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, 2019 Commission File Number 001-18761

MONSTER BEVERAGE CORPORATION

(Exact name of registrant as specified in its charter)

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

1 Monster Way

Corona, California 92879

(Address of principal executive offices) (Zip code)

(951) 739 - 6200

(Registrant’s telephone number, including area code)

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

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

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

Yes  X   No ___

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

Yes  X   No ___

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

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

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

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

Yes ☐ No   X 

The registrant had 537,681,684 shares of common stock, par value $0.005 per share, outstanding as of October 30, 2019.

MONSTER BEVERAGE CORPORATION AND SUBSIDIARIES

SEPTEMBER 30, 2019

INDEX

Part I.	FINANCIAL INFORMATION	Page No.
Item 1.	Condensed Consolidated Financial Statements (Unaudited)	3
	Condensed Consolidated Balance Sheets as of September 30, 2019 and December 31, 2018	3
	Condensed Consolidated Statements of Income for the Three- and Nine-Months Ended September 30, 2019 and 2018	4
	Condensed Consolidated Statements of Comprehensive Income for the Three- and Nine-Months Ended September 30, 2019 and 2018	5
	Condensed Consolidated Statements of Stockholders’ Equity for the  Nine-Months Ended September 30, 2019 and 2018	6
	Condensed Consolidated Statements of Cash Flows for the Nine-Months Ended September 30, 2019 and 2018	8
	Notes to Condensed Consolidated Financial Statements	10
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	32
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	45
Item 4.	Controls and Procedures	45
Part II.	OTHER INFORMATION
Item 1.	Legal Proceedings	46
Item 1A.	Risk Factors	46
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	46
Item 3.	Defaults Upon Senior Securities	47
Item 4.	Mine Safety Disclosures	47
Item 5.	Other Information	47
Item 6.	Exhibits	48
	Signatures	49

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, 2019 AND DECEMBER 31, 2018

(In Thousands, Except Par Value) (Unaudited)

	September 30,		December 31,
	2019		2018
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	717,617	$	637,513
Short-term investments		587,356		320,650
Accounts receivable, net		647,983		484,562
Inventories		317,745		277,705
Prepaid expenses and other current assets		58,390		44,909
Prepaid income taxes		31,669		38,831
Total current assets		2,360,760		1,804,170
INVESTMENTS		14,370		—
PROPERTY AND EQUIPMENT, net		251,760		243,051
DEFERRED INCOME TAXES, net		85,148		85,687
GOODWILL		1,331,643		1,331,643
OTHER INTANGIBLE ASSETS, net		1,047,473		1,045,878
OTHER ASSETS		46,212		16,462
Total Assets	$	5,137,366	$	4,526,891
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable	$	304,773	$	248,760
Accrued liabilities		112,318		112,507
Accrued promotional allowances		197,239		145,741
Deferred revenue		43,805		44,045
Accrued compensation		35,747		39,903
Income taxes payable		20,334		10,189
Total current liabilities		714,216		601,145
DEFERRED REVENUE		292,101		312,224
OTHER LIABILITIES		23,071		2,621
COMMITMENTS AND CONTINGENCIES (Note 12)
STOCKHOLDERS' EQUITY:
Common stock - $0.005 par value; 1,250,000 shares authorized; 636,235 shares issued and 540,591 shares outstanding as of September 30, 2019; 630,970 shares issued and 543,676 shares outstanding as of December 31, 2018		3,181		3,155
Additional paid-in capital		4,370,280		4,238,170
Retained earnings		4,767,526		3,914,645
Accumulated other comprehensive loss		(43,083)		(32,864)
Common stock in treasury, at cost; 95,644 shares and 87,294 shares as of September 30, 2019 and December 31, 2018, respectively		(4,989,926)		(4,512,205)
Total stockholders’ equity		4,107,978		3,610,901
Total Liabilities and Stockholders’ Equity	$	5,137,366	$	4,526,891

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, 2019 AND 2018

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

	Three-Months Ended				Nine-Months Ended
	September 30,				September 30,
	2019		2018		2019		2018
NET SALES	$	1,133,577	$	1,016,160	$	3,183,613	$	2,882,953
COST OF SALES		460,575		408,501		1,275,796		1,139,780
GROSS PROFIT		673,002		607,659		1,907,817		1,743,173
OPERATING EXPENSES		277,559		268,086		821,923		766,065
OPERATING INCOME		395,443		339,573		1,085,894		977,108
INTEREST and OTHER INCOME, net		3,121		2,988		8,835		5,269
INCOME BEFORE PROVISION FOR INCOME TAXES		398,564		342,561		1,094,729		982,377
PROVISION FOR INCOME TAXES		99,641		74,828		241,848		228,480
NET INCOME	$	298,923	$	267,733	$	852,881	$	753,897
NET INCOME PER COMMON SHARE:
Basic	$	0.55	$	0.48	$	1.57	$	1.35
Diluted	$	0.55	$	0.48	$	1.56	$	1.33
WEIGHTED AVERAGE NUMBER OF SHARES OF COMMON STOCK AND COMMON STOCK EQUIVALENTS:
Basic		544,469		552,694		543,804		559,472
Diluted		548,422		559,955		548,387		566,791

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, 2019 AND 2018

(In Thousands) (Unaudited)

	Three-Months Ended				Nine-Months Ended
	September 30,				September 30,
	2019		2018		2019		2018
Net income, as reported	$	298,923	$	267,733	$	852,881	$	753,897
Other comprehensive loss:
Change in foreign currency translation adjustment		(14,359)		(4,463)		(10,586)		(13,728)
Available-for-sale investments:
Change in net unrealized gains		32		(118)		367		610
Reclassification adjustment for net gains included in net income		—		—		—		—
Net change in available-for-sale investments		32		(118)		367		610
Other comprehensive loss		(14,327)		(4,581)		(10,219)		(13,118)
Comprehensive income	$	284,596	$	263,152	$	842,662	$	740,779

See accompanying notes to condensed consolidated financial statements.

