10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

Quarterly Report Pursuant to Section 13 or 15(d)

of the Securities Exchange Act of 1934

For the quarterly period ended September 30, 2018 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)

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 or a smaller reporting company.  See definition of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large Accelerated Filer x	Accelerated filer o
Non-accelerated filer o	Smaller reporting company o

Emerging growth company o

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

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

Yes ___    No  X

The Registrant had 552,963,481 shares of common stock, par value $0.005 per share, outstanding as of October 31, 2018.

MONSTER BEVERAGE CORPORATION AND SUBSIDIARIES

SEPTEMBER 30, 2018

INDEX

Part I.	FINANCIAL INFORMATION	Page No.
Item 1.	Condensed Consolidated Financial Statements (Unaudited)
	Condensed Consolidated Balance Sheets as of September 30, 2018 and December 31, 2017	3
	Condensed Consolidated Statements of Income for the Three- and Nine-Months Ended September 30, 2018 and 2017	4
	Condensed Consolidated Statements of Comprehensive Income for the Three- and Nine-Months Ended September 30, 2018 and 2017	5
	Condensed Consolidated Statements of Cash Flows for the Nine-Months Ended September 30, 2018 and 2017	6
	Notes to Condensed Consolidated Financial Statements	8
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	32
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	51
Item 4.	Controls and Procedures	51
Part II.	OTHER INFORMATION
Item 1.	Legal Proceedings	51
Item 1A.	Risk Factors	51
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	51
Item 3.	Defaults Upon Senior Securities	51
Item 4.	Mine Safety Disclosures	52
Item 5.	Other Information	52
Item 6.	Exhibits	52
	Signatures	52

2

PART I — FINANCIAL INFORMATION

ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

MONSTER BEVERAGE CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

AS OF SEPTEMBER 30, 2018 AND DECEMBER 31, 2017

(In Thousands, Except Par Value) (Unaudited)

	September 30, 2018		December 31, 2017
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	713,714	$	528,622
Short-term investments	457,898		672,933
Accounts receivable, net	620,162		449,476
Inventories	262,084		255,745
Prepaid expenses and other current assets	57,599		40,877
Prepaid income taxes	41,214		138,724
Total current assets	2,152,671		2,086,377
INVESTMENTS	1,610		2,366
PROPERTY AND EQUIPMENT, net	242,854		230,276
DEFERRED INCOME TAXES	85,253		92,333
GOODWILL	1,331,643		1,331,643
OTHER INTANGIBLE ASSETS, net	1,042,248		1,034,085
OTHER ASSETS	15,080		13,932
Total Assets	$	4,871,359	$	4,791,012
LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES:
Accounts payable	$	278,914	$	245,910
Accrued liabilities	112,436		87,475
Accrued promotional allowances	183,295		137,998
Accrued distributor terminations	795		91
Deferred revenue	44,232		43,236
Accrued compensation	30,237		34,996
Income taxes payable	6,453		10,645
Total current liabilities	656,362		560,351
DEFERRED REVENUE	319,007		334,354
OTHER LIABILITIES	2,723		1,095
COMMITMENTS AND CONTINGENCIES (Note 11)
STOCKHOLDERS’ EQUITY:
Common stock - $0.005 par value; 1,250,000 shares authorized; 630,825 shares issued and 552,952 shares outstanding as of September 30, 2018; 629,255 shares issued and 566,298 shares outstanding as of December 31, 2017	3,154		3,146
Additional paid-in capital	4,219,630		4,150,628
Retained earnings	3,675,538		2,928,226
Accumulated other comprehensive loss	(29,777)		(16,659)
Common stock in treasury, at cost; 77,873 shares and 62,957 shares as of September 30, 2018 and December 31, 2017, respectively	(3,975,278)		(3,170,129)
Total stockholders’ equity	3,893,267		3,895,212
Total Liabilities and Stockholders’ Equity	$	4,871,359	$	4,791,012

See accompanying notes to condensed consolidated financial statements.

3

MONSTER BEVERAGE CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

FOR THE THREE- AND NINE-MONTHS ENDED SEPTEMBER 30, 2018 AND 2017

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

	Three-Months Ended				Nine-Months Ended
	September 30,				September 30,
	2018		2017		2018		2017
NET SALES	$	1,016,160	$	909,476	$	2,882,953	$	2,558,690
COST OF SALES	408,501		339,767		1,139,780		924,610
GROSS PROFIT	607,659		569,709		1,743,173		1,634,080
OPERATING EXPENSES	268,086		252,337		766,065		702,405
OPERATING INCOME	339,573		317,372		977,108		931,675
INTEREST and OTHER INCOME, net	2,988		3,996		5,269		2,103
INCOME BEFORE PROVISION FOR INCOME TAXES	342,561		321,368		982,377		933,778
PROVISION FOR INCOME TAXES	74,828		102,624		228,480		314,422
NET INCOME	$	267,733	$	218,744	$	753,897	$	619,356
NET INCOME PER COMMON SHARE:
Basic	$	0.48	$	0.39	$	1.35	$	1.09
Diluted	$	0.48	$	0.38	$	1.33	$	1.07
WEIGHTED AVERAGE NUMBER OF SHARES OF COMMON STOCK AND COMMON STOCK EQUIVALENTS:
Basic	552,694		567,878		559,472		567,550
Diluted	559,955		578,368		566,791		577,964

See accompanying notes to condensed consolidated financial statements.

4

MONSTER BEVERAGE CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

FOR THE THREE- AND NINE-MONTHS ENDED SEPTEMBER 30, 2018 AND 2017

(In Thousands) (Unaudited)

	Three-Months Ended September 30,				Nine-Months Ended September 30,
	2018		2017		2018		2017
Net income, as reported	$	267,733	$	218,744	$	753,897	$	619,356
Other comprehensive income:
Change in foreign currency translation adjustment	(4,463)		1,329		(13,728)		7,641
Available-for-sale investments:
Change in net unrealized (losses) gains	(118)		(29)		610		75
Reclassification adjustment for net gains included in net income	-		-		-		-
Net change in available-for-sale investments	(118)		(29)		610		75
Other comprehensive (loss) income	(4,581)		1,300		(13,118)		7,716
Comprehensive income	$	263,152	$	220,044	$	740,779	$	627,072

See accompanying notes to condensed consolidated financial statements.

5

MONSTER BEVERAGE CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE NINE-MONTHS ENDED SEPTEMBER 30, 2018 AND 2017

(In Thousands) (Unaudited)

	Nine-Months Ended September 30,
	2018		2017
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	753,897	$	619,356
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	42,469		35,104
Gain on disposal of property and equipment	(634)		(514)
Stock-based compensation	42,436		39,265
Deferred income taxes	(76)		1,862
Effect on cash of changes in operating assets and liabilities:
Accounts receivable	(181,683)		(70,865)
TCCC Transaction receivable	-		125,000
Distributor receivables	7,803		1,605
Inventories	(10,338)		(46,700)
Prepaid expenses and other current assets	(16,465)		(9,210)
Prepaid income taxes	96,462		24,168
Accounts payable	39,641		24,653
Accrued liabilities	16,516		15,867
Accrued promotional allowances	48,682		42,064
Accrued distributor terminations	703		7,416
Accrued compensation	(4,357)		(3,230)
Income taxes payable	(1,383)		(4,142)
Other liabilities	1,628		819
Deferred revenue	(13,941)		(12,461)
Net cash provided by operating activities	821,360		790,057
CASH FLOWS FROM INVESTING ACTIVITIES:
Sales of available-for-sale investments	927,410		358,107
Purchases of available-for-sale investments	(711,009)		(768,276)
Purchases of property and equipment	(49,862)		(67,738)
Proceeds from sale of property and equipment	4,009		855
Increase in intangibles	(6,275)		(5,137)
Increase in other assets	(10,125)		(1,216)
Net cash provided by (used in) investing activities	154,148		(483,405)
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments on debt	(1,482)		(1,878)
Issuance of common stock	24,481		26,776
Purchases of common stock held in treasury	(805,149)		(249,173)
Net cash used in financing activities	(782,150)		(224,275)
Effect of exchange rate changes on cash and cash equivalents	(8,266)		5,600
NET INCREASE IN CASH AND CASH EQUIVALENTS	185,092		87,977
CASH AND CASH EQUIVALENTS, beginning of period	528,622		377,582
CASH AND CASH EQUIVALENTS, end of period	$	713,714	$	465,559
SUPPLEMENTAL INFORMATION:
Cash paid during the period for:
Interest	$	44	$	55
Income taxes	$	134,377	$	293,980

See accompanying notes to condensed consolidated financial statements.

6

MONSTER BEVERAGE CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE NINE-MONTHS ENDED SEPTEMBER 30, 2018 AND 2017

(In Thousands) (Unaudited) (Continued)

SUPPLEMENTAL DISCLOSURE OF NON-CASH ITEMS

The Company entered into capital leases for the acquisition of promotional vehicles of $1.2 million and $2.0 million for the nine-months ended September 30, 2018 and 2017, respectively.

Included in accrued liabilities as of September 30, 2017 were $6.0 million related to purchases of property and equipment.

Included in accrued liabilities as of September 30, 2018 and 2017 were $10.9 million and $4.6 million, respectively, related to additions to other intangible assets.

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

See accompanying notes to condensed consolidated financial statements.

7

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, 2017 (“Form 10-K”) 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 ended September 30, 2018 and 2017, 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.

2.RECENT ACCOUNTING PRONOUNCEMENTS

Recently issued accounting pronouncements not yet adopted

In August 2018, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2018-15, “Intangibles–Goodwill and Other–Internal–Use Software (Topic 350): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That is a Service Contract.” ASU No. 2018-15 aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software. ASU No. 2018-15 is effective for the Company on a prospective or retrospective basis beginning on January 1, 2020, with early adoption permitted. The Company is currently evaluating the impact of ASU No. 2018-15 on its financial position, results of operations and liquidity.

In August 2018, the FASB issued ASU No. 2018-14, “Compensation–Retirement Benefits–Defined Benefit Plans–General (Topic 715): Disclosure Framework–Changes to the Disclosure Requirements for Defined Benefit Plans.” ASU No. 2018-14 removes certain disclosures that are not considered cost beneficial, clarifies certain required disclosures and requires certain additional disclosures. ASU No. 2018-14 is effective for the Company on a retrospective basis beginning in the year ending December 31, 2020, with early adoption permitted. The Company is currently evaluating the impact of ASU No. 2018-14 on its financial position, results of operations and liquidity.

8

MONSTER BEVERAGE CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

In August 2018, the FASB issued ASU No. 2018-13, “Fair Value Measurement (Topic 820): Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement.” ASU No. 2018-13 removes certain disclosure requirements related to the fair value hierarchy, modifies existing disclosure requirements related to measurement uncertainty and adds new disclosure requirements. ASU No. 2018-13 disclosure requirements include disclosing the changes in unrealized gains and losses for the period included in other comprehensive income for recurring Level 3 fair value measurements held at the end of the reporting period and the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements. ASU No. 2018-13 is effective for the Company beginning on January 1, 2020, with early adoption permitted. Certain disclosures in the new guidance will need to be applied on a retrospective basis and others on a prospective basis. The Company is currently evaluating the impact of ASU No. 2018-13 on its financial position, results of operations and liquidity.

In February 2018, the FASB issued ASU No. 2018-02, “Income Statement - Reporting Comprehensive Income (Topic 220)”, which amends the previous guidance to allow for certain tax effects “stranded” in accumulated other comprehensive income, which are impacted by the Tax Cuts and Jobs Act (the “Tax Reform Act”), to be reclassified from accumulated other comprehensive income into retained earnings. This amendment pertains only to those items impacted by the new tax law and will not apply to any future tax effects stranded in accumulated other comprehensive income. This standard is effective for fiscal years beginning after December 15, 2018, and allows for early adoption. The Company is currently evaluating the impact of ASU No. 2018-02 on its financial position, results of operations and liquidity.

In January 2017, the FASB issued ASU No. 2017-04, “Intangibles and Other (Topic 350): Simplifying the Test for Goodwill Impairment”, which eliminates the requirement to calculate the implied fair value of goodwill, but rather requires an entity to record an impairment charge based on the excess of a reporting unit’s carrying value over its fair value. This amendment is effective for annual or interim goodwill impairment tests in fiscal years beginning after December 15, 2019. Early adoption is permitted. The Company is currently evaluating the impact of ASU No. 2017-04 on its financial position, results of operations and liquidity.

In June 2016, the FASB issued ASU No. 2016-13, “Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments”. The accounting standard changes the methodology for measuring credit losses on financial instruments and the timing when such losses are recorded. ASU No. 2016-13 is effective for fiscal years, and interim periods within those years, beginning after December 15, 2019. Early adoption is permitted for fiscal years, and interim periods within those years, beginning after December 15, 2018. The Company is currently evaluating the impact of ASU No. 2016-13 on its financial position, results of operations and liquidity.

In February 2016, the FASB issued ASU No. 2016-02, “Leases (Topic 842)”. This update is intended to increase transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements. This update is effective for annual and interim reporting periods beginning after December 15, 2018, including interim periods within those fiscal years. Early adoption is permitted. The Company has completed its initial assessment of ASU No. 2016-02 and currently believes the adoption will not have a material impact on its financial position, results of operations and liquidity. The Company anticipates finalizing its assessment prior to December 31, 2018.

Recently adopted accounting pronouncements

In October 2016, the FASB issued ASU No. 2016-16, “Income Taxes (Topic 740): Intra-Entity Transfers of Assets Other Than Inventory”, in an effort to improve the accounting for the income tax consequences of intra-entity transfers of assets other than inventory. Current GAAP prohibits the recognition of current and deferred income taxes for an intra-entity asset transfer until the asset has been sold to an outside party. FASB ASU No. 2016-16 establishes the requirement that an entity recognizes the income tax consequences of an intra-entity transfer of an asset other than inventory when the transfer occurs. ASU No. 2016-16 was effective for financial statements issued for annual periods beginning after December 15, 2017 and interim periods within those annual periods. The Company adopted ASU No. 2016-16 effective January 1, 2018 on a modified retrospective basis, resulting in a $6.6 million reclassification of the unrecognized income tax effects related to assets transfers that occurred prior to the adoption from deferred income taxes to opening retained earnings.

9

MONSTER BEVERAGE CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

In May 2014, the FASB issued ASU No. 2014-09, “Revenue from Contracts with Customers (Topic 606)”, which superseded previous revenue recognition guidance. ASU No. 2014-09 and its amendments were included in Accounting Standards Codification (“ASC”) 606, “Revenue from Contracts with Customers”. ASC 606 requires that a company recognizes revenue at an amount that reflects the consideration to which the company expects to be entitled in exchange for transferring goods or services to a customer. The Company adopted ASC 606 effective January 1, 2018, using the modified retrospective approach, with no impact to the opening retained earnings. Results for periods beginning on or after January 1, 2018 are presented under ASC 606, while prior periods are not adjusted and continue to be reported in accordance with the prior accounting guidance under ASC 605, “Revenue Recognition”. See Note 3.

3.REVENUE RECOGNITION

The Company has three operating and reportable segments, (i) Monster Energy® Drinks segment (“Monster Energy® Drinks”), which is primarily comprised of the Company’s Monster Energy® drinks, (ii) Strategic Brands segment (“Strategic Brands”), which is comprised of the various energy drink brands acquired from The Coca-Cola Company (“TCCC”) in 2015, and (iii) Other segment (“Other”), which is comprised of certain products sold by American Fruits & Flavors LLC, a wholly-owned subsidiary of the Company, to independent third-party customers.

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

The majority of the Company’s revenue is recognized when it satisfies a single performance obligation by transferring control of its products to a customer. Control is generally transferred when the Company’s products are either shipped or delivered based on the terms contained within the underlying contracts or agreements. Certain of the Company’s bottlers/distributors may also perform a separate function as a co-packer on the Company’s behalf. In such cases, control of the Company’s products passes to such bottlers/distributors when they notify the Company that they have taken possession or transferred the relevant portion of the Company’s finished goods. The Company’s general payment terms are short-term in duration. The Company does not have significant financing components or payment terms. The Company did not have any material unsatisfied performance obligations as of September 30, 2018 or December 31, 2017.

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.

10

MONSTER BEVERAGE CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

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

There were no changes to the Company’s accounting for variable consideration under ASC 606. Promotional and other allowances (variable consideration) recorded as a reduction to net sales, primarily include consideration given to the Company’s bottlers/distributors or retail customers including, but not limited to the following:

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

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

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

·     the Company’s agreed share of slotting, shelf space allowances and other fees given directly to retailers;

·     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 by the Company direct to certain customers that fall within the bottlers’/distributors’ sales territories; and

·     certain commissions paid based on sales to the Company’s bottlers/distributors.

The Company’s promotional allowance programs with its bottlers/distributors and/or retailers are executed through separate agreements in the ordinary course of business. These agreements generally provide for one or more of the arrangements described above and are of varying durations, ranging from one week to one year. The Company’s promotional and other allowances are calculated based on various programs with bottlers/distributors and retail customers, and accruals are established during the year for its 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 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.

Upon adoption of ASC 606, commissions paid to TCCC based on sales to certain of the Company’s bottlers/distributors who are (i) consolidated subsidiaries of TCCC (the “TCCC Subsidiaries”), (ii) accounted for under the equity method by TCCC (the “TCCC Related Parties”) and (iii) those not included in (i) or (ii) (the “TCCC Independent Bottlers”) are accounted for as follows:

	Three- and Nine-Months Ended September 30, 2018
Commissions Related To:	As Reported	Without Adoption of ASC 606
TCCC Subsidiaries	Reduction to net sales	Reduction to net sales
TCCC Related Parties	Reduction to net sales	Operating expenses
TCCC Independent Bottlers	Operating expenses	Operating expenses

11

MONSTER BEVERAGE CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

The impact of the adoption of ASC 606 on the Company’s condensed consolidated statement of income for the three- and nine-months ended September 30, 2018 was as follows:

	Three-Months Ended September 30, 2018
	As Reported		Without Adoption of ASC 606		Decrease due to Adoption of ASC 606
Net Sales	$	1,016,160	$	1,027,758	$	(11,598)	1
Operating Expenses	$	268,086	$	279,684	$	(11,598)	1

	Nine-Months Ended September 30, 2018
	As Reported		Without Adoption of ASC 606		Decrease due to Adoption of ASC 606
Net Sales	$	2,882,953	$	2,916,703	$	(33,750)	1
Operating Expenses	$	766,065	$	799,815	$	(33,750)	1

1 TCCC commissions based on sales to the TCCC Related Parties. There were no other identified changes to our revenue recognition policies as a result of the adoption of ASC 606.

Disaggregation of Revenue

The following table disaggregates the Company’s revenue by geographical markets and reportable segments:

	Three-Months Ended September 30, 2018
Net Sales	U.S. and Canada		EMEA1		Asia Pacific		Latin America and Caribbean		Total
Monster Energy® Drinks	$	710,172	$	127,286	$	63,758	$	33,930	$	935,146
Strategic Brands	47,645		18,287		8,231		278		74,441
Other	6,573		-		-		-		6,573
Total Net Sales	$	764,390	$	145,573	$	71,989	$	34,208	$	1,016,160

12

MONSTER BEVERAGE CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

	Nine-Months Ended September 30, 2018
Net Sales	U.S. and Canada		EMEA1		Asia Pacific		Latin America and Caribbean		Total
Monster Energy® Drinks	$	1,994,950	$	376,823	$	171,796	$	101,520	$	2,645,089
Strategic Brands	137,502		60,567		20,148		1,794		220,011
Other	17,853		-		-		-		17,853
Total Net Sales	$	2,150,305	$	437,390	$	191,944	$	103,314	$	2,882,953

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

Contract Liabilities

Amounts received from certain bottlers/distributors at inception of their distribution contracts or at the inception of certain sales/marketing programs are accounted for as deferred revenue. As of September 30, 2018, the Company had $363.2 million of deferred revenue, which is included in current and long-term deferred revenue in the Company’s condensed consolidated balance sheet. As of December 31, 2017, the Company had $377.6 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- and nine-months ended September 30, 2018, $11.1 million and $33.3 million, respectively, of deferred revenue was recognized in net sales. See Note 10.

13

MONSTER BEVERAGE CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

4.INVESTMENTS

The following table summarizes the Company’s investments at:

September 30, 2018	Amortized Cost		Gross Unrealized Holding Gains		Gross Unrealized Holding Losses		Fair Value		Continuous Unrealized Loss Position less than 12 Months		Continuous Unrealized Loss Position greater than 12 Months
Available-for-sale
Short-term:
Commercial paper	$	52,595	$	-	$	-	$	52,595	$	-	$	-
Certificates of deposit	26,068		-		-		26,068		-		-
Municipal securities	127,149		2		82		127,069		82		-
U.S. government agency securities	108,128		-		95		108,033		95		-
U.S. Treasuries	109,832		-		45		109,787		45		-
Variable rate demand notes	34,346		-		-		34,346		-		-
Long-term:
Municipal securities	1,612		-		2		1,610		2		-
Total	$	459,730	$	2	$	224	$	459,508	$	224	$	-

December 31, 2017	Amortized Cost		Gross Unrealized Holding Gains		Gross Unrealized Holding Losses		Fair Value		Continuous Unrealized Loss Position less than 12 Months		Continuous Unrealized Loss Position greater than 12 Months
Available-for-sale
Short-term:
Commercial paper	$	81,026	$	-	$	-	$	81,026	$	-	$	-
Certificates of deposit	11,869		-		-		11,869		-		-
Municipal securities	469,604		1		740		468,865		740		-
U.S. government agency securities	61,307		-		88		61,219		88		-
Variable rate demand notes	49,954		-		-		49,954		-		-
Long-term:
U.S. government agency securities	2,369		-		3		2,366		3		-
Total	$	676,129	$	1	$	831	$	675,299	$	831	$	-

During the nine-months ended September 30, 2018 and 2017, realized gains or losses recognized on the sale of investments were not significant.

The Company’s investments at September 30, 2018 and December 31, 2017 in commercial paper, certificates of deposit, municipal securities, U.S. government agency securities, U.S. treasuries and/or variable rate demand notes (“VRDNs”) carried investment grade credit ratings. VRDNs are floating rate municipal bonds with embedded put options that allow the bondholder to sell the security at par plus accrued interest. All of the put options are secured by a pledged liquidity source. While they are classified as marketable investment securities, the put option allows the VRDNs to be liquidated at par on a same day, or more generally, on a seven-day settlement basis.

14

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, 2018				December 31, 2017
	Amortized Cost		Fair Value		Amortized Cost		Fair Value
Less than 1 year:
Commercial paper	$	52,595	$	52,595	$	81,026	$	81,026
U.S. Treasuries	109,832		109,787		-		-
Municipal securities	127,149		127,069		469,604		468,865
U.S. government agency securities	108,128		108,033		61,307		61,219
Certificates of deposit	26,068		26,068		11,869		11,869
Due 1 - 10 years:
Municipal securities	1,612		1,610		-		-
U.S. government agency securities	-		-		2,369		2,366
Variable rate demand notes	-		-		6,366		6,366
Due 11 - 20 years:
Variable rate demand notes	15,952		15,952		28,377		28,377
Due 21 - 30 years:
Variable rate demand notes	14,291		14,291		15,211		15,211
Due 31 - 40 years:
Variable rate demand notes	4,103		4,103		-		-
Total	$	459,730	$	459,508	$	676,129	$	675,299

5.FAIR VALUE OF CERTAIN FINANCIAL ASSETS AND LIABILITIES

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

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

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

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

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

15

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, 2018	Level 1		Level 2			Level 3		Total
Cash	$	523,097	$	-		$	-	$	523,097
Money market funds	87,546		-			-		87,546
Certificates of deposit	-		59,104			-		59,104
Commercial paper	-		75,257			-		75,257
Variable rate demand notes	-		34,346			-		34,346
Municipal securities	-		153,204			-		153,204
U.S. government agency securities	-		128,887			-		128,887
U.S. Treasuries	-		111,781			-		111,781
Foreign currency derivatives	-		178			-		178
Total	$	610,643	$	562,757		$	-	$	1,173,400
Amounts included in:
Cash and cash equivalents	$	610,643	$	103,071		$	-	$	713,714
Short-term investments	-		457,898			-		457,898
Accounts receivable, net	-		271			-		271
Investments	-		1,610			-		1,610
Accrued liabilities	-		(93		)	-		(93		)
Total	$	610,643	$	562,757		$	-	$	1,173,400
December 31, 2017	Level 1		Level 2			Level 3		Total
Cash	$	310,885	$	-		$	-	$	310,885
Money market funds	112,848		-			-		112,848
Certificates of deposit	-		15,720			-		15,720
Commercial paper	-		99,903			-		99,903
Variable rate demand notes	-		49,954			-		49,954
Municipal securities	-		529,984			-		529,984
U.S. government agency securities	-		81,230			-		81,230
U.S. Treasuries	-		3,397			-		3,397
Foreign currency derivatives	-		(1,484		)	-		(1,484		)
Total	$	423,733	$	778,704		$	-	$	1,202,437
Amounts included in:
Cash and cash equivalents	$	423,733	$	104,889		$	-	$	528,622
Short-term investments	-		672,933			-		672,933
Accounts receivable, net	-		95			-		95
Investments	-		2,366			-		2,366
Accrued liabilities	-		(1,579		)	-		(1,579		)
Total	$	423,733	$	778,704		$	-	$	1,202,437

All of the Company’s short-term investments are classified within Level 1 or Level 2 of the fair value hierarchy.  The Company’s valuation of its Level 1 investments, which include money market funds, is based on quoted market prices in active markets for identical securities. The Company’s valuation of its Level 2 investments, which include municipal securities, commercial paper, certificates of deposit, VRDNs, U.S. treasuries and U.S. government agency securities, is based on other observable inputs, specifically a market approach which utilizes valuation models, pricing systems, mathematical tools and other relevant information for the same or similar securities. The Company’s valuation of its Level 2 foreign currency exchange contracts is based on quoted market prices of the same or similar instruments, adjusted for counterparty risk. There were no transfers between Level 1 and Level 2 measurements during the nine-months ended September 30, 2018 or the year-ended December 31, 2017, and there were no changes in the Company’s valuation techniques.

16

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 is exposed to foreign currency exchange rate risks related primarily to its foreign business operations. During the three- and nine-months ended September 30, 2018 and the year-ended December 31, 2017, the Company entered into forward currency exchange contracts with financial institutions to create an economic hedge to specifically manage a portion of the foreign exchange risk exposure associated with certain consolidated subsidiaries’ non-functional currency denominated assets and liabilities. All foreign currency exchange contracts of the Company that were outstanding as of September 30, 2018 have terms of one month or less. The Company does not enter into forward currency exchange contracts for speculation or trading purposes.

