (loss)		(71,497)		(26,673)		(155,290)		(46,529)		(7,814)		(80,812)		3,348		(83,792)
Comprehensive income	$	250,890	$	310,532	$	734,660	$	1,009,632	$	406,057	$	192,548	$	814,663	$	483,771

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 ~~NINE-MONTHS~~SIX-MONTHS ENDED ~~SEPTEMBER~~JUNE 30, ~~2022~~2023 AND ~~2021~~2022

(In Thousands) (Unaudited)



								Accumulated Other					Total									Accumulated Other					Total
	Common stock			Additional		Retained		Comprehensive (Loss)		Treasury stock			Stockholders’		Common stock			Additional		Retained		Comprehensive		Treasury stock			Stockholders’
	Shares	Amount		Paid-in Capital		Earnings		Income		Shares	Amount		Equity		Shares	Amount		Paid-in Capital		Earnings		(Loss) Income		Shares	Amount		Equity
Balance, December 31, 2021	640,043	$	3,200	$	4,652,620	$	7,809,549	$	(69,165)	(110,720)	$	(5,829,253)	$	6,566,951
Balance, December 31, 2022															1,283,688	$	6,418	$	4,776,804	$	9,001,173	$	(159,073)	(239,088)	$	(6,600,281)	$	7,025,041

Stock-based compensation	—		—		16,175		—		—	—		—		16,175	—		—		15,743		—		—	—		—		15,743
Exercise of stock options	485		3		4,507		—		—	—		—		4,510
Unrealized loss, net on available-for-sale securities	—		—		—		—		(4,059)	—		—		(4,059)
Stock options/awards															3,704		19		36,329		—		—	—		—		36,348
Unrealized gain (loss), net on available-for-sale securities															—		—		—		—		3,181	—		—		3,181
Repurchase of common stock															—		—		—		—		—	(1,688)		(90,378)		(90,378)
Retirement of treasury stock															(170,000)		(850)		425		(4,692,425)		—	170,000		4,692,850		—
Foreign currency translation															—		—		—		—		7,981	—		—		7,981
Net income															—		—		—		397,444		—	—		—		397,444

Balance, March 31, 2023															1,117,392	$	5,587	$	4,829,301	$	4,706,192	$	(147,911)	(70,776)	$	(1,997,809)	$	7,395,360

Stock-based compensation															—		—		17,176		—		—	—		—		17,176
Stock options/awards															877		4		23,314		—		—	—		—		23,318
Unrealized gain (loss), net on available-for-sale securities															—		—		—		—		(773)	—		—		(773)
Repurchase of common stock	—		—		—		—		—	(166)		(12,187)		(12,187)	—		—		—		—		—	(8)		(447)		(447)
Foreign currency translation	—		—		—		—		1,079	—		—		1,079	—		—		—		—		(5,775)	—		—		(5,775)
Net losses on commodity derivatives															—		—		—		—		(1,266)	—		—		(1,266)
Net income	—		—		—		294,203		—	—		—		294,203	—		—		—		413,871		—	—		—		413,871
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	—		—		—		—		(1,106)	—		—		(1,106)
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		(152,958)	(114,172)		(6,125,751)		6,809,177
Stock-based compensation	—		—		16,436		—		—	—		—		16,436
Exercise of stock options	301		1		12,136		—		—	—		—		12,137
Unrealized loss, net on available-for-sale securities	—		—		—		—		(2,675)	—		—		(2,675)
Repurchase of common stock	—		—		—		—		—	(3,108)		(272,880)		(272,880)
Foreign currency translation	—		—		—		—		(68,822)	—		—		(68,822)
Net income	—		—		—		322,387		—	—		—		322,387
Balance, September 30, 2022	641,245	$	3,206	$	4,736,141	$	8,699,499	$	(224,455)	(117,280)	$	(6,398,631)	$	6,815,760

Balance, June 30, 2023															1,118,269	$	5,591	$	4,869,791	$	5,120,063	$	(155,725)	(70,784)	$	(1,998,256)	$	7,841,464



								Accumulated Other					Total									Accumulated Other					Total
	Common stock			Additional		Retained		Comprehensive (Loss)		Treasury stock			Stockholders’		Common stock			Additional		Retained		Comprehensive		Treasury stock			Stockholders’
	Shares	Amount		Paid-in Capital		Earnings		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
Balance, December 31, 2021															1,280,086	$	6,400	$	4,649,420	$	7,809,549	$	(69,165)	(221,440)	$	(5,829,253)	$	6,566,951

Stock-based compensation	—		—		17,949		—		—	—		—		17,949	—		—		16,175		—		—	—		—		16,175
Exercise of stock options	492		3		6,758		—		—	—		—		6,761
Unrealized gain, net on available-for-sale securities	—		—		—		—		24	—		—		24
Stock options/awards															970		6		4,504		—		—	—		—		4,510
Unrealized gain (loss), net on available-for-sale securities															—		—		—		—		(4,059)	—		—		(4,059)
Repurchase of common stock	—		—		—		—		—	(150)		(13,419)		(13,419)	—		—		—		—		—	(332)		(12,187)		(12,187)
Foreign currency translation	—		—		—		—		(27,932)	—		—		(27,932)	—		—		—		—		1,079	—		—		1,079
Net income	—		—		—		315,194		—	—		—		315,194	—		—		—		294,203		—	—		—		294,203
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, March 31, 2022															1,281,056	$	6,406	$	4,670,099	$	8,103,752	$	(72,145)	(221,772)	$	(5,841,440)	$	6,866,672

Stock-based compensation	—		—		16,921		—		—	—		—		16,921	—		—		16,157		—		—	—		—		16,157
Exercise of stock options	422		2		17,723		—		—	—		—		17,725
Unrealized loss, net on available-for-sale securities	—		—		—		—		(183)	—		—		(183)
Stock options/awards															832		4		18,108		—		—	—		—		18,112
Unrealized gain (loss), net on available-for-sale securities															—		—		—		—		(1,105)	—		—		(1,105)
Repurchase of common stock	—		—		—		—		—	(4)		(399)		(399)	—		—		—		—		—	(6,572)		(284,311)		(284,311)
Foreign currency translation	—		—		—		—		8,235	—		—		8,235	—		—		—		—		(79,707)	—		—		(79,707)
Net income	—		—		—		403,762		—	—		—		403,762	—		—		—		273,360		—	—		—		273,360
Balance, June 30, 2021	639,576		3,198		4,597,333		7,151,030		(16,822)	(110,719)		(5,829,241)		5,905,498
Stock-based compensation	—		—		16,293		—		—	—		—		16,293
Exercise of stock options	275		1		12,673		—		—	—		—		12,674
Unrealized gain, net on available-for-sale securities	—		—		—		—		43	—		—		43
Foreign currency translation	—		—		—		—		(26,716)	—		—		(26,716)
Net income	—		—		—		337,205		—	—		—		337,205
Balance, September 30, 2021	639,851	$	3,199	$	4,626,299	$	7,488,235	$	(43,495)	(110,719)	$	(5,829,241)	$	6,244,997

Balance, June 30, 2022															1,281,888	$	6,410	$	4,704,364	$	8,377,112	$	(152,957)	(228,344)	$	(6,125,751)	$	6,809,178

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

See accompanying notes to condensed consolidated financial statements.

Table of Contents

MONSTER BEVERAGE CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE ~~NINE-MONTHS~~SIX-MONTHS ENDED ~~SEPTEMBER~~JUNE 30, ~~2022~~2023 AND ~~2021~~2022

(In Thousands) (Unaudited)

Nine-Months Ended

September 30,

2022

2021
CASH FLOWS FROM OPERATING ACTIVITIES:

Net income

$
889,950

$
1,056,161
Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation and amortization

46,040

37,854
Non-cash lease expense

5,180

2,862
Gain on disposal of property and equipment

(253)

(984)
Stock-based compensation

49,167

52,391
Deferred income taxes

29,710

353
Effect on cash of changes in operating assets and liabilities net of acquisition:

Accounts receivable

(202,447)

(199,481)
Inventories

(297,140)

(149,414)
Prepaid expenses and other assets

(39,204)

(41,162)
Prepaid income taxes

7,867

(7,365)
Accounts payable

52,663

106,570
Accrued liabilities

(2,572)

39,387
Accrued promotional allowances

89,236

51,022
Accrued compensation

(6,636)

(2,888)
Income taxes payable

(12,823)

(114)
Other liabilities

(3,492)

574
Deferred revenue

(16,060)

(17,784)
Net cash provided by operating activities

589,186

927,982

CASH FLOWS FROM INVESTING ACTIVITIES:

Sales of available-for-sale investments

1,823,943

1,016,556
Purchases of available-for-sale investments

(1,393,910)

(1,343,351)
Acquisition of CANarchy, net of cash

(329,472)

—
Purchases of property and equipment

(136,158)

(28,131)
Proceeds from sale of property and equipment

603

1,246
Additions to intangibles

(3,578)

(5,211)
Increase in other assets

(19,171)

(22,809)
Net cash used in investing activities

(57,743)

(381,700)

CASH FLOWS FROM FINANCING ACTIVITIES:

Payments on debt

(719)

(1,814)
Issuance of common stock

34,759

37,160
Purchases of common stock held in treasury

(493,315)

(13,818)
Net cash (used in) provided by financing activities

(459,275)

21,528

Effect of exchange rate changes on cash and cash equivalents

(95,582)

(35,552)

NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS

(23,414)

532,258
CASH AND CASH EQUIVALENTS, beginning of period

1,326,462

1,180,413
CASH AND CASH EQUIVALENTS, end of period

$
1,303,048

$
1,712,671

SUPPLEMENTAL INFORMATION:

Cash paid during the period for:

Interest

$
359

$
99
Income taxes

$
297,526

$
338,584


	Six-Months Ended
	June 30,
	2023		2022
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	811,315	$	567,563
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		32,384		30,432
Non-cash lease expense		2,828		3,222
Gain on disposal of property and equipment		(767)		(69)
Loss on impairment of intangibles		2,800		—
Stock-based compensation		34,603		32,609
Deferred income taxes		—		21,934
Effect on cash of changes in operating assets and liabilities net of acquisition:
Accounts receivable		(317,808)		(289,236)
Inventories		93,077		(299,076)
Prepaid expenses and other assets		(36,779)		(55,663)
Prepaid income taxes		(3,345)		(1,220)
Accounts payable		132,173		85,499
Accrued liabilities		20,491		(789)
Accrued promotional allowances		23,643		77,746
Accrued compensation		(17,616)		(15,311)
Income taxes payable		(1,219)		(14,666)
Other liabilities		(257)		(3,211)
Deferred revenue		(12,361)		(9,101)
Net cash provided by operating activities		763,162		130,663

CASH FLOWS FROM INVESTING ACTIVITIES:
Sales of available-for-sale investments		1,037,803		1,409,707
Purchases of available-for-sale investments		(1,091,126)		(964,267)
Acquisition of CANarchy, net of cash		—		(329,472)
Purchases of property and equipment		(82,425)		(99,446)
Proceeds from sale of property and equipment		1,035		372
Additions to intangibles		(5,926)		(9,894)
Increase in other assets		(17,570)		(12,738)
Net cash used in investing activities		(158,209)		(5,738)

CASH FLOWS FROM FINANCING ACTIVITIES:
(Payments) borrowings on debt		(6,661)		4,924
Issuance of common stock		59,666		22,622
Purchases of common stock held in treasury		(90,825)		(296,499)
Net cash used in financing activities		(37,820)		(268,953)

Effect of exchange rate changes on cash and cash equivalents		(4,500)		(50,395)

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS		562,633		(194,423)
CASH AND CASH EQUIVALENTS, beginning of period		1,307,141		1,326,462
CASH AND CASH EQUIVALENTS, end of period	$	1,869,774	$	1,132,039

SUPPLEMENTAL INFORMATION:
Cash paid during the period for:
Interest	$	147	$	227
Income taxes	$	232,896	$	209,513

See accompanying notes to condensed consolidated financial statements.

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MONSTER BEVERAGE CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE ~~NINE-MONTHS~~SIX-MONTHS ENDED ~~SEPTEMBER~~JUNE 30, ~~2022~~2023 AND ~~2021~~2022

(In Thousands) (Unaudited) (Continued)

SUPPLEMENTAL DISCLOSURE OF NON-CASH ITEMS

Included in accrued liabilities as of ~~September~~June 30, 2023 and 2022 ~~and 2021~~ were ~~$14.4~~$9.6 million and ~~$13.0~~$3.4 million, respectively, related to net additions to other intangible assets.

Included in accounts payable as of ~~September~~June 30, ~~2022 and 2021~~2023 were ~~$2.6~~$3.2 million ~~and $0.5 million, respectively,~~ related to ~~equipment purchases.~~

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

Included in accounts payable as of ~~September~~June 30, 2022 were available-for-sale short-term investment purchases of ~~$7.9~~$3.4 million.

Included in accounts payable as of ~~September~~June 30, 2023 and 2022 were ~~purchases of common stock held in treasury of $76.1 million.~~$2.0 million and $0.1 million, respectively, related to equipment purchases.

See accompanying notes to condensed consolidated financial statements.

Table of Contents

MONSTER BEVERAGE CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

1.	BASIS OF PRESENTATION

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, ~~2021~~2022 for a summary of significant accounting policies utilized by the Company and its consolidated subsidiaries and other disclosures, which should be read in conjunction with this Quarterly Report on Form 10-Q (“Form 10-Q”).

The Company’s condensed consolidated financial statements included in this Form 10-Q have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and Securities and Exchange Commission (“SEC”) rules and regulations applicable to interim financial reporting. They do not include all the information and footnote disclosures normally included in annual financial statements prepared in accordance with GAAP. The information set forth in these interim condensed consolidated financial statements for the three- and ~~nine-months~~six-months ended ~~September~~June 30, ~~2022~~2023 and ~~2021,~~2022, respectively, is unaudited and reflects all adjustments, which include only normal recurring adjustments and which in the opinion of management are necessary to make the interim condensed consolidated financial statements not misleading. Results of operations for periods covered by this report may not necessarily be indicative of results of operations for the full year.

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

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

Stock Split – On February 28, 2023, the Company announced a two-for-one stock split of the Company’s common stock to be effected in the form of a 100% stock dividend. The common stock dividend was issued on March 27, 2023 (the “Stock Split”) and the Company’s common stock began trading at the split adjusted price on March 28, 2023. Accordingly, all per share amounts, average common stock outstanding, common stock outstanding, common stock repurchased and equity-based compensation presented in the condensed consolidated financial statements and notes have been adjusted retroactively, where applicable, to reflect the Stock Split. Stockholders’ equity has been retroactively adjusted, where applicable, to give effect to the Stock Split for all periods presented by reclassifying the par value of the additional shares issued in connection with the Stock Split to Common Stock from Retained Earnings and Additional Paid-in Capital.

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

Recent Accounting Pronouncements

There have been no changes in recently issued or adopted accounting pronouncements that would materially impact the Company from those disclosed in our Annual Report on Form 10-K for the fiscal year ended December 31, ~~2021.~~2022.

2.	~~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 did not include CANarchy’s stand-alone restaurants. The Company’s organizational structure for its existing energy beverage business remains unchanged. CANarchy is functioning independently, retaining its own organizational structure and team.

~~The Company accounted for the CANarchy Transaction in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 805 “Business Combinations”.~~

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 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 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 the working capital (excluding inventory) approximates fair value due to the short-term nature of the accounts.~~

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

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

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

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 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)~~

3.2.	REVENUE RECOGNITION

Revenues are accounted for in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 606, “Revenue from Contracts with Consumers”. The Company has four operating and reportable segments: (i) Monster Energy® Drinks segment (“Monster Energy® Drinks”), which is primarily comprised of the Company’s Monster Energy® drinks, Reign Total Body Fuel® high performance energy drinks, Monster Tour Water® and ~~True North® Pure Energy Seltzers,~~Reign Storm® total wellness energy drinks, (ii) Strategic Brands segment (“Strategic Brands”), which is primarily comprised of the various energy drink brands acquired from The Coca-Cola Company (“TCCC”) in 2015 as well as the Company’s affordable energy brands, (iii) Alcohol Brands segment (“Alcohol Brands”), which is primarily comprised of the various craft beers and hard seltzers purchased as part of the acquisition of CANarchy ~~Transaction~~Craft Brewery Collective LLC (“CANarchy”) on February 17, 2022 (the “CANarchy Transaction”) as well as The Beast Unleashed^TM flavored malt beverages (“FMBs”) and (iv) Other segment (“Other”), which is primarily comprised of certain products sold by American Fruits and Flavors, LLC, a wholly-owned subsidiary of the Company, to independent third-party customers (the “AFF Third-Party Products”).

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

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

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

The majority of the Company’s revenue is recognized when it satisfies a single performance obligation by transferring control of its products to a customer. Control is generally transferred when the Company’s products are either shipped or delivered based on the terms contained within the underlying contracts or agreements. Certain of the Company’s bottlers/distributors may also perform a separate function as a co-packer on the Company’s behalf. In such cases, control of the Company’s products passes to such bottlers/distributors when they notify the Company that they have taken possession or transferred the relevant portion of the Company’s finished goods. The Company’s general payment terms are short-term in duration. The Company does not have significant financing components or payment terms. The Company did not have any material unsatisfied performance obligations as of ~~September~~June 30, ~~2022~~2023 and December 31, ~~2021.~~2022.

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

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

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

●

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

●

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

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MONSTER BEVERAGE CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

●

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

●

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

~~Table of Contents~~

~~MONSTER BEVERAGE CORPORATION AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

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

●

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

●

discounted or free products;

●

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

●

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

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

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

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

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

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

Disaggregation of Revenue

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


	Three-Months Ended September 30, 2022										Three-Months Ended June 30, 2023
							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	$	982,952	$	288,077	$	100,288	$	130,902	$	1,502,219	$	1,068,887	$	339,522	$	138,478	$	140,000	$	1,686,887
Strategic Brands		44,025		32,565		8,805		3,407		88,802		47,226		42,050		7,828		2,586		99,690
Alcohol Brands		26,818		—		—		—		26,818		61,076		—		—		—		61,076
Other		6,447		—		—		—		6,447		7,308		—		—		—		7,308
Total Net Sales	$	1,060,242	$	320,642	$	109,093	$	134,309	$	1,624,286	$	1,184,497	$	381,572	$	146,306	$	142,586	$	1,854,961


	Three-Months Ended September 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	$	880,012	$	252,101	$	120,864	$	76,816	$	1,329,793	$	973,674	$	308,839	$	116,788	$	138,389	$	1,537,690
Strategic Brands		35,417		28,450		5,603		4,979		74,449		38,368		29,171		7,477		4,126		79,142
Alcohol Brands		—		—		—		—		—		32,447		—		—		—		32,447
Other		6,315		—		—		—		6,315		5,981		—		—		—		5,981
Total Net Sales	$	921,744	$	280,551	$	126,467	$	81,795	$	1,410,557	$	1,050,470	$	338,010	$	124,265	$	142,515	$	1,655,260

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


	Nine-Months Ended September 30, 2022										Six-Months Ended June 30, 2023
							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	$	2,882,306	$	857,805	$	327,632	$	377,012	$	4,444,755	$	2,090,215	$	616,633	$	260,472	$	281,235	$	3,248,555
Strategic Brands		135,445		91,912		22,943		10,236		260,536		90,269		73,001		16,811		5,967		186,048
Alcohol Brands²		74,472		—		—		—		74,472
Alcohol Brands												107,366		—		—		—		107,366
Other		18,356		—		—		—		18,356		11,922		—		—		—		11,922
Total Net Sales	$	3,110,579	$	949,717	$	350,575	$	387,248	$	4,798,119	$	2,299,772	$	689,634	$	277,283	$	287,202	$	3,553,891


	Nine-Months Ended September 30, 2021										Six-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	$	2,548,873	$	741,208	$	346,545	$	230,536	$	3,867,162	$	1,899,354	$	569,728	$	227,343	$	246,111	$	2,942,536
Strategic Brands		122,487		76,234		21,047		9,425		229,193		91,420		59,347		14,138		6,830		171,735
Alcohol Brands		—		—		—		—		—
Alcohol Brands²												47,654		—		—		—		47,654
Other		19,953		—		—		—		19,953		11,908		—		—		—		11,908
Total Net Sales	$	2,691,313	$	817,442	$	367,592	$	239,961	$	4,116,308	$	2,050,336	$	629,075	$	241,481	$	252,941	$	3,173,833

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

²Effectively from February 17, 2022 to ~~September~~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 ~~September~~June 30, ~~2022,~~2023, the Company had ~~$268.9~~$257.8 million of deferred revenue, which is included in current and long-term deferred revenue in the Company’s condensed consolidated balance sheet. As of December 31, ~~2021,~~2022, the Company had ~~$285.8~~$267.1 million of deferred revenue, which is included in current and long-term deferred revenue in the Company’s condensed consolidated balance sheet. During the three-months ended ~~September~~June 30, ~~2022~~2023 and ~~2021,~~2022, $10.0 million and ~~$10.4~~$10.1 million, respectively, of deferred revenue was recognized in net sales. See Note ~~11.~~10. During the ~~nine-months~~six-months ended ~~September~~June 30, 2023 and 2022, ~~and 2021, $30.0~~$19.9 million and ~~$31.3~~$20.1 million, respectively, of deferred revenue was recognized in net sales. See Note ~~11.~~10.

