SEGMENT INFORMATION

12 Months Ended

Dec. 31, 2017

SEGMENT INFORMATION

SEGMENT INFORMATION

18.SEGMENT INFORMATION

The Company has three operating and reportable segments, (i) Monster Energy® Drinks segment (“Monster Energy® Drinks”), which is comprised of our Monster Energy® drinks, Monster Hydro® energy drinks and Mutant® Super Soda 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”), the principal products of which include the non-energy brands disposed of as a result of the TCCC Transaction (effectively from January 1, 2015 to June 12, 2015), as well as certain products sold by AFF to independent third-party customers (the “AFF Third-Party Products”) (effectively from April 1, 2016).

The Company’s Monster Energy® Drinks segment 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, drug stores, mass merchandisers, convenience chains, food service 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, food service customers, drug stores and the military. To a lesser extent, the Company’s Strategic Brands segment generates net operating revenues by selling 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 margins 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 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 years ended December 31, 2017, 2016 and 2015 are as follows:

	2017		2016		2015
Net sales:
Monster Energy® Drinks(1)	$	3,047,596	$	2,759,862	$	2,518,505
Strategic Brands	299,844		272,520		143,282
Other	21,605		17,011		60,777
Corporate and unallocated	-		-		-
	$	3,369,045	$	3,049,393	$	2,722,564
	2017		2016		2015
Operating Income:
Monster Energy® Drinks(1)(2)	$	1,264,579	$	1,148,427	$	836,053
Strategic Brands	174,458		163,121		89,841
Other(3)	5,583		2,295		165,233
Corporate and unallocated	(245,833)		(228,505)		(197,474)
	$	1,198,787	$	1,085,338	$	893,653
	2017		2016		2015
Income before tax:
Monster Energy® Drinks(1)(2)	$	1,264,555	$	1,148,640	$	836,429
Strategic Brands	174,442		163,084		89,825
Other(3)	5,583		2,295		165,233
Corporate and unallocated	(242,957)		(234,334)		(199,939)
	$	1,201,623	$	1,079,685	$	891,548

(1) Includes $43.4 million, $40.3 million and $62.8 million for the years ended December 31, 2017, 2016 and 2015, respectively, related to the recognition of deferred revenue.

(2) Includes $35.4 million, $79.8 million and $224.0 million for the years ended December 31, 2017, 2016 and 2015, respectively, related to distributor termination costs.

(3) Includes $161.5 million gain on the sale of Monster Non-Energy for the year ended December 31, 2015.

	2017		2016		2015
Depreciation and amortization:
Monster Energy® Drinks	$	29,591	$	24,048	$	21,464
Stategic Brands	7,443		7,113		3,868
Other	4,608		3,457		231
Corporate and unallocated	7,245		6,227		5,297
	$	48,887	$	40,845	$	30,860

Corporate and unallocated expenses were $245.8 million for the year ended December 31, 2017 and included $156.3 million of payroll costs, of which $52.3 million was attributable to stock-based compensation expense (see Note 14, “Stock-Based Compensation”), $51.8 million of professional service expenses, including accounting and legal costs, $6.0 million of insurance costs and $31.7 million of other operating expenses. Corporate and unallocated expenses were $228.5 million for the year ended December 31, 2016 and included $128.0 million of payroll costs, of which $45.8 million was attributable to stock-based compensation expense (see Note 14, “Stock-Based Compensation”), $66.3 million of professional service expenses, including accounting and legal costs, $6.0 million of insurance costs and $28.2 million of other operating expenses. Corporate and unallocated expenses were $197.5 million for the year ended December 31, 2015 and included $109.8 million of payroll costs, of which $32.7 million was attributable to stock-based compensation expense (see Note 14, “Stock-Based Compensation”), $60.8 million of professional service expenses, including accounting and legal costs, $7.0 million of insurance costs and $19.9 million of other operating expenses.

TCCC, through the TCCC Subsidiaries, accounted for approximately 18%, 41% and 43% of the Company’s net sales for the years ended December 31, 2017, 2016 and 2015, 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/non wholly-owned TCCC bottlers/distributors. Accordingly, the Company’s percentage of net sales classified as sales to the TCCC Subsidiaries decreased for the year ended December 31, 2017.  CCBCC Operations, LLC accounted for approximately 13%, 9% and 6% of the Company’s net sales for the years ended December 31, 2017, 2016 and 2015, respectively.

Net sales to customers outside the United States amounted to $909.3 million, $733.7 million and $580.3 million for the years ended December 31, 2017, 2016 and 2015, respectively.  Such sales were approximately 27%, 24% and 21% of net sales for the years ended December 31, 2017, 2016 and 2015, respectively.

Goodwill and other intangible assets for the Company’s reportable segments as of December 31, 2017 and 2016 are as follows:

	2017			2016
Goodwill and other intangible assets:
Monster Energy® Drinks	$		1,346,648	$	1,334,494
Strategic Brands	995,582			1,001,749
Other	23,498			28,035
Corporate and unallocated	-			-
	$	2,365,728		$	2,364,278