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

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

September 30, 2018
Derivatives not designated as hedging instruments under FASB ASC 815-20	Notional Amount		Fair Value		Balance Sheet Location
Assets:
Foreign currency exchange contracts:
Receive USD/pay EUR	$	31,411	$	111	Accounts receivable, net
Receive USD/pay GBP	28,315		105		Accounts receivable, net
Receive USD/pay ZAR	14,375		53		Accounts receivable, net
Receive NOK/pay USD	1,450		2		Accounts receivable, net
Liabilities:
Foreign currency exchange contracts:
Receive USD/pay COP	$	3,789	$	(34)	Accrued liabilities
Receive SGD/pay USD	7,342		(23)		Accrued liabilities
Receive USD/pay AUD	12,484		(18)		Accrued liabilities
Receive USD/pay NZD	2,645		(7)		Accrued liabilities
Receive USD/pay MXN	2,044		(6)		Accrued liabilities
Receive RUB/pay USD	909		(5)		Accrued liabilities

17

MONSTER BEVERAGE CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

December 31, 2017
Derivatives not designated as hedging instruments under FASB ASC 815-20	Notional Amount		Fair Value		Balance Sheet Location
Assets:
Foreign currency exchange contracts:
Receive CAD/pay USD	$	4,892	$	61	Accounts receivable, net
Receive USD/pay COP	2,803		13		Accounts receivable, net
Receive USD/pay BRL	1,806		1		Accounts receivable, net
Receive NOK/pay USD	1,534		18		Accounts receivable, net
Receive SGD/pay USD	223		2		Accounts receivable, net
Liabilities:
Foreign currency exchange contracts:
Receive USD/pay EUR	$	65,131	$	(642)	Accrued liabilities
Receive USD/pay GBP	31,342		(334)		Accrued liabilities
Receive USD/pay ZAR	21,311		(222)		Accrued liabilities
Receive USD/pay AUD	17,238		(177)		Accrued liabilities
Receive USD/pay MXN	7,720		(126)		Accrued liabilities
Receive USD/pay TRY	5,483		(52)		Accrued liabilities
Receive USD/pay NZD	1,826		(18)		Accrued liabilities
Receive USD/pay CLP	1,112		(8)		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 hedging instruments under FASB ASC 815-20	Location of gain (loss) recognized in income on derivatives	September 30, 2018		September 30, 2017
Foreign currency exchange contracts	Interest and other income, net	$	2,175	$	(2,172)
		Amount of gain (loss) recognized in income on derivatives
		Nine-months ended
Derivatives not designated as  hedging instruments under  FASB ASC 815-20	Location of gain (loss) recognized in income on derivatives	September 30, 2018		September 30, 2017
Foreign currency exchange contracts	Interest and other income, net	$	7,909	$	(11,639)

18

MONSTER BEVERAGE CORPORATION AND SUBSIDIARIES

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, 2018		December 31, 2017
Raw materials	$	99,266	$	78,834
Finished goods	162,818		176,911
	$	262,084	$	255,745

8.PROPERTY AND EQUIPMENT, NET

Property and equipment consist of the following at:

	September 30, 2018		December 31, 2017
Land	$	44,261	$	47,373
Leasehold improvements	5,760		3,109
Furniture and fixtures	6,925		6,461
Office and computer equipment	18,384		14,506
Computer software	3,103		3,650
Equipment	176,732		148,434
Buildings	113,625		107,374
Vehicles	39,488		38,179
	408,278		369,086
Less: accumulated depreciation and amortization	(165,424)		(138,810)
	$	242,854	$	230,276

Total depreciation and amortization expense recorded was $11.3 million and $9.4 million for the three-months ended September 30, 2018 and 2017, respectively. Total depreciation and amortization expense recorded was $33.5 million and $26.2 million for the nine-months ended September 30, 2018 and 2017, respectively.

19

MONSTER BEVERAGE CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

9.GOODWILL AND OTHER INTANGIBLE ASSETS

The following is a roll-forward of goodwill for the nine-months ended September 30, 2018 and 2017 by reportable segment:

	Monster Energy® Drinks		Strategic Brands		Other		Total
Balance at December 31, 2017	$	693,644	$	637,999	$	-	$	1,331,643
Acquisitions	-		-		-		-
Balance at September 30, 2018	$	693,644	$	637,999	$	-	$	1,331,643
	Monster Energy® Drinks		Strategic Brands		Other		Total
Balance at December 31, 2016	$	693,644	$	637,999	$	-	$	1,331,643
Acquisitions	-		-		-		-
Balance at September 30, 2017	$	693,644	$	637,999	$	-	$	1,331,643

Intangible assets consist of the following at:

	September 30, 2018		December 31, 2017
Amortizing intangibles	$	71,350	$	71,400
Accumulated amortization	(35,349)		(26,383)
	36,001		45,017
Non-amortizing intangibles	1,006,247		989,068
	$	1,042,248	$	1,034,085

Amortizing intangibles primarily consist of customer relationships. All amortizing intangibles have been assigned an estimated finite useful life and such intangibles are amortized on a straight-line basis over the number of years that approximate their respective useful lives, generally five to seven years. Total amortization expense recorded was $3.0 million for both the three-months ended September 30, 2018 and 2017. Total amortization expense recorded was $9.0 million and $8.9 million for the nine-months ended September 30, 2018 and 2017, respectively.

10.DISTRIBUTION AGREEMENTS

In accordance with ASC 420 “Exit or Disposal Cost Obligations”, the Company expenses distributor termination costs in the period in which the written notification of termination occurs. The Company incurred termination costs of $14.1 million and $15.9 million for the three-months ended September 30, 2018 and 2017, respectively. The Company incurred termination costs of $26.6 million and $35.9 million for the nine-months ended September 30, 2018 and 2017, respectively. Such termination costs have been expensed in full and are included in operating expenses for the three- and nine-months ended September 30, 2018 and 2017.

In the normal course of business, amounts received pursuant to new and/or amended distribution agreements entered into with certain distributors, relating to the costs associated with terminating agreements with the Company’s prior distributors, are accounted for as deferred revenue and are recognized as revenue ratably over the anticipated life of the respective distribution agreement, generally 20 years. Revenue recognized was $11.1 million and $11.4 million for the three-months ended September 30, 2018 and 2017, respectively. Revenue recognized was $33.3 million and $31.6 million for the nine-months ended September 30, 2018 and 2017, respectively.

20

MONSTER BEVERAGE CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

11.COMMITMENTS AND CONTINGENCIES

The Company had purchase commitments aggregating approximately $33.8 million at September 30, 2018, 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 $180.8 million at September 30, 2018, which related primarily to sponsorships and other marketing activities.

The Company had operating lease commitments aggregating approximately $15.1 million at September 30, 2018, which related primarily to warehouse and office space.

In February 2018, the working capital line limit for the Company’s credit facility with HSBC Bank (China) Company Limited, Shanghai Branch was increased from $9.0 million to $15.0 million. At September 30, 2018, the interest rate on borrowings under the line of credit was 5.5%. As of September 30, 2018, the Company had $10.1 million outstanding on this line of credit, including interest, which is included in accounts payable in the condensed consolidated balance sheet.

Legal Proceedings

Litigation — The Company, TCCC and certain affiliates are parties to various agreements setting forth, among other things, provisions relating to TCCC’s 18.5% equity holding in the Company and the terms on which the Company’s energy products are distributed globally by members of TCCC’s distribution network.  Among other provisions, the agreements restrict TCCC from competing in the energy drink category, with certain exceptions including an exception relating to the Coca-Cola brand.

TCCC has developed two energy products that it believes it may market under the exception relating to the Coca-Cola brand.  The Company believes that the exception does not apply.  By mutual agreement to obtain clarification, the issue was submitted to AAA arbitration on October 31, 2018.  TCCC has indicated that it has suspended the proposed launch of such products until April 2019. As the relief sought is limited, no reasonably possible range of losses, if any, can be estimated.

The Company has been named a defendant in personal injury lawsuits, claiming that the death or other serious injury of the plaintiffs was caused by consumption of Monster Energy® brand energy drinks. The plaintiffs in these lawsuits allege strict product liability, negligence, fraudulent concealment, breach of implied warranties and wrongful death. The Company believes that each complaint is without merit and plans a vigorous defense. The Company also believes that any damages, if awarded, would not have a material adverse effect on the Company’s financial position or results of operations.

Furthermore, from time to time in the normal course of business, the Company is named in other litigation, including consumer class actions, intellectual property litigation 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.

21

MONSTER BEVERAGE CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

The Company evaluates, on a quarterly basis, developments in legal proceedings and other matters that could cause an increase or decrease in the amount of the liability that is accrued, if any, or in the amount of any related insurance reimbursements recorded. As of September 30, 2018, the Company’s condensed consolidated balance sheet includes accrued loss contingencies of approximately $1.4 million.

12.ACCUMULATED OTHER COMPREHENSIVE LOSS

Changes in accumulated other comprehensive loss by component, after tax, for the nine-months ended September 30, 2018 are as follows:

	Currency Translation Losses		Unrealized (Gains) Losses on Available-for- Sale Securities		Total
Balance at December 31, 2017	$	15,818	$	841	$	16,659
Other comprehensive loss (income) before reclassifications	13,728		(610)		13,118
Amounts reclassified from accumulated other comprehensive loss (income)	-		-		-
Net current-period other comprehensive loss (income)	13,728		(610)		13,118
Balance at September 30, 2018	$	29,546	$	231	$	29,777

13.TREASURY STOCK

On May 29, 2018, 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 “May 2018 Repurchase Program”). No shares were repurchased during the three-months ended September 30, 2018 under the May 2018 Repurchase Program. As of November 8, 2018, $196.7 million remained available for repurchase under the May 2018 Repurchase Program.

On August 7, 2018, the Company’s Board of Directors authorized a new repurchase program for the repurchase of up to an additional $500.0 million of the Company’s outstanding common stock (the “August 2018 Repurchase Program”). No shares were repurchased during the three-months ended September 30, 2018 under the August 2018 Repurchase Program. As of November 8, 2018, $500.0 million remained available for repurchase under the August 2018 Repurchase Program.

14.STOCK-BASED COMPENSATION

The Company has two stock-based compensation plans under which shares were available for grant at September 30, 2018: the Monster Beverage Corporation 2011 Omnibus Incentive Plan, including the Monster Beverage Deferred Compensation Plan as a sub plan thereunder, and the Monster Beverage Corporation 2017 Compensation Plan for Non-Employee Directors, including the Monster Beverage Deferred Compensation Plan for Non-Employee Directors as a sub plan thereunder.

22

MONSTER BEVERAGE CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

The Company recorded $14.1 million and $13.3 million of compensation expense relating to outstanding options and restricted stock units during the three-months ended September 30, 2018 and 2017, respectively. The Company recorded $42.4 million and $39.3 million of compensation expense relating to outstanding options and restricted stock units during the nine-months ended September 30, 2018 and 2017, respectively.

The excess tax benefit for tax deductions from non-qualified stock option exercises, disqualifying dispositions of incentive stock options and vesting of restricted stock units for the three-months ended September 30, 2018 and 2017 was $3.1 million and $2.5 million, respectively. The excess tax benefit for tax deductions from non-qualified stock option exercises, disqualifying dispositions of incentive stock options and vesting of restricted stock units for the nine-months ended September 30, 2018 and 2017 was $7.7 million and $13.8 million, respectively.

Stock Options

Under the Company’s stock-based compensation plans, all stock options granted as of September 30, 2018 were granted at prices based on the fair value of the Company’s common stock on the date of grant. The Company records compensation expense for employee stock options based on the estimated fair value of the options on the date of grant using the Black-Scholes-Merton option pricing formula with the assumptions included in the table below. The Company records compensation expense for non-employee stock options based on the estimated fair value of the options as of the earlier of (1) the date at which a commitment for performance by the non-employee to earn the stock option is reached or (2) the date at which the non-employee’s performance is complete, using the Black-Scholes-Merton option pricing formula with the assumptions included in the table below. The Company uses historical data to determine the exercise behavior, volatility and forfeiture rate of the options.

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,
	2018	2017	2018	2017
Dividend yield	0.0%	0.0%	0.0%	0.0%
Expected volatility	34.5%	35.3%	34.9%	36.6%
Risk-free interest rate	2.9%	1.7%	2.8%	2.1%
Expected term	6.1 years	5.9 years	6.1 years	6.1 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.

23

MONSTER BEVERAGE CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

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

Options	Number of Shares (in thousands)	Weighted- Average Exercise Price Per Share		Weighted- Average Remaining Contractual Term (in years)	Aggregate Intrinsic Value
Outstanding at January 1, 2018	17,819	$	29.62	6.1	$	600,032
Granted 01/01/18 - 03/31/18	2,615	$	58.76
Granted 04/01/18 - 06/30/18	360	$	51.72
Granted 07/01/18 - 09/30/18	11	$	58.77
Exercised	(1,308)	$	18.71
Cancelled or forfeited	(495)	$	43.71
Outstanding at September 30, 2018	19,002	$	34.45	6.1	$	454,476
Vested and expected to vest in the
future at September 30, 2018	18,061	$	33.59	5.9	$	447,291
Exercisable at September 30, 2018	10,179	$	22.51	4.3	$	364,103

The weighted-average grant-date fair value of options granted during the three-months ended September 30, 2018 and 2017 was $22.80 per share and $20.61 per share, respectively. The weighted-average grant-date fair value of options granted during the nine-months ended September 30, 2018 and 2017 was $22.51 per share and $18.04 per share, respectively. The total intrinsic value of options exercised during the three-months ended September 30, 2018 and 2017 was $19.2 million and $12.5 million, respectively. The total intrinsic value of options exercised during the nine-months ended September 30, 2018 and 2017 was $52.1 million and $53.4 million, respectively.

Cash received from option exercises under all plans for the three-months ended September 30, 2018 and 2017 was approximately $10.9 million and $7.7 million, respectively. Cash received from option exercises under all plans for the nine-months ended September 30, 2018 and 2017 was approximately $24.5 million and $26.8 million, respectively.

At September 30, 2018, there was $107.9 million of total unrecognized compensation expense related to non-vested options granted to employees under the Company’s share-based payment plans. That cost is expected to be recognized over a weighted-average period of 2.8 years.

Restricted Stock Units

The cost of stock-based compensation for restricted stock 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 in cash, the award is classified as a liability and revalued at each balance sheet date.

24

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 as follows:

	Number of Shares (in thousands)	Weighted Average Grant-Date Fair Value
Non-vested at January 1, 2018	530	$	45.09
Granted 01/01/18- 03/31/18	221	$	58.75
Granted 04/01/18- 06/30/18	48	$	52.31
Granted 07/01/18 - 09/30/18	1	$	58.72
Vested	(263)	$	45.36
Forfeited/cancelled	(7)	$	33.60
Non-vested at September 30, 2018	530	$	51.48

The weighted-average grant-date fair value of restricted stock units granted during the three-months ended September 30, 2018 was $58.72 per share. No restricted stock units were granted during the three-months ended September 30, 2017. The weighted-average grant-date fair value of restricted stock units granted during the nine-months ended September 30, 2018 and 2017 was $57.59 per share and $46.65 per share, respectively.  As of September 30, 2018, 0.5 million of restricted stock units are expected to vest over their respective terms.

At September 30, 2018, total unrecognized compensation expense relating to non-vested restricted stock units was $19.0 million, which is expected to be recognized over a weighted-average period of 1.8 years.

15.INCOME TAXES

On December 22, 2017, the President of the United States signed into law the Tax Reform Act.  The legislation significantly changes U.S. tax law by, among other things, lowering corporate income tax rates, implementing a territorial tax system and imposing a repatriation tax on deemed repatriated earnings of foreign subsidiaries. The Tax Reform Act permanently reduces the U.S. corporate income tax rate from a maximum of 35% to a flat 21% rate, effective January 1, 2018. The SEC staff issued Staff Accounting Bulletin No. 118 to address the application of U.S. GAAP in situations when a registrant does not have the necessary information available, prepared, or analyzed (including computations) in reasonable detail to complete the accounting for certain income tax effects of the Tax Reform Act. A company may select between one of three scenarios to determine a reasonable estimate for certain income tax effects arising from the Tax Reform Act. Those scenarios are (i) a final estimate which effectively closes the measurement window; (ii) a reasonable estimate leaving the measurement window open for future revisions; and (iii) no estimate as the law is still being analyzed. The Company was able to provide a reasonable estimate for the revaluation of deferred taxes and the effects of the toll charge on undistributed foreign subsidiary earnings and profits (“E&P”). As a result of the reduction in the U.S. corporate income tax rate from 35% to 21% under the Tax Reform Act, the Company revalued its net deferred tax assets at December 31, 2017, resulting in a provisional $39.8 million charge included in the provision for income taxes for the year ended December 31, 2017. The Tax Reform Act also provided for a one-time deemed mandatory repatriation of Post-1986 E&P through the year ended December 31, 2017.  As a result, the Company recognized a provisional $2.1 million charge in the provision for income taxes for the year ended December 31, 2017 related to such deemed mandatory repatriation. During the three-months ended September 30, 2018, the Company made an adjustment to the provisional amount and recognized an additional $1.8 million provision for income tax related to the deemed mandatory repatriation.

25

MONSTER BEVERAGE CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

The Company has not made additional measurement window adjustments to these items during the three- and nine-months ended September 30, 2018. The Company continues to evaluate the various provisions of the Tax Reform Act, including, the global intangible low-taxed income (“GILTI”) and the foreign derived intangible income (“FDII”) provisions. The ultimate impact of the Tax Reform Act may differ from these provisional amounts, possibly materially, due to, among other things, additional analysis, changes in interpretations and assumptions the Company has made, additional regulatory guidance that may be issued, as well as any related actions the Company may take. The measurement window begins in the reporting period that includes the enactment date and ends when an entity has obtained, prepared and analyzed the information needed in order to complete the accounting requirements under ASC Topic 740.

The following is a roll-forward of the Company’s total gross unrecognized tax benefits, not including interest and penalties, for the nine-months ended September 30, 2018:

	Gross Unrecognized Tax Benefits
Balance at December 31, 2017	$	6,540
Additions for tax positions related to the current year	210
Additions for tax positions related to the prior years	1,172
Decreases related to settlement with taxing authority	(2,665)
Balance at September 30, 2018	$	5,257

The Company recognizes accrued interest and penalties related to unrecognized tax benefits in the provision for income taxes in the Company’s condensed consolidated financial statements. As of September 30, 2018, the Company had approximately $1.0 million in accrued interest and penalties related to unrecognized tax benefits. If the Company were to prevail on all uncertain tax positions, the resultant impact on the Company’s effective tax rate would not be significant. It is expected that any change in the amount of unrecognized tax benefits within the next 12 months will not be significant.

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

On October 18, 2016, the IRS began its examination of the Company’s U.S. federal income tax return for the year ended December 31, 2014. On March 27, 2017, the IRS began its examination of the Company’s U.S. federal income tax return for the year ended December 31, 2015.

The Company is in various stages of examination with certain states and certain foreign jurisdictions. The Company’s 2014 through 2017 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 2013 through 2017 tax years.

26

MONSTER BEVERAGE CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

16.EARNINGS PER SHARE

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

	Three-Months Ended		Nine-Months Ended
	September 30,		September 30,
	2018	2017	2018	2017
Weighted-average shares outstanding:
Basic	552,694	567,878	559,472	567,550
Dilutive	7,261	10,490	7,319	10,414
Diluted	559,955	578,368	566,791	577,964

For the three-months ended September 30, 2018 and 2017, options and awards outstanding totaling 3.2 million shares and 5.9 million shares, respectively, were excluded from the calculations as their effect would have been antidilutive. For the nine-months ended September 30, 2018 and 2017, options and awards outstanding totaling 3.0 million shares and 8.4 million shares, respectively, were excluded from the calculations as their effect would have been antidilutive.

17.SEGMENT INFORMATION

The Company has three operating and reportable segments, (i) Monster Energy® Drinks segment, which is primarily comprised of the Company’s Monster Energy® drinks, (ii) Strategic Brands segment, which is comprised of the various energy drink brands acquired from TCCC in 2015, and (iii) Other segment, which is comprised of certain products sold by American Fruits & Flavors LLC, a wholly-owned subsidiary of the Company, to independent third-party customers.

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

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

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

27

MONSTER BEVERAGE CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

The net revenues derived from the Company’s reportable segments and other financial information related thereto for the three- and nine-months ended September 30, 2018 and 2017 are as follows:

	Three-Months Ended				Nine-Months Ended
	September 30,				September 30,
	2018		2017		2018		2017
Net sales:
Monster Energy® Drinks(1)	$	935,146	$	827,690	$	2,645,089	$	2,311,521
Strategic Brands	74,441		76,586		220,011		230,255
Other	6,573		5,200		17,853		16,914
Corporate and unallocated	-		-		-		-
	$	1,016,160	$	909,476	$	2,882,953	$	2,558,690

	Three-Months Ended				Nine-Months Ended
	September 30,				September 30,
	2018		2017		2018		2017
Operating Income:
Monster Energy® Drinks(1) (2)	$	359,090	$	333,210	$	1,033,895	$	968,864
Strategic Brands	41,661		42,663		135,054		137,945
Other	1,742		1,451		4,539		4,585
Corporate and unallocated	(62,920)		(59,952)		(196,380)		(179,719)
	$	339,573	$	317,372	$	977,108	$	931,675

	Three-Months Ended				Nine-Months Ended
	September 30,				September 30,
	2018		2017		2018		2017
Income before tax:
Monster Energy® Drinks(1) (2)	$	359,216	$	333,065	$	1,034,521	$	968,716
Strategic Brands	41,659		42,663		135,075		137,931
Other	1,742		1,451		4,539		4,585
Corporate and unallocated	(60,056)		(55,811)		(191,758)		(177,454)
	$	342,561	$	321,368	$	982,377	$	933,778

(1)Includes $11.1 million and $11.4 million for the three-months ended September 30, 2018 and 2017, respectively, related to the recognition of deferred revenue. Includes $33.3 million and $31.6 million for the nine-months ended September 30, 2018 and 2017, respectively, related to the recognition of deferred revenue.

(2)Includes $14.1 million and $15.9 million for the three-months ended September 30, 2018 and 2017, respectively, related to distributor termination costs. Includes $26.6 million and $35.9 million for the nine-months ended September 30, 2018 and 2017, respectively, related to distributor termination costs.

28

MONSTER BEVERAGE CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

	Three-Months Ended				Nine-Months Ended
	September 30,				September 30,
	2018		2017		2018		2017
Depreciation and amortization:
Monster Energy® Drinks	$	9,157	$	7,546	$	26,926	$	20,959
Strategic Brands	1,947		1,836		5,819		5,474
Other	1,167		1,152		3,493		3,458
Corporate and unallocated	2,014		1,795		6,231		5,213
	$	14,285	$	12,329	$	42,469	$	35,104

Corporate and unallocated expenses for the three-months ended September 30, 2018 include $42.1 million of payroll costs, of which $14.0 million was attributable to stock-based compensation expenses (see Note 14, “Stock-Based Compensation”), as well as $12.3 million attributable to professional service expenses, including accounting and legal costs, and $8.5 million of other operating expenses. Corporate and unallocated expenses for the three-months ended September 30, 2017 include $37.9 million of payroll costs, of which $13.3 million was attributable to stock-based compensation expenses (see Note 14, “Stock-Based Compensation”), as well as $11.9 million attributable to professional service expenses, including accounting and legal costs, and $10.1 million of other operating expenses.

Corporate and unallocated expenses for the nine-months ended September 30, 2018 include $129.9 million of payroll costs, of which $42.4 million was attributable to stock-based compensation expenses (see Note 14, “Stock-Based Compensation”), as well as $36.5 million attributable to professional service expenses, including accounting and legal costs, and $30.0 million of other operating expenses. Corporate and unallocated expenses for the nine-months ended September 30, 2017 include $114.0 million of payroll costs, of which $39.3 million was attributable to stock-based compensation expenses (see Note 14, “Stock-Based Compensation”), as well as $38.3 million attributable to professional service expenses, including accounting and legal costs, and $27.5 million of other operating expenses.

TCCC, through the TCCC Subsidiaries, accounted for approximately 4% and 14% of the Company’s net sales for the three-months ended September 30, 2018 and 2017, respectively. TCCC, through the TCCC Subsidiaries, accounted for approximately 4% and 21% of the Company’s net sales for the nine-months ended September 30, 2018 and 2017, respectively. As part of TCCC’s North America Refranchising initiative (the “North America Refranchising”), the territories of certain TCCC Subsidiaries have been transitioned to certain independent TCCC bottlers/distributors and/or TCCC Related Parties. Accordingly, the Company’s percentage of net sales classified as sales to the TCCC Subsidiaries significantly decreased for three- and nine-months ended September 30, 2018.

CCBCC Operations, LLC accounted for approximately 14% of the Company’s net sales for both the three-months ended September 30, 2018 and 2017. CCBCC Operations, LLC accounted for approximately 14% and 13% of the Company’s net sales for the nine-months ended September 30, 2018 and 2017, respectively.

Reyes Coca-Cola Bottling accounted for approximately 13% and 5% of the Company’s net sales for the three-months ended September 30, 2018 and 2017, respectively. Reyes Coca-Cola Bottling accounted for approximately 13% and 5% of the Company’s net sales for the nine-months ended September 30, 2018 and 2017, respectively.

29

MONSTER BEVERAGE CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

Coca-Cola European Partners accounted for approximately 9% and 10% of the Company’s net sales for the three-months ended September 30, 2018 and 2017, respectively. Coca-Cola European Partners accounted for approximately 9% of the Company’s net sales for both the nine-months ended September 30, 2018 and 2017.

Net sales to customers outside the United States amounted to $283.0 million and $260.1 million for the three-months ended September 30, 2018 and 2017, respectively. Net sales to customers outside the United States amounted to $818.8 million and $698.9 million for the nine-months ended September 30, 2018 and 2017, respectively.

Goodwill and other intangible assets for the Company’s reportable segments as of September 30, 2018 and December 31, 2017 are as follows:

	September 30,		December 31,
	2018		2017
Goodwill and other intangible assets:
Monster Energy® Drinks	$	1,362,448	$	1,346,648
Strategic Brands	991,352		995,582
Other	20,091		23,498
Corporate and unallocated	-		-
	$	2,373,891	$	2,365,728

18.RELATED PARTY TRANSACTIONS

TCCC controls approximately 18.5% of the voting interests of the Company.  The TCCC Subsidiaries, the TCCC Related Parties and the TCCC Independent Bottlers, purchase and distribute certain of the Company’s products in certain domestic and 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, for the three- and nine-months ended September 30, 2018 were $13.7 million and $38.1 million, respectively, and are included as a reduction to net sales. TCCC commissions, based on sales to the TCCC Independent Bottlers for the three- and nine-months ended September 30, 2018 were $4.3 million and $11.8 million, respectively, and are included in operating expenses.

TCCC commissions, based on sales to the TCCC Subsidiaries, for the three- and nine-months ended September 30, 2017 were $2.5 million and $8.2 million, respectively, and are included as a reduction to net sales. TCCC commissions, based on sales to the TCCC Related Parties and the TCCC Independent Bottlers, for the three- and nine-months ended September 30, 2017 were $12.7 million and $33.5 million, respectively, and are included in operating expenses.

Upon adoption of ASC 606, commissions paid to TCCC, based on sales to the TCCC Related Parties, are included as a reduction to net sales. Prior to January 1, 2018, such commissions, based on sales to the TCCC Related Parties, were included in operating expenses.

Net sales to the TCCC Subsidiaries for the three-months ended September 30, 2018 and 2017 were $42.3 million and $130.7 million, respectively.  Net sales to the TCCC Subsidiaries for the nine-months ended September 30, 2018 and 2017 were $117.0 million and $540.4 million, respectively. As part of the North America Refranchising, the territories of certain TCCC Subsidiaries have been transitioned to certain independent TCCC bottlers/distributors and/or TCCC Related Parties. Accordingly, the Company’s net sales classified as sales to the TCCC Subsidiaries significantly decreased for the three- and nine-months ended September 30, 2018.

30

MONSTER BEVERAGE CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

The Company also purchases concentrates from TCCC which are then sold to certain of the Company’s bottlers/distributors. Concentrate purchases from TCCC were $7.4 million and $7.6 million for the three-months ended September 30, 2018 and 2017, respectively. Concentrate purchases from TCCC were $21.6 million and $20.2 million for the nine-months ended September 30, 2018 and 2017, respectively.