4.3.

LEASES

The Company leases identified assets ~~comprising of real estate and equipment. Real estate leases consist~~consisting primarily of office and warehouse space, warehouse equipment 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.

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

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

~~The Company’s~~ leases have remaining lease terms of less than one year to 1211 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~~components of lease cost were as follows:


	Three-Months Ended June 30,				Six-Months Ended June 30,
	2023		2022		2023		2022
Operating lease cost	$	2,616	$	2,238	$	5,083	$	3,932
Short-term lease cost		1,070		939		2,049		1,869
Variable lease cost		226		195		441		378

Finance leases:
Amortization of right-of-use assets		202		148		325		275
Interest on lease liabilities		44		7		58		10
Finance lease cost		246		155		383		285

Total lease cost	$	4,158	$	3,527	$	7,956	$	6,464

Supplemental cash flow information related to ~~recognize ROU assets and lease liabilities for short-term operating~~ leases ~~that have a term of 12 months or less.~~was as follows:


	Six-Months Ended June 30,
	2023		2022
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash outflows from operating leases	$	4,818	$	3,682
Operating cash outflows from finance leases		58		10
Financing cash outflows from finance leases		1,683		1,179

Right-of-use assets obtained in exchange for lease obligations:
Finance leases		5,115		1,561
Operating leases		1,847		18,339

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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 components of lease cost were comprised of the following:~~Supplemental balance sheet information related to leases was as follows:


	Three-Months		Three-Months		Nine-Months		Nine-Months			June 30,		December 31,
	Ended		Ended		Ended		Ended		Balance Sheet Location	2023		2022
Operating leases:
Right-of-use assets									Other assets	$	37,111	$	38,012
	September 30,		September 30,		September 30,		September 30,
	2022		2021		2022		2021
Operating lease cost	$	2,306	$	1,103	$	6,238	$	3,348

Short-term lease cost		1,001		1,235		2,870		3,370

Variable lease cost		189		185		567		532
Current lease liabilities									Accrued liabilities	$	7,835	$	7,747
Noncurrent lease liabilities									Other liabilities		28,829		29,586
Total operating lease liabilities										$	36,664	$	37,333

Finance leases:
Amortization of ROU assets		140		138		415		394
Interest on lease liabilities		8		6		18		15
Finance lease cost		148		144		433		409
Right-of-use assets									Property and equipment, net	$	5,335	$	1,598

Total lease cost	$	3,644	$	2,667	$	10,108	$	7,659
Current lease liabilities									Accrued liabilities	$	4,205	$	757
Noncurrent lease liabilities									Other liabilities		29		41
Total finance lease liabilities										$	4,234	$	798

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

Nine-Months

Nine-Months

Ended September 30,

Ended September 30,

2022

2021
Cash paid for amounts included in the measurement of lease liabilities:

Operating cash outflows from operating leases

$
5,859

$
3,057
Operating cash outflows from finance leases

18

15
Financing cash outflows from finance leases

1,678

1,970

ROU assets obtained in exchange for lease obligations:

Finance leases

1,654

2,767
Operating leases

20,093

251

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

September 30, 2022


Real Estate

Equipment

Total

Balance Sheet Location
Operating leases

$
36,681

$
404

$
37,085

Other Assets
Finance leases

—

1,753

1,753

Property and Equipment, net

December 31, 2021


Real Estate

Equipment

Total

Balance Sheet Location
Operating leases

$
22,518

$
639

$
23,157

Other Assets
Finance leases

—

2,646

2,646

Property and Equipment, net

~~Table of Contents~~

~~MONSTER BEVERAGE CORPORATION AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

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

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

September 30, 2022

Operating Leases

Finance Leases
Accrued liabilities

$
7,028

$
917
Other liabilities

29,265

48
Total

$
36,293

$
965

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~~Weighted-average remaining lease ~~terms~~term and weighted-average discount ~~rates~~rate for ~~operating and finance~~the Company’s leases ~~at September 30, 2022 and December 31, 2021~~ were as follows:

September 30, 2022


Operating Leases

Finance Leases

Weighted-average remaining lease term (years)

7.1

0.8

Weighted-average discount rate

3.4
%
2.7
%


	December 31, 2021				June 30, 2023		December 31, 2022
Weighted-average remaining lease term in years:
Operating leases					6.5		6.7
Finance leases					0.8		0.8
	Operating Leases		Finance Leases
Weighted-average remaining lease term (years)	8.1		0.7
Weighted-average discount rate	3.5	%	1.3	%
Weighted-average discount rate:
Operating leases					3.6	%	3.4	%
Finance leases					5.9	%	3.6	%

The following table ~~reconciles the undiscounted future lease payments for operating and finance leases to the operating and finance leases recorded in~~outlines maturities of the Company’s ~~condensed consolidated balance sheet at September~~lease liabilities as of June 30, ~~2022:~~2023:


	Undiscounted Future Lease Payments				Operating Leases		Finance Leases
	Operating Leases		Finance Leases
2022 (from October 1, 2022 to December 31, 2022)	$	2,038	$	410
2023		7,829		525
2023 (from July 1, 2023 to December 31, 2023)					$	4,592	$	2,711
2024		6,473		23		8,089		1,620
2025		4,808		17		5,962		17
2026		3,895		2		4,780		2
2027 and thereafter		15,974		—
2027						4,650		—
2028 and thereafter						13,183		—
Total lease payments		41,017		977		41,256		4,350
Less imputed interest		(4,724)		(12)		(4,592)		(116)
Total	$	36,293	$	965	$	36,664	$	4,234

As of ~~September~~June 30, ~~2022,~~2023, the Company did not have any significant additional ~~operating or finance~~ leases that ~~have~~had not yet commenced.

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MONSTER BEVERAGE CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

5.4.	INVESTMENTS

The following table summarizes the Company’s investments at:


									Continuous		Continuous										Continuous		Continuous
			Gross		Gross				Unrealized		Unrealized				Gross		Gross				Unrealized		Unrealized
			Unrealized		Unrealized				Loss Position		Loss Position				Unrealized		Unrealized				Loss Position		Loss Position
	Amortized		Holding		Holding		Fair		less than 12		greater than 12		Amortized		Holding		Holding		Fair		less than 12		greater than 12
September 30, 2022	Cost		Gains		Losses		Value		Months		Months
June 30, 2023													Cost		Gains		Losses		Value		Months		Months
Available-for-sale
Short-term:
Commercial paper	$	218,573	$	—	$	7	$	218,566	$	7	$	—	$	329,770	$	—	$	2	$	329,768	$	2	$	—
Certificates of deposit		20,035		—		—		20,035		—		—		15,161		—		—		15,161		—		—
Municipal securities		193,567		4		1,142		192,429		1,142				59,158		—		125		59,033		125		—
U.S. government agency securities		88,573		—		851		87,722		851		—		152,071		—		489		151,582		489		—
U.S. treasuries		834,249		—		6,220		828,029		6,220		—		705,370		31		2,002		703,399		2,002		—
Corporate bonds														158,748		10		462		158,296		462		—
Long-term:
U.S. government agency securities														2,580		—		9		2,571		9		—
U.S. treasuries		55,684		—		476		55,208		476		—		39,011		—		309		38,702		309		—
Municipal securities		5,562		—		35		5,527		35
U.S. government agency securities		11,711		1		74		11,638		74		—
Corporate bonds														21,065		—		90		20,975		90		—
Total	$	1,427,954	$	5	$	8,805	$	1,419,154	$	8,805	$	—	$	1,482,934	$	41	$	3,488	$	1,479,487	$	3,488	$	—


									Continuous		Continuous										Continuous		Continuous
			Gross		Gross				Unrealized		Unrealized				Gross		Gross				Unrealized		Unrealized
			Unrealized		Unrealized				Loss Position		Loss Position				Unrealized		Unrealized				Loss Position		Loss Position
	Amortized		Holding		Holding		Fair		less than 12		greater than 12		Amortized		Holding		Holding		Fair		less than 12		greater than 12
December 31, 2021	Cost		Gains		Losses		Value		Months		Months
December 31, 2022													Cost		Gains		Losses		Value		Months		Months
Available-for-sale
Short-term:
Commercial paper	$	334,077	$	—	$	—	$	334,077	$	—	$	—	$	197,712	$	1	$	4	$	197,709	$	4	$	—
Certificates of deposit		44,502		—		—		44,502		—		—		10,078		—		—		10,078		—		—
Municipal securities		666		—		—		666		—		—		211,791		60		612		211,239		612		—
U.S. government agency securities		62,687		—		26		62,661		26		—		109,697		3		715		108,985		715		—
U.S. treasuries		1,308,536		2		717		1,307,821		717		—		838,825		17		4,539		834,303		4,539		—
Long-term:
U.S. government agency securities		12,500		—		24		12,476		24		—		2,016		—		3		2,013		3		—
U.S. treasuries		87,133		—		190		86,943		190		—		53,215		20		71		53,164		71		—
Variable rate demand notes														6,266		—		—		6,266		—		—
Total	$	1,850,101	$	2	$	957	$	1,849,146	$	957	$	—	$	1,429,600	$	101	$	5,944	$	1,423,757	$	5,944	$	—

During the three- and ~~nine-months~~six-months ended ~~September~~June 30, ~~2022~~2023 and ~~2021,~~2022, realized gains or losses recognized on the sale of investments were not significant.

The Company’s investments at ~~September~~June 30, ~~2022~~2023 and December 31, ~~2021~~2022 carried investment grade credit ratings.

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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 underlying contractual maturities of the Company’s investments at:


	September 30, 2022				December 31, 2021				June 30, 2023				December 31, 2022
	Amortized Cost		Fair Value		Amortized Cost		Fair Value		Amortized Cost		Fair Value		Amortized Cost		Fair Value
Less than 1 year:
Commercial paper	$	218,573	$	218,566	$	334,077	$	334,077	$	329,770	$	329,768	$	197,712	$	197,710
Municipal securities		193,567		192,429		666		666		59,158		59,033		211,791		211,239
U.S. government agency securities		88,573		87,722		62,687		62,661		152,071		151,582		109,697		108,985
Certificates of deposit		20,035		20,035		44,502		44,502		15,161		15,161		10,078		10,078
U.S. treasuries		834,249		828,029		1,308,536		1,307,821		705,370		703,399		838,825		834,302
Due 1 -10 years:
Municipal securities		5,562		5,527		—		—
Corporate bonds										158,748		158,296		—		—
Due 1 - 10 years:
U.S. treasuries		55,684		55,208		87,133		86,943		39,011		38,702		53,215		53,164
U.S. government agency securities		11,711		11,638		12,500		12,476		2,580		2,571		2,016		2,013
Variable rate demand notes										—		—		4,862		4,862
Corporate bonds										21,065		20,975		—		—
Due 11 - 20 years:
Variable rate demand notes										—		—		1,404		1,404
Total	$	1,427,954	$	1,419,154	$	1,850,101	$	1,849,146	$	1,482,934	$	1,479,487	$	1,429,600	$	1,423,757

6.5.	FAIR VALUE OF CERTAIN FINANCIAL ASSETS AND LIABILITIES

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

●

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

●

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

●

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

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

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


September 30, 2022	Level 1		Level 2		Level 3		Total
June 30, 2023									Level 1		Level 2		Level 3		Total
Cash	$	1,113,207	$	—	$	—	$	1,113,207	$	877,582	$	—	$	—	$	877,582
Money market funds		116,952		—		—		116,952		911,446		—		—		911,446
Certificates of deposit		—		20,035		—		20,035		—		47,109		—		47,109
Commercial paper		—		234,310		—		234,310		—		336,764		—		336,764
Corporate bonds										—		179,271		—		179,271
Municipal securities		—		203,159		—		203,159		—		59,033		—		59,033
U.S. government agency securities		—		99,361		—		99,361		—		162,351		—		162,351
U.S. treasuries		—		935,178		—		935,178		—		775,707		—		775,707
Foreign currency derivatives		—		(204)		—		(204)		—		178		—		178
Commodity derivatives										—		(1,266)		—		(1,266)
Total	$	1,230,159	$	1,491,839	$	—	$	2,721,998	$	1,789,028	$	1,559,147	$	—	$	3,348,175

Amounts included in:
Cash and cash equivalents	$	1,230,159	$	72,889	$	—	$	1,303,048	$	1,789,028	$	80,746	$	—	$	1,869,774
Short-term investments		—		1,346,781		—		1,346,781		—		1,417,239		—		1,417,239
Accounts receivable, net		—		694		—		694		—		270		—		270
Investments		—		72,373		—		72,373		—		62,248		—		62,248
Accrued liabilities		—		(898)		—		(898)		—		(1,219)		—		(1,219)
Other liabilities										—		(137)		—		(137)
Total	$	1,230,159	$	1,491,839	$	—	$	2,721,998	$	1,789,028	$	1,559,147	$	—	$	3,348,175


December 31, 2021	Level 1		Level 2		Level 3		Total
December 31, 2022									Level 1		Level 2		Level 3		Total
Cash	$	749,089	$	—	$	—	$	749,089	$	1,132,509	$	—	$	—	$	1,132,509
Money market funds		440,826		—		—		440,826		121,444		—		—		121,444
Certificates of deposit		—		44,502		—		44,502		—		10,078		—		10,078
Commercial paper		—		335,477		—		335,477		—		225,067		—		225,067
Variable rate demand notes										—		6,266		—		6,266
Municipal securities		—		2,428		—		2,428		—		213,798		—		213,798
U.S. government agency securities		—		75,137		—		75,137		—		113,357		—		113,357
U.S. treasuries		—		1,528,149		—		1,528,149		—		908,379		—		908,379
Foreign currency derivatives		—		(278)		—		(278)		—		(3,733)		—		(3,733)
Total	$	1,189,915	$	1,985,415	$	—	$	3,175,330	$	1,253,953	$	1,473,212	$	—	$	2,727,165

Amounts included in:
Cash and cash equivalents	$	1,189,915	$	136,547	$	—	$	1,326,462	$	1,253,953	$	53,188	$	—	$	1,307,141
Short-term investments		—		1,749,727		—		1,749,727		—		1,362,314		—		1,362,314
Accounts receivable, net		—		654		—		654		—		965		—		965
Investments		—		99,419		—		99,419		—		61,443		—		61,443
Accrued liabilities		—		(932)		—		(932)		—		(4,698)		—		(4,698)
Total	$	1,189,915	$	1,985,415	$	—	$	3,175,330	$	1,253,953	$	1,473,212	$	—	$	2,727,165

All of the Company’s short-term and long-term investments are classified within Level 1 or Level 2 of the fair value hierarchy. The Company’s valuation of its Level 1 investments is based on quoted market prices in active markets for identical securities. The Company’s valuation of its Level 2 investments is based on other observable inputs, specifically a market approach which utilizes valuation models, pricing systems, mathematical tools and other relevant information for the same or similar securities. The Company’s valuation of its Level 2 foreign currency exchange contracts is based on quoted market prices of the same or similar instruments, adjusted for counterparty risk. There were no transfers between Level 1 and Level 2 measurements during the ~~nine-months~~three- and six-months ended ~~September~~June 30, ~~2022,~~2023, or during the year-ended December 31, ~~2021,~~2022, and there were no changes in the Company’s valuation techniques.

Table of Contents

MONSTER BEVERAGE CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

6.	DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES

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


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


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

Cash Flow Hedging Strategy

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

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

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


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


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

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MONSTER BEVERAGE CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

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

Economic (Non-Designated) Hedging Strategy

~~DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES~~

The Company is exposed to foreign currency exchange rate risks related primarily to its foreign business operations. During the ~~nine-months~~six-months ended ~~September~~June 30, ~~2022~~2023 and the year-ended December 31, ~~2021,~~2022, the Company entered into forward currency exchange contracts with financial institutions to create an economic hedge to specifically manage a portion of the foreign exchange risk exposure associated with certain consolidated subsidiaries’ non-functional currency denominated assets and liabilities. All foreign currency exchange contracts of the Company that were outstanding as of ~~September~~June 30, ~~2022~~2023 have terms of one month or less. The Company does not enter into forward currency exchange contracts for speculation or trading purposes.

The Company has not designated its foreign currency exchange contracts as hedge ~~transactions under ASC 815, “Derivatives and Hedging”.~~transactions. Therefore, gains and losses on the Company’s foreign currency exchange contracts are recognized in interest and other income (expense), net, in the condensed consolidated statements of income, and are largely offset by the changes in the fair value of the underlying economically hedged item. The total notional values of derivatives related to our foreign currency economic hedges were $176.0 million and $299.8 million as of June 30, 2023 and December 31, 2022, respectively.

