RELATED PARTY TRANSACTIONS

9 Months Ended

Sep. 30, 2023

RELATED PARTY TRANSACTIONS

RELATED PARTY TRANSACTIONS

19. RELATED PARTY TRANSACTIONS

TCCC controls approximately 19.6% 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 $21.4 million and $12.8 million for the three-months ended September 30, 2023 and 2022, respectively, and are included as a reduction to net sales. TCCC commissions, based on sales to the TCCC Subsidiaries and the TCCC Related Parties, were $55.2 million and $41.3 million for the nine-months ended September 30, 2023 and 2022, respectively, and are included as a reduction to net sales.

TCCC commissions, based on sales to TCCC independent bottlers/distributors, were $8.8 million and $5.5 million for the three-months ended September 30, 2023 and 2022, respectively, and are included in operating expenses. TCCC commissions, based on sales to TCCC independent bottlers/distributors, were $25.7 million and $24.4 million for the nine-months ended September 30, 2023 and 2022, respectively, and are included in operating expenses.

Net sales to the TCCC Subsidiaries for the three-months ended September 30, 2023 and 2022 were $40.2 million and $36.6 million, respectively. Net sales to the TCCC Subsidiaries for the nine-months ended September 30, 2023 and 2022 were $108.4 million and $95.0 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 $7.8 million and $6.5 million for the three-months ended September 30, 2023 and 2022, respectively. Concentrate purchases from TCCC were $22.5 million and $21.5 million for the nine-months ended September 30, 2023 and 2022, respectively.

Certain TCCC Subsidiaries also contract manufacture certain of the Company’s energy drinks. Such contract manufacturing expenses were $10.1 million and $9.1 million for the three-months ended September 30, 2023 and 2022, respectively. Such contract manufacturing expenses were $25.1 million and $23.1 million for the nine-months ended September 30, 2023 and 2022, respectively.

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

	September 30,		December 31,
	2023		2022
Accounts receivable, net	$	138,987	$	88,169
Accounts payable	$	(49,937)	$	(35,467)
Accrued promotional allowances	$	(13,256)	$	(11,222)
Accrued liabilities	$	(21,789)	$	(14,733)

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 September 30, 2023 and 2022 were $0.9 million and $1.3 million, respectively. Expenses incurred with such company in connection with promotional materials purchased during the nine-months ended September 30, 2023 and 2022 were $3.0 million and $4.7 million, respectively.

The Company occasionally charters 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 is accompanied by guests and other Company personnel when using such aircraft for business travel. During the three-months ended September 30, 2023, the Company incurred costs of $0.10 million, amounts the Company believes is commensurate with market rates for comparable travel. No amounts were incurred during the three-months ended September 30, 2022. During the nine-months ended September 30, 2023 and 2022, the Company incurred costs of $0.13 million and $0.08 million, respectively, amounts 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. This partnership meets the definition of a Variable Interest Entity (“VIE”) for which the Company has determined that it is the primary beneficiary. Therefore, the Company consolidates the VIE in the accompanying condensed consolidated financial statements. The aggregate carrying values of the VIE’s assets and liabilities, after elimination of any intercompany transactions and balances, as well as the results of operations for all periods presented, are not material to the Company’s condensed consolidated financial statements.