Certain TCCC Subsidiaries also contract manufacture certain of the Company’s Monster Energy® brand energy drinks. Such contract manufacturing expenses were $7.0 million and $3.6 million for the three-months ended September 30, 2018 and 2017, respectively. Such contract manufacturing expenses were $18.8 million and $8.7 million for the nine-months ended September 30, 2018 and 2017, respectively.

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

	September 30, 2018		December 31, 2017
Accounts receivable, net	$	43,383	$	32,607
Accounts payable	$	(62,566)	$	(45,465)
Accrued promotional allowances	$	(12,790)	$	(5,884)

Two directors and officers of the Company and their families are principal owners of a company that provides promotional materials to the Company. Expenses incurred with such company in connection with promotional materials purchased during the three-months ended September 30, 2018 and 2017 were $0.2 million and $0.6 million, respectively. Expenses incurred with such company in connection with promotional materials purchased during the nine-months ended September 30, 2018 and 2017 were $1.6 million and $2.0 million, respectively.

31

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.

Overview

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

·Monster Energy®	·NOS®
·Monster Energy Ultra®	·Full Throttle®
·Monster Rehab®	·Burn®
·Monster MAXXTM	·Mother®
·Java Monster®	·Nalu®
·Muscle Monster®	·Ultra Energy®
·Espresso MonsterTM	·Play® and Power Play (stylized)®
·Punch Monster®	·Relentless®
·Juice Monster®	·BPM®
·Übermonster®	·BU®
·Monster Hydro®	·Gladiator®
·Caffé Monster®	·Samurai®
·Monster MULETM	·Mutant®

Our Monster Energy® brand energy drinks represented 91.9% and 90.5% of our net sales for the three-months ended September 30, 2018 and 2017, respectively.

We have three operating and reportable segments, (i) Monster Energy® Drinks segment (“Monster Energy® Drinks”), which is primarily comprised of the Company’s Monster Energy® drinks, (ii) Strategic Brands segment (“Strategic Brands”), which is comprised of the various energy drink brands acquired from The Coca-Cola Company (“TCCC”) in 2015 and (iii) Other segment (“Other”), which is comprised of certain products sold by American Fruits and Flavors LLC (a wholly-owned subsidiary of the Company) to independent third-party customers (“AFF Third-Party Products”).

During the three-months ended September 30, 2018, we continued to expand our existing energy drink portfolio and further develop our distribution markets. During the three-months ended September 30, 2018, we introduced the following products:

·Play® Mango (September 2018)

·Juice Monster® Pacific Punch Energy + Juice (August 2018)

·Relentless® Mango (August 2018)

·Live+ Ascend (July 2018)

·Live+ Ignite (July 2018)

·Live+ Persist (July 2018)

In the normal course of business, we discontinue certain products and/or product lines. Those products or product lines discontinued in the three-months ended September 30, 2018, either individually or in aggregate, did not have a material adverse impact on our financial position, results of operations or liquidity.

32

Our net sales of $1.02 billion for the three-months ended September 30, 2018 represented record sales for our third fiscal quarter. The vast majority of our net sales are derived from our Monster Energy® brand energy drinks. Net sales of our Monster Energy® brand energy drinks were $933.5 million for the three-months ended September 30, 2018.  Net sales of our Strategic Brands were $74.4 million for the three-months ended September 30, 2018.

Net sales for the three-months ended September 30, 2018 were negatively impacted by approximately $11.6 million as a result of the adoption of Accounting Standards Codification (“ASC”) 606. Under ASC 606, commissions paid to TCCC, based on sales to certain of the Company’s TCCC bottlers/distributors that TCCC consolidates, or which TCCC accounts for under the equity method (the “TCCC Related Parties”), are included as a reduction to net sales. Prior to January 1, 2018, commissions based on sales to the TCCC Related Parties, were included in operating expenses.

Our net sales of $1.02 billion for the three-months ended September 30, 2018 were impacted by advance purchases made by our customers due to a pre-announced price increase that became effective on November 1, 2018 on certain of our Monster Energy® brand energy drinks. We estimate that net sales for the three-months ended September 30, 2018 were increased by approximately $16.0 million as a result of such advance purchases.

Our Monster Energy® Drinks segment represented 92.0% and 91.0% of our consolidated net sales for the three-months ended September 30, 2018 and 2017, respectively. Our Strategic Brands segment represented 7.3% and 8.4% of our consolidated net sales for the three-months ended September 30, 2018 and 2017, respectively. Our Other segment represented 0.7% and 0.6% of our consolidated net sales for the three-months ended September 30, 2018 and 2017, respectively.

Net changes in foreign currency exchange rates had an unfavorable impact on net sales in the Monster Energy® Drinks segment of approximately $3.9 million for the three-months ended September 30, 2018. Net changes in foreign currency exchange rates had an unfavorable impact on net sales in the Strategic Brands segment of approximately $1.4 million for the three-months ended September 30, 2018.

Our growth strategy includes expanding our international business. Net sales to customers outside the United States amounted to $283.0 million and $260.1 million for the three-months ended September 30, 2018 and 2017, respectively. Such sales were approximately 28% and 29% of net sales for the three-months ended September 30, 2018 and 2017, respectively. Net changes in foreign currency exchange rates had an unfavorable impact on net sales to customers outside the United States of approximately $5.3 million for the three-months ended September 30, 2018.

Our customers are primarily full service beverage bottlers/distributors, retail grocery and specialty chains, wholesalers, club stores, mass merchandisers, convenience chains, drug stores, foodservice customers and the military. Percentages of our gross sales to our various customer types for the three- and nine-months ended September 30, 2018 and 2017 are reflected below. Such information includes sales made by us directly to the customer types concerned, which include our full service beverage bottlers/distributors in the United States. Such full service beverage bottlers/distributors in turn sell certain of our products to some of the same customer types listed below. We limit our description of our customer types to include only our sales to our full service bottlers/distributors without reference to such bottlers’/distributors’ sales to their own customers.

33

	Three-Months Ended September 30,		Nine-Months Ended September 30,
	2018	2017	2018	2017
U.S. full service bottlers/distributors	62%	62%	62%	62%
International full service bottlers/distributors	30%	30%	30%	29%
Club stores and mass merchandisers	6%	7%	6%	7%
Retail grocery, specialty chains and wholesalers	1%	1%	1%	1%
Other	1%	0%	1%	1%

Our customers include Coca-Cola Refreshments USA, Inc., Coca-Cola Refreshments Canada Company, Coca-Cola Bottling Company, CCBCC Operations, LLC, United Bottling Contracts Company, LLC, Reyes Coca-Cola Bottling, Great Lakes Coca-Cola Bottling, Coca-Cola Southwest Beverages LLC, Coca-Cola of Northern New England, Swire Coca-Cola, USA, Liberty Coca-Cola Beverages, Coca-Cola European Partners, Coca-Cola Hellenic, Coca-Cola FEMSA, Coca-Cola Amatil, Swire Coca-Cola group in China, COFCO Coca-Cola group in China, Coca-Cola Beverages Africa, Coca-Cola İçecek and certain other TCCC network bottlers, Asahi Soft Drinks, Co., Ltd., Kalil Bottling Group, Wal-Mart, Inc. (including Sam’s Club), Costco Wholesale Corporation and Big Geyser, Inc.  A decision by any large customer to decrease amounts purchased from us or to cease carrying our products could have a material negative effect on our financial condition and consolidated results of operations.

TCCC, through certain consolidated subsidiaries (the “TCCC Subsidiaries”), accounted for approximately 4% and 14% of our net sales for the three-months ended September 30, 2018 and 2017, respectively. The TCCC Subsidiaries accounted for approximately 4% and 21% of our net sales for the nine-months ended September 30, 2018 and 2017, respectively. As part of TCCC’s North America Refranchising initiative (the “North America Refranchising”), the territories of certain TCCC Subsidiaries have been transitioned to certain independent TCCC bottlers/distributors and/or TCCC Related Parties. Accordingly, our percentage of net sales to the TCCC Subsidiaries significantly decreased for the three- and nine-months ended September 30, 2018.

CCBCC Operations, LLC accounted for approximately 14% of our net sales for both the three-months ended September 30, 2018 and 2017.  CCBCC Operations, LLC accounted for approximately 14% and 13% of our net sales for the nine-months ended September 30, 2018 and 2017, respectively.

Reyes Coca-Cola Bottling accounted for approximately 13% and 5% of the Company’s net sales for the three-months ended September 30, 2018 and 2017, respectively. Reyes Coca-Cola Bottling accounted for approximately 13% and 5% of the Company’s net sales for the nine-months ended September 30, 2018 and 2017, respectively.

Coca-Cola European Partners accounted for approximately 9% and 10% of the Company’s net sales for the three-months ended September 30, 2018 and 2017, respectively. Coca-Cola European Partners accounted for approximately 9% of the Company’s net sales for both the nine-months ended September 30, 2018 and 2017.

34

Results of Operations

The following table sets forth key statistics for the three- and nine-months ended September 30, 2018 and 2017.

(In thousands, except per share amounts)	Three-Months Ended September 30,				Percentage Change	Nine-Months Ended September 30,				Percentage Change
	2018		2017		18 vs. 17	2018		2017		18 vs. 17
Net sales1,2	$	1,016,160	$	909,476	11.7%	$	2,882,953	$	2,558,690	12.7%
Cost of sales	408,501		339,767		20.2%	1,139,780		924,610		23.3%
Gross profit*1,2	607,659		569,709		6.7%	1,743,173		1,634,080		6.7%
Gross profit as a percentage of net sales1	59.8%		62.6%			60.5%		63.9%
Operating expenses3,4	268,086		252,337		6.2%	766,065		702,405		9.1%
Operating expenses as a percentage of net sales	26.4%		27.7%			26.6%		27.5%
Operating income1,3	339,573		317,372		7.0%	977,108		931,675		4.9%
Operating income as a percentage of net sales	33.4%		34.9%			33.9%		36.4%
Interest and other income (expense), net	2,988		3,996		(25.2%)	5,269		2,103		150.5%
Income before provision for income taxes1,3	342,561		321,368		6.6%	982,377		933,778		5.2%
Provision for income taxes	74,828		102,624		(27.1%)	228,480		314,422		(27.3%)
Income taxes as a percentage of income before taxes	21.8%		31.9%			23.3%		33.7%
Net income1,3	$	267,733	$	218,744	22.4%	$	753,897	$	619,356	21.7%
Net income as a percentage of net sales	26.3%		24.1%			26.2%		24.2%
Net income per common share:
Basic	$	0.48	$	0.39	25.8%	$	1.35	$	1.09	23.5%
Diluted	$	0.48	$	0.38	26.4%	$	1.33	$	1.07	24.1%
Case sales (in thousands)
(in 192-ounce case equivalents)	111,038		96,184		15.4%	313,410		273,409		14.6%

¹Includes $11.1 million and $11.4 million for the three-months ended September 30, 2018 and 2017, respectively, related to the recognition of deferred revenue. Includes $33.3 million and $31.6 million for the nine-months ended September 30, 2018 and 2017, respectively, related to the recognition of deferred revenue.

2Net sales were negatively impacted by approximately $11.6 million and $33.8 million for the three- and nine-months ended September 30, 2018, respectively, as a result of the adoption of ASC 606.

3Includes $14.1 million and $15.9 million for the three-months ended September 30, 2018 and 2017, respectively, of distributor termination costs. Includes $26.6 million and $35.9 million for the nine-months ended September 30, 2018 and 2017, respectively, of distributor termination costs.

4Without the adoption of ASC 606, an additional $11.6 million and $33.8 million of commissions would have been included in operating expenses for the three- and nine-months ended September 30, 2018, respectively (such commissions are included as a reduction to net sales).

*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.

35

Results of Operations for the Three-Months Ended September 30, 2018 Compared to the Three-Months Ended September 30, 2017.

Net Sales. Net sales were $1.02 billion for the three-months ended September 30, 2018, an increase of approximately $106.7 million, or 11.7% higher than net sales of $909.5 million for the three-months ended September 30, 2017. Net sales for the three-months ended September 30, 2018 were negatively impacted by approximately $11.6 million as a result of the adoption of ASC 606. Net changes in foreign currency exchange rates had an unfavorable impact on net sales of approximately $5.3 million for the three-months ended September 30, 2018. Our net sales of $1.02 billion for the three-months ended September 30, 2018 were impacted by advance purchases made by our customers due to a pre-announced price increase that became effective on November 1, 2018 on certain of our Monster Energy® brand energy drinks. We estimate that net sales for the three-months ended September 30, 2018 were increased by approximately $16.0 million as a result of such advance purchases.

Net sales for the Monster Energy® Drinks segment were $935.1 million for the three-months ended September 30, 2018, an increase of approximately $107.5 million, or 13.0% higher than net sales of $827.7 million for the three-months ended September 30, 2017. Net sales for the Monster Energy® Drinks segment for the three-months ended September 30, 2018 were negatively impacted by approximately $5.3 million as a result of the adoption of ASC 606. Net changes in foreign currency exchange rates had an unfavorable impact on net sales for the Monster Energy® Drinks segment of approximately $3.9 million for the three-months ended September 30, 2018. Net sales for the Monster Energy® Drinks segment increased primarily due to increased sales by volume of our Monster Energy® brand energy drinks as a result of increased domestic and international consumer demand.

Net sales for the Strategic Brands segment were $74.4 million for the three-months ended September 30, 2018, a decrease of approximately $2.1 million, or 2.8% lower than net sales of $76.6 million for the three-months ended September 30, 2017. Net sales for the Strategic Brands segment for the three-months ended September 30, 2018 were negatively impacted by approximately $6.3 million as a result of the adoption of ASC 606. Net changes in foreign currency exchange rates had an unfavorable impact on net sales for the Strategic Brands segment of approximately $1.4 million for the three-months ended September 30, 2018.

Net sales for the Other segment were $6.6 million for the three-months ended September 30, 2018, an increase of approximately $1.4 million, or 26.4% higher than net sales of $5.2 million for the three-months ended September 30, 2017.

Case sales, in 192-ounce case equivalents, were 111.0 million cases for the three-months ended September 30, 2018, an increase of approximately 14.9 million cases or 15.4% higher than case sales of 96.2 million cases for the three-months ended September 30, 2017. The overall average net sales per case (excluding net sales of AFF Third-Party Products of $6.6 million and $5.2 million for the three-months ended September 30, 2018 and 2017, respectively, as these sales do not have unit case equivalents) decreased to $9.09 for the three-months ended September 30, 2018, which was 3.3% lower than the average net sales per case of $9.40 for the three-months ended September 30, 2017, partially due to the adoption of ASC 606. Without the adoption of ASC 606, the overall average net sales per case (excluding net sales of AFF Third-Party Products of $6.6 million and $5.2 million for the three-months ended September 30, 2018 and 2017, respectively, as these sales do not have unit case equivalents) decreased to $9.20 for the three-months ended September 30, 2018, which was 2.2% lower than the average net sales per case of $9.40 for the three-months ended September 30, 2017.

36

Gross Profit.  Gross profit was $607.7 million for the three-months ended September 30, 2018, an increase of approximately $38.0 million, or 6.7% higher than the gross profit of $569.7 million for the three-months ended September 30, 2017. The increase in gross profit dollars was primarily the result of the $110.2 million increase in net sales of our Monster Energy® brand energy drinks for the three-months ended September 30, 2018.

Gross profit as a percentage of net sales decreased to 59.8% for the three-months ended September 30, 2018 from 62.6% for the three-months ended September 30, 2017. Gross profit as a percentage of net sales, excluding the impact of ASC 606, was 60.3% for the three-months ended September 30, 2018.

The decrease in gross profit as a percentage of net sales was primarily attributable to (i) increases in certain input costs such as aluminum cans, freight in and other input costs; (ii) the $11.6 million of commissions accounted for as a reduction to net sales due to the adoption of ASC 606; (iii) increases in promotional allowances as a percentage of gross sales; (iv) a change in domestic product sales mix; and (v) geographical gross profit mix.

Operating Expenses.  Total operating expenses were $268.1 million for the three-months ended September 30, 2018, an increase of approximately $15.7 million, or 6.2% higher than total operating expenses of $252.3 million for the three-months ended September 30, 2017. The increase in operating expenses was primarily due to increased out-bound freight and warehouse costs of $12.8 million, increased payroll expenses of $5.9 million (of which $0.8 million was related to an increase in stock-based compensation), increased expenditures of $4.9 million for advertising, and increased expenditures of $3.1 million for sponsorships and endorsements. Commissions included in operating expenses were $4.7 million, a decrease of $8.7 million, or 65.0% lower than commissions included in operating expenses of $13.4 million for the three-months ended September 30, 2017. Without the adoption of ASC 606, an additional $11.6 million of commissions would have been included in operating expenses for the three-months ended September 30, 2018 (such commissions are included as a reduction to net sales).

Operating Income.  Operating income was $339.6 million for the three-months ended September 30, 2018, an increase of approximately $22.2 million, or 7.0% higher than operating income of $317.4 million for the three-months ended September 30, 2017. Operating income as a percentage of net sales decreased to 33.4% for the three-months ended September 30, 2018 from 34.9% for the three-months ended September 30, 2017. Operating income was $43.8 million and $41.9 million for the three-months ended September 30, 2018 and 2017, respectively, in connection with our operations in Europe, Middle East and Africa (“EMEA”), Asia Pacific and South America.

Operating income for the Monster Energy® Drinks segment was $359.1 million for the three-months ended September 30, 2018, an increase of approximately $25.9 million, or 7.8% higher than operating income of $333.2 million for the three-months ended September 30, 2017. The increase in operating income for the Monster Energy® Drinks segment was primarily the result of the $110.2 million increase in net sales of our Monster Energy® brand energy drinks for the three-months ended September 30, 2018.

Operating income for the Strategic Brands segment was $41.7 million for the three-months ended September 30, 2018, a decrease of approximately $1.0 million, or 2.3% lower than operating income of $42.7 million for the three-months ended September 30, 2017.

Operating income for the Other segment was $1.7 million for the three-months ended September 30, 2018, an increase of approximately $0.3 million, or 20.0% higher than operating income of $1.5 million for the three-months ended September 30, 2017.

37

Interest and Other Income, net.  Interest and other non-operating income, net, was $3.0 million for the three-months ended September 30, 2018, as compared to interest and other non-operating income, net of $4.0 million for the three-months ended September 30, 2017. Foreign currency transaction (losses) gains were ($0.3) million and $1.8 million for the three-months ended September 30, 2018 and 2017, respectively. Interest income was $3.4 million and $2.3 million for the three-months ended September 30, 2018 and 2017, respectively.

Provision for Income Taxes.  Provision for income taxes was $74.8 million for the three-months ended September 30, 2018, a decrease of $27.8 million, or 27.1% lower than the provision for income taxes of $102.6 million for the three-months ended September 30, 2017. The effective combined federal, state and foreign tax rate decreased to 21.8% from 31.9% for the three-months ended September 30, 2018 and 2017, respectively. The decrease in the effective tax rate was primarily due to the reduction in the U.S. federal statutory tax rate as a result of the Tax Cuts and Jobs Act (the “Tax Reform Act”) signed into law on December 22, 2017 (before considering the potential impact of further clarification of certain matters related to the Tax Reform Act), and to a reduction in certain foreign income that is subject to U.S. taxation.  The decrease in the provision for income taxes was partially offset by the elimination of the domestic production deduction following the Tax Reform Act.

The recorded impact of the Tax Reform Act is provisional and the final amount may differ, possibly materially, due to, among other things, changes in estimates, interpretations and assumptions we have made, changes in IRS interpretations, the issuance of new guidance, legislative actions, changes in accounting standards or related interpretations in response to the Tax Reform Act, as well as any and future actions by certain states within the United States that have not currently adopted the Tax Reform Act.

Net Income.  Net income was $267.7 million for the three-months ended September 30, 2018, an increase of $49.0 million, or 22.4% higher than net income of $218.7 million for the three-months ended September 30, 2017. The increase in net income was primarily due to the $38.0 million increase in gross profit and the $27.8 million decrease in the provision for income taxes. The increase in net income was partially offset by the increase in operating expenses of $15.7 million.

Results of Operations for the Nine-Months Ended September 30, 2018 Compared to the Nine-Months Ended September 30, 2017.

Net Sales. Net sales were $2.88 billion for the nine-months ended September 30, 2018, an increase of approximately $324.3 million, or 12.7% higher than net sales of $2.56 billion for the nine-months ended September 30, 2017. Net sales for the nine-months ended September 30, 2018 were negatively impacted by approximately $33.8 million as a result of the adoption of ASC 606. Net changes in foreign currency exchange rates had a favorable impact on net sales of approximately $29.2 million for the nine-months ended September 30, 2018.

Net sales for the Monster Energy® Drinks segment were $2.65 billion for the nine-months ended September 30, 2018, an increase of approximately $333.6 million, or 14.4% higher than net sales of $2.31 billion for the nine-months ended September 30, 2017. Net sales for the Monster Energy® Drinks segment for the nine-months ended September 30, 2018 were negatively impacted by approximately $14.2 million as a result of the adoption of ASC 606. Net changes in foreign currency exchange rates had a favorable impact on net sales for the Monster Energy® Drinks segment of approximately $27.0 million for the nine-months ended September 30, 2018. Net sales for the Monster Energy® Drinks segment increased primarily due to increased sales by volume of our Monster Energy® brand energy drinks as a result of increased domestic and international consumer demand.

38

Net sales for the Strategic Brands segment were $220.0 million for the nine-months ended September 30, 2018, a decrease of approximately $10.2 million, or 4.4% lower than net sales of $230.3 million for the nine-months ended September 30, 2017. Net sales for the Strategic Brands segment for the nine-months ended September 30, 2018 were negatively impacted by approximately $19.5 million as a result of the adoption of ASC 606. Net changes in foreign currency exchange rates had a favorable impact on net sales for the Strategic Brands segment of approximately $2.2 million for the nine-months ended September 30, 2018.

Net sales for the Other segment were $17.9 million for the nine-months ended September 30, 2018, an increase of approximately $0.9 million, or 5.6% higher than net sales of $16.9 million for the nine-months ended September 30, 2017.

Case sales, in 192-ounce case equivalents, were 313.4 million cases for the nine-months ended September 30, 2018, an increase of approximately 40.0 million cases or 14.6% higher than case sales of 273.4 million cases for the nine-months ended September 30, 2017. The overall average net sales per case (excluding net sales of AFF Third-Party Products of $17.9 million and $16.9 million for the nine-months ended September 30, 2018 and 2017, respectively, as these sales do not have unit case equivalents) decreased to $9.14 for the nine-months ended September 30, 2018, which was 1.7% lower than the average net sales per case of $9.30 for the nine-months ended September 30, 2017, partially due to the adoption of ASC 606. Without the adoption of ASC 606, the overall average net sales per case (excluding net sales of AFF Third-Party Products of $17.9 million and $16.9 million for the nine-months ended September 30, 2018 and 2017, respectively, as these sales do not have unit case equivalents) decreased to $9.25 for the nine-months ended September 30, 2018, which was 0.5% lower than the average net sales per case of $9.30 for the nine-months ended September 30, 2017.

Gross Profit.  Gross profit was $1.74 billion for the nine-months ended September 30, 2018, an increase of approximately $109.1 million, or 6.7% higher than the gross profit of $1.63 billion for the nine-months ended September 30, 2017. The increase in gross profit dollars was primarily the result of the $335.4 million increase in net sales of our Monster Energy® brand energy drinks for the nine-months ended September 30, 2018.

Gross profit as a percentage of net sales decreased to 60.5% for the nine-months ended September 30, 2018 from 63.9% for the nine-months ended September 30, 2017. Gross profit as a percentage of net sales, excluding the impact of ASC 606, was 60.9% for the nine-months ended September 30, 2018.

The decrease in gross profit as a percentage of net sales was primarily attributable to (i) increases in certain input costs, principally aluminum cans, freight in and other input costs; (ii) domestic product sales mix; (iii) increases in promotional allowances as a percentage of gross sales; (iv) the $33.8 million of commissions accounted for as a reduction to net sales due to the adoption of ASC 606; and (v) geographical sales mix, as a result of our international sales increasing as a percentage of total net sales (our foreign operations generally have lower gross profit margins).

Operating Expenses.  Total operating expenses were $766.1 million for the nine-months ended September 30, 2018, an increase of approximately $63.7 million, or 9.1% higher than total operating expenses of $702.4 million for the nine-months ended September 30, 2017. The increase in operating expenses was primarily due to increased out-bound freight and warehouse costs of $33.4 million, increased payroll expenses of $23.7 million (of which $3.2 million was related to an increase in stock-based compensation), increased expenditures of $11.1 million for sponsorships and endorsements, increased expenditures of $7.1 million for advertising, increased expenditures of $5.4 million for other marketing expenses and increased expenditures of $3.2 million for allocated trade development.  The increase in operating expenses was partially offset by the $9.3 million decrease in costs associated with distributor terminations. Commissions included in operating expenses were $13.0 million, or 63.4% lower than commissions included in operating expenses of $35.5 million for the nine-months ended September 30, 2017. Without the adoption of ASC 606, an additional $33.8 million of commissions would have been included in operating expenses for the nine-months ended September 30, 2018 (such commissions are included as a reduction to net sales).

39

Operating Income.  Operating income was $977.1 million for the nine-months ended September 30, 2018, an increase of approximately $45.4 million, or 4.9% higher than operating income of $931.7 million for the nine-months ended September 30, 2017. Operating income as a percentage of net sales decreased to 33.9% for the nine-months ended September 30, 2018 from 36.4% for the nine-months ended September 30, 2017. Operating income was $135.0 million and $119.3 million for the nine-months ended September 30, 2018 and 2017, respectively, in connection with our operations in EMEA, Asia Pacific and South America.

Operating income for the Monster Energy® Drinks segment was $1.03 billion for the nine-months ended September 30, 2018, an increase of approximately $65.0 million, or 6.7% higher than operating income of $968.9 million for the nine-months ended September 30, 2017. The increase in operating income for the Monster Energy® Drinks segment was primarily the result of the $335.4 million increase in net sales of our Monster Energy® brand energy drinks for the nine-months ended September 30, 2018.

Operating income for the Strategic Brands segment was $135.1 million for the nine-months ended September 30, 2018, a decrease of approximately $2.9 million, or 2.1% lower than operating income of $137.9 million for the nine-months ended September 30, 2017.

Operating income for the Other segment was $4.5 million for the nine-months ended September 30, 2018, a decrease of approximately $0.05 million, or 1.0% lower than operating income of $4.6 million for the nine-months ended September 30, 2017.

Interest and Other Income, net.  Interest and other non-operating income, net, was $5.3 million for the nine-months ended September 30, 2018, as compared to interest and other non-operating income, net of $2.1 million for the nine-months ended September 30, 2017. Foreign currency transaction (losses) gains were ($3.6) million and ($2.0) million for the nine-months ended September 30, 2018 and 2017, respectively. Interest income was $9.1 million and $4.5 million for the nine-months ended September 30, 2018 and 2017, respectively.

