SEGMENT INFORMATION

9 Months Ended

Sep. 30, 2021

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, Reign Total Body Fuel® high performance energy drinks and True North^TM Pure Energy Seltzers, (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 ready-to-drink packaged drinks 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, 2021 and 2020 are as follows:

	Three-Months Ended				Nine-Months Ended
	September 30,				September 30,
	2021		2020		2021		2020
Net sales:
Monster Energy® Drinks⁽¹⁾	$	1,329,793	$	1,163,419	$	3,867,162	$	3,183,559
Strategic Brands		74,449		74,325		229,193		198,429
Other		6,315		8,618		19,953		20,367
Corporate and unallocated		—		—		—		—
	$	1,410,557	$	1,246,362	$	4,116,308	$	3,402,355

	Three-Months Ended				Nine-Months Ended
	September 30,				September 30,
	2021		2020		2021		2020
Operating Income:
Monster Energy® Drinks⁽¹⁾	$	500,641	$	502,392	$	1,512,633	$	1,366,920
Strategic Brands		40,184		43,875		139,398		118,287
Other		1,146		2,368		5,266		4,780
Corporate and unallocated		(97,507)		(90,034)		(272,710)		(259,135)
	$	444,464	$	458,601	$	1,384,587	$	1,230,852

	Three-Months Ended				Nine-Months Ended
	September 30,				September 30,
	2021		2020		2021		2020
Income before tax:
Monster Energy® Drinks⁽¹⁾	$	500,929	$	502,500	$	1,513,421	$	1,367,096
Strategic Brands		40,198		43,876		139,419		118,287
Other		1,144		2,368		5,264		4,780
Corporate and unallocated		(100,097)		(94,711)		(275,696)		(264,802)
	$	442,174	$	454,033	$	1,382,408	$	1,225,361

(1) Includes $10.4 million and $10.5 million for the three- months ended September 30, 2021 and 2020, respectively, related to the recognition of deferred revenue. Includes $31.3 million and $31.6 million for the nine-months ended September 30, 2021 and 2020, respectively, related to the recognition of deferred revenue.

	Three-Months Ended				Nine-Months Ended
	September 30,				September 30,
	2021		2020		2021		2020
Depreciation and amortization:
Monster Energy® Drinks	$	8,477	$	8,713	$	26,315	$	27,687
Strategic Brands		283		227		832		3,932
Other		1,122		1,136		3,373		3,495
Corporate and unallocated		2,474		2,741		7,334		7,794
	$	12,356	$	12,817	$	37,854	$	42,908

Corporate and unallocated expenses for the three-months ended September 30, 2021 include $63.4 million of payroll costs, of which $16.7 million was attributable to stock-based compensation expenses (see Note 15 “Stock-Based Compensation”), as well as $19.3 million attributable to professional service expenses, including accounting and legal costs, and $14.8 million of other operating expenses. 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 nine-months ended September 30, 2021 include $189.7 million of payroll costs, of which $52.2 million was attributable to stock-based compensation expenses (see Note 15 “Stock-Based Compensation”), as well as $60.6 million attributable to professional service expenses, including accounting and legal costs, and $22.4 million of other operating expenses. Corporate and unallocated expenses for the nine-months ended September 30, 2021, were partially offset by $16.9 million due to the reversal of amounts previously accrued in connection with an intellectual property claim. 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.

Coca-Cola Europacific Partners (formerly Coca-Cola European Partners) accounted for approximately 12% and 11% of the Company’s net sales for the three-months ended September 30, 2021 and 2020, respectively. Coca-Cola Europacific Partners accounted for approximately 12% and 10% of the Company’s net sales for the nine-months ended September 30, 2021 and 2020, respectively.

Coca-Cola Consolidated, Inc. accounted for approximately 11% and 12% of the Company’s net sales for the three-months ended September 30, 2021 and 2020, respectively. Coca-Cola Consolidated, Inc. accounted for approximately 11% and 12% of the Company’s net sales for the nine-months ended September 30, 2021 and 2020, respectively.

Reyes Coca-Cola Bottling, LLC accounted for approximately 10% and 11% of the Company’s net sales for the three-months ended September 30, 2021 and 2020, respectively. Reyes Coca-Cola Bottling, LLC accounted for approximately 10% and 11% of the Company’s net sales for the nine-months ended September 30, 2021 and 2020, respectively.

Net sales to customers outside the United States amounted to $527.4 million and $444.5 million for the three-months ended September 30, 2021 and 2020, respectively. Such sales were approximately 37% and 36% of net sales for three-months ended September 30, 2021 and 2020, respectively. Net sales to customers outside the United States amounted to $1.53 billion and $1.13 billion for the nine-months ended September 30, 2021 and 2020, respectively. Such sales were approximately 37% and 33% of net sales for the nine-months ended September 30, 2021 and 2020, respectively.

Goodwill and other intangible assets for the Company’s reportable segments as of September 30, 2021 and December 31, 2020 are as follows:

	September 30,		December 31,
	2021		2020
Goodwill and other intangible assets:
Monster Energy® Drinks	$	1,414,190	$	1,406,646
Strategic Brands		976,944		974,132
Other		6,592		9,911
Corporate and unallocated		—		—
	$	2,397,726	$	2,390,689