RELATED PARTY TRANSACTIONS

3 Months Ended

Mar. 31, 2022

RELATED PARTY TRANSACTIONS

RELATED PARTY TRANSACTIONS

19.         RELATED PARTY TRANSACTIONS

TCCC controls approximately 19.3% of the voting interests of the Company. The TCCC Subsidiaries, the TCCC Related Parties and certain TCCC independent bottlers/distributors purchase and distribute the Company’s products in domestic and certain international markets. The Company also pays TCCC a commission based on certain sales within the TCCC distribution network.

TCCC commissions, based on sales to the TCCC Subsidiaries and the TCCC Related Parties, were $18.4 million and $16.1 million for the three-months ended March 31, 2022 and 2021, respectively, and are included as a reduction to net sales.

TCCC commissions, based on sales to TCCC independent bottlers/distributors, were $11.0 million and $5.5 million for the three-months ended March 31, 2022 and 2021, respectively, and are included in operating expenses.

Net sales to the TCCC Subsidiaries for the three-months ended March 31, 2022 and 2021 were $31.8 million and $27.1 million, respectively.

The Company also purchases concentrates from TCCC which are then sold to certain of the Company’s bottlers/distributors. Concentrate purchases from TCCC were $8.5 million and $6.4 million for the three-months ended March 31, 2022 and 2021, respectively.

Certain TCCC Subsidiaries also contract manufacture certain of the Company’s energy drinks. Such contract manufacturing expenses were $9.2 million and $7.4 million for the three-months ended March 31, 2022 and 2021, respectively.

Accounts receivable, accounts payable, accrued promotional allowances and accrued liabilities related to the TCCC Subsidiaries are as follows at:

	March 31,		December 31,
	2022		2021
Accounts receivable, net	$	115,497	$	94,647
Accounts payable	$	(37,629)	$	(35,248)
Accrued promotional allowances	$	(7,254)	$	(4,536)
Accrued liabilities	$	(35,849)	$	(26,616)

In 2021, TCCC exercised its contract rights for a third-party public accounting firm (the "Accounting Firm") to conduct an examination relating to commissions and fees payable to TCCC and marketing contributions payable to the Company, for the years ended December 31, 2015 through December 31, 2020. The Company understands that the Accounting Firm has advised TCCC that it may be entitled to additional commissions and fees and/or reduced amounts of marketing contributions due to the Company in an aggregate amount of up to approximately $65.0 million. No portion of such amounts have been recognized in the Company’s condensed consolidated financial statements at March 31, 2022. The Company disputes any liability for additional commissions or fees payable to TCCC or reduced amounts of marketing contributions due to the Company for these periods.

One director of the Company through certain trusts, and a family member of one director are the principal owners of a company that provides promotional materials to the Company. Expenses incurred with such company in connection with promotional materials purchased during the three-months ended March 31, 2022 and 2021 were $1.1 million and $0.4 million, respectively.

During the three-months ended March 31, 2022, the Company occasionally chartered a private aircraft that is indirectly owned by Mr. Rodney C. Sacks, Co-Chief Executive Officer and Chairman of the Board of Directors. On certain occasions, Mr. Sacks was accompanied by guests and other Company personnel when using such aircraft for business travel. During the three-months ended March 31, 2022, the Company incurred costs of $0.08 million, an amount the Company believes is commensurate with market rates for comparable travel.

In December 2018, the Company and a director of the Company entered into a 50-50 partnership that purchased land, and real property thereon, in Kona, Hawaii for the purpose of producing coffee products. The Company’s initial 50% contribution of $1.9 million was accounted for as an equity investment. During the three-months ended March 31, 2022, the Company recorded an equity loss of $0.03 million As of March 31, 2022, the Company’s equity investment is $1.3 million and is included in other assets (non-current) in the accompanying condensed consolidated balance sheet. At March 31, 2022 and December 31, 2021, the Company had $6.1 million and $3.4 million, respectively, in loans receivable from the partnership.