SEGMENT INFORMATION

6 Months Ended

Jun. 30, 2022

SEGMENT INFORMATION

SEGMENT INFORMATION

18.          SEGMENT INFORMATION

The Company has four 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® 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, (iii) Alcohol Brands segment, which is primarily comprised of the various craft beers and hard seltzers purchased as part of the CANarchy Transaction on February 17, 2022 and (iv) 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.

The Company’s Alcohol Brands segment primarily generates operating revenues by selling kegged and canned beer as well as hard seltzers primarily to distributors in the United States.

Generally, the Alcohol Brands segment will have lower gross profit margin percentages than the Monster Energy® Drinks 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 six-months ended June 30, 2022 and 2021 are as follows:

	Three-Months Ended				Six-Months Ended
	June 30,				June 30,
	2022		2021		2022		2021
Net sales:
Monster Energy® Drinks1	$	1,537,690	$	1,367,094	$	2,942,536	$	2,537,374
Strategic Brands		79,142		86,935		171,735		154,744
Alcohol Brands2		32,447		—		47,654		—
Other		5,981		7,905		11,908		13,633
Corporate and unallocated		—		—		—		—
	$	1,655,260	$	1,461,934	$	3,173,833	$	2,705,751

	Three-Months Ended				Six-Months Ended
	June 30,				June 30,
	2022		2021		2022		2021
Operating Income:
Monster Energy® Drinks1	$	441,719	$	547,269	$	896,282	$	1,012,088
Strategic Brands		41,500		54,074		98,695		99,214
Alcohol Brands2		(4,657)		—		(9,611)		—
Other		1,034		2,230		2,161		4,024
Corporate and unallocated		(106,645)		(77,598)		(215,088)		(175,203)
	$	372,951	$	525,975	$	772,439	$	940,123

	Three-Months Ended				Six-Months Ended
	June 30,				June 30,
	2022		2021		2022		2021
Income before tax:
Monster Energy® Drinks1	$	442,407	$	547,619	$	897,540	$	1,012,587
Strategic Brands		41,509		54,080		98,763		99,221
Alcohol Brands2		(3,890)		—		(9,496)		—
Other		1,025		2,230		2,162		4,024
Corporate and unallocated		(114,881)		(77,082)		(230,610)		(175,598)
	$	366,170	$	526,847	$	758,359	$	940,234

(1) Includes $10.1 million and $10.4 million for the three-months ended June 30, 2022 and 2021, respectively, related to the recognition of deferred revenue. Includes $20.1 million and $20.9 million for the six-months ended June 30, 2022 and 2021, respectively, related to the recognition of deferred revenue.

(2) Effectively from February 17, 2022 to June 30, 2022.

	Three-Months Ended				Six-Months Ended
	June 30,				June 30,
	2022		2021		2022		2021
Depreciation and amortization:
Monster Energy® Drinks	$	8,102	$	8,816	$	16,262	$	17,838
Strategic Brands		242		285		475		549
Alcohol Brands		3,683		—		5,966		—
Other		1,113		1,126		2,224		2,252
Corporate and unallocated		2,682		2,447		5,505		4,860
	$	15,822	$	12,674	$	30,432	$	25,499

Corporate and unallocated expenses for the three-months ended June 30, 2022 include $70.0 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 $16.9 million attributable to professional service expenses, including accounting and legal costs, and $19.7 million of other operating expenses.

Corporate and unallocated expenses for the three-months ended June 30, 2021 include $61.2 million of payroll costs, of which $17.3 million was attributable to stock-based compensation expenses (see Note 15 “Stock-Based Compensation”), as well as $21.0 million attributable to professional service expenses, including accounting and legal costs, and $12.3 million of other operating expenses. Corporate and unallocated expenses for the three-months ended June 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 six-months ended June 30, 2022 include $138.1 million of payroll costs, of which $32.2 million was attributable to stock-based compensation expenses (see Note 15 “Stock-Based Compensation”), as well as $43.3 million attributable to professional service expenses, including accounting and legal costs, and $33.7 million of other operating expenses.

Corporate and unallocated expenses for the six-months ended June 30, 2021 include $126.3 million of payroll costs, of which $35.6 million was attributable to stock-based compensation expenses (see Note 15 “Stock-Based Compensation”), as well as $41.4 million attributable to professional service expenses, including accounting and legal costs, and $24.4 million of other operating expenses. Corporate and unallocated expenses for the six-months ended June 30, 2021, were partially offset by $16.9 million due to the reversal of amounts previously accrued in connection with an intellectual property claim.

Coca-Cola Europacific Partners (formerly Coca-Cola European Partners) accounted for approximately 14% and 12% of the Company’s net sales for the three-months ended June 30, 2022 and 2021, respectively. Coca-Cola Europacific Partners accounted for approximately 13% and 12% of the Company’s net sales for the six-months ended June 30, 2022 and 2021, respectively.

Coca-Cola Consolidated, Inc. accounted for approximately 11% of the Company’s net sales for both the three-months ended June 30, 2022 and 2021. Coca-Cola Consolidated, Inc. accounted for approximately 10% and 11% of the Company’s net sales for the six-months ended June 30, 2022 and 2021, respectively.

Reyes Coca-Cola Bottling, LLC accounted for approximately 9% and 11% of the Company’s net sales for the three-months ended June 30, 2022 and 2021, respectively. Reyes Coca-Cola Bottling, LLC accounted for approximately 9% and 10% of the Company’s net sales for the six-months ended June 30, 2022 and 2021, respectively.

Net sales to customers outside the United States amounted to $649.0 million and $546.3 million for the three-months ended June 30, 2022 and 2021, respectively. Such sales were approximately 39% and 37% of net sales for the three-months ended June 30, 2022 and 2021, respectively. Net sales to customers outside the United States amounted to $1.20 billion and $1.01 billion for the six-months ended June 30, 2022 and 2021, respectively. Such sales were approximately 38% and 37% of net sales for the six-months ended June 30, 2022 and 2021, respectively.

Goodwill and other intangible assets for the Company’s reportable segments as of June 30, 2022 and December 31, 2021 are as follows:

	June 30,		December 31,
	2022		2021
Goodwill and other intangible assets:
Monster Energy® Drinks	$	1,420,967	$	1,420,503
Strategic Brands		976,832		978,032
Alcohol Brands		234,956		—
Other		3,300		5,494
Corporate and unallocated		—		—
	$	2,636,055	$	2,404,029