Provision for Income Taxes.  Provision for income taxes was $228.5 million for the nine-months ended September 30, 2018, a decrease of $85.9 million, or 27.3% lower than the provision for income taxes of $314.4 million for the nine-months ended September 30, 2017. The effective combined federal, state and foreign tax rate decreased to 23.3% from 33.7% for the nine-months ended September 30, 2018 and 2017, respectively. The decrease in the effective tax rate was primarily due to the reduction in the U.S. federal statutory tax rate as a result of the Tax Reform Act signed into law on December 22, 2017 (before considering the potential impact of further clarification of certain matters related to the Tax Reform Act), and to reduction in certain foreign income that is subject to U.S. taxation.  The decrease in the provision for income taxes was partially offset by the elimination of the domestic production deduction following the Tax Reform Act as well as a decrease in the stock based compensation tax deduction.

The recorded impact of the Tax Reform Act is provisional and the final amount may differ, possibly materially, due to, among other things, changes in estimates, interpretations and assumptions we have made, changes in IRS interpretations, the issuance of new guidance, legislative actions, changes in accounting standards or related interpretations in response to the Tax Reform Act as well as any and future actions by certain states within the United States that have not currently adopted the Tax Reform Act.

Net Income.  Net income was $753.9 million for the nine-months ended September 30, 2018, an increase of $134.5 million, or 21.7% higher than net income of $619.4 million for the nine-months ended September 30, 2017. The increase in net income was primarily due to the $109.1 million increase in gross profit and the $85.9 million decrease in the provision for income taxes. The increase in net income was partially offset by the increase in operating expenses of $63.7 million.

40

Non-GAAP Financial Measures

Gross Sales**.  Gross sales were $1.18 billion for the three-months ended September 30, 2018, an increase of approximately $142.4 million, or 13.7% higher than gross sales of $1.04 billion for the three-months ended September 30, 2017. Gross sales of our Monster Energy® brand energy drinks were $1.08 billion for the three-months ended September 30, 2018, an increase of $139.1 million, or 14.8% higher than gross sales of $939.8 million for the three-months ended September 30, 2017. Gross sales of our Monster Energy® brand energy drinks increased partially due to increased sales by volume as a result of increased domestic and international consumer demand.  Gross sales of our Strategic Brands were $85.5 million for the three-months ended September 30, 2018, an increase of $4.7 million, or 5.8% higher than gross sales of $80.7 million for the three-months ended September 30, 2017. Gross sales of our AFF Third-Party Products were $6.6 million for the three-months ended September 30, 2018, an increase of $1.4 million, or 26.4% higher than gross sales of $5.2 million for the three-months ended September 30, 2017. No other individual product line contributed either a material increase or decrease to net sales for the three-months ended September 30, 2018. Promotional and other allowances, as described in the footnote below, were $168.3 million for the three-months ended September 30, 2018, an increase of $35.7 million, or 26.9% higher than promotional and other allowances of $132.6 million for the three-months ended September 30, 2017. Promotional and other allowances as a percentage of gross sales increased to 14.2% from 12.7% for the three-months ended September 30, 2018 and 2017, respectively, partially due to commissions of $11.6 million included in net sales related to the adoption of ASC 606 described above.

Our gross sales of $1.18 billion for the three-months ended September 30, 2018 were impacted by advance purchases made by our customers due to a pre-announced price increase that became effective on November 1, 2018 on certain of our Monster Energy® brand energy drinks. We estimate that gross sales for the three-months ended September 30, 2018 were increased by approximately $18.0 million as a result of such advance purchases.

Net changes in foreign currency exchange rates had an unfavorable impact on gross sales in the Monster Energy® Drinks segment of approximately $4.3 million for the three-months ended September 30, 2018. Net changes in foreign currency exchange rates had an unfavorable impact on gross sales in the Strategic Brands segment of approximately $1.4 million for the three-months ended September 30, 2018.

Gross Sales**.  Gross sales were $3.37 billion for the nine-months ended September 30, 2018, an increase of approximately $439.8 million, or 15.0% higher than gross sales of $2.93 billion for the nine-months ended September 30, 2017. Gross sales of our Monster Energy® brand energy drinks were $3.05 billion for the nine-months ended September 30, 2018, an increase of $428.5 million, or 16.3% higher than gross sales of $2.62 billion for the nine-months ended September 30, 2017. Gross sales of our Monster Energy® brand energy drinks increased partially due to increased sales by volume as a result of increased domestic and international consumer demand.  Gross sales of our Strategic Brands were $253.8 million for the nine-months ended September 30, 2018, an increase of $9.7 million, or 4.0% higher than gross sales of $244.0 million for the nine-months ended September 30, 2017. Gross sales of our AFF Third-Party Products were $17.9 million for the nine-months ended September 30, 2018, an increase of $0.9 million, or 5.6% higher than gross sales of $16.9 million for the nine-months ended September 30, 2017. No other individual product line contributed either a material increase or decrease to net sales for the nine-months ended September 30, 2018. Promotional and other allowances, as described in the footnote below, were $483.4 million for the nine-months ended September 30, 2018, an increase of $115.5 million, or 31.4% higher than promotional and other allowances of $367.9 million for the nine-months ended September 30, 2017. Promotional and other allowances as a percentage of gross sales increased to 14.4% from 12.6% for the nine-months ended September 30, 2018 and 2017, respectively, partially due to an increase in commissions of $33.8 million included in net sales related to the adoption of ASC 606 described above.

Net changes in foreign currency exchange rates had a favorable impact on gross sales in the Monster Energy® Drinks segment of approximately $35.8 million for the nine-months ended September 30, 2018. Net changes in foreign currency exchange rates had a favorable impact on gross sales in the Strategic Brands segment of approximately $2.2 million for the nine-months ended September 30, 2018.

41

**Gross sales 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 overall Company performance. The use of gross sales allows evaluation of sales performance before the effect of any promotional items, which can mask certain performance issues. We therefore believe that the presentation of gross sales provides a useful measure of our operating performance. The use of gross sales is not a measure that is recognized under GAAP and should not be considered as an alternative to net sales, which is determined in accordance with GAAP, and should not be used alone as an indicator of operating performance in place of net sales. Additionally, gross sales may not be comparable to similarly titled measures used by other companies, as gross sales has been defined by our internal reporting practices. In addition, gross sales may not be realized in the form of cash receipts as promotional payments and allowances may be deducted from payments received from certain customers.

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

(In thousands)	Three-Months Ended September 30,				Percentage Change	Nine-Months Ended September 30,				Percentage Change
	2018		2017		18 vs. 17	2018		2017		18 vs. 17
Gross sales, net of discounts and returns	$	1,184,444	$	1,042,046	13.7%	$	3,366,334	$	2,926,564	15.0%
Less: Promotional and other allowances***	168,284		132,570		26.9%	483,381		367,874		31.4%
Net Sales	$	1,016,160	$	909,476	11.7%	$	2,882,953	$	2,558,690	12.7%

***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 primarily include consideration given to our bottlers/distributors or retail customers including, but not limited to the following: (i) discounts granted off list prices to support price promotions to end-consumers by retailers; (ii) reimbursements given to our bottlers/distributors for agreed portions of their promotional spend with retailers, including slotting, shelf space allowances and other fees for both new and existing products; (iii) our agreed share of fees given to bottlers/distributors and/or directly to retailers for advertising, in-store marketing and promotional activities; (iv) our agreed share of slotting, shelf space allowances and other fees given directly to retailers, club stores and/or wholesalers; (v) incentives given to our bottlers/distributors and/or retailers for achieving or exceeding certain predetermined sales goals; (vi) discounted or free products; (vii) contractual fees given to our bottlers/distributors related to sales made by us direct to certain customers that fall within the bottlers’/distributors’ sales territories; and (viii) certain commissions 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 constitute a material portion of our marketing activities. Our promotional allowance programs with its 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 the three- and nine-months ended September 30, 2018 and 2017 were (i) to increase sales volume and trial, (ii) to address market conditions, and (iii) to secure shelf and display space at retail.

Sales

The table below discloses selected quarterly data regarding sales for the three- and nine-months ended September 30, 2018 and 2017, respectively. Data from any one or more quarters or periods is not necessarily indicative of annual results or continuing trends.

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

42

Our quarterly results of operations reflect seasonal trends that are primarily the result of increased demand in the warmer months of the year. It has been our experience that beverage sales tend to be lower during the first and fourth quarters of each calendar year. However, our experience with our energy drink products suggests they may be less seasonal than the seasonality of traditional beverages. In addition, our continued growth internationally may further reduce the impact of seasonality on our business. Quarterly fluctuations may also be affected by other factors including the introduction of new products, the opening of new markets where temperature fluctuations are more pronounced, the addition of new bottlers, customers and distributors, changes in the sales mix of our products and changes in advertising and promotional expenses.

(In thousands, except average net sales per case)	Three-Months Ended September 30,				Nine-Months Ended September 30,
	2018		2017		2018		2017
Net sales1	$	1,016,160	$	909,476	$	2,882,953	$	2,558,690
Less: AFF third-party sales	(6,573)		(5,200)		(17,853)		(16,914)
Adjusted net sales1,2	$	1,009,587	$	904,276	$	2,865,100	$	2,541,776
Case sales by segment:
Monster Energy® Drinks	91,806		78,330		257,746		220,433
Strategic Brands	19,232		17,854		55,664		52,976
Other2	-		-		-		-
Total case sales	111,038		96,184		313,410		273,409
Average net sales per case3	$	9.09	$	9.40	$	9.14	$	9.30

1Includes $11.1 million and $11.4 million for the three-months ended September 30, 2018 and 2017, respectively, related to the recognition of deferred revenue. Includes $33.3 million and $31.6 million for the nine-months ended September 30, 2018 and 2017, respectively, related to the recognition of deferred revenue.

2Excludes Other segment net sales of $6.6 million and $5.2 million for the three-months ended September 30, 2018 and 2017, respectively, comprised of net sales of AFF Third-Party Products to independent third-party customers, as these sales do not have unit case equivalents. Excludes Other segment net sales of $17.9 million and $16.9 million for the nine-months ended September 30, 2018 and 2017, respectively, comprised of net sales of AFF Third-Party Products to independent third-party customers, as these sales do not have unit case equivalents.

3Without the adoption of ASC 606, the overall average net sales per case decreased to $9.20 for the three-months ended September 30, 2018, which was 2.2% lower than the average net sales per case of $9.40 for the three-months ended September 30, 2017. Without the adoption of ASC 606, the overall average net sales per case decreased to $9.25 for the nine-months ended September 30, 2018, which was 0.5% lower than the average net sales per case of $9.30 for the nine-months ended September 30, 2017.

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

Liquidity and Capital Resources

Cash flows provided by operating activities.  Cash provided by operating activities was $821.4 million for the nine-months ended September 30, 2018, as compared with cash provided by operating activities of $790.1 million for the nine-months ended September 30, 2017.

For the nine-months ended September 30, 2018, cash provided by operating activities was primarily attributable to net income earned of $753.9 million and adjustments for certain non-cash expenses, consisting of $42.4 million of stock-based compensation and $42.5 million of depreciation and other amortization. For the nine-months ended September 30, 2018, cash provided by operating activities also increased due to a $96.5 million decrease in prepaid income taxes, a $48.7 million increase in accrued promotional allowances, a $39.6 million increase in accounts payable, a $16.5 million increase in accrued liabilities, a $7.8 million decrease in distributor receivables and a $1.6 million increase in other liabilities. For the nine-months ended September 30, 2018, cash used in operating activities was primarily attributable to a $181.7 million increase in accounts receivable, a $16.5 million increase in prepaid expenses and other current assets, a $13.9 million decrease in deferred revenue, a $10.3 million increase in inventories, a $4.4 million decrease in accrued compensation and a $1.4 million decrease in income taxes payable.

43

For the nine-months ended September 30, 2017, cash provided by operating activities was primarily attributable to net income earned of $619.4 million and adjustments for certain non-cash expenses, consisting of $39.3 million of stock-based compensation and $35.1 million of depreciation and other amortization. For the nine-months ended September 30, 2017, cash provided by operating activities also increased due to a $125.0 million decrease in the TCCC transaction receivables, a $42.1 million increase in accrued promotional allowances, a $24.7 million increase in accounts payable, a $24.2 million decrease in prepaid income taxes, a $15.9 million increase in accrued liabilities and a $7.4 million increase in accrued distributor terminations. For the nine-months ended September 30, 2017, cash used in operating activities was primarily attributable to a $70.9 million increase in accounts receivable, a $46.7 million increase in inventories, a $12.5 million decrease in deferred revenue, a $9.2 million increase in prepaid expenses and other current assets, a $4.1 million decrease in income taxes payable and a $3.2 million decrease in accrued compensation.

Cash flows provided by (used in) investing activities. Cash provided by investing activities was $154.1 million for the nine-months ended September 30, 2018 as compared to cash used in investing activities of ($483.4) million for the nine-months ended September 30, 2017.

For both the nine-months ended September 30, 2018 and 2017, cash provided by investing activities was primarily attributable to sales of available-for-sale investments. For both the nine-months ended September 30, 2018 and 2017, cash used in investing activities was primarily attributable to purchases of available-for-sale investments. For both the nine-months ended September 30, 2018 and 2017, cash used in investing activities also included the acquisitions of fixed assets consisting of vans and promotional vehicles, coolers and other equipment to support our marketing and promotional activities, production equipment, furniture and fixtures, office and computer equipment, computer software, equipment used for sales and administrative activities, certain leasehold improvements, as well as acquisitions of and/or improvements to real property. We expect to continue to use a portion of our cash in excess of our requirements for operations for purchasing short-term and long-term investments, leasehold improvements, the acquisition of capital equipment (specifically, vans, trucks and promotional vehicles, coolers, other promotional equipment, merchandise displays, warehousing racks as well as items of production equipment required to produce certain of our existing and/or new products) to develop our brand in international markets and for other corporate purposes. From time to time, we may also use cash to purchase additional real property related to our beverage business and/or acquire compatible businesses.

Cash flows used in financing activities.  Cash used in financing activities was $782.2 million for the nine-months ended September 30, 2018 as compared to cash flows used in financing activities of $224.3 million for the nine-months ended September 30, 2017. The cash flows used in financing activities for both the nine-months ended September 30, 2018 and 2017 was primarily the result of the repurchases of our common stock. The cash flows provided by financing activities for both the nine-months ended September 30, 2018, and 2017 was primarily attributable to the issuance of our common stock under our stock-based compensation plans.

Purchases of inventories, increases in accounts receivable and other assets, acquisition of property and equipment (including real property, personal property and coolers), leasehold improvements, advances for or the purchase of equipment for our bottlers, acquisition and maintenance of trademarks, payments of accounts payable, income taxes payable and purchases of our common stock are expected to remain our principal recurring use of cash.

Cash and cash equivalents, short-term and long-term investments.  At September 30, 2018, we had $713.7 million in cash and cash equivalents and $457.9 million in short-term investments. We have historically invested these amounts in U.S. treasury bills, U.S. government agency securities and municipal securities, commercial paper, certificates of deposit, variable rate demand notes and money market funds meeting certain criteria. We maintain our investments for cash management purposes and not for purposes of speculation. Our

44

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 $713.7 million of cash and cash equivalents held at September 30, 2018, $360.2 million was held by our foreign subsidiaries. No short-term or long-term investments were held by our foreign subsidiaries at September 30, 2018. We do not currently intend, nor do we foresee a need, to repatriate undistributed earnings of our foreign subsidiaries other than to repay certain intercompany debt owed to our U.S. operations.

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 and properties, 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 are likely to be less than $100.0 million through September 30, 2019. However, future business opportunities may cause a change in this estimate.

The following represents a summary of the Company’s contractual commitments and related scheduled maturities as of September 30, 2018:

	Payments due by period (in thousands)
Obligations	Total		Less than 1 year		1-3 years		3-5 years		More than 5 years
Contractual Obligations1	$	180,845	$	85,279	$	75,910	$	19,656	$	-
Capital Leases	977		977		-		-		-
Operating Leases	15,126		2,350		3,458		2,630		6,688
Purchase Commitments2	33,781		33,781		-		-		-
	$	230,729	$	122,387	$	79,368	$	22,286	$	6,688

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 $5.3 million of unrecognized tax benefits have been recorded as liabilities as of September 30, 2018. It is expected that the amount of unrecognized tax benefits will not significantly change within the next 12 months. As of September 30, 2018, we had $1.0 million of accrued interest and penalties related to unrecognized tax benefits.

Critical Accounting Policies

There have been no material changes to our critical accounting policies from the information provided in Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations”, included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2017 (“Form 10-K”).

Cost of Sales - Cost of sales consists of the costs of flavors, concentrates and/or beverage bases, the costs of raw materials utilized in the manufacture of beverages, co-packing fees, repacking fees, in-bound freight charges, as well as certain internal transfer costs, warehouse expenses incurred prior to the manufacture of the Company’s finished products and certain quality control costs.  In addition, the Company includes in cost of sales certain costs such as depreciation, amortization and payroll costs that relate to the direct manufacture by the Company of certain flavors and concentrates.  Raw materials account for the largest portion of cost of sales.  Raw materials include cans, bottles, other containers, flavors, ingredients and packaging materials.

45

Recently issued accounting pronouncements not yet adopted

In August 2018, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2018-15, “Intangibles–Goodwill and Other–Internal–Use Software (Topic 350): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That is a Service Contract.” ASU No. 2018-15 aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software. ASU No. 2018-15 is effective for the Company on a prospective or retrospective basis beginning on January 1, 2020, with early adoption permitted. The Company is currently evaluating the impact of ASU No. 2018-15 on its financial position, results of operations and liquidity.

In August 2018, the FASB issued ASU No. 2018-14, “Compensation–Retirement Benefits–Defined Benefit Plans–General (Topic 715): Disclosure Framework–Changes to the Disclosure Requirements for Defined Benefit Plans.” ASU No. 2018-14 removes certain disclosures that are not considered cost beneficial, clarifies certain required disclosures and requires certain additional disclosures. ASU No. 2018-14 is effective for the Company on a retrospective basis beginning in the year ending December 31, 2020, with early adoption permitted. The Company is currently evaluating the impact of ASU No. 2018-14 on its financial position, results of operations and liquidity.

In August 2018, the FASB issued ASU No. 2018-13, “Fair Value Measurement (Topic 820): Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement.” ASU No. 2018-13 removes certain disclosure requirements related to the fair value hierarchy, modifies existing disclosure requirements related to measurement uncertainty and adds new disclosure requirements. ASU No. 2018-13 disclosure requirements include disclosing the changes in unrealized gains and losses for the period included in other comprehensive income for recurring Level 3 fair value measurements held at the end of the reporting period and the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements. ASU No. 2018-13 is effective for the Company beginning on January 1, 2020, with early adoption permitted. Certain disclosures in the new guidance will need to be applied on a retrospective basis and others on a prospective basis. The Company is currently evaluating the impact of ASU No. 2018-13 on its financial position, results of operations and liquidity.

In February 2018, the FASB issued ASU No. 2018-02 (ASU No. 2018-02), “Income Statement - Reporting Comprehensive Income (Topic 220)”, which amends the previous guidance to allow for certain tax effects “stranded” in accumulated other comprehensive income, which are impacted by the Tax Reform Act, to be reclassified from accumulated other comprehensive income into retained earnings. This amendment pertains only to those items impacted by the new tax law and will not apply to any future tax effects stranded in accumulated other comprehensive income. This standard is effective for fiscal years beginning after December 15, 2018, and allows for early adoption. The Company is currently evaluating the impact of ASU No. 2018-02 on its financial position, results of operations and liquidity.

In January 2017, the FASB issued ASU No. 2017-04, “Intangibles and Other (Topic 350): Simplifying the Test for Goodwill Impairment”, which eliminates the requirement to calculate the implied fair value of goodwill, but rather requires an entity to record an impairment charge based on the excess of a reporting unit’s carrying value over its fair value. This amendment is effective for annual or interim goodwill impairment tests in fiscal years beginning after December 15, 2019. Early adoption is permitted. The Company is currently evaluating the impact of ASU No. 2017-04 on its financial position, results of operations and liquidity.

46

In June 2016, the FASB issued ASU No. 2016-13, “Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments”. The accounting standard changes the methodology for measuring credit losses on financial instruments and the timing when such losses are recorded. ASU No. 2016-13 is effective for fiscal years, and interim periods within those years, beginning after December 15, 2019. Early adoption is permitted for fiscal years, and interim periods within those years, beginning after December 15, 2018. The Company is currently evaluating the impact of ASU No. 2016-13 on its financial position, results of operations and liquidity.

In February 2016, the FASB issued ASU No. 2016-02, “Leases (Topic 842)”. This update is intended to increase transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements. This update is effective for annual and interim reporting periods beginning after December 15, 2018, including interim periods within those fiscal years. Early adoption is permitted. The Company has completed its initial assessment of ASU No. 2016-02 and currently believes the adoption will not have a material impact on its financial position, results of operations and liquidity. The Company anticipates finalizing its assessment prior to December 31, 2018.

Recently adopted accounting pronouncements

In October 2016, the FASB issued ASU No. 2016-16, “Income Taxes (Topic 740): Intra-Entity Transfers of Assets Other Than Inventory”, in an effort to improve the accounting for the income tax consequences of intra-entity transfers of assets other than inventory. Current GAAP prohibits the recognition of current and deferred income taxes for an intra-entity asset transfer until the asset has been sold to an outside party. FASB ASU No. 2016-16 establishes the requirement that an entity recognizes the income tax consequences of an intra-entity transfer of an asset other than inventory when the transfer occurs. ASU No. 2016-16 was effective for financial statements issued for annual periods beginning after December 15, 2017 and interim periods within those annual periods. The Company adopted ASU No. 2016-16 effective January 1, 2018 on a modified retrospective basis, resulting in a $6.6 million reclassification of the unrecognized income tax effects related to assets transfers that occurred prior to the adoption from deferred income taxes to opening retained earnings.

In May 2014, the FASB issued ASU No. 2014-09, “Revenue from Contracts with Customers (Topic 606)”, which superseded previous revenue recognition guidance. ASU No. 2014-09 and its amendments were included in ASC 606, “Revenue from Contracts with Customers”. ASC 606 requires that a company recognizes revenue at an amount that reflects the consideration to which the company expects to be entitled in exchange for transferring goods or services to a customer. The Company adopted ASC 606 effective January 1, 2018, using the modified retrospective approach, with no impact to the opening retained earnings. Results for periods beginning on or after January 1, 2018 are presented under ASC 606, while prior periods are not adjusted and continue to be reported in accordance with the prior accounting guidance under ASC 605, “Revenue Recognition”.

Inflation

We believe inflation did not have a significant impact on our results of operations for the periods presented.

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,

47

dividends, capital structure or other financial items, a statement of management’s plans and objectives for future operations, or a statement of future economic performance contained in management’s discussion and analysis of financial condition and results of operations, including statements related to new products, volume growth and statements encompassing general optimism about future operating results and non-historical information, are forward-looking statements within the meaning of the Exchange Act. Without limiting the foregoing, the words “believes,” “thinks,” “anticipates,” “plans,” “expects,” and similar expressions are intended to identify forward-looking statements.

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

· Our ability to recognize any and/or all of the benefits from the TCCC transaction and the AFF transaction;

· The effect of our extensive commercial arrangements with TCCC on our future performance;

· The effects of our arbitration with TCCC regarding energy products developed by TCCC;

· The effect of TCCC becoming one of our significant shareholders and the potential divergence of TCCC’s interests from those of our other shareholders;

· The effect of TCCC’s refranchising initiative to transition from a TCCC owned system to an independent bottling system, including our ability to maintain relationships with TCCC system bottlers/distributors and manage their ongoing commitment to focus on our products;

· Our ability to successfully enter into new distribution agreements with bottlers/distributors within the TCCC distribution system for new international territories;

· The possible slowing of and/or decline in the sales growth rates of the energy drink category and/or the U.S. convenience store market generally;

· Disruption in distribution or sales and/or decline in sales due to the termination and/or appointment of existing and/or new domestic and/or international distributors;

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

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

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

· The effect of inquiries from, and/or actions by, state attorneys general, the Federal Trade Commission (the “FTC”), the Food and Drug Administration (the “FDA”), municipalities, city attorneys, other government agencies, quasi-government agencies, government officials (including members of 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 regulations and evolving industry standards regarding consumer privacy and data use and security, including with respect to the General Data Protection Regulation approved by the European Union;

· Our ability to achieve profitability 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 distributors;

· 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;

48

· Changes in accounting standards may affect our reported profitability;

· Implications of the Tax Reform Act;

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

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

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

· The outcome of any other litigation;

· Unfavorable resolution of tax matters;

· Uncertainty and volatility in the domestic and global economies;

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

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

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

· Changes in demand that are weather related and/or for other reasons, including changes in product category consumption;

· The impact on our business of competitive products and pricing pressures and our ability to gain or maintain our share of sales in the marketplace as a result of actions by competitors;

· Our ability to introduce new products;

· Our ability to implement and/or maintain price increases;

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

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

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

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

· Our ability to satisfy all criteria set forth in any model energy drink guidelines, including, without limitation, those adopted by the American Beverage Association, of which the Company is a member, and/or any international beverage association and the impact on the Company of such guidelines;

49

· Disruptions in the timely import or export of our products and/or ingredients due to port strikes and related labor issues;

· 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, the Midwest and other premiums, raw materials 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, PET containers used for our Monster Hydro® energy drinks and 24-ounce aluminum cap cans;

· 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;

· Economic or political instability in one or more of our international markets;

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

· Unilateral decisions by full service bottlers/distributors, convenience chains, grocery chains, mass merchandisers, specialty chain stores, club stores and other customers to discontinue carrying all or any of our products that they are carrying at any time, restrict the range of our products they carry and/or devote less resources to the sale of our products;

· The effects of retailer consolidation on our business;

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

· The success of our sports marketing endeavors both domestically and internationally;

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

· Possible recalls of our products and/or defective production;

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

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

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

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

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

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

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

· Any disruption in and/or lack of effectiveness of our information technology systems, including a breach of cyber security, that disrupts our business or negatively impacts customer relationships; and

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

50

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

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

There have been no material changes in our market risk during the three-months ended September 30, 2018 compared with the disclosures in Part II, Item 7A of our Form 10-K.

ITEM 4.  CONTROLS AND PROCEDURES

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

Changes in Internal Control Over Financial Reporting – There were no changes in the Company’s internal controls over financial reporting during the quarter ended September 30, 2018, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II - OTHER INFORMATION

ITEM 1.          LEGAL PROCEEDINGS

The information required by this Item is incorporated herein by reference to the Notes to Condensed Consolidated Financial Statements - Note 11. Commitments and Contingencies: Legal Proceedings in Part I, Item 1, of this Quarterly Report on Form 10-Q.

ITEM 1A.       RISK FACTORS

Our risk factors are discussed in our Form 10-K.  There have been no material changes with respect to the risk factors disclosed in our Form 10-K.

ITEM 2.UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

None.

ITEM 3.          DEFAULTS UPON SENIOR SECURITIES

None.

51

ITEM 4.          MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5.          OTHER INFORMATION

None.

ITEM 6.          EXHIBITS

31.1*	Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2*	Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1*	Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2*	Certification by Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as 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 30, 2018, formatted in XBRL (eXtensible Business Reporting Language): (i) Condensed Consolidated Balance Sheets as of September 30, 2018 and December 31, 2017, (ii) Condensed Consolidated Statements of Income for the three- and nine-months ended September 30, 2018 and 2017, (iii) Condensed Consolidated Statements of Comprehensive Income for the three- and nine-months ended September 30, 2018 and 2017, (iv) Condensed Consolidated Statements of Cash Flows for the nine-months ended September 30, 2018 and 2017, and (v) the Notes to Condensed Consolidated Financial Statements.

