SEGMENT INFORMATION

12 Months Ended

Dec. 31, 2016

SEGMENT INFORMATION

SEGMENT INFORMATION

18.SEGMENT INFORMATION

During the second quarter of 2016, the Company renamed and revised its reportable segments to reflect management’s current view of the business and to align its external financial reporting with its operating and internal financial model. Historical segment information has been revised to reflect the effect of this change.

The Company has three operating and reportable segments, (i) Monster Energy® Drinks segment (“Monster Energy® Drinks”), which is comprised of the Company’s Monster Energy® drinks (previously the Finished Products segment) as well as Mutant® Super Soda drinks, (ii) Strategic Brands segment (“Strategic Brands”), which include the various energy drink brands acquired from TCCC as a result of the TCCC Transaction (previously the Concentrate segment) and (iii) Other segment (“Other”), the principal products of which include the non-energy brands disposed of as a result of the TCCC Transaction as well as certain products acquired as part of the AFF Transaction that are sold to independent third-parties.

The Company’s Monster Energy® Drinks segment generates net operating revenues by selling ready-to-drink packaged drinks primarily to bottlers and full service beverage distributors. In some cases, the Company sells directly to retail grocery and specialty chains, wholesalers, club stores, mass merchandisers, convenience chains, food service customers 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 to other bottlers, full service distributors or retailers, including, retail grocery and specialty chains, wholesalers, club stores, mass merchandisers, convenience chains, food service customers, drug stores and the military. To a lesser extent, the Company’s Strategic Brands segment generates net operating revenues by selling ready-to-drink packaged energy drinks to bottlers and full service beverage distributors.

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

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

The net revenues derived from the Company’s reportable segments and other financial information related thereto for the years ended December 31, 2016, 2015 and 2014 are as follows:

	2016		2015		2014
Net sales:
Monster Energy® Drinks(1)	$	2,759,862	$	2,518,505	$	2,314,492
Strategic Brands	272,520		143,282		-
Other	17,011		60,777		150,375
Corporate and unallocated	-		-		-
	$	3,049,393	$	2,722,564	$	2,464,867
	2016		2015		2014
Operating Income:
Monster Energy® Drinks(1)(2)	$	1,148,427	$	836,053	$	904,224
Strategic Brands	163,121		89,841		-
Other(3)	2,295		165,233		7,560
Corporate and unallocated	(228,505)		(197,474)		(164,279)
	$	1,085,338	$	893,653	$	747,505
	2016		2015		2014
Income before tax:
Monster Energy® Drinks(1)(2)	$	1,148,640	$	836,429	$	904,888
Strategic Brands	163,084		89,825		-
Other(3)	2,295		165,233		7,557
Corporate and unallocated	(234,334)		(199,939)		(166,657)
	$	1,079,685	$	891,548	$	745,788

(1) Includes $40.3 million, $62.8 million and $15.0 million for the years ended December 31, 2016, 2015 and 2014, respectively, related to the recognition of deferred revenue.

(2) Includes $79.8 million, $224.0 million and ($0.2) million for the years ended December 31, 2016, 2015 and 2014, respectively, related to distributor termination costs.

(3) Includes $161.5 million gain on the sale of Monster Non-Energy for the year ended December 31, 2015.

	2016		2015		2014
Depreciation and amortization
Monster Energy® Drinks	$	24,048	$	21,464	$	19,572
Stategic Brands	7,113		3,868		-
Other	3,457		231		531
Corporate and unallocated	6,227		5,297		5,548
	$	40,845	$	30,860	$	25,651

Corporate and unallocated expenses were $228.5 million for the year ended December 31, 2016 and included $128.0 million of payroll costs, of which $45.8 million was attributable to stock-based compensation expense (see Note 14, “Stock-Based Compensation”), $66.3 million of professional service expenses, including accounting and legal costs, $6.0 million of insurance costs and $28.2 million of other operating expenses. Corporate and unallocated expenses were $197.5 million for the year ended December 31, 2015 and included $109.8 million of payroll costs, of which $32.7 million was attributable to stock-based compensation expense (see Note 14, “Stock-Based Compensation”), $60.8 million of professional service expenses, including accounting and legal costs, $7.0 million of insurance costs and $19.9 million of other operating expenses. Corporate and unallocated expenses were $164.3 million for the year ended December 31, 2014 and included $86.2 million of payroll costs, of which $28.6 million was attributable to stock-based compensation expense (see Note 14, “Stock-Based Compensation”), $43.8 million of professional service expenses, including accounting and legal costs, $7.4 million of insurance costs and $26.9 million of other operating expenses.

TCCC, through the TCCC Subsidiaries, accounted for approximately 41%, 43% and 29% of the Company’s net sales for the years ended December 31, 2016, 2015 and 2014, respectively.

Net sales to customers outside the United States amounted to $733.7 million, $580.3 million and $534.2 million for the years ended December 31, 2016, 2015 and 2014, respectively.  Such sales were approximately 24%, 21% and 22% of net sales for the years ended December 31, 2016, 2015 and 2014, respectively.

Goodwill and other intangible assets for the Company’s reportable segments as of December 31, 2016 and 2015 are as follows:

	2016		2015
Goodwill and other intangible assets:
Monster Energy® Drinks	$	1,334,494	$	699,346
Strategic Brands	1,001,749		1,008,355
Other	28,035		-
Corporate and unallocated	-		-
	$	2,364,278	$	1,707,701