5

MONSTER BEVERAGE CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

FOR THE NINE-MONTHS ENDED SEPTEMBER 30, 2019 AND 2018 (In Thousands) (Unaudited)

								Accumulated
				Additional				Other					Total
	Common stock			Paid-in		Retained		Comprehensive		Treasury stock			Stockholders'
	Shares	Amount		Capital		Earnings		Loss		Shares	Amount		Equity
Balance, December 31, 2018	630,970	$	3,155	$	4,238,170	$	3,914,645	$	(32,864)	(87,294)	$	(4,512,205)	$	3,610,901
Stock-based compensation	—		—		15,324		—		—	—		—		15,324
Exercise of stock options	3,871		19		35,144		—		—	—		—		35,163
Unrealized gain, net on available-for-sale securities	—		—		—		—		120	—		—		120
Repurchase of common stock	—		—		—		—		—	(4,000)		(222,792)		(222,792)
Foreign currency translation	—		—		—		—		(1,381)	—		—		(1,381)
Net income	—		—		—		261,485		—	—		—		261,485
Balance, March 31, 2019	634,841	$	3,174	$	4,288,638	$	4,176,130	$	(34,125)	(91,294)	$	(4,734,997)	$	3,698,820
Stock-based compensation	—		—		15,575		—		—	—		—		15,575
Exercise of stock options	1,288		6		45,964		—		—	—		—		45,970
Unrealized gain, net on available-for-sale securities	—		—		—		—		215	—		—		215
Repurchase of common stock	—		—		—		—		—	(10)		(621)		(621)
Foreign currency translation	—		—		—		—		5,154	—		—		5,154
Net income	—		—		—		292,473		—	—		—		292,473
Balance, June 30, 2019	636,129	$	3,180	$	4,350,177	$	4,468,603	$	(28,756)	(91,304)	$	(4,735,618)	$	4,057,586
Stock-based compensation	—		—		15,991		—		—	—		—		15,991
Exercise of stock options	106		1		4,112		—		—	—		—		4,113
Unrealized gain, net on available-for-sale securities	—		—		—		—		32	—		—		32
Repurchase of common stock	—		—		—		—		—	(4,340)		(254,308)		(254,308)
Foreign currency translation	—		—		—		—		(14,359)	—		—		(14,359)
Net income	—		—		—		298,923		—	—		—		298,923
Balance, September 30, 2019	636,235	$	3,181	$	4,370,280	$	4,767,526	$	(43,083)	(95,644)	$	(4,989,926)	$	4,107,978

6

MONSTER BEVERAGE CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

FOR THE NINE-MONTHS ENDED SEPTEMBER 30, 2019 AND 2018 (In Thousands) (Unaudited) (Continued)

								Accumulated
				Additional				Other					Total
	Common stock			Paid-in		Retained		Comprehensive		Treasury stock			Stockholders'
	Shares	Amount		Capital		Earnings		Loss		Shares	Amount		Equity
Balance, December 31, 2017	629,255	$	3,146	$	4,150,628	$	2,928,226	$	(16,659)	(62,957)	$	(3,170,129)	$	3,895,212
Stock-based compensation	—		—		13,439		—		—	—		—		13,439
Exercise of stock options	669		4		6,498		—		—	—		—		6,502
Unrealized gain, net on available-for-sale securities	—		—		—		—		215	—		—		215
ASU No. 2016-16 adoption	—		—		—		(6,585)		—	—		—		(6,585)
Repurchase of common stock	—		—		—		—		—	(4,362)		(251,949)		(251,949)
Foreign currency translation	—		—		—		—		2,723	—		—		2,723
Net income	—		—		—		216,050		—	—		—		216,050
Balance, March 31, 2018	629,924	$	3,150	$	4,170,565	$	3,137,691	$	(13,721)	(67,319)	$	(3,422,078)	$	3,875,607
Stock-based compensation	—		—		14,906		—		—	—		—		14,906
Exercise of stock options	406		2		7,112		—		—	—		—		7,114
Unrealized gain, net on available-for-sale securities	—		—		—		—		513	—		—		513
Adjustment to excess tax from prior periods	—		—		2,093		—		—	—		—		2,093
Repurchase of common stock	—		—		—		—		—	(10,554)		(553,200)		(553,200)
Foreign currency translation	—		—		—		—		(11,988)	—		—		(11,988)
Net income	—		—		—		270,116		—	—		—		270,116
Balance, June 30, 2018	630,330	$	3,152	$	4,194,676	$	3,407,807	$	(25,196)	(77,873)	$	(3,975,278)	$