*   Filed herewith

SIGNATURES

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

	MONSTER BEVERAGE CORPORATION
	Registrant
Date: November 8, 2018	/s/ RODNEY C. SACKS
	Rodney C. Sacks
	Chairman of the Board of Directors
	and Chief Executive Officer

52

EX-31.1

EXHIBIT 31.1

CERTIFICATION 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

I, Rodney Sacks, certify that:

1.    I have reviewed this quarterly report on Form 10-Q of Monster Beverage Corporation;

2.    Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.    Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.    The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a.designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b.designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c.evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d.disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent function):

a.all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b.any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date:	November 8, 2018	/s/Rodney C. Sacks
		Rodney C. Sacks Chairman of the Board of Directors and Chief Executive Officer

EX-31.2

EXHIBIT 31.2

CERTIFICATION 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

I, Hilton Schlosberg, certify that:

1.    I have reviewed this quarterly report on Form 10-Q of Monster Beverage Corporation;

2.    Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.    Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.    The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a.designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b.designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c.evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d.disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent function):

a.all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b.any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date:	November 8, 2018	/s/ Hilton H. Schlosberg
		Hilton H. Schlosberg
		Vice Chairman of the Board of Directors,
		President, Chief Operating Officer, Chief
		Financial Officer and Secretary

EX-32.1

EXHIBIT 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the quarterly report of Monster Beverage Corporation (the “Company”) on Form 10-Q for the quarter ended September 30, 2018 as filed with the Securities and Exchange Commission (the “Report”), the undersigned, Rodney C. Sacks, Chairman of the Board of Directors and Chief Executive Officer of the Company, certifies, pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

1.The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2.The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date:	November 8, 2018	/s/ Rodney C. Sacks
		Rodney C. Sacks
		Chairman of the Board of Directors
		and Chief Executive Officer

EX-32.2

EXHIBIT 32.2

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the quarterly report of Monster Beverage Corporation (the “Company”) on Form 10-Q for the quarter ended September 30, 2018 as filed with the Securities and Exchange Commission (the “Report”), the undersigned, Hilton H. Schlosberg, Vice Chairman of the Board of Directors, President, Chief Operating Officer, Chief Financial Officer and Secretary of the Company, certifies, pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

1.The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2.The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date:	November 8, 2018	/s/ Hilton H. Schlosberg
		Hilton H. Schlosberg Vice Chairman of the Board of Directors, President, Chief Operating Officer, Chief Financial Officer and Secretary

XML

Document and Entity Information - shares	9 Months Ended
	Sep. 30, 2018	Oct. 31, 2018
Document and Entity Information
Entity Registrant Name	Monster Beverage Corp
Entity Central Index Key	0000865752
Document Type	10-Q
Document Period End Date	Sep. 30, 2018
Amendment Flag	false
Current Fiscal Year End Date	--12-31
Entity Current Reporting Status	Yes
Entity Filer Category	Large Accelerated Filer
Entity Common Stock, Shares Outstanding		552,963,481
Document Fiscal Year Focus	2018
Document Fiscal Period Focus	Q3

XML

CONDENSED CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands	Sep. 30, 2018	Dec. 31, 2017
CURRENT ASSETS:
Cash and cash equivalents	$ 713,714	$ 528,622
Short-term investments	457,898	672,933
Accounts receivable, net	620,162	449,476
Inventories	262,084	255,745
Prepaid expenses and other current assets	57,599	40,877
Prepaid income taxes	41,214	138,724
Total current assets	2,152,671	2,086,377
INVESTMENTS	1,610	2,366
PROPERTY AND EQUIPMENT, net	242,854	230,276
DEFERRED INCOME TAXES	85,253	92,333
GOODWILL	1,331,643	1,331,643
OTHER INTANGIBLE ASSETS, net	1,042,248	1,034,085
OTHER ASSETS	15,080	13,932
Total Assets	4,871,359	4,791,012
CURRENT LIABILITIES:
Accounts payable	278,914	245,910
Accrued liabilities	112,436	87,475
Accrued promotional allowances	183,295	137,998
Accrued distributor terminations	795	91
Deferred revenue	44,232	43,236
Accrued compensation	30,237	34,996
Income taxes payable	6,453	10,645
Total current liabilities	656,362	560,351
DEFERRED REVENUE	319,007	334,354
OTHER LIABILITIES	2,723	1,095
COMMITMENTS AND CONTINGENCIES (Note 11)
STOCKHOLDERS' EQUITY:
Common stock - $0.005 par value; 1,250,000 shares authorized; 630,825 shares issued and 552,952 shares outstanding as of September 30, 2018; 629,255 shares issued and 566,298 shares outstanding as of December 31, 2017	3,154	3,146
Additional paid-in capital	4,219,630	4,150,628
Retained earnings	3,675,538	2,928,226
Accumulated other comprehensive loss	(29,777)	(16,659)
Common stock in treasury, at cost; 77,873 shares and 62,957 shares as of September 30, 2018 and December 31, 2017, respectively	(3,975,278)	(3,170,129)
Total stockholders' equity	3,893,267	3,895,212
Total Liabilities and Stockholders' Equity	$ 4,871,359	$ 4,791,012

XML

CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) - $ / shares shares in Thousands	Sep. 30, 2018	Dec. 31, 2017
CONDENSED CONSOLIDATED BALANCE SHEETS
Common stock, par value (in dollars per share)	$ 0.005	$ 0.005
Common stock, shares authorized	1,250,000	1,250,000
Common stock, shares issued	630,825	629,255
Common stock, shares outstanding	552,952	566,298
Common stock in treasury, shares	77,873	62,957

XML

CONDENSED CONSOLIDATED STATEMENTS OF INCOME - USD ($) shares in Thousands, $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2018	Sep. 30, 2017	Sep. 30, 2018	Sep. 30, 2017
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
Net Sales	$ 1,016,160	$ 909,476	$ 2,882,953	$ 2,558,690
COST OF SALES	408,501	339,767	1,139,780	924,610
GROSS PROFIT	607,659	569,709	1,743,173	1,634,080
OPERATING EXPENSES	268,086	252,337	766,065	702,405
OPERATING INCOME	339,573	317,372	977,108	931,675
INTEREST and OTHER INCOME, net	2,988	3,996	5,269	2,103
INCOME BEFORE PROVISION FOR INCOME TAXES	342,561	321,368	982,377	933,778
PROVISION FOR INCOME TAXES	74,828	102,624	228,480	314,422
NET INCOME	$ 267,733	$ 218,744	$ 753,897	$ 619,356
NET INCOME PER COMMON SHARE:
Basic (in dollars per share)	$ 0.48	$ 0.39	$ 1.35	$ 1.09
Diluted (in dollars per share)	$ 0.48	$ 0.38	$ 1.33	$ 1.07
WEIGHTED AVERAGE NUMBER OF SHARES OF COMMON STOCK AND COMMON STOCK EQUIVALENTS:
Basic (in shares)	552,694	567,878	559,472	567,550
Diluted (in shares)	559,955	578,368	566,791	577,964

XML

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2018	Sep. 30, 2017	Sep. 30, 2018	Sep. 30, 2017
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
Net income, as reported	$ 267,733	$ 218,744	$ 753,897	$ 619,356
Other comprehensive income:
Change in foreign currency translation adjustment	(4,463)	1,329	(13,728)	7,641
Available-for-sale investments:
Change in net unrealized (losses) gains	(118)	(29)	610	75
Net change in available-for-sale investments	(118)	(29)	610	75
Other comprehensive (loss) income	(4,581)	1,300	(13,118)	7,716
Comprehensive income	$ 263,152	$ 220,044	$ 740,779	$ 627,072

XML

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands	9 Months Ended
	Sep. 30, 2018	Sep. 30, 2017
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$ 753,897	$ 619,356
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	42,469	35,104
Gain on disposal of property and equipment	(634)	(514)
Stock-based compensation	42,436	39,265
Deferred income taxes	(76)	1,862
Effect on cash of changes in operating assets and liabilities:
Accounts receivable	(181,683)	(70,865)
TCCC Transaction receivable		125,000
Distributor receivables	7,803	1,605
Inventories	(10,338)	(46,700)
Prepaid expenses and other current assets	(16,465)	(9,210)
Prepaid income taxes	96,462	24,168
Accounts payable	39,641	24,653
Accrued liabilities	16,516	15,867
Accrued promotional allowances	48,682	42,064
Accrued distributor terminations	703	7,416
Accrued compensation	(4,357)	(3,230)
Income taxes payable	(1,383)	(4,142)
Other liabilities	1,628	819
Deferred revenue	(13,941)	(12,461)
Net cash provided by operating activities	821,360	790,057
CASH FLOWS FROM INVESTING ACTIVITIES:
Sales of available-for-sale investments	927,410	358,107
Purchases of available-for-sale investments	(711,009)	(768,276)
Purchases of property and equipment	(49,862)	(67,738)
Proceeds from sale of property and equipment	4,009	855
Increase in intangibles	(6,275)	(5,137)
Increase in other assets	(10,125)	(1,216)
Net cash provided by (used in) investing activities	154,148	(483,405)
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments on debt	(1,482)	(1,878)
Issuance of common stock	24,481	26,776
Purchases of common stock held in treasury	(805,149)	(249,173)
Net cash used in financing activities	(782,150)	(224,275)
Effect of exchange rate changes on cash and cash equivalents	(8,266)	5,600
NET INCREASE IN CASH AND CASH EQUIVALENTS	185,092	87,977
CASH AND CASH EQUIVALENTS, beginning of period	528,622	377,582
CASH AND CASH EQUIVALENTS, end of period	713,714	465,559
Cash paid during the period for:
Interest	44	55
Income taxes	$ 134,377	$ 293,980

XML

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS SUPPLEMENTAL DISCLOSURE OF NON-CASH ITEMS (Parenthetical) - USD ($) $ in Millions	9 Months Ended
	Sep. 30, 2018	Sep. 30, 2017
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS NON-CASH SUPPLEMENTAL DATA
Capital lease for acquisition of promotional vehicles	$ 1.2	$ 2.0
Accrued liabilities for property and equipment		6.0
Accrued liabilities for other intangible assets	$ 10.9	4.6
Accounts payable on short-term investments		$ 4.2

XML

BASIS OF PRESENTATION

9 Months Ended

Sep. 30, 2018

BASIS OF PRESENTATION

BASIS OF PRESENTATION

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, 2017 (“Form 10-K”) 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 ended September 30, 2018 and 2017, 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.

XML

RECENT ACCOUNTING PRONOUNCEMENTS

9 Months Ended

Sep. 30, 2018

RECENT ACCOUNTING PRONOUNCEMENTS

RECENT ACCOUNTING PRONOUNCEMENTS

2.RECENT ACCOUNTING PRONOUNCEMENTS

Recently issued accounting pronouncements not yet adopted

In August 2018, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2018-15, “Intangibles–Goodwill and Other–Internal–Use Software (Topic 350): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That is a Service Contract.” ASU No. 2018-15 aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software. ASU No. 2018-15 is effective for the Company on a prospective or retrospective basis beginning on January 1, 2020, with early adoption permitted. The Company is currently evaluating the impact of ASU No. 2018-15 on its financial position, results of operations and liquidity.

In August 2018, the FASB issued ASU No. 2018-14, “Compensation–Retirement Benefits–Defined Benefit Plans–General (Topic 715): Disclosure Framework–Changes to the Disclosure Requirements for Defined Benefit Plans.” ASU No. 2018-14 removes certain disclosures that are not considered cost beneficial, clarifies certain required disclosures and requires certain additional disclosures. ASU No. 2018-14 is effective for the Company on a retrospective basis beginning in the year ending December 31, 2020, with early adoption permitted. The Company is currently evaluating the impact of ASU No. 2018-14 on its financial position, results of operations and liquidity.

In August 2018, the FASB issued ASU No. 2018-13, “Fair Value Measurement (Topic 820): Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement.” ASU No. 2018-13 removes certain disclosure requirements related to the fair value hierarchy, modifies existing disclosure requirements related to measurement uncertainty and adds new disclosure requirements. ASU No. 2018-13 disclosure requirements include disclosing the changes in unrealized gains and losses for the period included in other comprehensive income for recurring Level 3 fair value measurements held at the end of the reporting period and the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements. ASU No. 2018-13 is effective for the Company beginning on January 1, 2020, with early adoption permitted. Certain disclosures in the new guidance will need to be applied on a retrospective basis and others on a prospective basis. The Company is currently evaluating the impact of ASU No. 2018-13 on its financial position, results of operations and liquidity.

In February 2018, the FASB issued ASU No. 2018-02, “Income Statement - Reporting Comprehensive Income (Topic 220)”, which amends the previous guidance to allow for certain tax effects “stranded” in accumulated other comprehensive income, which are impacted by the Tax Cuts and Jobs Act (the “Tax Reform Act”), to be reclassified from accumulated other comprehensive income into retained earnings. This amendment pertains only to those items impacted by the new tax law and will not apply to any future tax effects stranded in accumulated other comprehensive income. This standard is effective for fiscal years beginning after December 15, 2018, and allows for early adoption. The Company is currently evaluating the impact of ASU No. 2018-02 on its financial position, results of operations and liquidity.

In January 2017, the FASB issued ASU No. 2017-04, “Intangibles and Other (Topic 350): Simplifying the Test for Goodwill Impairment”, which eliminates the requirement to calculate the implied fair value of goodwill, but rather requires an entity to record an impairment charge based on the excess of a reporting unit’s carrying value over its fair value. This amendment is effective for annual or interim goodwill impairment tests in fiscal years beginning after December 15, 2019. Early adoption is permitted. The Company is currently evaluating the impact of ASU No. 2017-04 on its financial position, results of operations and liquidity.

In June 2016, the FASB issued ASU No. 2016-13, “Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments”. The accounting standard changes the methodology for measuring credit losses on financial instruments and the timing when such losses are recorded. ASU No. 2016-13 is effective for fiscal years, and interim periods within those years, beginning after December 15, 2019. Early adoption is permitted for fiscal years, and interim periods within those years, beginning after December 15, 2018. The Company is currently evaluating the impact of ASU No. 2016-13 on its financial position, results of operations and liquidity.

In February 2016, the FASB issued ASU No. 2016-02, “Leases (Topic 842)”. This update is intended to increase transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements. This update is effective for annual and interim reporting periods beginning after December 15, 2018, including interim periods within those fiscal years. Early adoption is permitted. The Company has completed its initial assessment of ASU No. 2016-02 and currently believes the adoption will not have a material impact on its financial position, results of operations and liquidity. The Company anticipates finalizing its assessment prior to December 31, 2018.

Recently adopted accounting pronouncements

In October 2016, the FASB issued ASU No. 2016-16, “Income Taxes (Topic 740): Intra-Entity Transfers of Assets Other Than Inventory”, in an effort to improve the accounting for the income tax consequences of intra-entity transfers of assets other than inventory. Current GAAP prohibits the recognition of current and deferred income taxes for an intra-entity asset transfer until the asset has been sold to an outside party. FASB ASU No. 2016-16 establishes the requirement that an entity recognizes the income tax consequences of an intra-entity transfer of an asset other than inventory when the transfer occurs. ASU No. 2016-16 was effective for financial statements issued for annual periods beginning after December 15, 2017 and interim periods within those annual periods. The Company adopted ASU No. 2016-16 effective January 1, 2018 on a modified retrospective basis, resulting in a $6.6 million reclassification of the unrecognized income tax effects related to assets transfers that occurred prior to the adoption from deferred income taxes to opening retained earnings.

In May 2014, the FASB issued ASU No. 2014-09, “Revenue from Contracts with Customers (Topic 606)”, which superseded previous revenue recognition guidance. ASU No. 2014-09 and its amendments were included in Accounting Standards Codification (“ASC”) 606, “Revenue from Contracts with Customers”. ASC 606 requires that a company recognizes revenue at an amount that reflects the consideration to which the company expects to be entitled in exchange for transferring goods or services to a customer. The Company adopted ASC 606 effective January 1, 2018, using the modified retrospective approach, with no impact to the opening retained earnings. Results for periods beginning on or after January 1, 2018 are presented under ASC 606, while prior periods are not adjusted and continue to be reported in accordance with the prior accounting guidance under ASC 605, “Revenue Recognition”. See Note 3.

XML

REVENUE RECOGNITION

9 Months Ended

Sep. 30, 2018

REVENUE RECOGNITION

REVENUE RECOGNITION

3.REVENUE RECOGNITION

The Company has three operating and reportable segments, (i) Monster Energy® Drinks segment (“Monster Energy® Drinks”), which is primarily comprised of the Company’s Monster Energy® drinks, (ii) Strategic Brands segment (“Strategic Brands”), which is comprised of the various energy drink brands acquired from The Coca-Cola Company (“TCCC”) in 2015, and (iii) Other segment (“Other”), which is comprised of certain products sold by American Fruits & Flavors LLC, a wholly-owned subsidiary of the Company, to independent third-party customers.

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

The majority of the Company’s revenue is recognized when it satisfies a single performance obligation by transferring control of its products to a customer. Control is generally transferred when the Company’s products are either shipped or delivered based on the terms contained within the underlying contracts or agreements. Certain of the Company’s bottlers/distributors may also perform a separate function as a co-packer on the Company’s behalf. In such cases, control of the Company’s products passes to such bottlers/distributors when they notify the Company that they have taken possession or transferred the relevant portion of the Company’s finished goods. The Company’s general payment terms are short-term in duration. The Company does not have significant financing components or payment terms. The Company did not have any material unsatisfied performance obligations as of September 30, 2018 or December 31, 2017.

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.

There were no changes to the Company’s accounting for variable consideration under ASC 606. Promotional and other allowances (variable consideration) recorded as a reduction to net sales, primarily include consideration given to the Company’s bottlers/distributors or retail customers including, but not limited to the following:

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

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

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

· the Company’s agreed share of slotting, shelf space allowances and other fees given directly to retailers;

· 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 by the Company direct to certain customers that fall within the bottlers’/distributors’ sales territories; and

· certain commissions paid based on sales to the Company’s bottlers/distributors.

The Company’s promotional allowance programs with its bottlers/distributors and/or retailers are executed through separate agreements in the ordinary course of business. These agreements generally provide for one or more of the arrangements described above and are of varying durations, ranging from one week to one year. The Company’s promotional and other allowances are calculated based on various programs with bottlers/distributors and retail customers, and accruals are established during the year for its 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 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.

Upon adoption of ASC 606, commissions paid to TCCC based on sales to certain of the Company’s bottlers/distributors who are (i) consolidated subsidiaries of TCCC (the “TCCC Subsidiaries”), (ii) accounted for under the equity method by TCCC (the “TCCC Related Parties”) and (iii) those not included in (i) or (ii) (the “TCCC Independent Bottlers”) are accounted for as follows:

	Three- and Nine-Months Ended September 30, 2018
Commissions Related To:	As Reported	Without Adoption of ASC 606
TCCC Subsidiaries	Reduction to net sales	Reduction to net sales
TCCC Related Parties	Reduction to net sales	Operating expenses
TCCC Independent Bottlers	Operating expenses	Operating expenses

The impact of the adoption of ASC 606 on the Company’s condensed consolidated statement of income for the three- and nine-months ended September 30, 2018 was as follows:

	Three-Months Ended September 30, 2018
	As Reported		Without Adoption of ASC 606		Decrease due to Adoption of ASC 606
Net Sales	$	1,016,160	$	1,027,758	$	(11,598)	1
Operating Expenses	$	268,086	$	279,684	$	(11,598)	1

	Nine-Months Ended September 30, 2018
	As Reported		Without Adoption of ASC 606		Decrease due to Adoption of ASC 606
Net Sales	$	2,882,953	$	2,916,703	$	(33,750)	1
Operating Expenses	$	766,065	$	799,815	$	(33,750)	1

1 TCCC commissions based on sales to the TCCC Related Parties. There were no other identified changes to our revenue recognition policies as a result of the adoption of ASC 606.

Disaggregation of Revenue

The following table disaggregates the Company’s revenue by geographical markets and reportable segments:

	Three-Months Ended September 30, 2018
Net Sales	U.S. and Canada		EMEA1		Asia Pacific		Latin America and Caribbean		Total
Monster Energy® Drinks	$	710,172	$	127,286	$	63,758	$	33,930	$	935,146
Strategic Brands	47,645		18,287		8,231		278		74,441
Other	6,573		-		-		-		6,573
Total Net Sales	$	764,390	$	145,573	$	71,989	$	34,208	$	1,016,160

	Nine-Months Ended September 30, 2018
Net Sales	U.S. and Canada		EMEA1		Asia Pacific		Latin America and Caribbean		Total
Monster Energy® Drinks	$	1,994,950	$	376,823	$	171,796	$	101,520	$	2,645,089
Strategic Brands	137,502		60,567		20,148		1,794		220,011
Other	17,853		-		-		-		17,853
Total Net Sales	$	2,150,305	$	437,390	$	191,944	$	103,314	$	2,882,953

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

Contract Liabilities

Amounts received from certain bottlers/distributors at inception of their distribution contracts or at the inception of certain sales/marketing programs are accounted for as deferred revenue. As of September 30, 2018, the Company had $363.2 million of deferred revenue, which is included in current and long-term deferred revenue in the Company’s condensed consolidated balance sheet. As of December 31, 2017, the Company had $377.6 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- and nine-months ended September 30, 2018, $11.1 million and $33.3 million, respectively, of deferred revenue was recognized in net sales. See Note 10.

XML

INVESTMENTS

9 Months Ended

Sep. 30, 2018

INVESTMENTS

INVESTMENTS

4.INVESTMENTS

The following table summarizes the Company’s investments at:

September 30, 2018	Amortized Cost		Gross Unrealized Holding Gains		Gross Unrealized Holding Losses		Fair Value		Continuous Unrealized Loss Position less than 12 Months		Continuous Unrealized Loss Position greater than 12 Months
Available-for-sale
Short-term:
Commercial paper	$	52,595	$	-	$	-	$	52,595	$	-	$	-
Certificates of deposit	26,068		-		-		26,068		-		-
Municipal securities	127,149		2		82		127,069		82		-
U.S. government agency securities	108,128		-		95		108,033		95		-
U.S. Treasuries	109,832		-		45		109,787		45		-
Variable rate demand notes	34,346		-		-		34,346		-		-
Long-term:
Municipal securities	1,612		-		2		1,610		2		-
Total	$	459,730	$	2	$	224	$	459,508	$	224	$	-

December 31, 2017	Amortized Cost		Gross Unrealized Holding Gains		Gross Unrealized Holding Losses		Fair Value		Continuous Unrealized Loss Position less than 12 Months		Continuous Unrealized Loss Position greater than 12 Months
Available-for-sale
Short-term:
Commercial paper	$	81,026	$	-	$	-	$	81,026	$	-	$	-
Certificates of deposit	11,869		-		-		11,869		-		-
Municipal securities	469,604		1		740		468,865		740		-
U.S. government agency securities	61,307		-		88		61,219		88		-
Variable rate demand notes	49,954		-		-		49,954		-		-
Long-term:
U.S. government agency securities	2,369		-		3		2,366		3		-
Total	$	676,129	$	1	$	831	$	675,299	$	831	$	-

During the nine-months ended September 30, 2018 and 2017, realized gains or losses recognized on the sale of investments were not significant.

The Company’s investments at September 30, 2018 and December 31, 2017 in commercial paper, certificates of deposit, municipal securities, U.S. government agency securities, U.S. treasuries and/or variable rate demand notes (“VRDNs”) carried investment grade credit ratings. VRDNs are floating rate municipal bonds with embedded put options that allow the bondholder to sell the security at par plus accrued interest. All of the put options are secured by a pledged liquidity source. While they are classified as marketable investment securities, the put option allows the VRDNs to be liquidated at par on a same day, or more generally, on a seven-day settlement basis.

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

	September 30, 2018				December 31, 2017
	Amortized Cost		Fair Value		Amortized Cost		Fair Value
Less than 1 year:
Commercial paper	$	52,595	$	52,595	$	81,026	$	81,026
U.S. Treasuries	109,832		109,787		-		-
Municipal securities	127,149		127,069		469,604		468,865
U.S. government agency securities	108,128		108,033		61,307		61,219
Certificates of deposit	26,068		26,068		11,869		11,869
Due 1 - 10 years:
Municipal securities	1,612		1,610		-		-
U.S. government agency securities	-		-		2,369		2,366
Variable rate demand notes	-		-		6,366		6,366
Due 11 - 20 years:
Variable rate demand notes	15,952		15,952		28,377		28,377
Due 21 - 30 years:
Variable rate demand notes	14,291		14,291		15,211		15,211
Due 31 - 40 years:
Variable rate demand notes	4,103		4,103		-		-
Total	$	459,730	$	459,508	$	676,129	$	675,299

XML

FAIR VALUE OF CERTAIN FINANCIAL ASSETS AND LIABILITIES

9 Months Ended

Sep. 30, 2018

FAIR VALUE OF CERTAIN FINANCIAL ASSETS AND LIABILITIES

FAIR VALUE OF CERTAIN FINANCIAL ASSETS AND LIABILITIES

5.FAIR VALUE OF CERTAIN FINANCIAL ASSETS AND LIABILITIES

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

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

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

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

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

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, 2018	Level 1		Level 2			Level 3		Total
Cash	$	523,097	$	-		$	-	$	523,097
Money market funds	87,546		-			-		87,546
Certificates of deposit	-		59,104			-		59,104
Commercial paper	-		75,257			-		75,257
Variable rate demand notes	-		34,346			-		34,346
Municipal securities	-		153,204			-		153,204
U.S. government agency securities	-		128,887			-		128,887
U.S. Treasuries	-		111,781			-		111,781
Foreign currency derivatives	-		178			-		178
Total	$	610,643	$	562,757		$	-	$	1,173,400
Amounts included in:
Cash and cash equivalents	$	610,643	$	103,071		$	-	$	713,714
Short-term investments	-		457,898			-		457,898
Accounts receivable, net	-		271			-		271
Investments	-		1,610			-		1,610
Accrued liabilities	-		(93		)	-		(93		)
Total	$	610,643	$	562,757		$	-	$	1,173,400
December 31, 2017	Level 1		Level 2			Level 3		Total
Cash	$	310,885	$	-		$	-	$	310,885
Money market funds	112,848		-			-		112,848
Certificates of deposit	-		15,720			-		15,720
Commercial paper	-		99,903			-		99,903
Variable rate demand notes	-		49,954			-		49,954
Municipal securities	-		529,984			-		529,984
U.S. government agency securities	-		81,230			-		81,230
U.S. Treasuries	-		3,397			-		3,397
Foreign currency derivatives	-		(1,484		)	-		(1,484		)
Total	$	423,733	$	778,704		$	-	$	1,202,437
Amounts included in:
Cash and cash equivalents	$	423,733	$	104,889		$	-	$	528,622
Short-term investments	-		672,933			-		672,933
Accounts receivable, net	-		95			-		95
Investments	-		2,366			-		2,366
Accrued liabilities	-		(1,579		)	-		(1,579		)
Total	$	423,733	$	778,704		$	-	$	1,202,437

All of the Company’s short-term investments are classified within Level 1 or Level 2 of the fair value hierarchy.  The Company’s valuation of its Level 1 investments, which include money market funds, is based on quoted market prices in active markets for identical securities. The Company’s valuation of its Level 2 investments, which include municipal securities, commercial paper, certificates of deposit, VRDNs, U.S. treasuries and U.S. government agency securities, is based on other observable inputs, specifically a market approach which utilizes valuation models, pricing systems, mathematical tools and other relevant information for the same or similar securities. The Company’s valuation of its Level 2 foreign currency exchange contracts is based on quoted market prices of the same or similar instruments, adjusted for counterparty risk. There were no transfers between Level 1 and Level 2 measurements during the nine-months ended September 30, 2018 or the year-ended December 31, 2017, and there were no changes in the Company’s valuation techniques.