The ~~notional amount and fair value~~net gains (losses) on derivatives not designated as hedging instruments in the condensed consolidated statements of ~~all outstanding foreign currency~~income were as follows:


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


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

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

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

7.	INVENTORIES

Inventories consist of the following at:

September 30, 2022
Derivatives not designated as

hedging instruments under

Notional

Fair

ASC 815

Amount

Value

Balance Sheet Location
Assets:

Foreign currency exchange contracts:

Receive USD/pay COP

$
11,264

$
298

Accounts receivable, net
Receive USD/pay CLP

42,139

250

Accounts receivable, net
Receive USD/pay NZD

3,614

81

Accounts receivable, net
Receive USD/pay ZAR

3,172

41

Accounts receivable, net
Receive RSD/pay USD

1,809

16

Accounts receivable, net
Receive USD/pay AUD

520

8

Accounts receivable, net

Liabilities:

Foreign currency exchange contracts:

Receive USD/pay GBP

$
12,492

$
(308)

Accrued liabilities
Receive CAD/pay USD

20,757

(277)

Accrued liabilities
Receive USD/pay CNY

11,877

(141)

Accrued liabilities
Receive USD/pay EUR

16,703

(82)

Accrued liabilities
Receive SGD/pay USD

16,969

(47)

Accrued liabilities
Receive USD/pay MXN

20,673

(34)

Accrued liabilities
Receive USD/pay DKK

1,893

(9)

Accrued liabilities


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

8.	PROPERTY AND EQUIPMENT, NET

Property and equipment consist of the following at:


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

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

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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, 2021
Derivatives not designated as

hedging instruments under

Notional

Fair

ASC 815

Amount

Value

Balance Sheet Location
Assets:

Foreign currency exchange contracts:

Receive SGD/pay USD

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

Amount of gain (loss)

recognized in income on

derivatives

Three-months ended
Derivatives not designated as

Location of gain (loss)

hedging instruments under

recognized in income on

September 30,

September 30,
ASC 815

derivatives

2022

2021
Foreign currency exchange contracts

Interest and other income (expense), net

$
4,631

$
(308)

Amount of gain (loss)

recognized in income on

derivatives

Nine-months ended
Derivatives not designated as

Location of gain (loss)

hedging instruments under

recognized in income on

September 30,

September 30,
ASC 815

derivatives

2022

2021
Foreign currency exchange contracts

Interest and other income (expense), net

$
1,355

$
(5,706)

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~~MONSTER BEVERAGE CORPORATION AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

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

8.	~~INVENTORIES~~

~~Inventories consist of the following at:~~

September 30,

December 31,


2022

2021
Raw materials

$
450,097

$
349,865
Work in process

1,574

—
Finished goods

411,306

243,492

$
862,977

$
593,357

9.	~~PROPERTY AND EQUIPMENT, NET~~

~~Property and equipment consist of the following at:~~

September 30,

December 31,


2022

2021
Land

$
139,248

$
85,455
Leasehold improvements

30,710

11,795
Furniture and fixtures

9,175

8,274
Office and computer equipment

22,642

21,601
Computer software

6,496

7,409
Equipment

253,057

189,820
Buildings

162,034

148,971
Vehicles

46,715

45,088
Assets under construction

58,791

20,125

728,868

538,538
Less: accumulated depreciation and amortization

(243,318)

(224,785)

$
485,550

$
313,753

Total depreciation and amortization expense recorded was $13.6 million and $11.3 million for the three-months ended September 30, 2022 and 2021, respectively. Total depreciation and amortization expense recorded was $40.5 million and $34.5 million for the nine-months ended September 30, 2022 and 2021, 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)~~

~~10.~~9.GOODWILL AND OTHER INTANGIBLE ASSETS

The following is a roll-forward of goodwill for the ~~nine-months~~six-months ended ~~September~~June 30, ~~2022~~2023 and ~~2021~~2022 by reportable segment:


	Monster										Monster
	Energy®		Strategic		Alcohol						Energy®		Strategic		Alcohol
	Drinks		Brands		Brands		Other		Total		Drinks		Brands		Brands		Other		Total
Balance at December 31, 2021	$	693,644	$	637,999	$	—	$	—	$	1,331,643
Balance at December 31, 2022											$	693,644	$	637,999	$	86,298	$	—	$	1,417,941
Acquisitions		—		—		81,298		—		81,298		—		—		—		—		—
Balance at September 30, 2022	$	693,644	$	637,999	$	81,298	$	—	$	1,412,941
Balance at June 30, 2023											$	693,644	$	637,999	$	86,298	$	—	$	1,417,941


	Monster										Monster
	Energy®		Strategic		Alcohol						Energy®		Strategic		Alcohol
	Drinks		Brands		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 September 30, 2021	$	693,644	$	637,999	$	—	$	—	$	1,331,643
Balance at June 30, 2022											$	693,644	$	637,999	$	81,298	$	—	$	1,412,941

Intangible assets consist of the following at:


	September 30,		December 31,		June 30,		December 31,
	2022		2021		2023		2022
Amortizing intangibles	$	121,372	$	66,872	$	121,378	$	121,378
Accumulated amortization		(66,781)		(61,227)		(71,712)		(68,790)
		54,591		5,645		49,666		52,588
Non-amortizing intangibles		1,171,235		1,066,741		1,174,434		1,167,822
	$	1,225,826	$	1,072,386	$	1,224,100	$	1,220,410

Amortizing intangibles primarily consist of customer relationships. All amortizing intangibles have been assigned an estimated finite useful life and such intangibles are amortized on a straight-line basis over the number of years that approximate their respective useful lives, generally five to fifteen years. Total amortization expense ~~recorded~~ was ~~$2.0~~$0.9 million and ~~$1.1~~$2.0 million for the three-months ended ~~September~~June 30, ~~2022~~2023 and ~~2021,~~2022, respectively. Total amortization expense ~~recorded~~ was ~~$5.6~~$2.9 million and ~~$3.3~~$3.5 million for the ~~nine-months~~six-months ended ~~September~~June 30, 2023 and 2022, respectively. For the three- and six-months ended June 30, 2023, impairment charges of $2.8 million and $2.8 million, respectively, were recorded to non-amortizing intangibles. For the three- and six-months ended June 30, 2022, ~~and 2021, respectively.~~no intangible impairments were recorded.

The following is the future estimated amortization expense related to amortizing intangibles as of ~~September~~June 30, ~~2022:~~2023:


2022 (from October 1, 2022 to December 31, 2022)	$	2,010
2023		4,745
2023 (from July 1, 2023 to December 31, 2023)			$	1,824
2024		3,647		3,648
2025		3,647		3,647
2026		3,646		3,647
2027 and thereafter		36,896
2027				3,646
2028 and thereafter				33,254
	$	54,591	$	49,666

1110.

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

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MONSTER BEVERAGE CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

inception of certain sales/marketing programs are accounted for as deferred revenue and are recognized as revenue ratably over the anticipated life of the respective agreement, generally 20 years or program duration, as the case may be. Revenue recognized was $10.0

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~~MONSTER BEVERAGE CORPORATION AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

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

million and ~~$10.4~~$10.1 million for the three-months ended ~~September~~June 30, ~~2022~~2023 and ~~2021,~~2022, respectively. Revenue recognized was ~~$30.0~~$19.9 million and ~~$31.3~~$20.1 million for the ~~nine-months~~six-months ended ~~September~~June 30, ~~2022~~2023 and ~~2021,~~2022, respectively.

~~12.~~11.

COMMITMENTS AND CONTINGENCIES

The Company had purchase commitments aggregating approximately ~~$275.5~~$309.3 million at ~~September~~June 30, ~~2022,~~2023, which represented commitments made by the Company and its subsidiaries to various suppliers of raw materials for the production of its products. These obligations vary in terms, but are generally satisfied within one year.

The Company had contractual obligations aggregating approximately ~~$338.9~~$380.4 million at ~~September~~June 30, ~~2022,~~2023, which related primarily to sponsorships and other marketing activities.

The Company has a credit facility with HSBC Bank (China) Company Limited, Shanghai Branch, of $15.0 million. At ~~September~~June 30, ~~2022,~~2023, the interest rate on borrowings under the line of credit was 5.5%. As of ~~September~~June 30, ~~2022, $6.3~~2023, $2.7 million was outstanding on this line of credit.

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

The Company evaluates, on a quarterly basis, developments in legal proceedings and other matters that could cause an increase or decrease in the amount of the liability that is accrued, if any, and any related insurance reimbursements. As of ~~September~~June 30, 2023, $0.3 million of loss contingencies were included in the Company’s accompanying consolidated balance sheet. As of December 31, 2022, no loss contingencies were included in the Company’s ~~condensed~~accompanying consolidated balance sheet.

On September 29, 2022, a jury in the U.S. District Court for the Central District of California (the “District Court”) awarded Monster Energy Company (“MEC”) approximately $293 million in damages in its false advertising and trade secrets case (the “Jury Award”) against Vital Pharmaceuticals, Inc. (“VPX”), the maker of Bang Energy. The jury found VPX and its former chief executive officer John H. Owoc to have falsely advertised the ~~“super creatine”~~“Super Creatine” ingredient of Bang Energy and to have acted willfully and deliberately in violating the federal Lanham Act. The jury also found that VPX stole trade secrets and interfered with ~~the Company’s~~MEC’s contracts over shelf space with certain key vendors. On April 12, 2023, the District Court granted Monster’s motion for a permanent injunction which, among other things, enjoined VPX, ~~may also be liable for enhanced~~Mr. Owoc, and ~~punitive damages as will be determined by the judge presiding over the case at~~others working in concert with them from falsely or deceptively claiming that BANG or any other beverages contain creatine or a ~~later date.~~

form of creatine, requires them to remove all such advertising within 60 days, and required VPX and Mr. Owoc to issue corrective statements to consumers and non-consumer partners, including retailers and distributors.

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

On October 10, 2022, VPX, along with certain of its domestic subsidiaries and affiliates, filed for protection under Chapter 11 of the Bankruptcy Code in the Southern District of Florida. ~~Per ASC 450 “Contingencies”,~~Due to such ongoing proceedings, VPX’s appeal of the ~~Company will not recognize~~District Court’s final judgment confirming the ~~September 2022 jury award or April 2022 arbitration award until the awards are realized or realizable. As~~Arbitration Award was stayed. While reserving all rights to appeal, VPX made its first royalty payment of ~~November 4, 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.~~

$3.6

2422

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MONSTER BEVERAGE CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

million on February 14, 2023, which is for sales of Bang Energy drink and other Bang-branded products from October 10, 2022 through December 31, 2022. On May 25, 2023, VPX made an additional royalty payment in the amount of approximately $3.7 million for sales of Bang-branded products from January 1, 2023 through March 31, 2023. Per ASC 450 “Contingencies”, the Company will not recognize the royalty payments until they are realized or realizable.

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

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

~~13.~~12.

ACCUMULATED OTHER COMPREHENSIVE LOSS

Changes in accumulated other comprehensive loss by component, after tax, for the ~~nine-months~~six-months ended ~~September~~June 30, ~~2022~~2023 and ~~2021~~2022 are as follows:


			Unrealized				Accumulated				Unrealized
	Currency		Losses on				Net Losses on		Currency		Gains (Losses)
	Translation		Available-for-				Commodity		Translation		on Available-for-
	Losses		Sale Securities		Total		Derivatives		Gains (Losses)		Sale Securities		Total
Balance at December 31, 2021	$	(68,209)	$	(956)	$	(69,165)
Other comprehensive (loss) income before reclassifications		(147,450)		(7,840)		(155,290)
Amounts reclassified from accumulated other comprehensive (loss) income		—		—		—
Net current-period other comprehensive (loss) income		(147,450)		(7,840)		(155,290)
Balance at September 30, 2022	$	(215,659)	$	(8,796)	$	(224,455)
Balance at December 31, 2022							$	—	$	(153,230)	$	(5,843)	$	(159,073)
Other comprehensive income before reclassifications								(1,266)		2,206		2,408		3,348
Net current-period other comprehensive (loss) gain								(1,266)		2,206		2,408		3,348
Balance at June 30, 2023							$	(1,266)	$	(151,024)	$	(3,435)	$	(155,725)


			Unrealized				Accumulated				Unrealized
	Currency		Gains (Losses)				Net Losses on		Currency		Losses
	Translation		on Available-for-				Commodity		Translation		on Available-for-
	Losses		Sale Securities		Total		Derivatives		Losses		Sale Securities		Total
Balance at December 31, 2020	$	2,950	$	84	$	3,034
Other comprehensive (loss) income before reclassifications		(46,412)		(117)		(46,529)
Amounts reclassified from accumulated other comprehensive (loss) income		—		—		—
Net current-period other comprehensive (loss) income		(46,412)		(117)		(46,529)
Balance at September 30, 2021	$	(43,462)	$	(33)	$	(43,495)
Balance at December 31, 2021							$	—	$	(68,209)	$	(956)	$	(69,165)
Other comprehensive loss before reclassifications								—		(78,628)		(5,164)		(83,792)
Net current-period other comprehensive loss								—		(78,628)		(5,164)		(83,792)
Balance at June 30, 2022							$	—	$	(146,837)	$	(6,120)	$	(152,957)

~~14.~~13.

TREASURY STOCK

On March ~~13, 2020,~~10, 2023, the Company retired 170.0 million shares (stock split adjusted) of treasury stock owned by the Company. The retired stock had a carrying value of approximately$4.69 billion. The Company’s accounting policy upon the formal retirement of treasury stock is to deduct its par value from common stock and to reflect any excess of cost over par as a deduction from retained earnings.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

On June 14, 2022, the Company’s Board of Directors authorized a share repurchase program for the purchase of up to $500.0 million of the Company’s outstanding common stock (the ~~“March 2020~~“June 2022 Repurchase Plan”). During the three-months ended ~~September~~June 30, ~~2022, the Company purchased approximately 1.8 million~~2023, no shares ~~of common stock at an average purchase price of $87.55 per share, for a total amount of approximately $157.4 million (excluding broker commissions), which exhausted the availability~~were repurchased under the ~~March 2020~~June 2022 Repurchase Plan. ~~Such shares are included in~~As of August 4, 2023, $182.8 million remained available for repurchase under the ~~common stock in treasury in the accompanying condensed balance sheet at September 30, 2022.~~June 2022 Repurchase Plan.

On ~~June 14,~~November 2, 2022, the Company’s Board of Directors authorized a share repurchase program for the purchase of up to an additional $500.0 million of the Company’s outstanding common stock (the ~~“June~~“November 2022 Repurchase Plan”). During the three-months ended ~~September~~June 30, ~~2022, the Company purchased approximately 1.3 million~~2023, no shares ~~of common stock at an average purchase price of $88.11 per share, for a total amount of approximately $115.5 million (excluding broker commissions),~~were repurchased under the ~~June~~November 2022 Repurchase Plan. As of ~~November~~August 4, ~~2022, $182.8~~2023, $500.0 million remained available for repurchase under the ~~June~~November 2022 Repurchase Plan.

The aggregate amount of the Company’s outstanding common stock that remains available for repurchase under all previously authorized repurchase plans is $682.8 million as of August 4, 2023.

During the three-months ended ~~September~~June 30, ~~2022, no~~2023, 7,579 shares of common stock were purchased from employees in lieu of cash payments for options exercised or withholding taxes ~~due.~~due for a total amount of $0.4 million. While such purchases are considered common stock repurchases, they are not counted as purchases against the Company’s authorized share repurchase programs. Such shares are included in common stock in treasury in the accompanying consolidated balance sheet at June 30, 2023.

~~15.~~14.

STOCK-BASED COMPENSATION

The Company has two stock-based compensation plans under which shares were available for grant at ~~September~~June 30, ~~2022:~~2023: (i) the Monster Beverage Corporation 2020 Omnibus Incentive Plan, including the Monster Beverage Corporation Deferred Compensation Plan as a sub-plan thereunder, and (ii) the Monster Beverage Corporation 2017 Compensation Plan for Non-Employee Directors as Amended and Restated on February 23, 2022, including the Monster Beverage Corporation Deferred Compensation Plan for Non-Employee Directors as a sub-plan thereunder.

~~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 ~~$16.6~~$18.6 million and ~~$16.7~~$16.3 million of compensation expense relating to outstanding options, restricted stock units, performance share units and other share-based awards during the three-months ended ~~September~~June 30, ~~2022~~2023 and ~~2021,~~2022, respectively. The Company recorded ~~$49.2~~$34.6 million and ~~$52.4~~$32.6 million of compensation expense relating to outstanding options, restricted stock units, performance share units and other share-based awards during the ~~nine-months~~six-months ended ~~September~~June 30, ~~2022~~2023 and ~~2021,~~2022, respectively.

The tax benefit for tax deductions from non-qualified stock option exercises, disqualifying dispositions of incentive stock options and vesting of restricted stock units and performance share units for the three-months ended ~~September~~June 30, 2023 and 2022 ~~and 2021~~ was ~~$2.0~~$4.1 million and ~~$2.0~~$2.2 million, respectively. The tax benefit for tax deductions from non-qualified stock option exercises, disqualifying dispositions of incentive stock options and vesting of restricted stock units and performance share units for the ~~nine-months~~six-months ended ~~September~~June 30, 2023 and 2022 ~~and 2021~~ was ~~$4.6~~$30.0 million and ~~$6.1~~$2.7 million, respectively.

Stock Options

Under the Company’s stock-based compensation plans, all stock options granted as of ~~September~~June 30, ~~2022~~2023 were granted at prices based on the fair value of the Company’s common stock on the date of grant. The Company records compensation expense for stock options based on the estimated fair value of the options on the date of grant using the Black-Scholes-Merton option pricing formula with the assumptions included in the table below. The Company uses historical data to determine the exercise behavior, volatility and forfeiture rate of the options.

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


	Three-Months Ended September 30,				Nine-Months Ended September 30,				Three-Months Ended June 30,				Six-Months Ended June 30,
	2022		2021		2022		2021		2023		2022		2023		2022
Dividend yield	0.0	%	0.0	%	0.0	%	0.0	%	0.0	%	0.0	%	0.0	%	0.0	%
Expected volatility	27.6	%	28.3	%	27.7	%	28.9	%	27.4	%	27.8	%	27.6	%	27.7	%
Risk-free interest rate	2.8	%	0.7	%	2.1	%	0.8	%	3.7	%	3.0	%	3.7	%	2.1	%
Expected term	6.2 years		5.8 years		6.1 years		5.8 years		6.3 years		6.2 years		6.3 years		6.0 years

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

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

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

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


				Weighted-
		Weighted-		Average
		Average		Remaining
	Number of	Exercise		Contractual
	Shares (in	Price Per		Term (in	Aggregate
Options	thousands)	Share		years)	Intrinsic Value
Outstanding at January 1, 2023	29,710	$	26.38	5.0	$	724,651
Granted 01/01/23 - 03/31/23	3,962	$	50.82
Granted 04/01/23 - 06/30/23	31	$	59.36
Exercised	(3,990)	$	14.95
Cancelled or forfeited	(222)	$	37.82
Outstanding at June 30, 2023	29,491	$	31.15	5.6	$	775,296
Vested and expected to vest in the future at June 30, 2023	28,511	$	30.71	5.4	$	762,069
Exercisable at June 30, 2023	18,659	$	24.70	3.8	$	610,938

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

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

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

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

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

Weighted-

Weighted-

Average

Average

Remaining

Number of

Exercise

Contractual

Shares

Price Per

Term

Aggregate
Options

(in thousands)

Share

(in years)

Intrinsic Value
Outstanding at January 1, 2022

13,860

$
48.19

5.1

$
663,148
Granted 01/01/22 - 03/31/22

2,489

$
73.96

Granted 04/01/22 - 06/30/22

8

$
88.05

Granted 07/01/22 - 09/30/22

34

$
95.72

Exercised

(813)

$
42.74

Cancelled or forfeited

(143)

$
72.26

Outstanding at September 30, 2022

15,435

$
52.54

5.2

$
533,680
Vested and expected to vest in the future at September 30, 2022

15,043

$
51.97

5.1

$
528,586
Exercisable at September 30, 2022

10,287

$
43.06

3.7

$
451,963

~~The weighted-average grant-date fair value of options granted during the three-months ended September~~At June 30, 2022 and 2021 was $31.94 per share and $26.90 per share, respectively. The weighted-average grant-date fair value of options granted during the nine-months ended September 30, 2022 and 2021 was $23.35 per share and $25.81 per share, respectively.

The total intrinsic value of options exercised during the three-months ended September 30, 2022 and 2021 was $15.3 million and $14.0 million, respectively. The total intrinsic value of options exercised during the nine-months ended September 30, 2022 and 2021 was $38.2 million and $42.2 million, respectively.

Cash received from option exercises under all plans for the three-months ended September 30, 2022 and 2021 was $12.1 million and $12.7 million, respectively. Cash received from option exercises under all plans for the nine-months ended September 30, 2022 and 2021 was $34.8 million and $37.2 million, respectively.

~~At September 30, 2022,~~2023, there was ~~$77.5~~$115.6 million of total unrecognized compensation expense related to non-vested options granted to employees under the Company’s stock-based compensation plans. That cost is expected to be recognized over a weighted-average period of ~~2.9~~3.4 years.

Restricted Stock Units and Performance Share Units

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

~~Table of Contents~~

~~MONSTER BEVERAGE CORPORATION AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

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

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


		Weighted			Weighted
	Number of	Average		Number of	Average
	Shares (in	Grant-Date		Shares (in	Grant-Date
	thousands)	Fair Value		thousands)	Fair Value
Non-vested at January 1, 2022	910	$	69.02
Granted 01/01/22 - 03/31/22¹	484	$	71.88
Granted 04/01/22 - 06/30/22	15	$	87.52
Granted 07/01/22 - 09/30/22	6	$	95.17
Non-vested at January 1, 2023				2,026	$	36.27
Granted 01/01/23 - 03/31/23¹				523	$	48.49
Granted 04/01/23 - 06/30/23				22	$	59.70
Vested	(388)	$	64.56	(592)	$	32.80
Forfeited/cancelled	(13)	$	68.77	(11)	$	32.83
Non-vested at September 30, 2022	1,014	$	72.52
Non-vested at June 30, 2023				1,968	$	40.85

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

The weighted-average grant-date fair value of restricted stock units and/or performance share units granted during the three-months ended ~~September~~June 30, 2023 and 2022 was $59.17 and ~~2021 was $95.17 and $89.84~~$43.76 per share, respectively. The weighted-average grant-date fair value of restricted stock units and/or performance share units granted during the ~~nine-months~~six-months ended ~~September~~June 30, 2023 and 2022 was $48.93 and ~~2021 was $74.23 and $89.12~~$36.98 per share, respectively.

