SEGMENT INFORMATION

6 Months Ended

Jun. 30, 2015

SEGMENT INFORMATION

SEGMENT INFORMATION

18.SEGMENT INFORMATION

In the second quarter of 2015, as a result of the acquisitions and divestitures in connection with the TCCC Transaction, the Company revised its reportable segments to reflect managements’ current view of the business and to align its external financial reporting with its new operating and internal financial reporting model. Historical segment information has been revised to reflect the effect of this change.

The Company has three operating and reportable segments, (i) Finished Products, which is comprised of the Company’s Monster Energy® drink products (previously comprising the majority of the former Direct Store Delivery segment) (“Finished Products”), (ii) Concentrate, the principal products of which include the various energy drink brands acquired from TCCC as a result of the TCCC Transaction  (“Concentrate”) and (iii) Other, the principal products of which include the brands disposed of as a result of the TCCC Transaction (previously comprising the majority of the former Warehouse segment and the Peace Tea® brand).

The Company’s Finished Product segment generates net operating revenues by selling finished energy drinks to full service beverage distributors, retail grocery and specialty chains, wholesalers, club stores, drug chains, mass merchandisers, convenience chains, health food distributors, food service customers and the military.

The Company’s Concentrate segment 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 and water to produce finished beverages. The finished energy drinks are packaged in authorized containers bearing the Company’s respective trademarks, such as cans and bottles, and are then sold to retailers directly or, in some cases, through wholesalers or other bottlers.

Generally, the Finished Products segment generates higher net operating revenues but lower gross profit margins than the Concentrate segment.

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

The net revenues derived from the Company’s reportable segments and other financial information related thereto for the three- and six-months ended June 30, 2015 and 2014 are as follows:

	Three-Months Ended				Six-Months Ended
	June 30,				June 30,
	2015		2014		2015		2014
Net sales:
Finished Products(1)	$	651,228	$	643,404	$	1,246,710	$	1,145,345
Concentrate	12,978		-		12,978		-
Other	29,516		43,795		60,824		77,984
Corporate and unallocated	-		-		-		-
	$	693,722	$	687,199	$	1,320,512	$	1,223,329
	Three-Months Ended				Six-Months Ended
	June 30,				June 30,
	2015		2014		2015		2014
Operating Income:
Finished Products(1) (2)	$	251,551	$	254,414	$	307,172	$	439,317
Concentrate	9,084		-		9,084		-
Other(3)	163,661		3,053		165,660		4,914
Corporate and unallocated	(58,157)		(41,654)		(108,149)		(79,554)
	$	366,139	$	215,813	$	373,767	$	364,677
	Three-Months Ended				Six-Months Ended
	June 30,				June 30,
	2015		2014		2015		2014
Income before tax:
Finished Products(1) (2)	$	251,740	$	254,686	$	307,435	$	439,616
Concentrate	9,084		-		9,084		-
Other(3)	163,661		3,053		165,660		4,914
Corporate and unallocated	(59,361)		(41,748)		(108,194)		(79,521)
	$	365,124	$	215,991	$	373,985	$	365,009

(1) Includes $3.2 million and $3.8 million for the three-months ended June 30, 2015 and 2014, respectively, related to the recognition of deferred revenue. Includes $46.5 million and $7.5 million for the six-months ended June 30, 2015 and 2014, respectively, related to the recognition of deferred revenue.

(2) Includes $12.2 million and $0.5 million for the three-months ended June 30, 2015 and 2014, respectively, related to distributor termination costs. Includes $218.2 million and $0.5 million for the six-months ended June 30, 2015 and 2014, respectively, related to distributor termination costs.

(3) Includes $161.5 million gain on the sale of Monster Non-Energy for the three- and six-months ended June 30, 2015.

	Three-Months Ended				Six-Months Ended
	June 30,				June 30,
	2015		2014		2015		2014
Depreciation and amortization
Finished Products	$	5,093	$	4,971	$	10,148	$	9,870
Concentrate	345		-		345		-
Other	92		129		231		256
Corporate and unallocated	1,250		1,445		2,525		2,869
	$	6,780	$	6,545	$	13,249	$	12,995

	June 30,		December 31,
	2015		2014
Goodwill and other intangible assets:
Finished Products	$	839,588	$	50,748
Concentrate	876,355		-
Other	-		18,079
Corporate and unallocated	-		-
	$	1,715,943	$	68,827

Corporate and unallocated expenses for the three-months ended June 30, 2015 include $28.3 million of payroll costs, of which $8.5 million was attributable to stock-based compensation expense (see Note 15, “Stock-Based Compensation”), as well as $21.8 million attributable to professional service expenses, including accounting and legal costs, and $8.1 million of other operating expenses.  Corporate and unallocated expenses for the three-months ended June 30, 2014 include $21.6 million of payroll costs, of which $8.1 million was attributable to stock-based compensation expense (see Note 15, “Stock-Based Compensation”), as well as $15.3 million attributable to professional service expenses, including accounting and legal costs, and $4.8 million attributable to other operating expenses.

Corporate and unallocated expenses for the six-months ended June 30, 2015 include $56.9 million of payroll costs, of which $14.8 million was attributable to stock-based compensation expense (see Note 15, “Stock-Based Compensation”), as well as $36.3 million attributable to professional service expenses, including accounting and legal costs, and $14.9 million attributable to other operating expenses.  Corporate and unallocated expenses for the six-months ended June 30, 2014 include $42.6 million of payroll costs, of which $15.1 million was attributable to stock-based compensation expense (see Note 15, “Stock-Based Compensation”), as well as $25.4 million attributable to professional service expenses, including accounting and legal costs, and $11.6 million attributable to other operating expenses.

Coca-Cola Refreshments USA Inc. (“CCR”) accounted for approximately 45% and 28% of the Company’s net sales for the three-months ended June 30, 2015 and 2014, respectively. CCR accounted for approximately 40% and 29% of the Company’s net sales for the six-months ended June 30, 2015 and 2014, respectively.

Net sales to customers outside the United States amounted to $151.3 million and $148.4 million for the three-months ended June 30, 2015 and 2014, respectively.  Net sales to customers outside the United States amounted to $264.3 million and $264.1 million for the six-months ended June 30, 2015 and 2014, respectively.