XML

DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES

9 Months Ended

Sep. 30, 2018

DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES

DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES

6.DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES

The Company is exposed to foreign currency exchange rate risks related primarily to its foreign business operations. During the three- and nine-months ended September 30, 2018 and the year-ended December 31, 2017, the Company entered into forward currency exchange contracts with financial institutions to create an economic hedge to specifically manage a portion of the foreign exchange risk exposure associated with certain consolidated subsidiaries’ non-functional currency denominated assets and liabilities. All foreign currency exchange contracts of the Company that were outstanding as of September 30, 2018 have terms of one month or less. The Company does not enter into forward currency exchange contracts for speculation or trading purposes.

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

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

September 30, 2018
Derivatives not designated as hedging instruments under FASB ASC 815-20	Notional Amount		Fair Value		Balance Sheet Location
Assets:
Foreign currency exchange contracts:
Receive USD/pay EUR	$	31,411	$	111	Accounts receivable, net
Receive USD/pay GBP	28,315		105		Accounts receivable, net
Receive USD/pay ZAR	14,375		53		Accounts receivable, net
Receive NOK/pay USD	1,450		2		Accounts receivable, net
Liabilities:
Foreign currency exchange contracts:
Receive USD/pay COP	$	3,789	$	(34)	Accrued liabilities
Receive SGD/pay USD	7,342		(23)		Accrued liabilities
Receive USD/pay AUD	12,484		(18)		Accrued liabilities
Receive USD/pay NZD	2,645		(7)		Accrued liabilities
Receive USD/pay MXN	2,044		(6)		Accrued liabilities
Receive RUB/pay USD	909		(5)		Accrued liabilities

December 31, 2017
Derivatives not designated as hedging instruments under FASB ASC 815-20	Notional Amount		Fair Value		Balance Sheet Location
Assets:
Foreign currency exchange contracts:
Receive CAD/pay USD	$	4,892	$	61	Accounts receivable, net
Receive USD/pay COP	2,803		13		Accounts receivable, net
Receive USD/pay BRL	1,806		1		Accounts receivable, net
Receive NOK/pay USD	1,534		18		Accounts receivable, net
Receive SGD/pay USD	223		2		Accounts receivable, net
Liabilities:
Foreign currency exchange contracts:
Receive USD/pay EUR	$	65,131	$	(642)	Accrued liabilities
Receive USD/pay GBP	31,342		(334)		Accrued liabilities
Receive USD/pay ZAR	21,311		(222)		Accrued liabilities
Receive USD/pay AUD	17,238		(177)		Accrued liabilities
Receive USD/pay MXN	7,720		(126)		Accrued liabilities
Receive USD/pay TRY	5,483		(52)		Accrued liabilities
Receive USD/pay NZD	1,826		(18)		Accrued liabilities
Receive USD/pay CLP	1,112		(8)		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 hedging instruments under FASB ASC 815-20	Location of gain (loss) recognized in income on derivatives	September 30, 2018		September 30, 2017
Foreign currency exchange contracts	Interest and other income, net	$	2,175	$	(2,172)
		Amount of gain (loss) recognized in income on derivatives
		Nine-months ended
Derivatives not designated as hedging instruments under FASB ASC 815-20	Location of gain (loss) recognized in income on derivatives	September 30, 2018		September 30, 2017
Foreign currency exchange contracts	Interest and other income, net	$	7,909	$	(11,639)

XML

INVENTORIES

9 Months Ended

Sep. 30, 2018

INVENTORIES

INVENTORIES

7.INVENTORIES

Inventories consist of the following at:

	September 30, 2018		December 31, 2017
Raw materials	$	99,266	$	78,834
Finished goods	162,818		176,911
	$	262,084	$	255,745

XML

PROPERTY AND EQUIPMENT, NET

9 Months Ended

Sep. 30, 2018

PROPERTY AND EQUIPMENT, NET

PROPERTY AND EQUIPMENT, NET

8.PROPERTY AND EQUIPMENT, NET

Property and equipment consist of the following at:

	September 30, 2018		December 31, 2017
Land	$	44,261	$	47,373
Leasehold improvements	5,760		3,109
Furniture and fixtures	6,925		6,461
Office and computer equipment	18,384		14,506
Computer software	3,103		3,650
Equipment	176,732		148,434
Buildings	113,625		107,374
Vehicles	39,488		38,179
	408,278		369,086
Less: accumulated depreciation and amortization	(165,424)		(138,810)
	$	242,854	$	230,276

Total depreciation and amortization expense recorded was $11.3 million and $9.4 million for the three-months ended September 30, 2018 and 2017, respectively. Total depreciation and amortization expense recorded was $33.5 million and $26.2 million for the nine-months ended September 30, 2018 and 2017, respectively.

XML

GOODWILL AND OTHER INTANGIBLE ASSETS

9 Months Ended

Sep. 30, 2018

GOODWILL AND OTHER INTANGIBLE ASSETS

GOODWILL AND OTHER INTANGIBLE ASSETS

9.GOODWILL AND OTHER INTANGIBLE ASSETS

The following is a roll-forward of goodwill for the nine-months ended September 30, 2018 and 2017 by reportable segment:

	Monster Energy® Drinks		Strategic Brands		Other		Total
Balance at December 31, 2017	$	693,644	$	637,999	$	-	$	1,331,643
Acquisitions	-		-		-		-
Balance at September 30, 2018	$	693,644	$	637,999	$	-	$	1,331,643
	Monster Energy® Drinks		Strategic Brands		Other		Total
Balance at December 31, 2016	$	693,644	$	637,999	$	-	$	1,331,643
Acquisitions	-		-		-		-
Balance at September 30, 2017	$	693,644	$	637,999	$	-	$	1,331,643

Intangible assets consist of the following at:

	September 30, 2018		December 31, 2017
Amortizing intangibles	$	71,350	$	71,400
Accumulated amortization	(35,349)		(26,383)
	36,001		45,017
Non-amortizing intangibles	1,006,247		989,068
	$	1,042,248	$	1,034,085

Amortizing intangibles primarily consist of customer relationships. All amortizing intangibles have been assigned an estimated finite useful life and such intangibles are amortized on a straight-line basis over the number of years that approximate their respective useful lives, generally five to seven years. Total amortization expense recorded was $3.0 million for both the three-months ended September 30, 2018 and 2017. Total amortization expense recorded was $9.0 million and $8.9 million for the nine-months ended September 30, 2018 and 2017, respectively.

XML

DISTRIBUTION AGREEMENTS

9 Months Ended

Sep. 30, 2018

DISTRIBUTION AGREEMENTS

DISTRIBUTION AGREEMENTS

10.DISTRIBUTION AGREEMENTS

In accordance with ASC 420 “Exit or Disposal Cost Obligations”, the Company expenses distributor termination costs in the period in which the written notification of termination occurs. The Company incurred termination costs of $14.1 million and $15.9 million for the three-months ended September 30, 2018 and 2017, respectively. The Company incurred termination costs of $26.6 million and $35.9 million for the nine-months ended September 30, 2018 and 2017, respectively. Such termination costs have been expensed in full and are included in operating expenses for the three- and nine-months ended September 30, 2018 and 2017.

In the normal course of business, amounts received pursuant to new and/or amended distribution agreements entered into with certain distributors, relating to the costs associated with terminating agreements with the Company’s prior distributors, are accounted for as deferred revenue and are recognized as revenue ratably over the anticipated life of the respective distribution agreement, generally 20 years. Revenue recognized was $11.1 million and $11.4 million for the three-months ended September 30, 2018 and 2017, respectively. Revenue recognized was $33.3 million and $31.6 million for the nine-months ended September 30, 2018 and 2017, respectively.

XML

COMMITMENTS AND CONTINGENCIES

9 Months Ended

Sep. 30, 2018

COMMITMENTS AND CONTINGENCIES

COMMITMENTS AND CONTINGENCIES

11.COMMITMENTS AND CONTINGENCIES

The Company had purchase commitments aggregating approximately $33.8 million at September 30, 2018, 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 $180.8 million at September 30, 2018, which related primarily to sponsorships and other marketing activities.

The Company had operating lease commitments aggregating approximately $15.1 million at September 30, 2018, which related primarily to warehouse and office space.

In February 2018, the working capital line limit for the Company’s credit facility with HSBC Bank (China) Company Limited, Shanghai Branch was increased from $9.0 million to $15.0 million. At September 30, 2018, the interest rate on borrowings under the line of credit was 5.5%. As of September 30, 2018, the Company had $10.1 million outstanding on this line of credit, including interest, which is included in accounts payable in the condensed consolidated balance sheet.

Legal Proceedings

Litigation  — The Company, TCCC and certain affiliates are parties to various agreements setting forth, among other things, provisions relating to TCCC’s 18.5% equity holding in the Company and the terms on which the Company’s energy products are distributed globally by members of TCCC’s distribution network.  Among other provisions, the agreements restrict TCCC from competing in the energy drink category, with certain exceptions including an exception relating to the Coca-Cola brand.

TCCC has developed two energy products that it believes it may market under the exception relating to the Coca-Cola brand.  The Company believes that the exception does not apply.  By mutual agreement to obtain clarification, the issue was submitted to AAA arbitration on October 31, 2018.  TCCC has indicated that it has suspended the proposed launch of such products until April 2019. As the relief sought is limited, no reasonably possible range of losses, if any, can be estimated.

The Company has been named a defendant in personal injury lawsuits, claiming that the death or other serious injury of the plaintiffs was caused by consumption of Monster Energy® brand energy drinks. The plaintiffs in these lawsuits allege strict product liability, negligence, fraudulent concealment, breach of implied warranties and wrongful death. The Company believes that each complaint is without merit and plans a vigorous defense. The Company also believes that any damages, if awarded, would not have a material adverse effect on the Company’s financial position or results of operations.

Furthermore, from time to time in the normal course of business, the Company is named in other litigation, including consumer class actions, intellectual property litigation 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, or in the amount of any related insurance reimbursements recorded. As of September 30, 2018, the Company’s condensed consolidated balance sheet includes accrued loss contingencies of approximately $1.4 million.

XML

ACCUMULATED OTHER COMPREHENSIVE LOSS

9 Months Ended

Sep. 30, 2018

ACCUMULATED OTHER COMPREHENSIVE LOSS

ACCUMULATED OTHER COMPREHENSIVE LOSS

12.ACCUMULATED OTHER COMPREHENSIVE LOSS

Changes in accumulated other comprehensive loss by component, after tax, for the nine-months ended September 30, 2018 are as follows:

	Currency Translation Losses		Unrealized (Gains) Losses on Available-for- Sale Securities		Total
Balance at December 31, 2017	$	15,818	$	841	$	16,659
Other comprehensive loss (income) before reclassifications	13,728		(610)		13,118
Amounts reclassified from accumulated other comprehensive loss (income)	-		-		-
Net current-period other comprehensive loss (income)	13,728		(610)		13,118
Balance at September 30, 2018	$	29,546	$	231	$	29,777

XML

TREASURY STOCK

9 Months Ended

Sep. 30, 2018

TREASURY STOCK

TREASURY STOCK

13.TREASURY STOCK

On May 29, 2018, 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 “May 2018 Repurchase Program”). No shares were repurchased during the three-months ended September 30, 2018 under the May 2018 Repurchase Program. As of November 8, 2018, $196.7 million remained available for repurchase under the May 2018 Repurchase Program.

On August 7, 2018, the Company’s Board of Directors authorized a new repurchase program for the repurchase of up to an additional $500.0 million of the Company’s outstanding common stock (the “August 2018 Repurchase Program”). No shares were repurchased during the three-months ended September 30, 2018 under the August 2018 Repurchase Program. As of November 8, 2018, $500.0 million remained available for repurchase under the August 2018 Repurchase Program.

XML

STOCK-BASED COMPENSATION

9 Months Ended

Sep. 30, 2018

STOCK-BASED COMPENSATION

STOCK-BASED COMPENSATION

14.STOCK-BASED COMPENSATION

The Company has two stock-based compensation plans under which shares were available for grant at September 30, 2018: the Monster Beverage Corporation 2011 Omnibus Incentive Plan, including the Monster Beverage Deferred Compensation Plan as a sub plan thereunder, and the Monster Beverage Corporation 2017 Compensation Plan for Non-Employee Directors, including the Monster Beverage Deferred Compensation Plan for Non-Employee Directors as a sub plan thereunder.

The Company recorded $14.1 million and $13.3 million of compensation expense relating to outstanding options and restricted stock units during the three-months ended September 30, 2018 and 2017, respectively. The Company recorded $42.4 million and $39.3 million of compensation expense relating to outstanding options and restricted stock units during the nine-months ended September 30, 2018 and 2017, respectively.

The excess tax benefit for tax deductions from non-qualified stock option exercises, disqualifying dispositions of incentive stock options and vesting of restricted stock units for the three-months ended September 30, 2018 and 2017 was $3.1 million and $2.5 million, respectively. The excess tax benefit for tax deductions from non-qualified stock option exercises, disqualifying dispositions of incentive stock options and vesting of restricted stock units for the nine-months ended September 30, 2018 and 2017 was $7.7 million and $13.8 million, respectively.

Stock Options

Under the Company’s stock-based compensation plans, all stock options granted as of September 30, 2018 were granted at prices based on the fair value of the Company’s common stock on the date of grant. The Company records compensation expense for employee stock options based on the estimated fair value of the options on the date of grant using the Black-Scholes-Merton option pricing formula with the assumptions included in the table below. The Company records compensation expense for non-employee stock options based on the estimated fair value of the options as of the earlier of (1) the date at which a commitment for performance by the non-employee to earn the stock option is reached or (2) the date at which the non-employee’s performance is complete, using the Black-Scholes-Merton option pricing formula with the assumptions included in the table below. The Company uses historical data to determine the exercise behavior, volatility and forfeiture rate of the options.

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,
	2018	2017	2018	2017
Dividend yield	0.0%	0.0%	0.0%	0.0%
Expected volatility	34.5%	35.3%	34.9%	36.6%
Risk-free interest rate	2.9%	1.7%	2.8%	2.1%
Expected term	6.1 years	5.9 years	6.1 years	6.1 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:

Options	Number of Shares (in thousands)	Weighted- Average Exercise Price Per Share		Weighted- Average Remaining Contractual Term (in years)	Aggregate Intrinsic Value
Outstanding at January 1, 2018	17,819	$	29.62	6.1	$	600,032
Granted 01/01/18 - 03/31/18	2,615	$	58.76
Granted 04/01/18 - 06/30/18	360	$	51.72
Granted 07/01/18 - 09/30/18	11	$	58.77
Exercised	(1,308)	$	18.71
Cancelled or forfeited	(495)	$	43.71
Outstanding at September 30, 2018	19,002	$	34.45	6.1	$	454,476
Vested and expected to vest in the
future at September 30, 2018	18,061	$	33.59	5.9	$	447,291
Exercisable at September 30, 2018	10,179	$	22.51	4.3	$	364,103

The weighted-average grant-date fair value of options granted during the three-months ended September 30, 2018 and 2017 was $22.80 per share and $20.61 per share, respectively. The weighted-average grant-date fair value of options granted during the nine-months ended September 30, 2018 and 2017 was $22.51 per share and $18.04 per share, respectively. The total intrinsic value of options exercised during the three-months ended September 30, 2018 and 2017 was $19.2 million and $12.5 million, respectively. The total intrinsic value of options exercised during the nine-months ended September 30, 2018 and 2017 was $52.1 million and $53.4 million, respectively.

Cash received from option exercises under all plans for the three-months ended September 30, 2018 and 2017 was approximately $10.9 million and $7.7 million, respectively. Cash received from option exercises under all plans for the nine-months ended September 30, 2018 and 2017 was approximately $24.5 million and $26.8 million, respectively.

At September 30, 2018, there was $107.9 million of total unrecognized compensation expense related to non-vested options granted to employees under the Company’s share-based payment plans. That cost is expected to be recognized over a weighted-average period of 2.8 years.

Restricted Stock Units

The cost of stock-based compensation for restricted stock 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 in cash, the award is classified as a liability and revalued at each balance sheet date.

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

	Number of Shares (in thousands)	Weighted Average Grant-Date Fair Value
Non-vested at January 1, 2018	530	$	45.09
Granted 01/01/18- 03/31/18	221	$	58.75
Granted 04/01/18- 06/30/18	48	$	52.31
Granted 07/01/18 - 09/30/18	1	$	58.72
Vested	(263)	$	45.36
Forfeited/cancelled	(7)	$	33.60
Non-vested at September 30, 2018	530	$	51.48

The weighted-average grant-date fair value of restricted stock units granted during the three-months ended September 30, 2018 was $58.72 per share. No restricted stock units were granted during the three-months ended September 30, 2017. The weighted-average grant-date fair value of restricted stock units granted during the nine-months ended September 30, 2018 and 2017 was $57.59 per share and $46.65 per share, respectively.  As of September 30, 2018, 0.5 million of restricted stock units are expected to vest over their respective terms.

At September 30, 2018, total unrecognized compensation expense relating to non-vested restricted stock units was $19.0 million, which is expected to be recognized over a weighted-average period of 1.8 years.

XML

INCOME TAXES

9 Months Ended

Sep. 30, 2018

INCOME TAXES

INCOME TAXES

15.INCOME TAXES

On December 22, 2017, the President of the United States signed into law the Tax Reform Act.  The legislation significantly changes U.S. tax law by, among other things, lowering corporate income tax rates, implementing a territorial tax system and imposing a repatriation tax on deemed repatriated earnings of foreign subsidiaries. The Tax Reform Act permanently reduces the U.S. corporate income tax rate from a maximum of 35% to a flat 21% rate, effective January 1, 2018. The SEC staff issued Staff Accounting Bulletin No. 118 to address the application of U.S. GAAP in situations when a registrant does not have the necessary information available, prepared, or analyzed (including computations) in reasonable detail to complete the accounting for certain income tax effects of the Tax Reform Act. A company may select between one of three scenarios to determine a reasonable estimate for certain income tax effects arising from the Tax Reform Act. Those scenarios are (i) a final estimate which effectively closes the measurement window; (ii) a reasonable estimate leaving the measurement window open for future revisions; and (iii) no estimate as the law is still being analyzed. The Company was able to provide a reasonable estimate for the revaluation of deferred taxes and the effects of the toll charge on undistributed foreign subsidiary earnings and profits (“E&P”). As a result of the reduction in the U.S. corporate income tax rate from 35% to 21% under the Tax Reform Act, the Company revalued its net deferred tax assets at December 31, 2017, resulting in a provisional $39.8 million charge included in the provision for income taxes for the year ended December 31, 2017. The Tax Reform Act also provided for a one-time deemed mandatory repatriation of Post-1986 E&P through the year ended December 31, 2017.  As a result, the Company recognized a provisional $2.1 million charge in the provision for income taxes for the year ended December 31, 2017 related to such deemed mandatory repatriation. During the three-months ended September 30, 2018, the Company made an adjustment to the provisional amount and recognized an additional $1.8 million provision for income tax related to the deemed mandatory repatriation.

The Company has not made additional measurement window adjustments to these items during the three- and nine-months ended September 30, 2018. The Company continues to evaluate the various provisions of the Tax Reform Act, including, the global intangible low-taxed income (“GILTI”) and the foreign derived intangible income (“FDII”) provisions. The ultimate impact of the Tax Reform Act may differ from these provisional amounts, possibly materially, due to, among other things, additional analysis, changes in interpretations and assumptions the Company has made, additional regulatory guidance that may be issued, as well as any related actions the Company may take. The measurement window begins in the reporting period that includes the enactment date and ends when an entity has obtained, prepared and analyzed the information needed in order to complete the accounting requirements under ASC Topic 740.

The following is a roll-forward of the Company’s total gross unrecognized tax benefits, not including interest and penalties, for the nine-months ended September 30, 2018:

	Gross Unrecognized Tax Benefits
Balance at December 31, 2017	$	6,540
Additions for tax positions related to the current year	210
Additions for tax positions related to the prior years	1,172
Decreases related to settlement with taxing authority	(2,665)
Balance at September 30, 2018	$	5,257

The Company recognizes accrued interest and penalties related to unrecognized tax benefits in the provision for income taxes in the Company’s condensed consolidated financial statements. As of September 30, 2018, the Company had approximately $1.0 million in accrued interest and penalties related to unrecognized tax benefits. If the Company were to prevail on all uncertain tax positions, the resultant impact on the Company’s effective tax rate would not be significant. It is expected that any change in the amount of unrecognized tax benefits within the next 12 months will not be significant.

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

On October 18, 2016, the IRS began its examination of the Company’s U.S. federal income tax return for the year ended December 31, 2014. On March 27, 2017, the IRS began its examination of the Company’s U.S. federal income tax return for the year ended December 31, 2015.

The Company is in various stages of examination with certain states and certain foreign jurisdictions. The Company’s 2014 through 2017 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 2013 through 2017 tax years.

XML

EARNINGS PER SHARE

9 Months Ended

Sep. 30, 2018

EARNINGS PER SHARE

EARNINGS PER SHARE

16.EARNINGS PER SHARE

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

	Three-Months Ended		Nine-Months Ended
	September 30,		September 30,
	2018	2017	2018	2017
Weighted-average shares outstanding:
Basic	552,694	567,878	559,472	567,550
Dilutive	7,261	10,490	7,319	10,414
Diluted	559,955	578,368	566,791	577,964

For the three-months ended September 30, 2018 and 2017, options and awards outstanding totaling 3.2 million shares and 5.9 million shares, respectively, were excluded from the calculations as their effect would have been antidilutive. For the nine-months ended September 30, 2018 and 2017, options and awards outstanding totaling 3.0 million shares and 8.4 million shares, respectively, were excluded from the calculations as their effect would have been antidilutive.

XML

SEGMENT INFORMATION

9 Months Ended

Sep. 30, 2018

SEGMENT INFORMATION

SEGMENT INFORMATION

17.SEGMENT INFORMATION

The Company has three operating and reportable segments, (i) Monster Energy® Drinks segment, which is primarily comprised of the Company’s Monster Energy® drinks, (ii) Strategic Brands segment, which is comprised of the various energy drink brands acquired from TCCC in 2015, and (iii) Other segment, which is comprised of certain products sold by American Fruits & Flavors LLC, a wholly-owned subsidiary of the Company, to independent third-party customers.

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

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

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

The net revenues derived from the Company’s reportable segments and other financial information related thereto for the three- and nine-months ended September 30, 2018 and 2017 are as follows:

	Three-Months Ended				Nine-Months Ended
	September 30,				September 30,
	2018		2017		2018		2017
Net sales:
Monster Energy® Drinks(1)	$	935,146	$	827,690	$	2,645,089	$	2,311,521
Strategic Brands	74,441		76,586		220,011		230,255
Other	6,573		5,200		17,853		16,914
Corporate and unallocated	-		-		-		-
	$	1,016,160	$	909,476	$	2,882,953	$	2,558,690

	Three-Months Ended				Nine-Months Ended
	September 30,				September 30,
	2018		2017		2018		2017
Operating Income:
Monster Energy® Drinks(1) (2)	$	359,090	$	333,210	$	1,033,895	$	968,864
Strategic Brands	41,661		42,663		135,054		137,945
Other	1,742		1,451		4,539		4,585
Corporate and unallocated	(62,920)		(59,952)		(196,380)		(179,719)
	$	339,573	$	317,372	$	977,108	$	931,675

	Three-Months Ended				Nine-Months Ended
	September 30,				September 30,
	2018		2017		2018		2017
Income before tax:
Monster Energy® Drinks(1) (2)	$	359,216	$	333,065	$	1,034,521	$	968,716
Strategic Brands	41,659		42,663		135,075		137,931
Other	1,742		1,451		4,539		4,585
Corporate and unallocated	(60,056)		(55,811)		(191,758)		(177,454)
	$	342,561	$	321,368	$	982,377	$	933,778

(1) Includes $11.1 million and $11.4 million for the three-months ended September 30, 2018 and 2017, respectively, related to the recognition of deferred revenue. Includes $33.3 million and $31.6 million for the nine-months ended September 30, 2018 and 2017, respectively, related to the recognition of deferred revenue.

(2) Includes $14.1 million and $15.9 million for the three-months ended September 30, 2018 and 2017, respectively, related to distributor termination costs. Includes $26.6 million and $35.9 million for the nine-months ended September 30, 2018 and 2017, respectively, related to distributor termination costs.

	Three-Months Ended				Nine-Months Ended
	September 30,				September 30,
	2018		2017		2018		2017
Depreciation and amortization:
Monster Energy® Drinks	$	9,157	$	7,546	$	26,926	$	20,959
Strategic Brands	1,947		1,836		5,819		5,474
Other	1,167		1,152		3,493		3,458
Corporate and unallocated	2,014		1,795		6,231		5,213
	$	14,285	$	12,329	$	42,469	$	35,104

Corporate and unallocated expenses for the three-months ended September 30, 2018 include $42.1 million of payroll costs, of which $14.0 million was attributable to stock-based compensation expenses (see Note 14, “Stock-Based Compensation”), as well as $12.3 million attributable to professional service expenses, including accounting and legal costs, and $8.5 million of other operating expenses. Corporate and unallocated expenses for the three-months ended September 30, 2017 include $37.9 million of payroll costs, of which $13.3 million was attributable to stock-based compensation expenses (see Note 14, “Stock-Based Compensation”), as well as $11.9 million attributable to professional service expenses, including accounting and legal costs, and $10.1 million of other operating expenses.

Corporate and unallocated expenses for the nine-months ended September 30, 2018 include $129.9 million of payroll costs, of which $42.4 million was attributable to stock-based compensation expenses (see Note 14, “Stock-Based Compensation”), as well as $36.5 million attributable to professional service expenses, including accounting and legal costs, and $30.0 million of other operating expenses. Corporate and unallocated expenses for the nine-months ended September 30, 2017 include $114.0 million of payroll costs, of which $39.3 million was attributable to stock-based compensation expenses (see Note 14, “Stock-Based Compensation”), as well as $38.3 million attributable to professional service expenses, including accounting and legal costs, and $27.5 million of other operating expenses.

TCCC, through the TCCC Subsidiaries, accounted for approximately 4% and 14% of the Company’s net sales for the three-months ended September 30, 2018 and 2017, respectively. TCCC, through the TCCC Subsidiaries, accounted for approximately 4% and 21% of the Company’s net sales for the nine-months ended September 30, 2018 and 2017, respectively. As part of TCCC’s North America Refranchising initiative (the “North America Refranchising”), the territories of certain TCCC Subsidiaries have been transitioned to certain independent TCCC bottlers/distributors and/or TCCC Related Parties. Accordingly, the Company’s percentage of net sales classified as sales to the TCCC Subsidiaries significantly decreased for three- and nine-months ended September 30, 2018.

CCBCC Operations, LLC accounted for approximately 14% of the Company’s net sales for both the three-months ended September 30, 2018 and 2017. CCBCC Operations, LLC accounted for approximately 14% and 13% of the Company’s net sales for the nine-months ended September 30, 2018 and 2017, respectively.

Reyes Coca-Cola Bottling accounted for approximately 13% and 5% of the Company’s net sales for the three-months ended September 30, 2018 and 2017, respectively. Reyes Coca-Cola Bottling accounted for approximately 13% and 5% of the Company’s net sales for the nine-months ended September 30, 2018 and 2017, respectively.