As of ~~September~~June 30, ~~2022, 1.0~~2023, 1.9 million of restricted stock units and performance share units are expected to vest over their respective terms.

At ~~September~~June 30, ~~2022,~~2023, total unrecognized compensation expense relating to non-vested restricted stock units and performance share units was ~~$43.8~~$47.1 million, which is expected to be recognized over a weighted-average period of ~~1.9~~1.7 years.

Other Share-Based Awards

The Company has granted other share-based awards to certain employees that are payable in cash. These awards are classified as liabilities and are valued based on the fair value of the award at the grant date and are remeasured at each reporting date until settlement, with compensation expense being recognized in proportion to the completed requisite service period up until date of settlement. At ~~September~~June 30, ~~2022,~~2023, other share-based awards outstanding included grants that vest over three years payable in the first quarters of ~~2023,~~ 2024, 2025 and ~~2025.~~2026.

At ~~September~~June 30, ~~2022,~~2023, there was ~~$0.2~~$1.5 million of total unrecognized compensation expense related to nonvested other share-based awards granted to employees under the Company’s stock-based compensation plans. That ~~cost~~expense is expected to be recognized over a weighted-average period of ~~0.3~~1.7 years.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

~~16.~~15.

INCOME TAXES

The following is a roll-forward of the Company’s total gross unrecognized tax benefits, not including interest and penalties, for the ~~nine-months~~six-months ended ~~September~~June 30, ~~2022:~~2023:


	Gross Unrecognized		Gross Unrecognized
	Tax Benefits		Tax Benefits
Balance at December 31, 2021	$	—
Balance at December 31, 2022			$	3,020
Additions for tax positions related to the current year		—		—
Additions for tax positions related to the prior years		2,008		738
Increases for tax positions related to the prior years		—
Balance at September 30, 2022	$	2,008
Decreases for tax positions related to the prior years				—
Balance at June 30, 2023			$	3,758

The Company recognizes accrued interest and penalties related to unrecognized tax benefits in the provision for income taxes in the Company’s condensed consolidated financial statements. As of ~~September~~June 30, ~~2022,~~2023, the Company had approximately ~~$0.4~~$0.6 million in accrued interest and penalties related to unrecognized tax benefits. If the Company were to prevail on all uncertain tax positions, the resultant impact on the Company’s effective tax rate would not be significant. It is expected that any change in the amount of unrecognized tax benefits within the next 12 months will not be significant.

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

The Company is in various stages of examination with certain states and certain foreign jurisdictions. The Company’s ~~2018~~2019 through ~~2021~~2022 U.S. federal income tax returns are subject to examination by the IRS. The Company’s state income tax returns are subject to examination for the ~~2017~~2018 through ~~2021~~2022 tax years.

~~17.~~16.

EARNINGS PER SHARE

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


	Three-Months Ended		Nine-Months Ended		Three-Months Ended		Six-Months Ended
	September 30,		September 30,		June 30,		June 30,
	2022	2021	2022	2021	2023	2022	2023	2022
Weighted-average shares outstanding:
Basic	526,797	528,997	528,263	528,618	1,047,065	1,057,233	1,045,993	1,058,017
Dilutive	6,503	6,918	6,336	6,936	13,028	12,389	13,674	12,401
Diluted	533,300	535,915	534,599	535,554	1,060,093	1,069,622	1,059,667	1,070,418

For the three-months ended ~~September~~June 30, ~~2022~~2023 and ~~2021,~~2022, options and awards outstanding totaling ~~3.5~~4.1 million shares and ~~1.0~~3.5 million shares, respectively, were excluded from the calculations as their effect would have been antidilutive. For the ~~nine-months~~six-months ended ~~September~~June 30, ~~2022~~2023 and ~~2021,~~2022, options and awards outstanding totaling ~~2.9~~2.6 million shares and ~~0.8~~2.5 million shares, respectively, were excluded from the calculations as their effect would have been antidilutive.

~~18.~~17.

SEGMENT INFORMATION

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

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

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

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.

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

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

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

The net revenues derived from the Company’s reportable segments and other financial information related thereto for the three- and ~~nine-months~~six-months ended ~~September~~June 30, 2023 and 2022 ~~and 2021 are~~were as follows:


	Three-Months Ended				Nine-Months Ended				Three-Months Ended				Six-Months Ended
	September 30,				September 30,				June 30,				June 30,
	2022		2021		2022		2021		2023		2022		2023		2022
Net sales:
Monster Energy® Drinks¹	$	1,502,219	$	1,329,793	$	4,444,755	$	3,867,162	$	1,686,887	$	1,537,690	$	3,248,555	$	2,942,536
Strategic Brands		88,802		74,449		260,536		229,193		99,690		79,142		186,048		171,735
Alcohol Brands²		26,818		—		74,472		—		61,076		32,447		107,366		47,654
Other		6,447		6,315		18,356		19,953		7,308		5,981		11,922		11,908
Corporate and unallocated		—		—		—		—		—		—		—		—
	$	1,624,286	$	1,410,557	$	4,798,119	$	4,116,308	$	1,854,961	$	1,655,260	$	3,553,891	$	3,173,833


	Three-Months Ended				Nine-Months Ended				Three-Months Ended				Six-Months Ended
	September 30,				September 30,				June 30,				June 30,
	2022		2021		2022		2021		2023		2022		2023		2022
Operating Income:
Monster Energy® Drinks¹	$	492,534	$	500,641	$	1,388,815	$	1,512,633	$	597,922	$	441,719	$	1,158,740	$	896,282
Strategic Brands		47,282		40,184		145,977		139,398		55,137		41,500		106,909		98,695
Alcohol Brands²		(10,262)		—		(19,873)		—		(6,577)		(4,657)		(13,460)		(9,611)
Other		977		1,146		3,138		5,266		1,651		1,034		1,358		2,161
Corporate and unallocated		(112,601)		(97,507)		(327,688)		(272,710)		(124,328)		(106,645)		(244,677)		(215,088)
	$	417,930	$	444,464	$	1,190,369	$	1,384,587	$	523,805	$	372,951	$	1,008,870	$	772,439


	Three-Months Ended				Nine-Months Ended				Three-Months Ended				Six-Months Ended
	September 30,				September 30,				June 30,				June 30,
	2022		2021		2022		2021		2023		2022		2023		2022
Income before tax:
Monster Energy® Drinks¹	$	493,486	$	500,929	$	1,391,026	$	1,513,421	$	598,656	$	442,407	$	1,160,330	$	897,540
Strategic Brands		47,319		40,198		146,082		139,419		55,149		41,509		106,938		98,763
Alcohol Brands²		(10,124)		—		(19,620)		—		(6,584)		(3,890)		(13,451)		(9,496)
Other		977		1,144		3,139		5,264		1,657		1,025		1,364		2,162
Corporate and unallocated		(111,579)		(100,097)		(342,190)		(275,696)		(109,914)		(114,881)		(218,658)		(230,610)
	$	420,079	$	442,174	$	1,178,437	$	1,382,408	$	538,964	$	366,170	$	1,036,523	$	758,359

(1)

Includes $10.0 million and $~~10.4~~10.1 million for the three-months ended ~~September~~June 30, ~~2022~~2023 and ~~2021,~~2022, respectively, related to the recognition of deferred revenue. Includes $~~$30.0~~19.9 million and $~~$31.3~~20.1 million for the ~~nine-months~~six-months ended ~~September~~June 30, ~~2022~~2023 and ~~2021,~~2022, respectively, related to the recognition of deferred revenue.

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


	Three-Months Ended				Nine-Months Ended				Three-Months Ended				Six-Months Ended
	September 30,				September 30,				June 30,				June 30,
	2022		2021		2022		2021		2023		2022		2023		2022
Depreciation and amortization:
Monster Energy® Drinks	$	7,773	$	8,477	$	24,035	$	26,315	$	8,817	$	8,102	$	17,806	$	16,262
Strategic Brands		234		283		709		832		196		242		417		475
Alcohol Brands		3,713		—		9,679		—		4,106		3,683		8,157		5,966
Other		1,121		1,122		3,345		3,373		51		1,113		1,174		2,224
Corporate and unallocated		2,768		2,474		8,272		7,334		2,406		2,682		4,830		5,505
	$	15,609	$	12,356	$	46,040	$	37,854	$	15,576	$	15,822	$	32,384	$	30,432

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

Corporate and unallocated expenses for the three-months ended ~~September~~June 30, ~~2022~~2023 include ~~$69.4~~$82.6 million of payroll costs, of which ~~$16.2~~$18.1 million was attributable to stock-based compensation expenses (see Note 14 “Stock-Based Compensation”), as well as $25.3 million attributable to professional service expenses, including accounting and legal costs, and $16.4 million of other operating expenses.

Corporate and unallocated expenses for the three-months ended June 30, 2022 include $70.0 million of payroll costs, of which $16.0 million was attributable to stock-based compensation expenses (see Note 15 “Stock-Based Compensation”), as well as ~~$26.0~~$16.9 million attributable to professional service expenses, including accounting and legal costs, and ~~$17.2~~$19.7 million of other operating expenses.

Corporate and unallocated expenses for the ~~three-months~~six-months ended ~~September~~June 30, ~~2021~~2023 include ~~$63.4~~$162.9 million of payroll costs, of which ~~$16.7~~$33.8 million was attributable to stock-based compensation expenses (see Note 14 “Stock-Based Compensation”), as well as $47.4 million attributable to professional service expenses, including accounting and legal costs, and $34.4 million of other operating expenses.

Corporate and unallocated expenses for the six-months ended June 30, 2022 include $138.1 million of payroll costs, of which $32.2 million was attributable to stock-based compensation expenses (see Note 15 “Stock-Based Compensation”), as well as ~~$19.3~~$43.3 million attributable to professional service expenses, including accounting and legal costs, and ~~$14.8~~$33.7 million of other operating expenses.

Corporate and unallocated expenses for the nine-months ended September 30, 2022 include $207.6 million of payroll costs, of which $48.5 million was attributable to stock-based compensation expenses (see Note 15 “Stock-Based Compensation”), as well as $69.3 million attributable to professional service expenses, including accounting and legal costs, and $50.8 million of other operating expenses.

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

Coca-Cola Europacific Partners ~~(formerly Coca-Cola European Partners)~~ accounted for approximately ~~12%~~14% of the Company’s net sales for both the three-months ended ~~September~~June 30, ~~2022~~2023 and ~~2021.~~2022. Coca-Cola Europacific Partners accounted for approximately 13% ~~and 12% of the Company’s net sales for the nine-months ended September 30, 2022 and 2021, respectively.~~

~~Coca-Cola Consolidated, Inc. accounted for approximately 11%~~ of the Company’s net sales for both the ~~three-months~~six-months ended ~~September~~June 30, ~~2022~~2023 and ~~2021.~~ 2022.

Coca-Cola Consolidated, Inc. accounted for approximately 10% and 11% of the Company’s net sales for the ~~nine-months~~three-months ended ~~September~~June 30, 2023 and 2022, ~~and 2021,~~ respectively.

~~Reyes~~ Coca-Cola ~~Bottling, LLC~~Consolidated, Inc. accounted for approximately 10% of the Company’s net sales for both the ~~three-months~~six-months ended ~~September~~June 30, ~~2022~~2023 and ~~2021.~~ 2022.

Reyes ~~Coca-Cola Bottling,~~Holdings, LLC accounted for approximately 10% and 9% of the Company’s net sales for ~~both~~ the ~~nine-months~~three-months ended ~~September~~June 30, 2023 and 2022, respectively. Reyes Holdings, LLC accounted for approximately 10% and ~~2021.~~9% of the Company’s net sales for the six-months ended June 30, 2023 and 2022, respectively.

Net sales to customers outside the United States amounted to ~~$610.6~~$715.4 million and ~~$527.4~~$649.0 million for the three-months ended ~~September~~June 30, ~~2022~~2023 and ~~2021,~~2022, respectively. Such sales were approximately ~~38% and 37%~~39% of net sales for both the three-months ended ~~September~~June 30, ~~2022~~2023 and ~~2021, respectively.~~2022. Net sales to customers outside the United States amounted to ~~$1.81~~$1.34 billion and ~~$1.53~~$1.20 billion for the ~~nine-months~~six-months ended ~~September~~June 30, ~~2022~~2023 and ~~2021,~~2022, respectively. Such sales were approximately 38% ~~and 37%~~ of net sales for both the ~~nine-months~~six-months ended ~~September~~June 30, ~~2022~~2023 and ~~2021, respectively.~~2022.

Goodwill and other intangible assets for the Company’s reportable segments as of ~~September~~June 30, ~~2022~~2023 and December 31, ~~2021 are~~2022 were as follows:


	September 30,		December 31,		June 30,		December 31,
	2022		2021		2023		2022
Goodwill and other intangible assets:
Monster Energy® Drinks	$	1,424,667	$	1,420,503	$	1,431,947	$	1,424,212
Strategic Brands		977,851		978,032		981,570		979,896
Alcohol Brands		234,049		—		228,524		233,140
Other		2,200		5,494		—		1,103
Corporate and unallocated		—		—
	$	2,638,767	$	2,404,029	$	2,642,041	$	2,638,351

18.	RELATED PARTY TRANSACTIONS

TCCC controls approximately 19.5% of the voting interests of the Company. The TCCC Subsidiaries, the TCCC Related Parties and certain TCCC independent bottlers/distributors purchase and distribute the Company’s products in domestic and certain international markets. The Company also pays TCCC a commission based on certain sales within the TCCC distribution network.

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MONSTER BEVERAGE CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

~~19.~~

~~RELATED PARTY TRANSACTIONS~~

TCCC controls approximately 19.6% 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 ~~$12.8~~$18.1 million and ~~$23.6~~$10.1 million for the three-months ended ~~September~~June 30, ~~2022~~2023 and ~~2021,~~2022, respectively, and are included as a reduction to net sales. TCCC commissions, based on sales to the TCCC Subsidiaries and the TCCC Related Parties, were ~~$41.3~~$33.8 million and ~~$59.9~~$28.5 million for the ~~nine-months~~six-months ended ~~September~~June 30, ~~2022~~2023 and ~~2021,~~2022, respectively, and are included as a reduction to net sales.

TCCC commissions, based on sales to TCCC independent bottlers/distributors, were ~~$5.5~~$8.1 million and ~~$9.1~~$7.8 million for the three-months ended ~~September~~June 30, ~~2022~~2023 and ~~2021,~~2022, respectively, and are included in operating expenses. TCCC commissions, based on sales to TCCC independent bottlers/distributors, were ~~$24.4~~$16.9 million and ~~$22.6~~$18.8 million for the ~~nine-months~~six-months ended ~~September~~June 30, ~~2022~~2023 and ~~2021,~~2022, respectively, and are included in operating expenses.

Net sales to the TCCC Subsidiaries for the three-months ended ~~September~~June 30, 2023 and 2022 ~~and 2021~~ were ~~$36.6~~$33.2 million and ~~$30.3~~$26.5 million, respectively. Net sales to the TCCC Subsidiaries for the ~~nine-months~~six-months ended ~~September~~June 30, 2023 and 2022 ~~and 2021~~ were ~~$95.0~~$68.3 million and ~~$84.4~~$58.3 million, respectively.

The Company also purchases concentrates from TCCC, which are then sold to certain of the Company’s bottlers/distributors. Concentrate purchases from TCCC were ~~$6.5~~$8.3 million and ~~$7.1~~$6.5 million for the three-months ended ~~September~~June 30, ~~2022~~2023 and ~~2021,~~2022, respectively. Concentrate purchases from TCCC were ~~$21.5~~$14.8 million and ~~$21.3~~$15.0 million for the ~~nine-months~~six-months ended ~~September~~June 30, ~~2022~~2023 and ~~2021,~~2022, respectively.

Certain TCCC Subsidiaries also contract manufacture certain of the Company’s energy drinks. Such contract manufacturing expenses were ~~$9.1~~$7.5 million and ~~$6.8~~$4.8 million for the three-months ended ~~September~~June 30, ~~2022~~2023 and ~~2021,~~2022, respectively. Such contract manufacturing expenses were ~~$23.1~~$15.0 million and ~~$20.8~~$14.0 million for the ~~nine-months~~six-months ended ~~September~~June 30, ~~2022~~2023 and ~~2021,~~2022, respectively.

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


	September 30,		December 31,		June 30,		December 31,
	2022		2021		2023		2022
Accounts receivable, net	$	86,180	$	94,647	$	120,640	$	88,169
Accounts payable	$	(37,613)	$	(35,248)	$	(41,542)	$	(35,467)
Accrued promotional allowances	$	(5,308)	$	(4,536)	$	(10,807)	$	(11,222)
Accrued liabilities	$	(40,117)	$	(26,616)	$	(22,651)	$	(14,733)

In 2021, TCCC exercised its contract rights for a third-party public 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. During the three-months ended September 30, 2022, the Company was informed by TCCC that there would be no material adjustments as a result of this examination.

One director of the Company through certain trusts, and a family member of one director are the principal owners of a company that provides promotional materials to the Company. Expenses incurred with such company in connection with promotional materials purchased during the three-months ended ~~September~~June 30, 2023 and 2022 ~~and 2021 were $1.3~~was $1.0 million and ~~$1.0~~$2.3 million, respectively. Expenses incurred with such company in connection with promotional materials purchased during the ~~nine-months~~six-months ended ~~September~~June 30, 2023 and 2022 ~~and 2021 were $4.7~~was $2.1 million and ~~$2.7~~$3.4 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 nine-months ended September 30, 2022, the~~The Company occasionally ~~chartered~~charters a private aircraft that is indirectly owned by Mr. Rodney C. Sacks, Co-Chief Executive Officer and Chairman of the Board of Directors. On certain occasions, Mr. Sacks ~~was~~is accompanied by guests and other Company personnel when using such aircraft for business travel. During the ~~nine-months~~three-months ended ~~September~~June 30, ~~2022,~~2023, the Company incurred costs of ~~$0.08~~$0.03 million, amounts the Company believes ~~are~~is commensurate with market rates for comparable travel. No amounts were incurred ~~by the Company~~ during the three-months ended ~~September~~June 30, 2022. During the six-months ended June 30, 2023 and 2022, the Company incurred costs of $0.03 million and $0.08 million, respectively, amounts the Company believes is commensurate with market rates for comparable travel.

In December 2018, the Company and a director of the Company entered into a 50-50 partnership that purchased land, and real property thereon, in Kona, Hawaii for the purpose of producing coffee products. This partnership meets the definition of a Variable Interest Entity (“VIE”) for which the Company has determined that it is the primary beneficiary. Therefore, the Company consolidates the VIE in the accompanying condensed consolidated financial statements. The aggregate carrying values of the VIE’s assets and

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MONSTER BEVERAGE CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

liabilities, after elimination of any intercompany transactions and balances, as well as the results of operations for all periods presented, are not material to the Company’s condensed consolidated financial statements.

~~20.~~19.

SUBSEQUENT EVENTS

On ~~November 2, 2022, the Company’s Board of Directors authorized~~July 31, 2023, a ~~new share repurchase program for the purchase of up to an additional $500.0 million~~subsidiary of the ~~Company’s outstanding common stock. As~~Company, Blast Asset Acquisition LLC, completed its acquisition of substantially all of the assets of Vital Pharmaceuticals, Inc. and its debtor affiliates (collectively, “Bang Energy”) for a ~~result, the aggregate amount available~~purchase price of approximately $362.0 million in cash, subject to ~~repurchase the Company’s common stock as of November 4, 2022 is $682.8 million.~~adjustments. The acquired assets include Bang Energy® drinks and a beverage production facility in Phoenix, AZ.

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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, and to a lesser extent, craft beers, hard seltzers and ~~hard seltzers.~~flavored malt beverages (“FMBs”).

~~CANarchy Acquisition~~Stock Split

On February ~~17, 2022,~~28, 2023, we ~~completed our acquisition of CANarchy Craft Brewery Collective LLC (“CANarchy”),~~announced 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 did not include CANarchy’s stand-alone restaurants. Our organizational structure for our existing energy beverage business remains unchanged. CANarchy is functioning independently, retaining its own organizational structure and team.

