SEGMENT INFORMATION

9 Months Ended

Sep. 30, 2020

SEGMENT INFORMATION

SEGMENT INFORMATION

18.          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 and Reign Total Body Fuel® high performance energy drinks, (ii) Strategic Brands segment, which is primarily comprised of the various energy drink brands acquired from TCCC in 2015 as well as the Company’s affordable energy brands, and (iii) Other segment, which is comprised of the AFF Third-Party Products.

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

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

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, 2020 and 2019 are as follows:

	Three-Months Ended				Nine-Months Ended
	September 30,				September 30,
	2020		2019		2020		2019
Net sales:
Monster Energy® Drinks⁽¹⁾	$	1,163,419	$	1,061,383	$	3,183,559	$	2,950,877
Strategic Brands		74,325		66,333		198,429		215,763
Other		8,618		5,861		20,367		16,973
Corporate and unallocated		—		—		—		—
	$	1,246,362	$	1,133,577	$	3,402,355	$	3,183,613

	Three-Months Ended				Nine-Months Ended
	September 30,				September 30,
	2020		2019		2020		2019
Operating Income:
Monster Energy® Drinks⁽¹⁾ ⁽²⁾	$	502,392	$	433,848	$	1,366,920	$	1,187,652
Strategic Brands		43,875		35,107		118,287		130,762
Other		2,368		1,005		4,780		3,026
Corporate and unallocated		(90,034)		(74,517)		(259,135)		(235,546)
	$	458,601	$	395,443	$	1,230,852	$	1,085,894

	Three-Months Ended				Nine-Months Ended
	September 30,				September 30,
	2020		2019		2020		2019
Income before tax:
Monster Energy® Drinks⁽¹⁾ ⁽²⁾	$	502,500	$	434,003	$	1,367,096	$	1,187,916
Strategic Brands		43,876		35,106		118,287		130,758
Other		2,368		1,005		4,780		3,031
Corporate and unallocated		(94,711)		(71,550)		(264,802)		(226,976)
	$	454,033	$	398,564	$	1,225,361	$	1,094,729

(1) Includes $10.5 million and $10.7 million for the three-months ended September 30, 2020 and 2019, respectively, related to the recognition of deferred revenue. Includes $31.6 million and $35.6 million for the nine-months ended September 30, 2020 and 2019, respectively, related to the recognition of deferred revenue.

(2) The three-months ended September 30, 2020 and 2019 includes no distributor termination costs. Includes $0.2 million and $11.0 million for the nine-months ended September 30, 2020 and 2019, respectively, related to distributor termination costs.

	Three-Months Ended				Nine-Months Ended
	September 30,				September 30,
	2020		2019		2020		2019
Depreciation and amortization:
Monster Energy® Drinks	$	8,713	$	9,319	$	27,687	$	29,449
Strategic Brands		227		1,990		3,932		5,925
Other		1,136		1,162		3,495		3,475
Corporate and unallocated		2,741		2,050		7,794		6,172
	$	12,817	$	14,521	$	42,908	$	45,021

Corporate and unallocated expenses for the three- months ended September 30, 2020 include $61.7 million of payroll costs, of which $19.2 million was attributable to stock-based compensation expenses (see Note 15 "Stock-Based Compensation"), as well as $16.7 million attributable to professional service expenses, including accounting and legal costs, and $11.6 million of other operating expenses. Corporate and unallocated expenses for the three-months ended September 30, 2019 include $50.1 million of payroll costs, of which $16.0 million was attributable to stock-based compensation expenses (see Note 15 "Stock-Based Compensation"), as well as $13.3 million attributable to professional service expenses, including accounting and legal costs, and $11.1 million of other operating expenses.

Corporate and unallocated expenses for the nine-months ended September 30, 2020 include $173.5 million of payroll costs, of which $52.7 million was attributable to stock-based compensation expenses (see Note 15 "Stock-Based Compensation"), as well as $50.1 million attributable to professional service expenses, including accounting and legal costs, and $35.5 million of other operating expenses. Corporate and unallocated expenses for the nine-months ended September 30, 2019 include $151.0 million of payroll costs, of which $46.9 million was attributable to stock-based compensation expenses (see Note 15 "Stock-Based Compensation"), as well as $49.2 million attributable to professional service expenses, including accounting and legal costs, and $35.3 million of other operating expenses.

Coca-Cola Consolidated, Inc. accounted for approximately 12% and 13% of the Company’s net sales for the three- months ended September 30, 2020 and 2019, respectively. Coca-Cola Consolidated, Inc. accounted for approximately 12% and 13% of the Company's net sales for the nine- months ended September 30, 2020 and 2019, respectively.

Reyes Coca-Cola Bottling, LLC accounted for approximately 11% and 12% of the Company’s net sales for the three- months ended September 30, 2020 and 2019, respectively. Reyes Coca-Cola Bottling, LLC accounted for approximately 11% and 12% of the Company's net sales for the nine-months ended September 30, 2020 and 2019 , respectively.

Coca-Cola European Partners accounted for approximately 11% and 10% of the Company’s net sales for the three- months ended September 30, 2020 and 2019, respectively. Coca-Cola European Partners accounted for approximately 10% of the Company's net sales for both the nine- months ended September 30, 2020 and 2019.

Net sales to customers outside the United States amounted to $444.5 million and $379.8 million for the three- months ended September 30, 2020 and 2019, respectively. Such sales were approximately 36% and 34% of net sales for the three- months ended September 30, 2020 and 2019, respectively. Net sales to customers outside the United States amounted to $1.13 billion and $1.01 billion for the nine-months ended September 30, 2020 and 2019, respectively. Such sales were approximately 33% and 32% of net sales for the nine-months ended September 30, 2020 and 2019, respectively.

Goodwill and other intangible assets for the Company’s reportable segments as of September 30, 2020 and December 31, 2019 are as follows:

	September 30,		December 31,
	2020		2019
Goodwill and other intangible assets:
Monster Energy® Drinks	$	1,404,754	$	1,384,940
Strategic Brands		975,392		984,393
Other		11,034		14,415
Corporate and unallocated		—		—
	$	2,391,180	$	2,383,748