Coca-Cola European Partners accounted for approximately 9% and 10% of the Company’s net sales for the three-months ended September 30, 2018 and 2017, respectively. Coca-Cola European Partners accounted for approximately 9% of the Company’s net sales for both the nine-months ended September 30, 2018 and 2017.

Net sales to customers outside the United States amounted to $283.0 million and $260.1 million for the three-months ended September 30, 2018 and 2017, respectively. Net sales to customers outside the United States amounted to $818.8 million and $698.9 million for the nine-months ended September 30, 2018 and 2017, respectively.

Goodwill and other intangible assets for the Company’s reportable segments as of September 30, 2018 and December 31, 2017 are as follows:

	September 30,		December 31,
	2018		2017
Goodwill and other intangible assets:
Monster Energy® Drinks	$	1,362,448	$	1,346,648
Strategic Brands	991,352		995,582
Other	20,091		23,498
Corporate and unallocated	-		-
	$	2,373,891	$	2,365,728

XML

RELATED PARTY TRANSACTIONS

9 Months Ended

Sep. 30, 2018

RELATED PARTY TRANSACTIONS

RELATED PARTY TRANSACTIONS

18.RELATED PARTY TRANSACTIONS

TCCC controls approximately 18.5% of the voting interests of the Company.  The TCCC Subsidiaries, the TCCC Related Parties and the TCCC Independent Bottlers, purchase and distribute certain of the Company’s products in certain domestic and 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, for the three- and nine-months ended September 30, 2018 were $13.7 million and $38.1 million, respectively, and are included as a reduction to net sales. TCCC commissions, based on sales to the TCCC Independent Bottlers for the three- and nine-months ended September 30, 2018 were $4.3 million and $11.8 million, respectively, and are included in operating expenses.

TCCC commissions, based on sales to the TCCC Subsidiaries, for the three- and nine-months ended September 30, 2017 were $2.5 million and $8.2 million, respectively, and are included as a reduction to net sales. TCCC commissions, based on sales to the TCCC Related Parties and the TCCC Independent Bottlers, for the three- and nine-months ended September 30, 2017 were $12.7 million and $33.5 million, respectively, and are included in operating expenses.

Upon adoption of ASC 606, commissions paid to TCCC, based on sales to the TCCC Related Parties, are included as a reduction to net sales. Prior to January 1, 2018, such commissions, based on sales to the TCCC Related Parties, were included in operating expenses.

Net sales to the TCCC Subsidiaries for the three-months ended September 30, 2018 and 2017 were $42.3 million and $130.7 million, respectively.  Net sales to the TCCC Subsidiaries for the nine-months ended September 30, 2018 and 2017 were $117.0 million and $540.4 million, respectively. As part of the North America Refranchising, the territories of certain TCCC Subsidiaries have been transitioned to certain independent TCCC bottlers/distributors and/or TCCC Related Parties. Accordingly, the Company’s net sales classified as sales to the TCCC Subsidiaries significantly decreased for the three- and nine-months ended September 30, 2018.

The Company also purchases concentrates from TCCC which are then sold to certain of the Company’s bottlers/distributors. Concentrate purchases from TCCC were $7.4 million and $7.6 million for the three-months ended September 30, 2018 and 2017, respectively. Concentrate purchases from TCCC were $21.6 million and $20.2 million for the nine-months ended September 30, 2018 and 2017, respectively.

Certain TCCC Subsidiaries also contract manufacture certain of the Company’s Monster Energy® brand energy drinks. Such contract manufacturing expenses were $7.0 million and $3.6 million for the three-months ended September 30, 2018 and 2017, respectively. Such contract manufacturing expenses were $18.8 million and $8.7 million for the nine-months ended September 30, 2018 and 2017, respectively.

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

	September 30, 2018		December 31, 2017
Accounts receivable, net	$	43,383	$	32,607
Accounts payable	$	(62,566)	$	(45,465)
Accrued promotional allowances	$	(12,790)	$	(5,884)

Two directors and officers of the Company and their families are principal owners of a company that provides promotional materials to the Company. Expenses incurred with such company in connection with promotional materials purchased during the three-months ended September 30, 2018 and 2017 were $0.2 million and $0.6 million, respectively. Expenses incurred with such company in connection with promotional materials purchased during the nine-months ended September 30, 2018 and 2017 were $1.6 million and $2.0 million, respectively.

XML

REVENUE RECOGNITION (Tables)

9 Months Ended

Sep. 30, 2018

Schedule of disaggregation of revenue by geographical markets

	Three-Months Ended September 30, 2018
Net Sales	U.S. and Canada		EMEA1		Asia Pacific		Latin America and Caribbean		Total
Monster Energy® Drinks	$	710,172	$	127,286	$	63,758	$	33,930	$	935,146
Strategic Brands	47,645		18,287		8,231		278		74,441
Other	6,573		-		-		-		6,573
Total Net Sales	$	764,390	$	145,573	$	71,989	$	34,208	$	1,016,160

	Nine-Months Ended September 30, 2018
Net Sales	U.S. and Canada		EMEA1		Asia Pacific		Latin America and Caribbean		Total
Monster Energy® Drinks	$	1,994,950	$	376,823	$	171,796	$	101,520	$	2,645,089
Strategic Brands	137,502		60,567		20,148		1,794		220,011
Other	17,853		-		-		-		17,853
Total Net Sales	$	2,150,305	$	437,390	$	191,944	$	103,314	$	2,882,953

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

Accounting Standards Update 2014-09

Schedule of impact of adoption of ASC 606

	Three-Months Ended September 30, 2018
	As Reported		Without Adoption of ASC 606		Decrease due to Adoption of ASC 606
Net Sales	$	1,016,160	$	1,027,758	$	(11,598)	1
Operating Expenses	$	268,086	$	279,684	$	(11,598)	1

	Nine-Months Ended September 30, 2018
	As Reported		Without Adoption of ASC 606		Decrease due to Adoption of ASC 606
Net Sales	$	2,882,953	$	2,916,703	$	(33,750)	1
Operating Expenses	$	766,065	$	799,815	$	(33,750)	1

1 TCCC commissions based on sales to the TCCC Related Parties. There were no other identified changes to our revenue recognition policies as a result of the adoption of ASC 606.

XML

INVESTMENTS (Tables)

9 Months Ended

Sep. 30, 2018

INVESTMENTS

Summary of investments in available-for-sale

September 30, 2018	Amortized Cost		Gross Unrealized Holding Gains		Gross Unrealized Holding Losses		Fair Value		Continuous Unrealized Loss Position less than 12 Months		Continuous Unrealized Loss Position greater than 12 Months
Available-for-sale
Short-term:
Commercial paper	$	52,595	$	-	$	-	$	52,595	$	-	$	-
Certificates of deposit	26,068		-		-		26,068		-		-
Municipal securities	127,149		2		82		127,069		82		-
U.S. government agency securities	108,128		-		95		108,033		95		-
U.S. Treasuries	109,832		-		45		109,787		45		-
Variable rate demand notes	34,346		-		-		34,346		-		-
Long-term:
Municipal securities	1,612		-		2		1,610		2		-
Total	$	459,730	$	2	$	224	$	459,508	$	224	$	-

December 31, 2017	Amortized Cost		Gross Unrealized Holding Gains		Gross Unrealized Holding Losses		Fair Value		Continuous Unrealized Loss Position less than 12 Months		Continuous Unrealized Loss Position greater than 12 Months
Available-for-sale
Short-term:
Commercial paper	$	81,026	$	-	$	-	$	81,026	$	-	$	-
Certificates of deposit	11,869		-		-		11,869		-		-
Municipal securities	469,604		1		740		468,865		740		-
U.S. government agency securities	61,307		-		88		61,219		88		-
Variable rate demand notes	49,954		-		-		49,954		-		-
Long-term:
U.S. government agency securities	2,369		-		3		2,366		3		-
Total	$	676,129	$	1	$	831	$	675,299	$	831	$	-

Summary of the underlying contractual maturities of investments

	September 30, 2018				December 31, 2017
	Amortized Cost		Fair Value		Amortized Cost		Fair Value
Less than 1 year:
Commercial paper	$	52,595	$	52,595	$	81,026	$	81,026
U.S. Treasuries	109,832		109,787		-		-
Municipal securities	127,149		127,069		469,604		468,865
U.S. government agency securities	108,128		108,033		61,307		61,219
Certificates of deposit	26,068		26,068		11,869		11,869
Due 1 - 10 years:
Municipal securities	1,612		1,610		-		-
U.S. government agency securities	-		-		2,369		2,366
Variable rate demand notes	-		-		6,366		6,366
Due 11 - 20 years:
Variable rate demand notes	15,952		15,952		28,377		28,377
Due 21 - 30 years:
Variable rate demand notes	14,291		14,291		15,211		15,211
Due 31 - 40 years:
Variable rate demand notes	4,103		4,103		-		-
Total	$	459,730	$	459,508	$	676,129	$	675,299

XML

FAIR VALUE OF CERTAIN FINANCIAL ASSETS AND LIABILITIES (Tables)

9 Months Ended

Sep. 30, 2018

FAIR VALUE OF CERTAIN FINANCIAL ASSETS AND LIABILITIES

Schedule of financial assets and liabilities recorded at fair value on a recurring basis

September 30, 2018	Level 1		Level 2			Level 3		Total
Cash	$	523,097	$	-		$	-	$	523,097
Money market funds	87,546		-			-		87,546
Certificates of deposit	-		59,104			-		59,104
Commercial paper	-		75,257			-		75,257
Variable rate demand notes	-		34,346			-		34,346
Municipal securities	-		153,204			-		153,204
U.S. government agency securities	-		128,887			-		128,887
U.S. Treasuries	-		111,781			-		111,781
Foreign currency derivatives	-		178			-		178
Total	$	610,643	$	562,757		$	-	$	1,173,400
Amounts included in:
Cash and cash equivalents	$	610,643	$	103,071		$	-	$	713,714
Short-term investments	-		457,898			-		457,898
Accounts receivable, net	-		271			-		271
Investments	-		1,610			-		1,610
Accrued liabilities	-		(93		)	-		(93		)
Total	$	610,643	$	562,757		$	-	$	1,173,400
December 31, 2017	Level 1		Level 2			Level 3		Total
Cash	$	310,885	$	-		$	-	$	310,885
Money market funds	112,848		-			-		112,848
Certificates of deposit	-		15,720			-		15,720
Commercial paper	-		99,903			-		99,903
Variable rate demand notes	-		49,954			-		49,954
Municipal securities	-		529,984			-		529,984
U.S. government agency securities	-		81,230			-		81,230
U.S. Treasuries	-		3,397			-		3,397
Foreign currency derivatives	-		(1,484		)	-		(1,484		)
Total	$	423,733	$	778,704		$	-	$	1,202,437
Amounts included in:
Cash and cash equivalents	$	423,733	$	104,889		$	-	$	528,622
Short-term investments	-		672,933			-		672,933
Accounts receivable, net	-		95			-		95
Investments	-		2,366			-		2,366
Accrued liabilities	-		(1,579		)	-		(1,579		)
Total	$	423,733	$	778,704		$	-	$	1,202,437

XML

DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES (Tables)

9 Months Ended

Sep. 30, 2018

DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES

Schedule of notional amount and fair value of all outstanding foreign currency derivative instruments in the condensed consolidated balance sheets

September 30, 2018
Derivatives not designated as hedging instruments under FASB ASC 815-20	Notional Amount		Fair Value		Balance Sheet Location
Assets:
Foreign currency exchange contracts:
Receive USD/pay EUR	$	31,411	$	111	Accounts receivable, net
Receive USD/pay GBP	28,315		105		Accounts receivable, net
Receive USD/pay ZAR	14,375		53		Accounts receivable, net
Receive NOK/pay USD	1,450		2		Accounts receivable, net
Liabilities:
Foreign currency exchange contracts:
Receive USD/pay COP	$	3,789	$	(34)	Accrued liabilities
Receive SGD/pay USD	7,342		(23)		Accrued liabilities
Receive USD/pay AUD	12,484		(18)		Accrued liabilities
Receive USD/pay NZD	2,645		(7)		Accrued liabilities
Receive USD/pay MXN	2,044		(6)		Accrued liabilities
Receive RUB/pay USD	909		(5)		Accrued liabilities

December 31, 2017
Derivatives not designated as hedging instruments under FASB ASC 815-20	Notional Amount		Fair Value		Balance Sheet Location
Assets:
Foreign currency exchange contracts:
Receive CAD/pay USD	$	4,892	$	61	Accounts receivable, net
Receive USD/pay COP	2,803		13		Accounts receivable, net
Receive USD/pay BRL	1,806		1		Accounts receivable, net
Receive NOK/pay USD	1,534		18		Accounts receivable, net
Receive SGD/pay USD	223		2		Accounts receivable, net
Liabilities:
Foreign currency exchange contracts:
Receive USD/pay EUR	$	65,131	$	(642)	Accrued liabilities
Receive USD/pay GBP	31,342		(334)		Accrued liabilities
Receive USD/pay ZAR	21,311		(222)		Accrued liabilities
Receive USD/pay AUD	17,238		(177)		Accrued liabilities
Receive USD/pay MXN	7,720		(126)		Accrued liabilities
Receive USD/pay TRY	5,483		(52)		Accrued liabilities
Receive USD/pay NZD	1,826		(18)		Accrued liabilities
Receive USD/pay CLP	1,112		(8)		Accrued liabilities

Schedule of net gains (losses) on derivative instruments in the condensed consolidated statements of income

		Amount of gain (loss) recognized in income on derivatives
		Three-months ended
Derivatives not designated as hedging instruments under FASB ASC 815-20	Location of gain (loss) recognized in income on derivatives	September 30, 2018		September 30, 2017
Foreign currency exchange contracts	Interest and other income, net	$	2,175	$	(2,172)
		Amount of gain (loss) recognized in income on derivatives
		Nine-months ended
Derivatives not designated as hedging instruments under FASB ASC 815-20	Location of gain (loss) recognized in income on derivatives	September 30, 2018		September 30, 2017
Foreign currency exchange contracts	Interest and other income, net	$	7,909	$	(11,639)

XML

INVENTORIES (Tables)

9 Months Ended

Sep. 30, 2018

INVENTORIES

Schedule of inventories

	September 30, 2018		December 31, 2017
Raw materials	$	99,266	$	78,834
Finished goods	162,818		176,911
	$	262,084	$	255,745

XML

PROPERTY AND EQUIPMENT, NET (Tables)

9 Months Ended

Sep. 30, 2018

PROPERTY AND EQUIPMENT, NET

Schedule of property and equipment

	September 30, 2018		December 31, 2017
Land	$	44,261	$	47,373
Leasehold improvements	5,760		3,109
Furniture and fixtures	6,925		6,461
Office and computer equipment	18,384		14,506
Computer software	3,103		3,650
Equipment	176,732		148,434
Buildings	113,625		107,374
Vehicles	39,488		38,179
	408,278		369,086
Less: accumulated depreciation and amortization	(165,424)		(138,810)
	$	242,854	$	230,276

XML

GOODWILL AND OTHER INTANGIBLE ASSETS (Tables)

9 Months Ended

Sep. 30, 2018

GOODWILL AND OTHER INTANGIBLE ASSETS

Schedule of Goodwill

	Monster Energy® Drinks		Strategic Brands		Other		Total
Balance at December 31, 2017	$	693,644	$	637,999	$	-	$	1,331,643
Acquisitions	-		-		-		-
Balance at September 30, 2018	$	693,644	$	637,999	$	-	$	1,331,643
	Monster Energy® Drinks		Strategic Brands		Other		Total
Balance at December 31, 2016	$	693,644	$	637,999	$	-	$	1,331,643
Acquisitions	-		-		-		-
Balance at September 30, 2017	$	693,644	$	637,999	$	-	$	1,331,643

Schedule of intangibles

	September 30, 2018		December 31, 2017
Amortizing intangibles	$	71,350	$	71,400
Accumulated amortization	(35,349)		(26,383)
	36,001		45,017
Non-amortizing intangibles	1,006,247		989,068
	$	1,042,248	$	1,034,085

XML

ACCUMULATED OTHER COMPREHENSIVE LOSS (Tables)

9 Months Ended

Sep. 30, 2018

ACCUMULATED OTHER COMPREHENSIVE LOSS

Changes in accumulated other comprehensive loss by component, after tax

	Currency Translation Losses		Unrealized (Gains) Losses on Available-for- Sale Securities		Total
Balance at December 31, 2017	$	15,818	$	841	$	16,659
Other comprehensive loss (income) before reclassifications	13,728		(610)		13,118
Amounts reclassified from accumulated other comprehensive loss (income)	-		-		-
Net current-period other comprehensive loss (income)	13,728		(610)		13,118
Balance at September 30, 2018	$	29,546	$	231	$	29,777

XML

STOCK-BASED COMPENSATION (Tables)

9 Months Ended

Sep. 30, 2018

STOCK-BASED COMPENSATION

Schedule of weighted-average assumptions used to estimate the fair value of options granted

	Three-Months Ended September 30,		Nine-Months Ended September 30,
	2018	2017	2018	2017
Dividend yield	0.0%	0.0%	0.0%	0.0%
Expected volatility	34.5%	35.3%	34.9%	36.6%
Risk-free interest rate	2.9%	1.7%	2.8%	2.1%
Expected term	6.1 years	5.9 years	6.1 years	6.1 years

Summary of Company's activities with respect to its stock option plans

Options	Number of Shares (in thousands)	Weighted- Average Exercise Price Per Share		Weighted- Average Remaining Contractual Term (in years)	Aggregate Intrinsic Value
Outstanding at January 1, 2018	17,819	$	29.62	6.1	$	600,032
Granted 01/01/18 - 03/31/18	2,615	$	58.76
Granted 04/01/18 - 06/30/18	360	$	51.72
Granted 07/01/18 - 09/30/18	11	$	58.77
Exercised	(1,308)	$	18.71
Cancelled or forfeited	(495)	$	43.71
Outstanding at September 30, 2018	19,002	$	34.45	6.1	$	454,476
Vested and expected to vest in the
future at September 30, 2018	18,061	$	33.59	5.9	$	447,291
Exercisable at September 30, 2018	10,179	$	22.51	4.3	$	364,103

Summary of Company's activities with respect to non-vested restricted stock units

	Number of Shares (in thousands)	Weighted Average Grant-Date Fair Value
Non-vested at January 1, 2018	530	$	45.09
Granted 01/01/18- 03/31/18	221	$	58.75
Granted 04/01/18- 06/30/18	48	$	52.31
Granted 07/01/18 - 09/30/18	1	$	58.72
Vested	(263)	$	45.36
Forfeited/cancelled	(7)	$	33.60
Non-vested at September 30, 2018	530	$	51.48

XML

INCOME TAXES (Tables)

9 Months Ended

Sep. 30, 2018

INCOME TAXES

Schedule of roll-forward of the Company's total gross unrecognized tax benefits, not including interest and penalties

	Gross Unrecognized Tax Benefits
Balance at December 31, 2017	$	6,540
Additions for tax positions related to the current year	210
Additions for tax positions related to the prior years	1,172
Decreases related to settlement with taxing authority	(2,665)
Balance at September 30, 2018	$	5,257

XML

EARNINGS PER SHARE (Tables)

9 Months Ended

Sep. 30, 2018

EARNINGS PER SHARE

Schedule of reconciliation of the weighted average shares used in the basic and diluted earnings per common share computations

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

	Three-Months Ended		Nine-Months Ended
	September 30,		September 30,
	2018	2017	2018	2017
Weighted-average shares outstanding:
Basic	552,694	567,878	559,472	567,550
Dilutive	7,261	10,490	7,319	10,414
Diluted	559,955	578,368	566,791	577,964

XML

SEGMENT INFORMATION (Tables)

9 Months Ended

Sep. 30, 2018

SEGMENT INFORMATION

Schedule of net revenues and other financial information by segment

	Three-Months Ended				Nine-Months Ended
	September 30,				September 30,
	2018		2017		2018		2017
Net sales:
Monster Energy® Drinks(1)	$	935,146	$	827,690	$	2,645,089	$	2,311,521
Strategic Brands	74,441		76,586		220,011		230,255
Other	6,573		5,200		17,853		16,914
Corporate and unallocated	-		-		-		-
	$	1,016,160	$	909,476	$	2,882,953	$	2,558,690

	Three-Months Ended				Nine-Months Ended
	September 30,				September 30,
	2018		2017		2018		2017
Operating Income:
Monster Energy® Drinks(1) (2)	$	359,090	$	333,210	$	1,033,895	$	968,864
Strategic Brands	41,661		42,663		135,054		137,945
Other	1,742		1,451		4,539		4,585
Corporate and unallocated	(62,920)		(59,952)		(196,380)		(179,719)
	$	339,573	$	317,372	$	977,108	$	931,675

	Three-Months Ended				Nine-Months Ended
	September 30,				September 30,
	2018		2017		2018		2017
Income before tax:
Monster Energy® Drinks(1) (2)	$	359,216	$	333,065	$	1,034,521	$	968,716
Strategic Brands	41,659		42,663		135,075		137,931
Other	1,742		1,451		4,539		4,585
Corporate and unallocated	(60,056)		(55,811)		(191,758)		(177,454)
	$	342,561	$	321,368	$	982,377	$	933,778

(1) Includes $11.1 million and $11.4 million for the three-months ended September 30, 2018 and 2017, respectively, related to the recognition of deferred revenue. Includes $33.3 million and $31.6 million for the nine-months ended September 30, 2018 and 2017, respectively, related to the recognition of deferred revenue.

(2) Includes $14.1 million and $15.9 million for the three-months ended September 30, 2018 and 2017, respectively, related to distributor termination costs. Includes $26.6 million and $35.9 million for the nine-months ended September 30, 2018 and 2017, respectively, related to distributor termination costs.

	Three-Months Ended				Nine-Months Ended
	September 30,				September 30,
	2018		2017		2018		2017
Depreciation and amortization:
Monster Energy® Drinks	$	9,157	$	7,546	$	26,926	$	20,959
Strategic Brands	1,947		1,836		5,819		5,474
Other	1,167		1,152		3,493		3,458
Corporate and unallocated	2,014		1,795		6,231		5,213
	$	14,285	$	12,329	$	42,469	$	35,104

Schedule of goodwill and other intangible assets for the reportable segments

	September 30,		December 31,
	2018		2017
Goodwill and other intangible assets:
Monster Energy® Drinks	$	1,362,448	$	1,346,648
Strategic Brands	991,352		995,582
Other	20,091		23,498
Corporate and unallocated	-		-
	$	2,373,891	$	2,365,728

XML

RELATED PARTY TRANSACTIONS (Tables)

9 Months Ended

Sep. 30, 2018

RELATED PARTY TRANSACTIONS

Schedule of related party transactions

	September 30, 2018		December 31, 2017
Accounts receivable, net	$	43,383	$	32,607
Accounts payable	$	(62,566)	$	(45,465)
Accrued promotional allowances	$	(12,790)	$	(5,884)

XML

RECENT ACCOUNTING PRONOUNCEMENTS (Details) - USD ($) $ in Thousands	9 Months Ended
	Sep. 30, 2018	Dec. 31, 2017
Retained earnings	$ 3,675,538	$ 2,928,226
ASU 2016-16 | Adjustment
Deferred income tax	(6,600)
Retained earnings	$ 6,600

XML

REVENUE RECOGNITION - Impact of adoption of ASC 606 (Details) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2018 USD ($)	Sep. 30, 2017 USD ($)	Sep. 30, 2018 USD ($) segment	Sep. 30, 2017 USD ($)
Number of operating segments | segment			3
Number of reportable segments | segment			3
Net Sales	$ 1,016,160	$ 909,476	$ 2,882,953	$ 2,558,690
Operating Expenses	268,086	$ 252,337	766,065	$ 702,405
Without 606 Adoption of ASC 606
Net Sales	1,027,758		2,916,703
Operating Expenses	279,684		799,815
(Decrease) Increase due to Adoption of ASC606
Net Sales	(11,598)		(33,750)
Operating Expenses	$ (11,598)		$ (33,750)

XML

REVENUE RECOGNITION - Disaggregation of Revenue (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2018	Sep. 30, 2017	Sep. 30, 2018	Sep. 30, 2017	Dec. 31, 2017
Total Net Sales	$ 1,016,160	$ 909,476	$ 2,882,953	$ 2,558,690
Contract Liabilities
Deferred revenue	363,200		363,200		$ 377,600
Deferred revenue recognized in net sales	11,100		33,300
U.S. And Canada
Total Net Sales	764,390		2,150,305
EMEA
Total Net Sales	145,573		437,390
Asia Pacific
Total Net Sales	71,989		191,944
Latin America And Caribbean
Total Net Sales	34,208		103,314
Monster Energy Drinks
Total Net Sales	935,146		2,645,089
Monster Energy Drinks | U.S. And Canada
Total Net Sales	710,172		1,994,950
Monster Energy Drinks | EMEA
Total Net Sales	127,286		376,823
Monster Energy Drinks | Asia Pacific
Total Net Sales	63,758		171,796
Monster Energy Drinks | Latin America And Caribbean
Total Net Sales	33,930		101,520
Strategic Brands
Total Net Sales	74,441		220,011
Strategic Brands | U.S. And Canada
Total Net Sales	47,645		137,502
Strategic Brands | EMEA
Total Net Sales	18,287		60,567
Strategic Brands | Asia Pacific
Total Net Sales	8,231		20,148
Strategic Brands | Latin America And Caribbean
Total Net Sales	278		1,794
Other
Total Net Sales	6,573		17,853
Other | U.S. And Canada
Total Net Sales	$ 6,573		$ 17,853

XML

INVESTMENTS (Details) - USD ($) $ in Thousands	Sep. 30, 2018	Dec. 31, 2017
Available-for-sale
Amortized Cost	$ 459,730	$ 676,129
Gross Unrealized Holding Gains	2	1
Gross Unrealized Holding Losses	224	831
Fair Value	459,508	675,299
Continuous Unrealized Loss Position less than 12 Months	224	831
Short-term | Commercial paper
Available-for-sale
Amortized Cost	52,595	81,026
Fair Value	52,595	81,026
Short-term | Certificates of deposit
Available-for-sale
Amortized Cost	26,068	11,869
Fair Value	26,068	11,869
Short-term | Municipal securities
Available-for-sale
Amortized Cost	127,149	469,604
Gross Unrealized Holding Gains	2	1
Gross Unrealized Holding Losses	82	740
Fair Value	127,069	468,865
Continuous Unrealized Loss Position less than 12 Months	82	740
Short-term | U.S. government agency securities
Available-for-sale
Amortized Cost	108,128	61,307
Gross Unrealized Holding Losses	95	88
Fair Value	108,033	61,219
Continuous Unrealized Loss Position less than 12 Months	95	88
Short-term | U.S. Treasuries
Available-for-sale
Amortized Cost	109,832
Gross Unrealized Holding Losses	45
Fair Value	109,787
Continuous Unrealized Loss Position less than 12 Months	45
Short-term | Variable rate demand notes
Available-for-sale
Amortized Cost	34,346	49,954
Fair Value	34,346	49,954
Long-term | Municipal securities
Available-for-sale
Amortized Cost	1,612
Gross Unrealized Holding Losses	2
Fair Value	1,610
Continuous Unrealized Loss Position less than 12 Months	$ 2
Long-term | U.S. government agency securities
Available-for-sale
Amortized Cost		2,369
Gross Unrealized Holding Losses		3
Fair Value		2,366
Continuous Unrealized Loss Position less than 12 Months		$ 3