~~Russia-Ukraine Conflict~~

During the third 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%two-for-one stock split of our ~~total net sales for~~common stock to be effected in the ~~twelve months ended December 31, 2021. We will continue~~form of a 100% stock dividend (the “Stock Split”). The common stock dividend was issued on March 27, 2023 and our common stock began trading at the split adjusted price on March 28, 2023. Accordingly, all per share amounts, average common stock outstanding, common stock outstanding, common stock repurchased and equity-based compensation presented in this Form 10-Q have been adjusted retroactively, where applicable, 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 regardingreflect 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.Stock Split.

Pricing Actions

In the third quarter of 2022, we continued to implement measures to mitigate our increased product and distribution costs through pricing increases and reductions in promotions (“Pricing Actions”). We implemented a price increase effective September 1, 2022 in the United States and ~~continued to implement~~implemented price increases at various times in certain international markets ~~where feasible,~~during 2022 and the first and second quarters of 2023 (the “Pricing Actions”), all of which positively impacted gross profit margins in the ~~third~~second quarter of ~~2022.~~2023.

~~Distribution and Supply Chain~~Gross Profit Margins

Since the beginning of the COVID-19 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 challenges and disruptions, despite adversely impacting our profitability. We continue to stand by our strategy to ensure product availability and solidify the continued long-term growth of our brands.

~~In the third quarter of 2022, we experienced a significant increase in cost of sales, resulting in a material decrease in both gross profit and gross~~Gross profit as a percentage of net sales ~~relative~~for the three-months ended June 30, 2023 improved to 52.5% from 47.1% for the comparative 2021 third quarter. The increase in cost of sales was primarily due to (i) increased ingredient and other input costs, including secondary packaging materials and increased co-packing fees, (ii) increased logistical costs, (iii) increased aluminum can costs and (iv) geographical and product sales mix. Furthermore, we experienced significant increases in distribution expenses, primarily the result of increased warehousing expenses, as well as increases in other logistical expenses, which adversely impacted operating costs.

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~~However, in the third quarter of 2022 we began to see an improvement in our gross profit margins as compared to the second quarter of~~three-months ended June 30, 2022. This improvement was primarily attributable to (i) Pricing Actions, (ii) ~~our decreased reliance on imported cans~~a reduction in certain freight-in costs and (iii) ~~improved finished product inventory levels in closer proximity to our customers, resulting in a reduction of long-distance freight~~decreased aluminum can costs.

~~We continue to address the controllable challenges in our supply chain.~~

~~Liquidity and Capital Resources~~

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

Overview

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

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

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

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We also develop, market, sell and distribute still and sparkling waters under the Monster Tour Water® brand name.

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

During the three-months ended ~~September~~June 30, ~~2022,~~2023, we continued to expand our existing ~~energy~~ drink portfolio by adding additional products to our portfolio in a number of countries and further developed our distribution markets. During the three-months ended ~~September~~June 30, ~~2022,~~2023, we sold the following new product to our customers:

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●~~Monster® (stylized) Reserve Orange Dreamsicle~~

●

Predator® Punch

In the normal course of business, we discontinue certain products and/or product lines. Those products or product lines discontinued in the ~~three-months~~three- and six-months ended ~~September~~June 30, ~~2022,~~2023, either individually or in aggregate, did not have a material adverse impact on our financial position, results of operations or liquidity.

Our net sales of ~~$1.62~~$1.85 billion for the three-months ended ~~September~~June 30, ~~2022~~2023 represented record sales for our ~~third~~second fiscal quarter. Net changes in foreign currency exchange rates had an unfavorable impact on net sales of approximately ~~$71.3~~$38.4 million for the three-months ended ~~September~~June 30, ~~2022.~~2023.

The vast majority of our net sales are derived from our Monster Energy® Drinks segment. Net sales of our Monster Energy® Drinks segment were ~~$1.50~~$1.69 billion for the three-months ended ~~September 30, 2022.~~June 30,2023. Net sales of our Strategic Brands segment were ~~$88.8~~$99.7 million for the three-months ended ~~September~~June 30, ~~2022.~~2023. Net sales of our Alcohol Brands segment were ~~$26.8~~$61.1 million for the three-months ended ~~September~~June 30, ~~2022.~~2023. Net sales of our Other segment were ~~$6.4~~$7.3 million for the three-months ended ~~September 30, 2022.~~ June 30,2023.

Our Monster Energy® Drinks segment represented ~~92.5%~~90.9% and ~~94.3%~~92.9% of our net sales for the three-months ended ~~September~~June 30, ~~2022~~2023 and ~~2021,~~2022, respectively. Our Strategic Brands segment represented ~~5.5%~~5.4% and ~~5.3%~~4.8% of our net sales for the three-months ended ~~September~~June 30, ~~2022~~2023 and ~~2021,~~2022, respectively. Our Alcohol Brands Segment represented ~~1.7%~~3.3% and 2.0% of our net sales for the three-months ended ~~September~~June 30, ~~2022.~~2023 and 2022, respectively. Our Other segment represented ~~0.3%~~0.4% and ~~0.4%~~0.3% of our net sales for the three-months ended ~~September~~June 30, ~~2022~~2023 and ~~2021,~~2022, respectively.

Our growth strategy includes further developing our domestic markets, expanding our international business and growing our business into new sectors, such as the alcohol beverage sector. Net sales to customers outside the United States were ~~$610.6~~$715.4 million for the three-months ended ~~September~~June 30, ~~2022,~~2023, an increase of approximately ~~$83.2~~$66.4 million, or ~~15.8%~~10.2% higher than net sales to customers outside of the United States of ~~$527.4~~$649.0 million for the three-months ended ~~September~~June 30, ~~2021.~~2022. Such sales were approximately ~~38% and 37%~~39% of net sales for both the three-months ended ~~September~~June 30, ~~2022~~2023 and ~~2021, respectively.~~2022. Net changes in foreign currency exchange rates had an unfavorable impact on net sales to customers outside of the United States of approximately ~~$71.3~~$38.4 million for the three-months ended ~~September~~June 30, ~~2022.~~2023. Net sales to customers outside the United States, on a foreign currency adjusted basis, increased ~~29.3%~~16.1% for the three-months ended ~~September~~June 30, ~~2022. On February 17, 2022, the Company completed the CANarchy Transaction which facilitates the Company’s entry into the alcohol beverage sector.~~2023.

Our non-alcohol customers are primarily full service beverage bottlers/distributors, retail grocery and specialty chains, wholesalers, club stores, mass merchandisers, convenience and gas chains, foodservice customers, value stores, e-commerce retailers and the military. Our alcohol customers are primarily beer distributors who in turn sell to retailers within the alcohol distribution system. Percentages of our gross billings to our various customer types for the three- and ~~nine-months~~six-months ended ~~September~~June 30, ~~2022~~2023 and ~~2021~~2022 are reflected below. Such information includes sales made by us directly to the customer types concerned, which include our full service beverage bottlers/distributors in the United States. Such full service beverage bottlers/distributors in turn sell certain of our products to some of

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the same customer types listed below. We limit our description of our customer types to include only our sales to our full service bottlers/distributors without reference to such bottlers/distributors’ sales to their own customers.


	Three-Months Ended				Nine-Months Ended				Three-Months Ended				Six-Months Ended
	September 30,				September 30,				June 30,				June 30,
	2022		2021		2022		2021		2023		2022		2023		2022
U.S. full service bottlers/distributors	48	%	51	%	48	%	51	%	46	%	46	%	47	%	47	%
International full service bottlers/distributors	39	%	39	%	39	%	39	%	41	%	41	%	40	%	40	%
Club stores and e-commerce retailers	9	%	8	%	9	%	9	%	8	%	9	%	8	%	9	%
Retail grocery, direct convenience, specialty chains and wholesalers	2	%	1	%	2	%	1	%	2	%	2	%	2	%	2	%
Direct value stores and other	2	%	1	%	2	%	0	%
Alcohol, value stores and other									3	%	2	%	3	%	2	%

Our non-alcohol customers include Coca-Cola Canada Bottling Limited, Coca-Cola Consolidated, Inc., Coca-Cola Bottling Company United, Inc., Reyes Coca-Cola Bottling, LLC, Coca-Cola Southwest Beverages LLC, The Coca-Cola Bottling Company of Northern New England, Inc., Swire Pacific Holdings, Inc. (USA), Liberty Coca-Cola Beverages, LLC, Coca-Cola Europacific Partners (formerly Coca-Cola European Partners and Coca-Cola Amatil), Coca-Cola Hellenic, Coca-Cola FEMSA, Swire Coca-Cola (China), COFCO Coca-Cola, Coca-Cola Beverages Africa, Coca-Cola İçecek and certain other TCCC network bottlers, Asahi Soft Drinks, Co., Ltd., Wal-Mart, Inc. (including Sam’s Club), Costco Wholesale Corporation and Amazon.com, Inc.

Our alcohol customers include Reyes Beverage Group, Ben E. Keith Company, J.J. Taylor Distributing and Sheehan Family Companies.

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.

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Coca-Cola Europacific Partners ~~(formerly Coca-Cola European Partners)~~ accounted for approximately ~~12%~~14% of our net sales for both the three-months ended ~~September~~June 30, ~~2022~~2023 and ~~2021.~~2022. Coca-Cola Europacific Partners accounted for approximately 13% ~~and 12% of our net sales for the nine-months ended September 30, 2022 and 2021, respectively.~~

~~Coca-Cola Consolidated, Inc. accounted for approximately 11%~~ of our net sales for both the ~~three-months~~six-months ended ~~September~~June 30, ~~2022~~2023 and ~~2021.~~ 2022.

Coca-Cola Consolidated, Inc. accounted for approximately 10% and 11% of our net sales for the ~~nine-months~~three-months ended ~~September~~June 30, 2023 and 2022, ~~and 2021,~~ respectively.

~~Reyes~~ Coca-Cola ~~Bottling, LLC~~Consolidated, Inc. accounted for approximately 10% of our net sales for both the ~~three-months~~six-months ended ~~September~~June 30, ~~2022~~2023 and ~~2021.~~ 2022.

Reyes ~~Coca-Cola Bottling,~~Holdings, LLC accounted for approximately 10% and 9% of our net sales for ~~both~~ the ~~nine-months~~three-months ended ~~September~~June 30, 2023 and 2022, respectively. Reyes Holdings, LLC accounted for approximately 10% and ~~2021.~~9% of our net sales for the six-months ended June 30, 2023 and 2022, respectively.

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Results of Operations

The following table sets forth key statistics for the three- and ~~nine-months~~six-months ended ~~September~~June 30, ~~2022~~2023 and ~~2021.~~2022.


	Three-Months Ended						Percentage		Nine-Months Ended						Percentage		Three-Months Ended						Percentage		Six-Months Ended						Percentage
(In thousands, except per share amounts)	September 30,						Change		September 30,						Change		June 30,						Change		June 30,						Change
	2022			2021			22 vs. 21		2022			2021			22 vs. 21		2023			2022			23 vs. 22		2023			2022			23 vs. 22
Net sales¹	$	1,624,286		$	1,410,557		15.2	%	$	4,798,119		$	4,116,308		16.6	%	$	1,854,961		$	1,655,260		12.1	%	$	3,553,891		$	3,173,833		12.0	%
Cost of sales		790,561			621,399		27.2	%		2,407,867			1,775,375		35.6	%		880,739			875,399		0.6	%		1,681,820			1,617,306		4.0	%
Gross profit*¹		833,725			789,158		5.6	%		2,390,252			2,340,933		2.1	%		974,222			779,861		24.9	%		1,872,071			1,556,527		20.3	%
Gross profit as a percentage of net sales		51.3	%		55.9	%				49.8	%		56.9	%				52.5	%		47.1	%				52.7	%		49.0	%

Operating expenses		415,795			344,694		20.6	%		1,199,883			956,346		25.5	%		450,417			406,910		10.7	%		863,201			784,088		10.1	%
Operating expenses as a percentage of net sales		25.6	%		24.4	%				25.0	%		23.2	%				24.3	%		24.6	%				24.3	%		24.7	%

Operating income¹		417,930			444,464		(6.0)	%		1,190,369			1,384,587		(14.0)	%		523,805			372,951		40.4	%		1,008,870			772,439		30.6	%
Operating income as a percentage of net sales		25.7	%		31.5	%				24.8	%		33.6	%				28.2	%		22.5	%				28.4	%		24.3	%

Interest and other income (expense), net		2,149			(2,290)		(193.8)	%		(11,932)			(2,179)		447.6	%		15,159			(6,781)		323.6	%		27,653			(14,080)		296.4	%

Income before provision for income taxes¹		420,079			442,174		(5.0)	%		1,178,437			1,382,408		(14.8)	%		538,964			366,170		47.2	%		1,036,523			758,359		36.7	%

Provision for income taxes		97,692			104,969		(6.9)	%		288,487			326,247		(11.6)	%		125,093			92,810		34.8	%		225,208			190,796		18.0	%

Income taxes as a percentage of income before taxes		23.3	%		23.7	%				24.5	%		23.6	%				23.2	%		25.3	%				21.7	%		25.2	%

Net income	$	322,387		$	337,205		(4.4)	%	$	889,950		$	1,056,161		(15.7)	%	$	413,871		$	273,360		51.4	%	$	811,315		$	567,563		42.9	%
Net income as a percentage of net sales		19.8	%		23.9	%				18.5	%		25.7	%				22.3	%		16.5	%				22.8	%		17.9	%

Net income per common share:
Basic	$	0.61		$	0.64		(4.0)	%	$	1.68		$	2.00		(15.7)	%	$	0.40		$	0.26		52.9	%	$	0.78		$	0.54		44.6	%
Diluted	$	0.60		$	0.63		(3.9)	%	$	1.66		$	1.97		(15.6)	%	$	0.39		$	0.26		52.8	%	$	0.77		$	0.53		44.4	%

Case sales (in thousands) (in 192‑ounce case equivalents)		182,460			159,975		14.1	%		535,451			459,991		16.4	%
Energy drink case sales (in thousands) (in 192‑ounce equivalents)																		198,406			184,197		7.7	%		380,850			352,990		7.9	%

¹Includes $10.0 million and ~~$10.4~~$10.1 million for the three-months ended ~~September~~June 30, ~~2022~~2023 and ~~2021,~~2022, respectively, related to the recognition of deferred revenue. Includes ~~$30.0~~$19.9 million and ~~$31.3~~$20.1 million for the ~~nine-months~~six-months ended ~~September~~June 30, ~~2022~~2023 and ~~2021,~~2022, respectively, related to the recognition of deferred revenue.

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*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.

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Three-Months Ended ~~September~~June 30, ~~2022~~2023 Compared to the Three-Months Ended ~~September~~June 30, ~~2021~~2022..

Net Sales

Net Sales. Net sales were ~~$1.62~~$1.85 billion for the three-months ended ~~September~~June 30, ~~2022,~~2023, an increase of approximately ~~$213.7~~$199.7 million, or ~~15.2%~~12.1% higher than net sales of ~~$1.41~~$1.66 billion for the three-months ended ~~September~~June 30, ~~2021.~~2022. Net sales increased primarily due to increased worldwide sales by volume of our Monster Energy® brand energy drinks as a result of increased consumer demand, as well as due to Pricing Actions in certain markets. Net changes in foreign currency exchange rates had an unfavorable impact on net sales of approximately ~~$71.3~~$38.4 million for the three-months ended ~~September~~June 30, ~~2022.~~2023. Net sales on a foreign currency adjusted basis increased ~~20.2%~~14.4% for the three-months ended ~~September~~June 30, ~~2022.~~2023.

Net sales were ~~$564.0~~$670.5 million and ~~$488.8~~$604.8 million for the three-months ended ~~September~~June 30, ~~2022~~2023 and ~~2021,~~2022, respectively, in EMEA, Asia Pacific, Latin America and the Caribbean.

Net sales for the Monster Energy® Drinks segment were ~~$1.50~~$1.69 billion for the three-months ended ~~September~~June 30, ~~2022,~~2023, an increase of approximately ~~$172.4~~$149.2 million, or ~~13.0%~~9.7% higher than net sales of ~~$1.33~~$1.54 billion for the three-months ended ~~September~~June 30, ~~2021.~~2022. 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 as well as due to ~~pricing actions and reductions in promotions~~Pricing Actions in certain markets. Net changes in foreign currency exchange rates had an unfavorable impact on net sales for the Monster Energy® Drinks segment of approximately ~~$66.3~~$36.3 million for the three-months ended ~~September~~June 30, ~~2022.~~2023. Net sales for the Monster Energy® Drinks segment on a foreign currency adjusted basis increased ~~18.0%~~12.1% for the three-months ended ~~September~~June 30, ~~2022.~~2023.

Net sales for the Strategic Brands segment were ~~$88.8~~$99.7 million for the three-months ended ~~September~~June 30, ~~2022,~~2023, an increase of approximately ~~$14.4~~$20.5 million, or ~~19.3%~~26.0% higher than net sales of ~~$74.4~~$79.1 million for the three-months ended ~~September~~June 30, ~~2021.~~2022. Net sales for the Strategic Brands segment increased primarily due to increased sales by volume of our NOS®, Burn® and Predator® ~~and NOS® brands~~brand energy drinks. Net changes in foreign currency exchange rates had an unfavorable impact on net sales of approximately ~~$5.0~~$2.1 million for the Strategic Brands segment for the three-months ended ~~September~~June 30, ~~2022.~~2023. Net sales for the Strategic Brands segment on a foreign currency adjusted basis increased ~~25.9%~~28.7% for the three-months ended ~~September~~June 30, ~~2022.~~2023. Net sales of concentrates within the Strategic Brands segment tend to have more pronounced fluctuations from period to period as compared to net sales of our finished goods within the Monster Energy Drinks® segment.

Net sales for the Alcohol Brands segment were ~~$26.8~~$61.1 million for the three-months ended ~~September~~June 30, 2023, an increase of approximately $28.6 million, or 88.2% higher than net sales of $32.4 million for the three-months ended June 30, 2022. ~~There~~Net sales of The Beast Unleashed^TM FMBs, which launched during the 2023 first quarter in the United States on a rolling state basis, were ~~no comparative 2021 net sales~~$33.5 million for the ~~Alcohol Brands segment as the Company completed its acquisition of CANarchy in February 2022.~~three-months ended June 30, 2023.

Net sales for the Other segment were ~~$6.4~~$7.3 million for the three-months ended ~~September~~June 30, ~~2022,~~2023, an increase of approximately ~~$0.1~~$1.3 million, or ~~2.1%~~22.2% higher than net sales of ~~$6.3~~$6.0 million for the three-months ended ~~September~~June 30, ~~2021.~~2022.

Case sales for our energy drink products, in 192-ounce case equivalents, were ~~182.5~~198.4 million cases for the three-months ended ~~September~~June 30, ~~2022,~~2023, an increase of approximately ~~22.5~~14.2 million cases or ~~14.1%~~7.7% higher than case sales of ~~160.0~~184.2 million cases for the three-months ended ~~September~~June 30, ~~2021.~~2022. The overall average net sales per case ~~decreased~~increased to ~~$8.72~~$9.00 for the three-months ended ~~September 30, 2022,~~June 30,2023, which was ~~0.7% lower~~2.6% higher than the average net sales per case of $8.78 for the three-months ended ~~September 30, 2021. Net changes in foreign currency exchange rates had an unfavorable impact on the overall average net sales per case for the three-months ended September~~June 30, 2022.

Barrel sales for our craft beers, ~~and~~ hard seltzers and FMBs, in 31 U.S. gallon equivalents, were 0.2 million barrels for the three-months ended June 30, 2023, an increase of approximately 0.1 million barrels or 105.7% higher than barrel sales of 0.1 million barrels for the three-months ended ~~September~~June 30, 2022.

Gross Profit

Gross profit was ~~$833.7~~$974.2 million for the three-months ended ~~September~~June 30, ~~2022,~~2023, an increase of approximately ~~$44.6~~$194.4 million, or ~~5.6%~~24.9% higher than the gross profit of ~~$789.2~~$779.9 million for the three-months ended ~~September~~June 30, ~~2021.~~2022. The increase in gross profit dollars was primarily the result of the ~~$213.7~~$199.7 million increase in net sales for the three-months ended ~~September~~June 30, ~~2022.~~

Gross profit as a percentage of net sales decreased to 51.3% for the three-months ended September 30, 2022 from 55.9% for the three-months ended September 30, 2021. The decrease for the three-months ended September 30, 2022 was primarily the result of2023.