XML

INVESTMENTS - Maturity Period (Details) - USD ($) $ in Thousands	Sep. 30, 2018	Dec. 31, 2017
Investments
Amortized Cost	$ 459,730	$ 676,129
Fair Value	459,508	675,299
Commercial paper | Less than 1 year
Investments
Amortized Cost	52,595	81,026
Fair Value	52,595	81,026
U.S. Treasuries | Less than 1 year
Investments
Amortized Cost	109,832
Fair Value	109,787
Municipal securities | Less than 1 year
Investments
Amortized Cost	127,149	469,604
Fair Value	127,069	468,865
Municipal securities | Due 1 - 10 years
Investments
Amortized Cost	1,612
Fair Value	1,610
U.S. government agency securities | Less than 1 year
Investments
Amortized Cost	108,128	61,307
Fair Value	108,033	61,219
U.S. government agency securities | Due 1 - 10 years
Investments
Amortized Cost		2,369
Fair Value		2,366
Certificates of deposit | Less than 1 year
Investments
Amortized Cost	26,068	11,869
Fair Value	26,068	11,869
Variable rate demand notes | Due 1 - 10 years
Investments
Amortized Cost		6,366
Fair Value		6,366
Variable rate demand notes | Due 11 - 20 years
Investments
Amortized Cost	15,952	28,377
Fair Value	15,952	28,377
Variable rate demand notes | Due 21 - 30 years
Investments
Amortized Cost	14,291	15,211
Fair Value	14,291	$ 15,211
Variable rate demand notes | Due 31 - 40 years
Investments
Amortized Cost	4,103
Fair Value	$ 4,103

XML

FAIR VALUE OF CERTAIN FINANCIAL ASSETS AND LIABILITIES - Assets - Recurring Basis (Details) - USD ($) $ in Thousands	9 Months Ended
	Sep. 30, 2018	Dec. 31, 2017
Fair value of certain financial assets and liabilities
Cash and cash equivalents	$ 713,714	$ 528,622
Short-term investments	457,898	672,933
Investments	1,610	2,366
Asset transfers between Level 1 and Level 2 measurements	0
Total fair value
Fair value of certain financial assets and liabilities
Cash	523,097	310,885
Assets measured at fair value	1,173,400	1,202,437
Foreign currency derivatives	178
Cash and cash equivalents	713,714	528,622
Short-term investments	457,898	672,933
Accounts receivable, net	271	95
Investments	1,610	2,366
Accrued liabilities	(93)	(1,579)
Foreign currency derivatives		(1,484)
Total fair value | Money market funds
Fair value of certain financial assets and liabilities
Assets measured at fair value	87,546	112,848
Total fair value | Certificates of deposit
Fair value of certain financial assets and liabilities
Assets measured at fair value	59,104	15,720
Total fair value | Commercial paper
Fair value of certain financial assets and liabilities
Assets measured at fair value	75,257	99,903
Total fair value | Variable rate demand notes
Fair value of certain financial assets and liabilities
Assets measured at fair value	34,346	49,954
Total fair value | Municipal securities
Fair value of certain financial assets and liabilities
Assets measured at fair value	153,204	529,984
Total fair value | U.S. government agency securities
Fair value of certain financial assets and liabilities
Assets measured at fair value	128,887	81,230
Total fair value | U.S. Treasuries
Fair value of certain financial assets and liabilities
Assets measured at fair value	111,781	3,397
Level 1
Fair value of certain financial assets and liabilities
Cash	523,097	310,885
Assets measured at fair value	610,643	423,733
Cash and cash equivalents	610,643	423,733
Level 1 | Money market funds
Fair value of certain financial assets and liabilities
Assets measured at fair value	87,546	112,848
Level 2
Fair value of certain financial assets and liabilities
Assets measured at fair value	562,757	778,704
Foreign currency derivatives	178
Cash and cash equivalents	103,071	104,889
Short-term investments	457,898	672,933
Accounts receivable, net	271	95
Investments	1,610	2,366
Accrued liabilities	(93)	(1,579)
Foreign currency derivatives		(1,484)
Level 2 | Certificates of deposit
Fair value of certain financial assets and liabilities
Assets measured at fair value	59,104	15,720
Level 2 | Commercial paper
Fair value of certain financial assets and liabilities
Assets measured at fair value	75,257	99,903
Level 2 | Variable rate demand notes
Fair value of certain financial assets and liabilities
Assets measured at fair value	34,346	49,954
Level 2 | Municipal securities
Fair value of certain financial assets and liabilities
Assets measured at fair value	153,204	529,984
Level 2 | U.S. government agency securities
Fair value of certain financial assets and liabilities
Assets measured at fair value	128,887	81,230
Level 2 | U.S. Treasuries
Fair value of certain financial assets and liabilities
Assets measured at fair value	$ 111,781	$ 3,397

XML

DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES - Notional Amount and Fair Value (Details) - USD ($) $ in Thousands	9 Months Ended
	Sep. 30, 2018	Dec. 31, 2017
Foreign currency exchange contracts | Maximum
Derivative Instruments and Hedging Activities
Term of derivative instrument	1 month
Not designated as hedging instruments | Accounts receivable, net | Receive USD/pay EUR
Derivative Instruments and Hedging Activities
Notional amount, Assets	$ 31,411
Fair Value, Assets	111
Not designated as hedging instruments | Accounts receivable, net | Receive USD/pay GBP
Derivative Instruments and Hedging Activities
Notional amount, Assets	28,315
Fair Value, Assets	105
Not designated as hedging instruments | Accounts receivable, net | Receive USD/pay ZAR
Derivative Instruments and Hedging Activities
Notional amount, Assets	14,375
Fair Value, Assets	53
Not designated as hedging instruments | Accounts receivable, net | Receive NOK/pay USD
Derivative Instruments and Hedging Activities
Notional amount, Assets	1,450	$ 1,534
Fair Value, Assets	2	18
Not designated as hedging instruments | Accounts receivable, net | Receive USD/pay COP
Derivative Instruments and Hedging Activities
Notional amount, Assets		2,803
Fair Value, Assets		13
Not designated as hedging instruments | Accounts receivable, net | Receive SGD/pay USD
Derivative Instruments and Hedging Activities
Notional amount, Assets		223
Fair Value, Assets		2
Not designated as hedging instruments | Accounts receivable, net | Receive CAD/pay USD
Derivative Instruments and Hedging Activities
Notional amount, Assets		4,892
Fair Value, Assets		61
Not designated as hedging instruments | Accounts receivable, net | Receive USD/pay BRL
Derivative Instruments and Hedging Activities
Notional amount, Assets		1,806
Fair Value, Assets		1
Not designated as hedging instruments | Accrued liabilities | Receive USD/pay EUR
Derivative Instruments and Hedging Activities
Notional amount, Liabilities		65,131
Fair Value, Liabilities		(642)
Not designated as hedging instruments | Accrued liabilities | Receive USD/pay GBP
Derivative Instruments and Hedging Activities
Notional amount, Liabilities		31,342
Fair Value, Liabilities		(334)
Not designated as hedging instruments | Accrued liabilities | Receive USD/pay ZAR
Derivative Instruments and Hedging Activities
Notional amount, Liabilities		21,311
Fair Value, Liabilities		(222)
Not designated as hedging instruments | Accrued liabilities | Receive USD/pay COP
Derivative Instruments and Hedging Activities
Notional amount, Liabilities	3,789
Fair Value, Liabilities	(34)
Not designated as hedging instruments | Accrued liabilities | Receive SGD/pay USD
Derivative Instruments and Hedging Activities
Notional amount, Liabilities	7,342
Fair Value, Liabilities	(23)
Not designated as hedging instruments | Accrued liabilities | Receive USD/pay AUD
Derivative Instruments and Hedging Activities
Notional amount, Liabilities	12,484	17,238
Fair Value, Liabilities	(18)	(177)
Not designated as hedging instruments | Accrued liabilities | Receive USD/pay NZD
Derivative Instruments and Hedging Activities
Notional amount, Liabilities	2,645	1,826
Fair Value, Liabilities	(7)	(18)
Not designated as hedging instruments | Accrued liabilities | Receive USD/pay MXN
Derivative Instruments and Hedging Activities
Notional amount, Liabilities	2,044	7,720
Fair Value, Liabilities	(6)	(126)
Not designated as hedging instruments | Accrued liabilities | Receive RUB/pay USD
Derivative Instruments and Hedging Activities
Notional amount, Liabilities	909
Fair Value, Liabilities	$ (5)
Not designated as hedging instruments | Accrued liabilities | Receive USD/pay CLP
Derivative Instruments and Hedging Activities
Notional amount, Liabilities		1,112
Fair Value, Liabilities		(8)
Not designated as hedging instruments | Accrued liabilities | Receive USD/pay TRY
Derivative Instruments and Hedging Activities
Notional amount, Liabilities		5,483
Fair Value, Liabilities		$ (52)

XML

DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES - Nonhedging Designation (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2018	Sep. 30, 2017	Sep. 30, 2018	Sep. 30, 2017
Not designated as hedging instruments | Foreign currency exchange contracts | Interest and other income, net
Net (losses) gains on derivative instruments
Amount of (loss) gain recognized in income on derivatives	$ 2,175	$ (2,172)	$ 7,909	$ (11,639)

XML

INVENTORIES (Details) - USD ($) $ in Thousands	Sep. 30, 2018	Dec. 31, 2017
INVENTORIES
Raw materials	$ 99,266	$ 78,834
Finished goods	162,818	176,911
Inventories, net	$ 262,084	$ 255,745

XML

PROPERTY AND EQUIPMENT, NET (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2018	Sep. 30, 2017	Sep. 30, 2018	Sep. 30, 2017	Dec. 31, 2017
Property and equipment, net
Property and equipment, gross	$ 408,278		$ 408,278		$ 369,086
Less: accumulated depreciation and amortization	(165,424)		(165,424)		(138,810)
Property and equipment, net	242,854		242,854		230,276
Total depreciation and amortization expense	11,300	$ 9,400	33,500	$ 26,200
Land
Property and equipment, net
Property and equipment, gross	44,261		44,261		47,373
Leasehold improvements
Property and equipment, net
Property and equipment, gross	5,760		5,760		3,109
Furniture and fixtures
Property and equipment, net
Property and equipment, gross	6,925		6,925		6,461
Office and computer equipment
Property and equipment, net
Property and equipment, gross	18,384		18,384		14,506
Computer software
Property and equipment, net
Property and equipment, gross	3,103		3,103		3,650
Equipment
Property and equipment, net
Property and equipment, gross	176,732		176,732		148,434
Buildings
Property and equipment, net
Property and equipment, gross	113,625		113,625		107,374
Vehicles
Property and equipment, net
Property and equipment, gross	$ 39,488		$ 39,488		$ 38,179

XML

GOODWILL AND OTHER INTANGIBLE ASSETS - Goodwill (Details) - USD ($) $ in Thousands	Sep. 30, 2018	Dec. 31, 2017	Sep. 30, 2017
Goodwill
Goodwill, Beginning Balance	$ 1,331,643	$ 1,331,643	$ 1,331,643
Goodwill, Ending Balance	1,331,643	1,331,643	1,331,643
Monster Energy Drinks
Goodwill
Goodwill, Beginning Balance	693,644	693,644	693,644
Goodwill, Ending Balance	693,644	693,644	693,644
Strategic Brands
Goodwill
Goodwill, Beginning Balance	637,999	637,999	637,999
Goodwill, Ending Balance	$ 637,999	$ 637,999	$ 637,999

XML

GOODWILL AND OTHER INTANGIBLE ASSETS - Intangible assets (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2018	Sep. 30, 2017	Sep. 30, 2018	Sep. 30, 2017	Dec. 31, 2017
Intangible assets
Amortizing intangibles	$ 71,350		$ 71,350		$ 71,400
Accumulated amortization	(35,349)		(35,349)		(26,383)
Amortizing intangibles, net	36,001		36,001		45,017
Non-amortizing intangibles	1,006,247		1,006,247		989,068
Intangible, net	1,042,248		1,042,248		$ 1,034,085
Amortization of in intangible assets	$ 3,000	$ 3,000	$ 9,000	$ 8,900
Minimum
Intangible assets
Useful life of intangible assets			5 years
Maximum
Intangible assets
Useful life of intangible assets			7 years

XML

DISTRIBUTION AGREEMENTS (Details) - USD ($) $ in Millions	3 Months Ended		9 Months Ended
	Sep. 30, 2018	Sep. 30, 2017	Sep. 30, 2018	Sep. 30, 2017
DISTRIBUTION AGREEMENTS
Termination costs	$ 14.1	$ 15.9	$ 26.6	$ 35.9
Distribution agreement (in years)			20 years
Revenue recognized	$ 11.1	$ 11.4	$ 33.3	$ 31.6

XML

COMMITMENTS AND CONTINGENCIES - Purchase Commitments (Details) $ in Millions	9 Months Ended
	Sep. 30, 2018 USD ($)
Purchase Commitments
Aggregate contractual obligations	$ 180.8
Aggregate operating lease commitments	15.1
Raw materials
Purchase Commitments
Purchase commitments	$ 33.8
Obligation term ( in years)	1 year

XML

COMMITMENTS AND CONTINGENCIES - Line of Credit Facility (Details) - Line of credit - USD ($) $ in Millions	Sep. 30, 2018	Feb. 28, 2018	Dec. 31, 2017
Line of Credit Facility [Line Items]
Maximum borrowing capacity		$ 15.0	$ 9.0
Interest rate (as a percent)	5.50%
Amount outstanding	$ 10.1

XML

COMMITMENTS AND CONTINGENCIES - Legal Proceedings (Details) $ in Millions	9 Months Ended
	Sep. 30, 2018 USD ($) product
Commitments and contingencies
Loss Contingency Accrual | $	$ 1.4
TCCC
Commitments and contingencies
Voting interest (as a percent)	18.50%
Number of energy products developed | product	2

XML

ACCUMULATED OTHER COMPREHENSIVE LOSS (Details) $ in Thousands	9 Months Ended
	Sep. 30, 2018 USD ($)
Components of accumulated other comprehensive loss:
Balance at the beginning of the period	$ 16,659
Other comprehensive loss (income) before reclassifications	13,118
Net current-period other comprehensive loss (income)	13,118
Balance at the end of the period	29,777
Currency Translation Losses
Components of accumulated other comprehensive loss:
Balance at the beginning of the period	15,818
Other comprehensive loss (income) before reclassifications	13,728
Net current-period other comprehensive loss (income)	13,728
Balance at the end of the period	29,546
Unrealized (Gains) Losses on Available-for-Sale Securities
Components of accumulated other comprehensive loss:
Balance at the beginning of the period	841
Other comprehensive loss (income) before reclassifications	(610)
Net current-period other comprehensive loss (income)	(610)
Balance at the end of the period	$ 231

XML

TREASURY STOCK (Details) - USD ($) $ in Millions	3 Months Ended
	Sep. 30, 2018	Nov. 08, 2018	Aug. 07, 2018	May 29, 2018
May 2018 Repurchase Program
Treasury Stock
Share repurchase program, authorized amount				$ 500.0
Shares repurchased (in shares)	0
Share repurchase program, authorized remaining amount		$ 196.7
August 2018 Repurchase Program
Treasury Stock
Share repurchase program, authorized amount			$ 500.0
Shares repurchased (in shares)	0
Share repurchase program, authorized remaining amount		$ 500.0

XML

STOCK-BASED COMPENSATION - Plans (Details) $ in Millions	3 Months Ended		9 Months Ended
	Sep. 30, 2018 USD ($)	Sep. 30, 2017 USD ($)	Sep. 30, 2018 USD ($) plan	Sep. 30, 2017 USD ($)
STOCK-BASED COMPENSATION
Stock-based compensation plans | plan			2
Compensation expense on share-based plans	$ 14.1	$ 13.3	$ 42.4	$ 39.3
Excess tax benefit realized for tax deductions from non-qualified stock option exercises and disqualifying dispositions of incentive stock options	$ 3.1	$ 2.5	$ 7.7	$ 13.8

XML

STOCK-BASED COMPENSATION - Fair Value Assumptions (Details) - Stock options - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands	3 Months Ended				9 Months Ended		12 Months Ended
	Sep. 30, 2018	Jun. 30, 2018	Mar. 31, 2018	Sep. 30, 2017	Sep. 30, 2018	Sep. 30, 2017	Dec. 31, 2017
Weighted-average assumptions used to estimate the fair value of options granted
Dividend yield (as a percent)	0.00%			0.00%	0.00%	0.00%
Expected volatility (as a percent)	34.50%			35.30%	34.90%	36.60%
Risk-free interest rate (as a percent)	2.90%			1.70%	2.80%	2.10%
Expected term	6 years 1 month 6 days			5 years 10 months 24 days	6 years 1 month 6 days	6 years 1 month 6 days
Stock Options, Number of Shares
Balance at the beginning of the period (in shares)			17,819		17,819
Granted (in shares)	11	360	2,615
Exercised (in shares)					(1,308)
Cancelled or forfeited (in shares)					(495)
Balance at the end of the period (in shares)	19,002				19,002		17,819
Vested and expected to vest in the future at the end of the period (in shares)	18,061				18,061
Exercisable at the end of the period (in shares)	10,179				10,179
Stock options, Weighted-Average Exercise Price Per Share
Balance at the beginning of the period (in dollars per share)			$ 29.62		$ 29.62
Granted (in dollars per share)	$ 58.77	$ 51.72	$ 58.76
Exercised (in dollars per share)					18.71
Cancelled or forfeited (in dollars per share)					43.71
Balance at the end of the period (in dollars per share)	34.45				34.45		$ 29.62
Vested and expected to vest in the future at the end of the period (in dollars per share)	33.59				33.59
Exercisable at the end of the period (in dollars per share)	$ 22.51				$ 22.51
Weighted-Average Remaining Contractual Term
Balance at the beginning of the period					6 years 1 month 6 days		6 years 1 month 6 days
Balance at the end of the period					6 years 1 month 6 days		6 years 1 month 6 days
Vested and expected to vest in the future at the end of the period					5 years 10 months 24 days
Exercisable at the end of the period					4 years 3 months 18 days
Aggregate Intrinsic Value
Balance at the beginning of the period			$ 600,032		$ 600,032
Balance at the end of the period	$ 454,476				454,476		$ 600,032
Vested and expected to vest in the future at the end of the period	447,291				447,291
Exercisable at the end of the period	$ 364,103				$ 364,103

XML

STOCK-BASED COMPENSATION - Equity Awards (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Millions	3 Months Ended				9 Months Ended
	Sep. 30, 2018	Jun. 30, 2018	Mar. 31, 2018	Sep. 30, 2017	Sep. 30, 2018	Sep. 30, 2017
Stock options
Stock-based compensation
Weighted-average grant-date fair value of options granted (in dollars per share)	$ 22.80			$ 20.61	$ 22.51	$ 18.04
Total intrinsic value of options exercised	$ 19.2			$ 12.5	$ 52.1	$ 53.4
Cash received from option exercises	10.9			$ 7.7	24.5	$ 26.8
Total unrecognized compensation expense related to non-vested shares granted to employees	$ 107.9				$ 107.9
Cost expected to be recognized over a weighted-average period					2 years 9 months 18 days
Stock units expected to vest (in shares)	18,061				18,061
Restricted stock units
Stock-based compensation
Total unrecognized compensation expense related to non-vested shares granted to employees	$ 19.0				$ 19.0
Cost expected to be recognized over a weighted-average period					1 year 9 months 18 days
Stock units expected to vest (in shares)	500				500
Number of Shares
Non-vested at the beginning of the period (in shares)			530		530
Granted (in shares)	1	48	221	0
Vested (in shares)					(263)
Forfeited/cancelled (in shares)					(7)
Non-vested at the end of the period (in shares)	530				530
Weighted Average Grant-Date Fair Value
Non-vested at the beginning of the period (in dollars per share)			$ 45.09		$ 45.09
Granted (in dollars per share)	$ 58.72	$ 52.31	$ 58.75		57.59	$ 46.65
Vested (in dollars per share)					45.36
Forfeited/cancelled (in dollars per share)					33.60
Non-vested at the end of the period (in dollars per share)	$ 51.48				$ 51.48

XML

INCOME TAXES - Tax Cuts and Jobs Act (Details) - USD ($) $ in Millions	9 Months Ended	12 Months Ended
	Sep. 30, 2018	Dec. 31, 2017
INCOME TAXES
Federal statutory rate (as a percent)	21.00%	35.00%
Provisional charge, revaluated net deferred tax assets		$ 39.8
Provision related to deemed mandatory repatriation	$ 1.8	$ 2.1

XML

INCOME TAXES - Unrecognized Tax Benefit Rollforward (Details) $ in Thousands	9 Months Ended
	Sep. 30, 2018 USD ($)
Gross unrecognized tax benefits, roll forward
Balance at the beginning of the period	$ 6,540
Additions for tax positions related to the current year	210
Additions for tax positions related to the prior years	1,172
Decreases related to settlement with taxing authority	(2,665)
Balance at the end of the period	5,257
Accrued interest and penalties related to unrecognized tax benefits	$ 1,000

XML

EARNINGS PER SHARE (Details) - shares shares in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2018	Sep. 30, 2017	Sep. 30, 2018	Sep. 30, 2017
Weighted-average shares outstanding:
Basic	552,694	567,878	559,472	567,550
Dilutive	7,261	10,490	7,319	10,414
Diluted	559,955	578,368	566,791	577,964
Options and awards outstanding excluded from the calculations as their effect would have been antidilutive (in shares)	3,200	5,900	3,000	8,400

XML

SEGMENT INFORMATION - Net Revenues (Details) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2018 USD ($)	Sep. 30, 2017 USD ($)	Sep. 30, 2018 USD ($) segment	Sep. 30, 2017 USD ($)
Segment information
Number of reportable segments | segment			3
Number of operating segments | segment			3
Total Net Sales	$ 1,016,160	$ 909,476	$ 2,882,953	$ 2,558,690
Operating income	339,573	317,372	977,108	931,675
Income before tax	342,561	321,368	982,377	933,778
Recognition of deferred revenue	11,100	11,400	33,300	31,600
Corporate and unallocated
Segment information
Operating income	(62,920)	(59,952)	(196,380)	(179,719)
Income before tax	(60,056)	(55,811)	(191,758)	(177,454)
Monster Energy Drinks
Segment information
Total Net Sales	935,146		2,645,089
Monster Energy Drinks | Operating segment
Segment information
Total Net Sales	935,146	827,690	2,645,089	2,311,521
Operating income	359,090	333,210	1,033,895	968,864
Income before tax	359,216	333,065	1,034,521	968,716
Recognition of deferred revenue	11,100	11,400	33,300	31,600
Distribution Agreements Termination Cost	14,100	15,900	26,600	35,900
Strategic Brands
Segment information
Total Net Sales	74,441		220,011
Strategic Brands | Operating segment
Segment information
Total Net Sales	74,441	76,586	220,011	230,255
Operating income	41,661	42,663	135,054	137,945
Income before tax	41,659	42,663	135,075	137,931
Other
Segment information
Total Net Sales	6,573		17,853
Other | Operating segment
Segment information
Total Net Sales	6,573	5,200	17,853	16,914
Operating income	1,742	1,451	4,539	4,585
Income before tax	$ 1,742	$ 1,451	$ 4,539	$ 4,585

XML

SEGMENT INFORMATION - Depreciation and Amortization (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2018	Sep. 30, 2017	Sep. 30, 2018	Sep. 30, 2017
Segment information
Depreciation and amortization	$ 14,285	$ 12,329	$ 42,469	$ 35,104
Corporate and unallocated
Segment information
Depreciation and amortization	2,014	1,795	6,231	5,213
Monster Energy Drinks | Operating segment
Segment information
Depreciation and amortization	9,157	7,546	26,926	20,959
Strategic Brands | Operating segment
Segment information
Depreciation and amortization	1,947	1,836	5,819	5,474
Other | Operating segment
Segment information
Depreciation and amortization	$ 1,167	$ 1,152	$ 3,493	$ 3,458

XML

SEGMENT INFORMATION - Expenses (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2018	Sep. 30, 2017	Sep. 30, 2018	Sep. 30, 2017
Segment information
Operating income	$ 339,573	$ 317,372	$ 977,108	$ 931,675
Stock-based compensation expense	14,100	13,300	42,400	39,300
Corporate and unallocated
Segment information
Operating income	(62,920)	(59,952)	(196,380)	(179,719)
Payroll costs	42,100	37,900	129,900	114,000
Stock-based compensation expense	14,000	13,300	42,400	39,300
Professional service expenses	12,300	11,900	36,500	38,300
Other operating expenses	$ 8,500	$ 10,100	$ 30,000	$ 27,500

XML

SEGMENT INFORMATION - Concentration Risk (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2018	Sep. 30, 2017	Sep. 30, 2018	Sep. 30, 2017
Segment information
Total Net Sales	$ 1,016,160	$ 909,476	$ 2,882,953	$ 2,558,690
Outside United States
Segment information
Total Net Sales	$ 283,000	$ 260,100	$ 818,800	$ 698,900
TCCC | Net Sales | Customer concentration
Segment information
Percentage of net sales	4.00%	14.00%	4.00%	21.00%
CCBCC Operations, LLC | Net Sales | Customer concentration
Segment information
Percentage of net sales	14.00%	14.00%	14.00%	13.00%
Coca-Cola European Partners | Net Sales | Customer concentration
Segment information
Percentage of net sales	9.00%	10.00%	9.00%	9.00%
Reyes Coca-Cola Bottling | Net Sales | Customer concentration
Segment information
Percentage of net sales	13.00%	5.00%	13.00%	5.00%

XML

SEGMENT INFORMATION - Goodwill and other intangible assets (Details) - USD ($) $ in Thousands	Sep. 30, 2018	Dec. 31, 2017
Segment information
Goodwill and other intangible assets	$ 2,373,891	$ 2,365,728
Monster Energy Drinks | Operating segment
Segment information
Goodwill and other intangible assets	1,362,448	1,346,648
Strategic Brands | Operating segment
Segment information
Goodwill and other intangible assets	991,352	995,582
Other | Operating segment
Segment information
Goodwill and other intangible assets	$ 20,091	$ 23,498

XML

RELATED PARTY TRANSACTIONS (Details) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2018 USD ($)	Sep. 30, 2017 USD ($)	Sep. 30, 2018 USD ($) director	Sep. 30, 2017 USD ($)	Dec. 31, 2017 USD ($)
TCCC
Related party transactions
Voting interest (as a percent)	18.50%		18.50%
Net sales	$ 42,300	$ 130,700	$ 117,000	$ 540,400
Purchases from related party	7,400	7,600	21,600	20,200
TCCC Subsidiaries and TCCC Related parties
Related party transactions
Commission expenses	13,700		38,100
TCCC Independent Bottlers
Related party transactions
Commission expenses	4,300		11,800
TCCC Subsidiaries
Related party transactions
Commission expenses		2,500		8,200
Accounts receivable, net	43,383		43,383		$ 32,607
Accounts payable	(62,566)		(62,566)		(45,465)
Accrued promotional allowances	(12,790)		$ (12,790)		$ (5,884)
TCCC Related parties and TCCC Independent Bottlers | Operating expense
Related party transactions
Commission expenses		12,700		33,500
Principal owners
Related party transactions
Number of directors who are principal owners of a company that provides promotional materials | director			2
Expenses incurred in connection with materials or services provided by a related party	200	600	$ 1,600	2,000
Monster Energy Drinks | TCCC Subsidiaries
Related party transactions
Contract manufacturing expenses	$ 7,000	$ 3,600	$ 18,800	$ 8,700