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Gross profit as a percentage of net sales increased ~~ingredient and other input~~to 52.5% for the three-months ended June 30, 2023 from 47.1% for the three-months ended June 30, 2022. The increase in gross profit as a percentage of net sales for the three-months ended June 30, 2023 was primarily the result of Pricing Actions in certain markets, decreased freight-in costs ~~including secondary packaging materials and increased co-packing fees, increased logistical costs, increased~~as well as decreased aluminum can costs. Gross profit as a percentage of net sales in EMEA increased to 34.0% for the three-months ended June 30, 2023 from 26.7% for the three-months ended June 30, 2022. Gross profit as a percentage of net sales in Asia Pacific increased to 42.4% for the three-months ended June 30, 2023 from 40.4% for the three-months ended June 30, 2022. Gross profit as a percentage of net sales in Latin America and the Caribbean decreased to 30.9% for the three-months ended June 30, 2023 from 36.4% for the three-months ended June 30, 2022. The decrease in the gross profit as a percentage of net sales in Latin America and the Caribbean was primarily due to raw material write-offs and excess storage costs, ~~and geographical and product sales mix.~~as a result of forecasting inefficiencies related to lower than anticipated category growth rates.

Operating Expenses

Total operating expenses were ~~$415.8~~$450.4 million for the three-months ended ~~September~~June 30, ~~2022,~~2023, an increase of approximately ~~$71.1~~$43.5 million, or ~~20.6%~~10.7% higher than total operating expenses of ~~$344.7~~$406.9 million for the three-months ended ~~September~~June 30, ~~2021.~~2022.

The increase in operating expenses was primarily due to increased ~~general and administrative expenses of $22.2 million, including travel and entertainment and professional service fees (including legal and accounting), increased~~ selling and marketing expenses of ~~$20.5~~$22.2 million, ~~including sponsorships and endorsements, social media and digital marketing, commissions, point of sale, premiums and allocated trade development,~~ increased warehouse ~~out-bound fuel and freight~~ costs of ~~$17.7~~$4.8 million, as well as increased payroll expenses of ~~$15.9~~$18.5 million (of which ~~$6.6~~$1.7 million was related to ~~CANarchy). CANarchy related depreciation and amortization was $2.4 million for~~ the ~~three-months ended September 30, 2022.~~Alcohol Brands segment). The increase in operating expenses was partially offset by a decrease in ~~distributor termination~~out-bound fuel and freight expenses of ~~$5.3~~$11.8 million for the three-months ended ~~September~~June 30, ~~2022.~~2023. Operating expenses as a percentage of net sales for the three-months ended ~~September~~June 30, ~~2022~~2023 were ~~25.6%~~24.3% as compared to ~~24.4%~~24.6% for the three-months ended ~~September~~June 30, ~~2021. Operating expenses as a percentage of net sales for the three-months ended September 30, 2019 (pre COVID-19) were 24.5%.~~2022.

Operating Income

Operating income was ~~$417.9~~$523.8 million for the three-months ended ~~September~~June 30, ~~2022, a decrease~~2023, an increase of approximately ~~$26.5~~$150.9 million, or ~~6.0% lower~~40.4% higher than operating income of ~~$444.5~~$373.0 million for the three-months ended ~~September~~June 30, ~~2021.~~2022. Operating income as a percentage of net sales ~~decreased~~increased to ~~25.7%~~28.2% for the three-months ended ~~September~~June 30, ~~2022~~2023 from ~~31.5%~~22.5% for the three-months ended ~~September 30, 2021. Operating income for the three-months ended September 30, 2022 decreased primarily as a result of the~~June 30,2022. The increase in operating ~~expenses~~income was primarily the result of an increase in net sales, as well as ~~the decrease~~an increase in ~~the~~ gross profit as a percentage of net sales.

Operating income was ~~$89.9~~$114.2 million and ~~$105.9~~$82.8 million for the three-months ended ~~September~~June 30, ~~2022~~2023 and ~~2021,~~2022, 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 ~~$492.5~~$597.9 million for the three-months ended ~~September~~June 30, ~~2022, a decrease~~2023, an increase of approximately ~~$8.1~~$156.2 million, or ~~1.6% lower~~35.4% higher than operating income of ~~$500.6~~$441.7 million for the three-months ended ~~September~~June 30, ~~2021.~~2022. The ~~decrease~~increase in operating income for the Monster Energy® Drinks segment was primarily the result of an increase in ~~operating expenses~~net sales as well as ~~a decrease~~an increase in gross profit as a percentage of net sales.

Operating income for the Strategic Brands segment, exclusive of corporate and unallocated expenses, was ~~$47.3~~$55.1 million for the three-months ended ~~September~~June 30, ~~2022,~~2023, an increase of approximately ~~$7.1~~$13.6 million, or ~~17.7%~~32.9% higher than operating income of ~~$40.2~~$41.5 million for the three-months ended ~~September~~June 30, ~~2021.~~2022. The increase in operating income for the Strategic Brands segment was primarily the result of an increase in ~~gross profit.~~net sales.

Operating loss for the Alcohol Brands segment, exclusive of corporate and unallocated expenses, was ~~$10.3~~$6.6 million for the three-months ended ~~September~~June 30, 2023, an increase of approximately $1.9 million, or 41.2% higher than operating loss of $4.7 million for the three-months ended June 30, 2022. The operating losses for the three-months ended June 30, 2023 were primarily due to expenses and infrastructure investments for the expansion of the Alcohol Brands segment.

Operating income for the Other segment, exclusive of corporate and unallocated expenses, was $1.7 million for the three-months ended June 30, 2023, as compared to operating income of $1.0 million for the three-months ended ~~September~~June 30, ~~2022, a decrease of approximately $0.2 million, or 14.7% lower than operating income of $1.1 million for the three-months ended September 30, 2021.~~2022.

Interest and Other Income (Expense), net

Interest and other non-operating income (expense), net, was ~~$2.1~~$15.2 million for the three-months ended ~~September~~June 30, ~~2022,~~2023, as compared to interest and other non-operating income (expense), net, of ($~~2.3)~~6.8) million for the three-months ended ~~September~~June 30, ~~2021.~~2022. Foreign currency transaction losses were $6.2 million and $2.9 million for the three-months ended September 30, 2022 and 2021, respectively. Interest income was $9.6 million and $0.8 million for the three-months ended September 30, 2022 and 2021, respectively.

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currency transaction losses were $14.2 million and $8.3 million for the three-months ended June 30, 2023 and 2022, respectively. Interest income was $29.4 million and $3.8 million for the three-months ended June 30, 2023 and 2022, respectively.

Provision for Income Taxes

Provision for income taxes was ~~$97.7~~$125.1 million for the three-months ended ~~September~~June 30, ~~2022, a decrease~~2023, an increase of ~~$7.3~~$32.3 million, or ~~6.9% lower~~34.8% higher than the provision for income taxes of ~~$105.0~~$92.8 million for the three-months ended ~~September~~June 30, ~~2021.~~2022. The effective combined federal, state and foreign tax rate decreased to ~~23.3%~~23.2% from ~~23.7%~~25.3% for the three-months ended ~~September~~June 30, 2023 and 2022, ~~and 2021,~~ respectively. The decrease in the effective tax rate was primarily attributable to an increase in deductible interest expense, a decrease in the effective state income tax rate as well as an increase in net income in certain foreign jurisdictions which have lower tax rates compared to the United States.

Net Income

Net income was ~~$322.4~~$413.9 million for the three-months ended ~~September~~June 30, ~~2022, a decrease~~2023, an increase of ~~$14.8~~$140.5 million, or ~~4.4% lower~~51.4% higher than net income of ~~$337.2~~$273.4 million for the three-months ended ~~September 30, 2021.~~June 30,2022. The ~~decrease~~increase in net income for the three-months ended ~~September~~June 30, ~~2022~~2023 was primarily due to the ~~decrease~~increase in net sales, the increase in the gross profit percentage of net sales as well as the ~~increase~~decrease in ~~operating expenses.~~the effective combined federal, state and foreign tax rate.

~~Nine-Months~~Six-Months Ended ~~September~~June 30, ~~2022~~2023 Compared to the ~~Nine-Months~~Six-Months Ended ~~September~~June 30, ~~2021~~2022..

Net Sales

Net ~~Sales.~~Sales. Net sales were ~~$4.80~~$3.55 billion for the ~~nine-months~~six-months ended ~~September~~June 30, ~~2022,~~2023, an increase of approximately ~~$681.8~~$380.1 million, or ~~16.6%~~12.0% higher than net sales of ~~$4.12~~$3.17 billion for the ~~nine-months~~six-months ended ~~September 30, 2021.~~June 30,2022. Net sales increased primarily due to increased worldwide sales by volume of our Monster Energy® brand energy drinks as a result of increased consumer demand, as well as due to Pricing Actions in certain markets. Net changes in foreign currency exchange rates had an unfavorable impact on net sales of approximately ~~$157.6~~$90.4 million for the ~~nine-months~~six-months ended ~~September~~June 30, ~~2022.~~2023. Net sales on a foreign currency adjusted basis increased ~~20.4%~~14.8% for the ~~nine-months~~six-months ended ~~September~~June 30, ~~2022.~~2023.

Net sales were ~~$1.69~~$1.25 billion and ~~$1.42~~$1.12 billion for the ~~nine-months~~six-months ended ~~September~~June 30, ~~2022~~2023 and ~~2021,~~2022, respectively, in EMEA, Asia Pacific, Latin America and the Caribbean.

Net sales for the Monster Energy® Drinks segment were ~~$4.44~~$3.25 billion for the ~~nine-months~~six-months ended ~~September~~June 30, ~~2022,~~2023, an increase of approximately ~~$577.6~~$306.0 million, or ~~14.9%~~10.4% higher than net sales of ~~$3.87~~$2.94 billion for the ~~nine-months~~six-months ended ~~September 30, 2021.~~June 30,2022. 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 as well as due to ~~pricing actions and reductions in promotions~~Pricing Actions in certain markets. Net changes in foreign currency exchange rates had an unfavorable impact on net sales for the Monster Energy® Drinks segment of approximately ~~$145.4~~$85.3 million for the ~~nine-months~~six-months ended ~~September~~June 30, ~~2022.~~2023. Net sales for the Monster Energy® Drinks segment on a foreign currency adjusted basis increased ~~18.7%~~13.3% for the ~~nine-months~~six-months ended ~~September~~June 30, ~~2022.~~2023.

Net sales for the Strategic Brands segment were ~~$260.5~~$186.0 million for the ~~nine-months~~six-months ended ~~September~~June 30, ~~2022,~~2023, an increase of approximately ~~$31.3~~$14.3 million, or ~~13.7%~~8.3% higher than net sales of ~~$229.2~~$171.7 million for the ~~nine-months~~six-months ended ~~September~~June 30, ~~2021.~~2022. Net sales for the Strategic Brands segment increased primarily due to increased ~~worldwide~~ sales by volume of our Predator® and ~~NOS®~~Burn® brand energy ~~drinks as a result of increased consumer demand.~~drinks. Net changes in foreign currency exchange rates had an unfavorable impact on net sales of approximately ~~$12.2~~$5.1 million for the Strategic Brands segment for the ~~nine-months~~six-months ended ~~September~~June 30, ~~2022.~~2023. Net sales for the Strategic Brands segment on a foreign currency adjusted basis increased ~~19.0%~~11.3% for the ~~nine-months~~six-months ended ~~September~~June 30, ~~2022.~~2023. Net sales of concentrates within the Strategic Brands segment tend to have more pronounced fluctuations from period to period as compared to net sales of our finished goods within the Monster Energy Drinks® segment.

Net sales for the Alcohol Brands segment were ~~$74.5~~$107.4 million for the ~~nine-months~~six-months ended ~~September~~June 30, 2023, an increase of approximately $59.7 million, or 125.3% higher than net sales of $47.7 million for the six-months ended June 30, 2022. The comparative 2022 ~~(effectively~~net sales for the Alcohol Brands segment were effectively from February 17, 2022 to ~~September~~June 30, ~~2022).~~2022, as we completed the CANarchy Transaction on February 17, 2022. Net sales of The Beast Unleashed^TM FMBs, which launched during the 2023 first quarter in the United States on a rolling state basis, were $54.0 million for the six-months ended June 30, 2023.

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Net sales for the Other segment were ~~$18.4~~$11.9 million for both the ~~nine-months~~six-months ended ~~September~~June 30, ~~2022, a decrease of approximately $1.6 million, or 8.0% lower than net sales of $20.0 million for the nine-months ended September 30, 2021.~~2023 and 2022.

Case sales for our energy drink products, in 192-ounce case equivalents, were ~~535.5~~380.8 million cases for the ~~nine-months~~six-months ended ~~September~~June 30, ~~2022,~~2023, an increase of approximately ~~75.5~~27.8 million cases or ~~16.4%~~7.9% higher than case sales of ~~460.0~~353.0 million cases for the ~~nine-months~~six-months ended ~~September~~June 30, ~~2021.~~2022. The overall average net sales per case ~~decreased~~increased to ~~$8.79~~$9.02 for the ~~nine-months~~six-months ended ~~September~~June 30, ~~2022,~~2023, which was ~~1.3% lower~~2.2% higher than the average net sales per case of ~~$8.91~~$8.82 for the ~~nine-months~~six-months ended ~~September 30, 2021. Net changes in foreign currency exchange rates had an unfavorable impact on the overall average net sales per case for the nine-months ended September~~June 30, 2022.

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Barrel sales for our craft beers, ~~and~~ hard seltzers and FMBs, in 31 USU.S. gallon equivalents, were ~~0.2~~0.4 million barrels for the ~~nine-months~~six-months ended ~~September~~June 30, 2023, an increase of approximately 0.3 million barrels or 142.6% higher than barrel sales of 0.1 million barrels for the six-months ended June 30, 2022.

Gross Profit

Gross profit was ~~$2.39~~$1.87 billion for the ~~nine-months~~six-months ended ~~September~~June 30, ~~2022,~~2023, an increase of approximately ~~$49.3~~$315.5 million, or ~~2.1%~~20.3% higher than the gross profit of ~~$2.34~~$1.56 billion for the ~~nine-months~~six-months ended ~~September~~June 30, ~~2021.~~2022. The increase in gross profit dollars was primarily the result of the $380.1 million increase in net sales for the six-months ended June 30, 2023.

Gross profit as a percentage of net sales ~~decreased~~increased to ~~49.8%~~52.7% for the ~~nine-months~~six-months ended ~~September~~June 30, ~~2022~~2023 from ~~56.9%~~49.0% for the ~~nine-months~~six-months ended ~~September~~June 30, ~~2021.~~2022. The ~~decrease~~increase in gross profit as a percentage of net sales for the ~~nine-months~~six-months ended ~~September~~June 30, ~~2022~~2023 was primarily the result of ~~increased freight rates and fuel~~Pricing Actions in certain markets, decreased freight-in costs ~~including costs relating to the importation of aluminum cans, increased ingredient and other input costs, including secondary packaging materials, increased~~as well as decreased aluminum can costs. Gross profit as a percentage of net sales in EMEA increased to 32.5 % for the six-months ended June 30, 2023 from 28.0% for the six-months ended June 30, 2022. Gross profit as a percentage of net sales in Asia Pacific increased to 43.3% for the sixmonths ended June 30, 2023 from 40.7% for the six-months ended June 30, 2022. Gross profit as a percentage of net sales in Latin America and the Caribbean decreased to 31.9% for the six-months ended June 30, 2023 from 35.9% for the six-months ended June 30, 2022. The decrease in the gross profit as a percentage of net sales in Latin America and the Caribbean was primarily due to a fire at a warehouse in Chile, as well as raw material write-offs and excess storage costs ~~attributable~~as a result of forecasting inefficiencies related to ~~higher aluminum commodity pricing, increased co-packing fees, production inefficiencies and geographical sales mix.~~lower than anticipated category growth rates.

Operating Expenses

Total operating expenses were ~~$1.20 billion~~$863.2 million for the ~~nine-months~~six-months ended ~~September~~June 30, ~~2022,~~2023, an increase of approximately ~~$243.5~~$79.1 million, or ~~25.5%~~10.1% higher than total operating expenses of ~~$956.3~~$784.1 million for the ~~nine-months~~six-months ended ~~September~~June 30, ~~2021.~~2022.

~~The comparative operating expenses for the nine-months ended September 30, 2021 included a $16.9 million reversal of amounts previously accrued in connection with an intellectual property claim.~~

The increase in operating expenses was primarily due to increased general and administrative expenses of $80.9 million, including travel and entertainment and professional service fees (including legal and accounting), increased out-bound fuel, freight and warehouse costs of $68.0 million, increased selling and marketing expenses of ~~$55.5~~$40.9 million, ~~including sponsorships and endorsements, social media and digital marketing, point~~increased warehouse costs of ~~sale, premiums and allocated trade development, and~~$14.7 million, as well as increased payroll expenses of ~~$44.5~~$40.5 million (of which ~~$15.8~~$8.0 million was related to ~~CANarchy). In addition, CANarchy related depreciation and amortization was $6.3 million for~~ the ~~nine-months ended September 30, 2022.~~Alcohol Brands segment). The increase in operating expenses was partially offset by a decrease in ~~distributor termination~~out-bound fuel and freight expenses of ~~$5.3~~$27.5 million for the ~~nine-months~~six-months ended ~~September~~June 30, ~~2022.~~2023. Operating expenses as a percentage of net sales for the ~~nine-months~~six-months ended ~~September~~June 30, ~~2022~~2023 were ~~25.0%~~24.3% as compared to ~~23.2%~~24.7% for the ~~nine-months~~six-months ended ~~September~~June 30, ~~2021. Operating expenses as a percentage of net sales for the nine-months ended September 30, 2019 (pre COVID-19) were 25.8%.~~2022.

Operating Income

Operating income was ~~$1.19~~$1.01 billion for the ~~nine-months~~six-months ended ~~September 30, 2022, a decrease~~June 30,2023, an increase of approximately ~~$194.2~~$236.4 million, or ~~14.0% lower~~30.6% higher than operating income of ~~$1.38 billion~~$772.4 million for the ~~nine-months~~six-months ended ~~September 30, 2021.~~June 30,2022. Operating income as a percentage of net sales ~~decreased~~increased to ~~24.8%~~28.4% for the ~~nine-months~~six-months ended ~~September 30, 2022~~June 30,2023 from ~~33.6%~~24.3% for the ~~nine-months~~six-months ended ~~September 30, 2021. Operating income for the nine-months ended September 30, 2022 decreased primarily as a result of the~~June 30,2022. The increase in operating ~~expenses~~income was primarily the result of an increase in net sales, as well as ~~the decrease~~an increase in ~~the~~ gross profit as a percentage of net sales.

Operating income was ~~$244.3~~$207.9 million and ~~$325.8~~$154.4 million for the ~~nine-months~~six-months ended ~~September 30,~~June 30,2023 and 2022, ~~and 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 ~~$1.39~~$1.16 billion for the ~~nine-months~~six-months ended ~~September 30, 2022, a decrease~~June 30,2023, an increase of approximately ~~$123.8~~$262.5 million, or ~~8.2% lower~~29.3% higher than operating income of ~~$1.51 billion~~$896.3 million for the ~~nine-months~~six-months ended ~~September 30, 2021.~~June 30,2022. The ~~decrease~~increase in operating income for the Monster Energy® Drinks segment was primarily the result of an increase in ~~operating expenses~~net sales as well as ~~a decrease~~an increase in gross profit as a percentage of net sales.

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Operating income for the Strategic Brands segment, exclusive of corporate and unallocated expenses, was ~~$146.0~~$106.9 million for the ~~nine-months~~six-months ended ~~September~~June 30, ~~2022,~~2023, an increase of approximately ~~$6.6~~$8.2 million, or ~~4.7%~~8.3% higher than operating income of ~~$139.4~~$98.7 million for the ~~nine-months~~six-months ended ~~September~~June 30, ~~2021.~~2022. The increase in operating income for the Strategic Brands segment was primarily the result of an increase in ~~gross profit.~~net sales.

Operating loss for the Alcohol Brands segment, exclusive of corporate and unallocated expenses, was ~~$19.9~~$13.5 million for the ~~nine-months~~six-months ended ~~September~~June 30, ~~2022. Inventory purchased as part~~2023, an increase of approximately $3.8 million, or 40.1% higher than operating loss of $9.6 million for the six-months ended June 30, 2022 (effectively from February 17, 2022 to June 30, 2022). The operating losses for the six-months ended June 30, 2023 were primarily due to expenses and infrastructure investments for the expansion of the ~~CANarchy Transaction was recorded at fair value. The inventory acquired was subsequently sold in the nine-months ended September 30, 2022 and was recognized through cost of goods sold~~Alcohol Brands segment.

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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 nine-months ended September 30, 2022 as a result. As of September 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 ~~$3.1~~$1.4 million for the ~~nine-months~~six-months ended ~~September~~June 30, ~~2022, a decrease of approximately $2.1 million, or 40.4% lower than~~2023, as compared to operating income of ~~$5.3~~$2.2 million for the ~~nine-months~~six-months ended ~~September~~June 30, ~~2021.~~2022.

Interest and Other Income (Expense), net

Interest and other non-operating income (expense), net, was ~~($11.9)~~$27.7 million for the ~~nine-months~~six-months ended ~~September~~June 30, ~~2022,~~2023, as compared to interest and other non-operating income (expense), net, of ($~~2.2)~~14.1) million for the ~~nine-months~~six-months ended ~~September~~June 30, ~~2021.~~2022. Foreign currency transaction losses were ~~$22.9~~$25.4 million and ~~$5.5~~$16.7 million for the ~~nine-months~~six-months ended ~~September~~June 30, ~~2022~~2023 and ~~2021,~~2022, respectively. Interest income was ~~$14.8~~$52.8 million and ~~$3.1~~$5.3 million for the ~~nine-months~~six-months ended ~~September~~June 30, 2023 and 2022, ~~and 2021,~~ respectively.

Provision for Income Taxes

Provision for income taxes was ~~$288.5~~$225.2 million for the ~~nine-months~~six-months ended ~~September~~June 30, ~~2022, a decrease~~2023, an increase of ~~$37.8~~$34.4 million, or ~~11.6% lower~~18.0% higher than the provision for income taxes of ~~$326.2~~$190.8 million for the ~~nine-months~~six-months ended ~~September 30, 2021.~~June 30,2022. The effective combined federal, state and foreign tax rate ~~increased~~decreased to ~~24.5%~~21.7% from ~~23.6%~~25.2% for the ~~nine-months~~six-months ended ~~September~~June 30, ~~2022~~2023 and ~~2021,~~2022, respectively. The ~~increase~~decrease in the effective tax rate was primarily attributable to anthe increase in the ~~effective state income tax rate as well as a decrease~~stock compensation deduction in the ~~net income in certain foreign jurisdictions which have lower tax rates compared to the United States.~~six-months ended June 30, 2023.

Net Income

Net income was ~~$890.0~~$811.3 million for the ~~nine-months~~six-months ended ~~September~~June 30, ~~2022, a decrease~~2023, an increase of ~~$166.2~~$243.8 million, or ~~15.7% lower~~42.9% higher than net income of ~~$1.06 billion~~$567.6 million for the ~~nine-months~~six-months ended ~~September~~June 30, ~~2021.~~2022. The ~~decrease~~increase in net income for the ~~nine-months~~six-months ended ~~September~~June 30, ~~2022~~2023 was primarily due to the ~~decrease~~increase in net sales, the increase in the gross profit percentage of net sales as well as the ~~increase~~decrease in ~~operating expenses.~~the effective combined federal, state and foreign tax rate.

Key Business Metrics

We use certain key metrics and financial measures not prepared in accordance with United States Generally Accepted Accounting Principles (“GAAP”) to evaluate and manage our business. For a further discussion of how we use key metrics and certain non-GAAP financial measures, see “Non-GAAP Financial Measures and Other Key Metrics.”

Non-GAAP Financial Measures and Other Key Metrics

Gross Billings**

Gross billings were ~~$1.87~~$2.14 billion for the three-months ended ~~September~~June 30, ~~2022,~~2023, an increase of approximately ~~$218.8~~$237.0 million, or ~~13.3%~~12.4% higher than gross billings of ~~$1.65~~$1.91 billion for the three-months ended ~~September~~June 30, ~~2021.~~2022. Net changes in foreign currency exchange rates had an unfavorable impact on gross billings of approximately ~~$85.6~~$42.1 million for the three-months ended ~~September~~June 30, ~~2022.~~2023.

Gross billings for the Monster Energy® Drinks segment were ~~$1.73~~$1.96 billion for the three-months ended ~~September~~June 30, ~~2022,~~2023, an increase of approximately ~~$180.3~~$184.6 million, or ~~11.6%~~10.4% higher than gross billings of ~~$1.55~~$1.78 billion for the three-months ended ~~September~~June 30, ~~2021.~~2022. 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 as well as due to ~~price increases~~Pricing Actions in certain markets. Net changes in foreign currency exchange rates had an unfavorable impact on gross billings for the Monster Energy® Drinks segment of approximately ~~$80.6~~$40.1 million for the three-months ended ~~September~~June 30, ~~2022.~~

Gross billings for the Strategic Brands segment were $99.6 million for the three-months ended September 30, 2022, an increase of $11.1 million, or 12.6% higher than gross billings of $88.5 million for the three-months ended September 30, 2021. Net changes in2023.

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Gross billings for the Strategic Brands segment were $111.6 million for the three-months ended June 30, 2023, an increase of $21.7 million, or 24.2% higher than gross billings of $89.9 million for the three-months ended June 30, 2022. Gross Billings for the Strategic Brands segment increased primarily due to decreased sales by volume of our Burn®, NOS® and Predator® brand energy drinks. Net changes in foreign currency exchange rates had an unfavorable impact on gross billings in the Strategic Brands segment of approximately ~~$5.0~~$2.1 million for the three-months ended ~~September~~June 30, ~~2022.~~2023.

Gross billings for the Alcohol Brands segment were ~~$27.3~~$62.2 million for the three-months ended ~~September~~June 30, 2023, an increase of approximately $29.3 million, or 88.9% higher than gross billings of $32.9 million for the three-months ended June 30, 2022. Gross Billings of The Beast Unleashed^TM FMBs, which launched during the 2023 first quarter in the United States on a rolling state basis, were $34.2 million for the three-months ended June 30, 2023.

Gross billings for the Other segment were ~~$6.4~~$7.3 million for the three-months ended ~~September~~June 30, ~~2022,~~2023, an increase of ~~$0.1~~$1.4 million, or ~~2.1%~~22.7% higher than gross billings of ~~$6.3~~$6.0 million for the three-months ended ~~September~~June 30, ~~2021.~~2022.

Promotional allowances, commissions and other expenses, as described in the footnote below, were ~~$252.6~~$297.1 million for the three-months ended ~~September~~June 30, ~~2022,~~2023, an increase of ~~$4.7~~$37.2 million, or ~~1.9%~~14.3% higher than promotional allowances, commissions and other expenses of ~~$247.9~~$259.9 million for the three-months ended ~~September~~June 30, ~~2021.~~2022. Promotional allowances, commissions and other expenses as a percentage of gross billings ~~decreased~~increased to ~~13.5%~~13.9% from ~~15.0%~~13.6% for the three-months ended ~~September~~June 30, ~~2022~~2023 and ~~2021,~~2022, respectively.

Gross billings were ~~$5.52~~$4.10 billion for the ~~nine-months~~six-months ended ~~September~~June 30, ~~2022,~~2023, an increase of approximately ~~$723.2~~$448.1 million, or ~~15.1%~~12.3% higher than gross billings of ~~$4.79~~$3.65 billion for the ~~nine-months~~six-months ended ~~September~~June 30, ~~2021.~~2022. Net changes in foreign currency exchange rates had an unfavorable impact on gross billings of approximately ~~$187.8~~$103.0 million for the ~~nine-months~~six-months ended ~~September~~June 30, ~~2022.~~2023.

Gross billings for the Monster Energy® Drinks segment were ~~$5.13~~$3.77 billion for the ~~nine-months~~six-months ended ~~September~~June 30, ~~2022,~~2023, an increase of approximately ~~$621.0~~$371.0 million, or ~~13.8%~~10.9% higher than gross billings of ~~$4.51~~$3.39 billion for the ~~nine-months~~six-months ended ~~September~~June 30, ~~2021.~~2022. 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 as well as due to ~~price increases~~Pricing Actions in certain markets. Net changes in foreign currency exchange rates had an unfavorable impact on gross billings for the Monster Energy® Drinks segment of approximately ~~$175.6~~$98.0 million for the ~~nine-months~~six-months ended ~~September~~June 30, ~~2022.~~2023.

Gross billings for the Strategic Brands segment were ~~$293.7~~$210.3 million for the ~~nine-months~~six-months ended ~~September~~June 30, ~~2022,~~2023, an increase of ~~$28.2~~$16.2 million, or ~~10.6%~~8.3% higher than gross billings of ~~$265.5~~$194.1 million for the ~~nine-months~~six-months ended ~~September~~June 30, ~~2021.~~2022. Gross Billings for the Strategic Brands segment decreased primarily due to decreased sales by volume of our Burn® and Predator® brand energy drinks. Net changes in foreign currency exchange rates had an unfavorable impact on gross billings in the Strategic Brands segment of approximately ~~$12.2~~$5.0 million for the ~~nine-months~~six-months ended ~~September~~June 30, ~~2022.~~2023.

Gross billings for the Alcohol Brands segment were ~~$75.6~~$109.2 million for the ~~nine-months~~six-months ended ~~September~~June 30, 2023, an increase of approximately $60.9 million, or 125.9% higher than gross billings of $48.4 million for the six-months ended June 30, 2022. The comparative 2022 gross billings for the Alcohol Brands segment were effectively from February 17, 2022 to June 30, 2022 as we completed the CANarchy Transaction on February 17, 2022. Gross billings of The Beast Unleashed^TM FMBs, which launched during the 2023 first quarter on the United States on a rolling state basis, were $54.9 million for the six-months ended June 30, 2023.

Gross billings for the Other segment were ~~$18.4~~$12.0 million for the ~~nine-months~~six-months ended ~~September~~June 30, ~~2022, a decrease of $1.6 million, or 8.0% lower than~~2023, as compared to gross billings of ~~$20.0~~$11.9 million for the ~~nine-months~~six-months ended ~~September~~June 30, ~~2021.~~2022.

Promotional allowances, commissions and other expenses, as described in the footnote below, were ~~$747.9~~$563.2 million for the ~~nine-months~~six-months ended ~~September~~June 30, ~~2022,~~2023, an increase of ~~$40.2~~$67.9 million, or ~~5.7%~~13.7% higher than promotional allowances, commissions and other expenses of ~~$707.7~~$495.3 million for the ~~nine-months~~six-months ended ~~September~~June 30, ~~2021.~~2022. Promotional allowances, commissions and other expenses as a percentage of gross billings ~~decreased~~increased to ~~13.6%~~13.7% from ~~14.8%~~13.6% for the ~~nine-months~~six-months ended ~~September~~June 30, 2023 and 2022, ~~and 2021,~~ respectively.

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**Gross Billings represent amounts invoiced to customers net of cash discounts, returns and ~~returns.~~excise taxes. Gross billings are used internally by management as an indicator of and to monitor operating performance, including sales performance of particular products, salesperson performance, product growth or declines and is useful to investors in evaluating overall Company performance. The use of gross 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~~.customers.

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


	Three-Months Ended				Percentage			Nine-Months Ended			Percentage		Three-Months Ended				Percentage			Six-Months Ended			Percentage
(In thousands)	September 30,				Change		September 30,				Change		June 30,				Change		June 30,				Change
	2022		2021		22 vs. 21		2022		2021		22 vs. 21		2023		2022		23 vs. 22		2023		2022		23 vs. 22
Gross Billings	$	1,866,888	$	1,648,048	13.3	%	$	5,515,964	$	4,792,728	15.1	%	$	2,142,095	$	1,905,150	12.4	%	$	4,097,133	$	3,649,077	12.3	%
Deferred Revenue		9,955		10,386	(4.1)	%		30,026		31,265	(4.0)	%		9,985		10,051	(0.7)	%		19,931		20,071	(0.7)	%
Less: Promotional allowances, commissions and other expenses***		252,557		247,877	1.9	%		747,871		707,685	5.7	%		297,119		259,941	14.3	%		563,173		495,315	13.7	%
Net Sales	$	1,624,286	$	1,410,557	15.2	%	$	4,798,119	$	4,116,308	16.6	%	$	1,854,961	$	1,655,260	12.1	%	$	3,553,891	$	3,173,833	12.0	%

*** 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 paid based on sales to our bottlers/distributors. The presentation of promotional and other allowances facilitates an evaluation of their impact on the determination of net sales and the spending levels incurred or correlated with such sales. Promotional and other allowances for our energy drink products constitute a material portion of our marketing activities. Our promotional allowance programs for our energy drink products with our numerous bottlers/distributors and/or retailers are executed through separate agreements in the ordinary course of business. These agreements generally provide for one or more of the arrangements described above and are of varying durations, 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- and nine-months ended September 30, 2022 and 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 ~~nine-months~~six-months ended ~~September~~June 30, ~~2022~~2023 and ~~2021,~~2022, respectively. Data from any one or more quarters or periods is not necessarily indicative of annual results or continuing trends.

Sales of 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~~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~~are less seasonal than the seasonality ofexpected from traditional beverages. In addition, our continued growth internationally may further reduce the impact of seasonality on our business. Quarterly fluctuations may also be affected by other factors including the introduction of new products, the opening of new markets where temperature fluctuations are more pronounced, the addition of new bottlers/distributors, changes in the sales mix of our products and changes in ~~advertising~~marketing and promotional expenses. ~~The COVID-19 pandemic, including new variants, may also have an impact on consumer behavior and change the seasonal fluctuation of our business.~~


	Three-Months Ended				Nine-Months Ended
Energy Drinks:									Three-Months Ended				Six-Months Ended
(In thousands, except average net sales per case)	September 30,				September 30,				June 30,				June 30,
	2022		2021		2022		2021		2023		2022		2023		2022
Net sales	$	1,624,286	$	1,410,557	$	4,798,119	$	4,116,308	$	1,854,961	$	1,655,260	$	3,553,891	$	3,173,833
Less: Alcohol Brands segment sales		(26,818)		—		(74,472)		—		(61,076)		(32,447)		(107,366)		(47,654)
Less: Other segment sales		(6,447)		(6,316)		(18,355)		(19,953)		(7,308)		(5,981)		(11,922)		(11,908)
Adjusted net sales¹	$	1,591,021	$	1,404,241	$	4,705,292	$	4,096,355	$	1,786,577	$	1,616,832	$	3,434,603	$	3,114,271

Case sales by segment:¹
Monster Energy® Drinks		150,961		133,177		447,233		388,214		163,390		156,146		314,460		296,272
Strategic Brands		31,499		26,798		88,218		71,777		35,016		28,051		66,389		56,718
Total case sales		182,460		159,975		535,451		459,991		198,406		184,197		380,849		352,990
Average net sales per case - Energy Drinks	$	8.72	$	8.78	$	8.79	$	8.91	$	9.00	$	8.78	$	9.02	$	8.82

¹Excludes Alcohol Brands segment ~~(effectively from February 17, 2022 to September 30, 2022)~~ and Other segment net ~~sales, as these sales do not have unit case equivalents.~~sales.

Net changes in foreign currency exchange rates had an unfavorable impact on the overall average net sales per case for the three- and ~~nine-months~~six-months ended ~~September~~June 30, ~~2022.~~2023.

Sales of our ~~Alcohol~~alcohol products are expressed in barrel volume. A “Barrel” means a unit of measurement equal to 31 U.S. gallons. Barrel sales were ~~0.1~~0.2 million and ~~0.2~~0.1 million for the ~~three-~~three-months ended June 30, 2023 and ~~nine-months~~2022, respectively. Barrel sales were 0.4 million and 0.15 million for the six-months ended ~~September~~June 30, 2023 and 2022, respectively.

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

Liquidity and Capital Resources

Cash and cash equivalents, short-term and long-term investments. At ~~September~~June 30, ~~2022,~~2023, we had ~~$1.30~~$1.87 billion in cash and cash equivalents, ~~$1.35~~$1.42 billion in short-term investments and ~~$72.4~~$62.2 million in long-term investments, including certificates of deposit, commercial paper, U.S. government agency securities, municipal securities, U.S. treasuries and ~~U.S. treasuries.~~corporate bonds. We maintain our investments for cash management purposes and not for purposes of speculation. Our risk management policies emphasize credit quality (primarily based on short-term ratings by nationally recognized statistical organizations) in selecting and maintaining our investments. We regularly assess market risk of our investments and believe our current policies and investment practices adequately limit those risks. However, certain of these investments are subject to general credit, liquidity, market and interest rate risks. These market risks associated with our investment portfolio may have an adverse effect on our future results of operations, liquidity and financial condition.

Of our ~~$1.30~~$1.87 billion of cash and cash equivalents held at ~~September~~June 30, ~~2022, $584.6~~2023, $774.3 million was held by our foreign subsidiaries. No short-term or long-term investments were held by our foreign subsidiaries at ~~September~~June 30, ~~2022.~~2023.

We believe that cash available from operations, including our cash resources and access to credit, will be sufficient for our working capital needs, including purchase commitments for raw materials and inventory, increases in accounts receivable, payments of tax liabilities, expansion and development needs, purchases of capital assets, purchases of equipment, purchases of real property, acquisitions 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~~$300 million through ~~September~~June 30, ~~2023.~~2024. However, future business opportunities may cause a change in this estimate.

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Purchases of inventories, increases in accounts receivable and other assets, acquisition of property and equipment (including real property, personal property, plant and manufacturing equipment, 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 ~~nine-months~~six-months ended ~~September~~June 30, ~~2022~~2023 and ~~2021~~2022 (in thousands):


Net cash provided by (used in):
	2022		2021		2023		2022
Operating activities	$	589,186	$	927,982	$	763,162	$	130,663
Investing activities	$	(57,743)	$	(381,700)	$	(158,209)	$	(5,738)
Financing activities	$	(459,275)	$	21,528	$	(37,820)	$	(268,953)

Cash flows provided by operating activities.Cash provided by operating activities was ~~$589.2~~$763.2 million for the ~~nine-months~~six-months ended ~~September~~June 30, ~~2022,~~2023, as compared with cash provided by operating activities of ~~$928.0~~$130.7 million for the ~~nine-months~~six-months ended ~~September~~June 30, ~~2021.~~2022.

For the ~~nine-months~~six-months ended ~~September~~June 30, 2023, cash provided by operating activities was primarily attributable to net income earned of $811.3 million and adjustments for certain non-cash expenses, consisting of $35.2 million of depreciation and amortization and non-cash lease expense, and $34.6 million of stock-based compensation. For the six-months ended June 30, 2023, cash provided by operating activities also increased due to a $132.2 million increase in accounts payable, a $93.1 million decrease in inventories, a $23.6 million increase in accrued promotional allowances and a $20.5 million increase in accrued liabilities. For the six-months ended June 30, 2023, cash used in operating activities was primarily attributable to a $317.8 million increase in accounts receivable, a $36.8 million increase in prepaid expenses and other assets, a $17.6 million decrease in accrued compensation, a $12.4 million decrease in deferred revenue, a $3.3 million increase in prepaid income taxes and a $1.2 million decrease in income taxes payable.

For the six-months ended June 30, 2022, cash provided by operating activities was primarily attributable to net income earned of ~~$890.0~~$567.6 million and adjustments for certain non-cash expenses, consisting of ~~$49.2~~$32.6 million of stock-based compensation and ~~$51.2~~$30.4 million of depreciation and ~~amortization and non-cash lease expense.~~amortization. For the ~~nine-months~~six-months ended ~~September~~June 30, 2022, cash provided by operating activities also increased due to ~~a $52.7~~an $85.5 million increase in accounts payable, ~~an $89.2~~a $77.7 million increase in accrued promotional allowances and a ~~$29.7~~$21.9 million decrease in deferred income ~~taxes and a $7.9 million decrease in prepaid income~~ taxes. For the ~~nine-months~~six-months ended ~~September~~June 30, 2022, cash used in operating activities was primarily attributable to a ~~$297.1~~$299.1 million increase in inventories, a ~~$202.4~~$289.2 million increase in accounts receivable, a ~~$39.2~~$15.3 million decrease in accrued compensation, a $55.7 million increase in prepaid expenses and other assets, a ~~$16.1 million decrease in deferred revenue, a $12.8~~$14.7 million decrease in income taxes payable, a ~~$2.6 million decrease in accrued liabilities, a $6.6 million decrease in accrued compensation and a $3.5 million decrease in other liabilities.~~

For the nine-months ended September 30, 2021, cash provided by operating activities was primarily attributable to net income earned of $1.06 billion and adjustments for certain non-cash expenses, consisting of $52.4 million of stock-based compensation and $40.7 million of depreciation and amortization and non-cash lease expense. For the nine-months ended September 30, 2021, cash provided by operating activities also increased due to a $106.6 million increase in accounts payable, a $51.0 million increase in accrued promotional allowances and a $39.4 million increase in accrued liabilities. For the nine-months ended September 30, 2021, cash used in operating activities was primarily attributable to a $199.5 million increase in accounts receivable, a $149.4 million increase in inventories, a $41.2 million increase in prepaid expenses and other assets, a $17.8$9.1 million decrease in deferred revenue, a ~~$7.4~~$3.2 million decrease in other liabilities and a $1.2 million increase in prepaid income ~~taxes and a $2.9 million decrease in accrued compensation.~~taxes.

Cash flows used in investing activities.Cash used in investing activities was ~~$57.7~~$158.2 million for the ~~nine-months~~six-months ended ~~September~~June 30, ~~2022~~2023 as compared to cash used in investing activities of ~~$381.7~~$5.7 million for ~~the nine-months~~six-months ended ~~September~~June 30, ~~2021.~~2022.

For both the ~~nine-months~~six-months ended ~~September~~June 30, ~~2022~~2023 and ~~2021,~~2022, cash provided by investing activities was primarily attributable to sales of available-for-sale investments. For the ~~nine-months~~six-months ended ~~September 30, 2022,~~June 30,2022, cash used in investing activities included $329.5 million net of cash acquired, related to the CANarchy Transaction. For both the ~~nine-months~~six-months ended ~~September~~June 30, ~~2022~~2023 and ~~2021,~~2022, cash used in investing activities was primarily attributable to purchases of available-for-sale investments. To a lesser extent, for both the ~~nine-months~~six-months ended ~~September~~June 30, ~~2022~~2023 and ~~2021,~~2022, cash used in investing activities also included the acquisitions of fixed assets consisting of vans and promotional vehicles, coolers and other equipment to support our marketing and promotional activities, production equipment, furniture and fixtures, office and computer equipment, computer software, equipment used for sales and administrative activities, certain leasehold improvements, as well as acquisitions of and/or construction of and/or improvements to real property. We expect to continue to use a portion of our cash in excess of our requirements for operations for purchasing short-term and long-term investments, leasehold improvements, the acquisition of capital equipment (specifically, vans, trucks and promotional vehicles, coolers, other promotional equipment, merchandise displays, warehousing racks as well as items of plant and production equipment required to produce certain of our existing and/or new products) to develop our brand in international markets, acquisitions and for other corporate purposes. From time to time, we may also use cash to purchase additional real property related to our beverage business and/or acquire compatible businesses.

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Cash flow ~~(used in) provided by~~used in financing activities.Cash used in financing activities was ~~$459.3~~$37.8 million for the ~~nine-months~~six-months ended ~~September~~June 30, ~~2022~~2023 as compared to cash ~~provided by~~used in financing activities of ~~$21.5~~$269.0 million for the ~~nine-months~~six-months ended ~~September~~June 30, ~~2021. The cash~~2022. Cash used in financing activities for both the ~~nine-months~~six-months ended ~~September~~June 30, ~~2022~~2023 and ~~2021~~2022 was primarily the result of the repurchases of our common stock. ~~The cash~~Cash provided by financing activities for both the ~~nine-months~~six-months ended ~~September~~June 30, ~~2022,~~2023, and ~~2021~~2022 was primarily attributable to the issuance of our common stock under our stock-based compensation ~~plans and borrowings on debt.~~plans.

The following represents a summary of the Company’s contractual commitments and related scheduled maturities as of ~~September~~June 30, ~~2022:~~2023:


	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	$	338,929	$	276,696	$	61,370	$	863	$	—	$	380,396	$	276,567	$	98,063	$	5,766	$	—
Finance Leases		977		927		45		5		—		4,350		4,321		29		—		—
Operating Leases		41,017		8,047		11,951		7,895		13,124		41,256		9,004		12,098		8,572		11,582
Purchase Commitments²		275,511		264,235		9,944		1,332		—		309,256		296,386		12,480		390		—
	$	656,434	$	549,905	$	83,310	$	10,095	$	13,124	$	735,258	$	586,278	$	122,670	$	14,728	$	11,582

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 ~~$2.0~~$3.8 million of unrecognized tax benefits have been recorded as liabilities as of ~~September~~June 30, ~~2022.~~2023. It is expected that the amount of unrecognized tax benefits will not significantly change within the next 12 months. As of ~~September~~June 30, ~~2022,~~2023, we had ~~$0.4~~$0.6 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, ~~2021~~2022 (“Form 10-K”).

Recent Accounting Pronouncements

Inflation

~~Inflation had~~We believe inflation did not have a ~~negative~~significant impact on our results of operations for the three- and ~~nine-months~~six-months ended September 30, 2022, leading to increased cost of sales and operating expenses. To mitigate the impact of inflation, we implemented a price increase effective September 1, 2022 in the United States and continue to implement price increases in certain international markets where feasible.June 30,2023.

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Forward-Looking Statements

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

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

●

Our ability to successfully integrate the Bang Energy® business and recognize the anticipated benefits of the transaction;

●

Our ability to successfully transition the acquired Bang Energy® beverages to the Company’s primary bottlers/distributors, including, limiting disruptions in distribution during the transition period;

●

Our ability to procure shelf space, retain customers and increase sales of the acquired Bang Energy® beverages;

●

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

●

The impact of rising costs, interest rates and inflation on the discretionary income of our ~~consumers, particularly~~consumers;

●

Uncertainties associated with an economic slowdown or recession that could negatively impact the ~~rising cost~~financial condition of ~~gasoline;~~our customers and could result in a reduced demand for our products;

●

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

●

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

●

Fluctuations in growth and/or growth rates ~~and/~~(positive or ~~declining sales in~~negative) 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;~~uncertainties;

●

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

●

~~The impact of potential future reductions of~~Disruption to our ~~sponsorship~~and/or our copackers’ manufacturing facilities and ~~endorsement activities as well as our sampling activities as a result of COVID-19~~operations due to severe weather, natural disasters, climate change, labor-related issues, production difficulties, capacity limitations, or other ~~pandemics on our future sales and market share;~~

●

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

●

~~The impact of vaccine mandates on our business and supply chain, including~~causes, which could impair our ability to ~~recruit and/~~produce or ~~retain employees, and disruptions~~deliver finished products, resulting in ~~the business of our co-packers, bottlers/distributors and/or suppliers;~~

●

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

●

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

●

~~The~~a negative impact ~~of the COVID-19 pandemic~~ on our ~~product sampling programs;~~operating results;

●

Our ability to ~~introduce new products~~modify our manufacturing facilities to comply with safety, health, environmental, and ~~the impact of the COVID-19 pandemic on our innovation activities;~~other regulations;

●

~~Our ability~~The consolidation of co-packers leading us to ~~successfully adapt to the changing landscape~~increasingly rely on fewer co-packing groups, certain of ~~advertising, marketing, promotional, sponsorship and endorsement opportunities created by the COVID-19 pandemic;~~

●

~~Other effects~~which account for a large percentage of ~~the COVID-19 pandemic on~~ our ~~employees, such as mental health challenges that employees may face;~~co-packing capacity for our Monster Energy® drinks;

●

The impact of logistical issues and delays, including shortages of shipping containers and port of entry ~~congestion~~congestion;

●

The human and ~~increased freight costs;~~economic consequences of a material reemergence of COVID-19, including new variants, as well as the measures that may be taken by governments and businesses (including the Company and its suppliers, bottlers/distributors, co-packers, and other service providers) and the public at large to limit the spread of COVID-19, including, but not limited to, lockdowns, labor issues, delays, and/or decreased sponsorship, endorsement, sampling, and/or innovation activities, which may have an adverse impact on our business and operations;

●

We have extensive commercial arrangements with TCCC 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;

●

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 non-alcohol products;

●

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

●

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

●

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

●

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

●

The effect of inquiries from, and/or actions by, state attorneys general, the Federal Trade Commission (the “FTC”), the Food and Drug Administration (the “FDA”), the Bureau of Alcohol, Tobacco, Firearms and Explosives (the “ATF”), 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, but not limited to, with respect to the General Data Protection Regulation and the California Consumer Privacy Act of 2018;

●

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

●

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

●

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

●

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

●

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

●

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

●

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

●

Changes in accounting standards may affect our reported profitability;

●

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

●

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

●

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

●

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

●

Exposure to significant liabilities due to litigation, legal or regulatory ~~proceedings;~~proceedings, including litigation directed at the energy and alcohol beverage industries generally or at the Company in particular;

●

Intellectual property injunctions;

●

Unfavorable resolution of possible tax matters;

●

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

●

~~Uncertainties associated with an economic slowdown or recession that could negatively impact the financial condition of our customers and could result in a reduced demand for our products;~~

●

~~The impact of rising interest rates;~~

●

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, but not limited to: changes in demand for different packages, sizes and ~~configurations, obesity and other~~configurations; changes due to perceived health concerns ~~including concerns relating to certain~~such as obesity, ingredients in our products or packaging, and alcohol abuse; changes due to product safety concerns and/or ~~from~~changes due to decreased consumer discretionary spending power;

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●

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

●

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

●

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

●

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

●

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

●

The impact on our business of trademark and trade dress infringement proceedings brought against us relating to any of our brands, which could result in an injunction barring us from selling certain of our products and/or require changes to be made to our current trade dress;

●

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

●

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

●

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

●

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

●

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

●

~~Our ability to successfully integrate CANarchy and other acquired businesses or assets;~~alcohol, including death;

●

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

●

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

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Our ability to satisfy all criteria set forth in any model energy and/or alcohol drink guidelines, including, without limitation, those adopted by the American Beverage Association, of which 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;

●

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

●

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

●

Any shortages that may be experienced in the procurement of containers and/or other raw materials including, without limitation, water, flavors, flavor ingredients, supplement ingredients, aluminum cans generally, PET containers used for our Monster Hydro® energy drinks, 24-ounce aluminum cap cans, 19.2-ounce cans and 550ml BRE aluminum cans with resealable ends;

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●

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

●

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

●

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

●

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;

●

Unilateral decisions by bottlers/distributors, buying groups, convenience and gas chains, grocery chains, mass merchandisers, specialty chain stores, e-commerce retailers, e-commerce websites, club stores and other customers ~~including retailer disagreements with our bottlers/distributors,~~ 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;~~landscape, including, but not limited to, competition from new entrants, consolidations by competitors and retailers, and other competitive activities;

●

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

●

The effects of bottler/distributor consolidation on our business;

●

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

●

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

●

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

●

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

●

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

●

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

●

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

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

●

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;

●

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

●

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

●

Any disruption in and/or lack of effectiveness of our information technology systems, including a breach of cyber security, that disrupts our business or negatively impacts customer relationships, as well as cybersecurity incidents involving data shared with third parties; and

●

~~Recruitment~~Succession plans for and/or the 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 ~~September~~June 30, ~~2022~~2023 compared with the disclosures in Part II, Item 7A of our Form 10-K.

ITEM 4. CONTROLS AND PROCEDURES

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

Changes in Internal Control Over Financial Reporting – There were no changes in the Company’s internal controls over financial reporting during the quarter ended ~~September~~June 30, ~~2022,~~2023, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

5351

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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.~~11. 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, 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.~~10-K. 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 described in this report and our Form 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

On ~~March 13, 2020,~~June 14, 2022, the Company’s Board of Directors authorized a share repurchase program for the purchase of up to $500.0 million of the Company’s outstanding common stock (the ~~“March 2020~~“June 2022 Repurchase Plan”). During the three-months ended ~~September 30, 2022, the Company purchased approximately 1.8 million~~June 30,2023, no shares ~~of common stock at an average purchase price of $87.55 per share, for a total amount of approximately $157.4 million (excluding broker commissions), which exhausted the availability~~were repurchased under the ~~March 2020~~June 2022 Repurchase Plan. ~~Such shares are included in~~As of August 4, 2023, $182.8 million remained available for repurchase under the ~~common stock in treasury in the accompanying condensed consolidated balance sheet at September 30, 2022.~~June 2022 Repurchase Plan.

On ~~June 14,~~November 2, 2022, the Company’s Board of Directors authorized a share repurchase program for the purchase of up to an additional $500.0 million of the Company’s outstanding common stock (the ~~“June~~“November 2022 Repurchase Plan”). During the three-months ended ~~September 30, 2022, the Company purchased approximately 1.3 million~~June 30,2023, no shares ~~of common stock at an average purchase price of $88.11 per share, for a total amount of approximately $115.5 million (excluding broker commissions),~~were repurchased under the ~~June~~November 2022 Repurchase Plan. As of ~~November~~August 4, ~~2022, $182.8~~2023, $500.0 million remained available for repurchase under the ~~June~~November 2022 Repurchase Plan.

~~On November 2, 2022, the Company’s Board of Directors authorized a new share repurchase program for the purchase of up to an additional $500.0 million~~

The aggregate amount of the Company’s outstanding common ~~stock. As a result, the aggregate amount~~stock that remains available tofor repurchase ~~the Company’s common stock~~under all previously authorized repurchase plans is $682.8 million as of ~~November~~August 4, ~~2022 is $682.8 million.~~

~~The following tabular summary reflects the Company’s repurchase activity during the quarter ended September 30, 2022:~~2023.

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
Jul 1 – Jul 31, 2022

—

$
—

—

$
657,426
Aug 1 – Aug 31, 2022

—

$
—

—

$
657,426
Sept 1 – Sept 30, 2022

3,108,500

$
87.78

3,108,500

$
384,500

~~¹Excluding broker commissions paid.~~

~~²Net of broker commissions paid.~~

During the three-months ended ~~September 30, 2022, no~~June 30,2023, 7,579 shares of common stock were purchased from employees in lieu of cash payments for options exercised or withholding taxes ~~due.~~due for a total amount of $0.4 million. While such purchases are considered common stock repurchases, they are not counted as purchases against the Company’s authorized share repurchase programs. Such shares are included in common stock in treasury in the accompanying consolidated balance sheet at June 30, 2023.

~~Table of Contents~~

ITEM 3.DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4.MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5.OTHER INFORMATION

~~None.~~During the three-months ended June 30, 2023, none of the Company’s directors or officers adopted, modified or terminated a Rule 10b5-1 trading arrangement or a non-Rule 10b5-1 trading arrangement (each as defined in Item 408 of Regulation S-K under the Securities Exchange Act of 1934, as amended).

Table of Contents

ITEM 6.EXHIBITS


3.1		Second Amended and Restated Certificate of Incorporation of the Company (incorporated by reference to Exhibit 3.1 to our Form 8-K dated June 27, 2023).

3.2		Third Amended and Restated By-laws of the Company (incorporated by reference to Exhibit 3.2 to our Form 8-K dated June 27, 2023).

31.1*		Certification ofby Co-Chief Executive Officer ~~Pursuant~~pursuant to Rule 13A-14(a) or 15D-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

31.2*		Certification ofby Co-Chief Executive Officer ~~Pursuant~~pursuant to Rule 13A-14(a) or 15D-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

31.3*		Certification ofby Chief Financial Officer ~~Pursuant~~pursuant to Rule 13A-14(a) or 15D-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

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

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

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

101*		The following financial information from Monster Beverage Corporation’s Quarterly Report on Form 10-Q for the quarter ended ~~September~~June 30, ~~2022,~~2023, formatted in iXBRL (Inline eXtensible Business Reporting Language): (i) Condensed Consolidated Balance Sheets as of ~~September~~June 30, ~~2022~~2023 and December 31, ~~2021,~~2022, (ii) Condensed Consolidated Statements of Income for the ~~three-and nine-months~~three- and six-months ended ~~September~~June 30, ~~2022~~2023 and ~~2021,~~2022, (iii) Condensed Consolidated Statements of Comprehensive Income for the three- and ~~nine-months~~six-months ended ~~September~~June 30, ~~2022~~2023 and ~~2021,~~2022, (iv) Condensed Consolidated Statements of Stockholders’ Equity for the three- and ~~nine-months~~six-months ended ~~September~~June 30, ~~2022~~2023 and ~~2021,~~2022, (v) Condensed Consolidated Statements of Cash Flows for the ~~nine-months~~six-months ended ~~September~~June 30, ~~2022~~2023 and ~~2021,~~2022, and (vi) the Notes to Condensed Consolidated Financial Statements.

104*		The cover page from Monster Beverage Corporation’s Quarterly Report on Form 10-Q for the quarter ended ~~September~~June 30, ~~2022,~~2023, formatted in iXBRL (Inline eXtensible Business Reporting Language) and contained in Exhibit 101.

* Filed herewith

5553

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SIGNATURES

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

	MONSTER BEVERAGE CORPORATION
	Registrant


Date: ~~November~~August 4, ~~2022~~2023	/s/ RODNEY C. SACKS
	Rodney C. Sacks
	Chairman of the Board of Directors
	and Co-Chief Executive Officer

Date: ~~November~~August 4, ~~2022~~2023	/s/ HILTON H. SCHLOSBERG
	Hilton H. Schlosberg
	Vice Chairman of the Board of Directors
	and Co-Chief Executive Officer

5654


	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


	Nine-Months		Nine-Months
	Ended September 30,		Ended September 30,
	2022		2021
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash outflows from operating leases	$	5,859	$	3,057
Operating cash outflows from finance leases		18		15
Financing cash outflows from finance leases		1,678		1,970

ROU assets obtained in exchange for lease obligations:
Finance leases		1,654		2,767
Operating leases		20,093		251


	September 30, 2022
	Real Estate		Equipment		Total		Balance Sheet Location
Operating leases	$	36,681	$	404	$	37,085	Other Assets
Finance leases		—		1,753		1,753	Property and Equipment, net


September 30, 2022
Derivatives not designated as
hedging instruments under	Notional		Fair
ASC 815	Amount		Value		Balance Sheet Location
Assets:
Foreign currency exchange contracts:
Receive USD/pay COP	$	11,264	$	298	Accounts receivable, net
Receive USD/pay CLP		42,139		250	Accounts receivable, net
Receive USD/pay NZD		3,614		81	Accounts receivable, net
Receive USD/pay ZAR		3,172		41	Accounts receivable, net
Receive RSD/pay USD		1,809		16	Accounts receivable, net
Receive USD/pay AUD		520		8	Accounts receivable, net

Liabilities:
Foreign currency exchange contracts:
Receive USD/pay GBP	$	12,492	$	(308)	Accrued liabilities
Receive CAD/pay USD		20,757		(277)	Accrued liabilities
Receive USD/pay CNY		11,877		(141)	Accrued liabilities
Receive USD/pay EUR		16,703		(82)	Accrued liabilities
Receive SGD/pay USD		16,969		(47)	Accrued liabilities
Receive USD/pay MXN		20,673		(34)	Accrued liabilities
Receive USD/pay DKK		1,893		(9)	Accrued liabilities


		Amount of gain (loss)
		recognized in income on
		derivatives
		Three-months ended
Derivatives not designated as	Location of gain (loss)
hedging instruments under	recognized in income on	September 30,		September 30,
ASC 815	derivatives	2022		2021
Foreign currency exchange contracts	Interest and other income (expense), net	$	4,631	$	(308)


					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
Jul 1 – Jul 31, 2022	—	$	—	—	$	657,426
Aug 1 – Aug 31, 2022	—	$	—	—	$	657,426
Sept 1 – Sept 30, 2022	3,108,500	$	87.78	3,108,500	$	384,500