Table of Contents

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

Form 10-Q

 

 

Quarterly Report Pursuant to Section 13 or 15(d)

of the Securities Exchange Act of 1934

 

 

 

For the quarterly period ended June 30, 2018

Commission File Number 001-18761

 

 

 

MONSTER BEVERAGE CORPORATION

(Exact name of Registrant as specified in its charter)

 

 

 

Delaware

47-1809393

 

(State or other jurisdiction of

(I.R.S. Employer

 

incorporation or organization)

Identification No.)

 

 

1 Monster Way

Corona, California 92879

(Address of principal executive offices) (Zip code)

 

 

 

(951) 739 – 6200

(Registrant’s telephone number, including area code)

 

 

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

 

Yes  X    No __

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

 

Yes    No __

 

 

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company.  See definition of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

 

Large Accelerated Filer x

 

Accelerated filer o

 

 

 

Non-accelerated filer o (Do not check if smaller reporting company)

 

Smaller reporting company o

 

Emerging growth company o

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

 

Indicate by check mark whether the Registrant is a shell company (as defined by Rule 12b-2 of the Exchange Act).

 

Yes ___    No  X

 

The Registrant had 552,523,130 shares of common stock, par value $0.005 per share, outstanding as of August 1, 2018.

 



Table of Contents

 

MONSTER BEVERAGE CORPORATION AND SUBSIDIARIES

JUNE 30, 2018

 

 

INDEX

 

 

Part I.

FINANCIAL INFORMATION

Page No.

 

 

 

Item 1.

Condensed Consolidated Financial Statements (Unaudited)

 

 

 

 

 

Condensed Consolidated Balance Sheets as of June 30, 2018 and December 31, 2017

3

 

 

 

 

Condensed Consolidated Statements of Income for the Three- and Six-Months Ended June 30, 2018 and 2017

4

 

 

 

 

Condensed Consolidated Statements of Comprehensive Income for the Three- and Six-Months Ended June 30, 2018 and 2017

5

 

 

 

 

Condensed Consolidated Statements of Cash Flows for the Six-Months Ended June 30, 2018 and 2017

6

 

 

 

 

Notes to Condensed Consolidated Financial Statements

8

 

 

 

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

31

 

 

 

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

49

 

 

 

Item 4.

Controls and Procedures

50

 

 

 

Part II.

OTHER INFORMATION

 

 

 

 

Item 1.

Legal Proceedings

50

 

 

 

Item 1A.

Risk Factors

50

 

 

 

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

50

 

 

 

Item 3.

Defaults Upon Senior Securities

51

 

 

 

Item 4.

Mine Safety Disclosures

51

 

 

 

Item 5.

Other Information

51

 

 

 

Item 6.

Exhibits

51

 

 

 

 

Signatures

52

 

2



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PART I — FINANCIAL INFORMATION

 

ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

 

MONSTER BEVERAGE CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

AS OF JUNE 30, 2018 AND DECEMBER 31, 2017

(In Thousands, Except Par Value) (Unaudited)

 

 

 

June 30,
2018

 

December 31,
2017

 

ASSETS

 

 

 

 

 

CURRENT ASSETS:

 

 

 

 

 

Cash and cash equivalents

 

  $

659,687

 

  $

528,622

 

Short-term investments

 

 

211,093

 

 

672,933

 

Accounts receivable, net

 

 

592,568

 

 

449,476

 

Inventories

 

 

275,566

 

 

255,745

 

Prepaid expenses and other current assets

 

 

57,320

 

 

40,877

 

Prepaid income taxes

 

 

32,445

 

 

138,724

 

Total current assets

 

 

1,828,679

 

 

2,086,377

 

 

 

 

 

 

 

 

 

INVESTMENTS

 

 

-

 

 

2,366

 

PROPERTY AND EQUIPMENT, net

 

 

240,658

 

 

230,276

 

DEFERRED INCOME TAXES

 

 

85,253

 

 

92,333

 

GOODWILL

 

 

1,331,643

 

 

1,331,643

 

OTHER INTANGIBLE ASSETS, net

 

 

1,039,401

 

 

1,034,085

 

OTHER ASSETS

 

 

16,436

 

 

13,932

 

Total Assets

 

  $

4,542,070

 

  $

4,791,012

 

 

 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

 

 

CURRENT LIABILITIES:

 

 

 

 

 

 

 

Accounts payable

 

  $

267,117

 

  $

245,910

 

Accrued liabilities

 

 

82,191

 

 

87,475

 

Accrued promotional allowances

 

 

178,193

 

 

137,998

 

Accrued distributor terminations

 

 

488

 

 

91

 

Deferred revenue

 

 

43,888

 

 

43,236

 

Accrued compensation

 

 

26,357

 

 

34,996

 

Income taxes payable

 

 

15,978

 

 

10,645

 

Total current liabilities

 

 

614,212

 

 

560,351

 

 

 

 

 

 

 

 

 

DEFERRED REVENUE

 

 

320,259

 

 

334,354

 

 

 

 

 

 

 

 

 

OTHER LIABILITIES

 

 

2,439

 

 

1,095

 

 

 

 

 

 

 

 

 

COMMITMENTS AND CONTINGENCIES (Note 11)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

STOCKHOLDERS’ EQUITY:

 

 

 

 

 

 

 

Common stock - $0.005 par value; 1,250,000 shares authorized; 630,330 shares issued and 552,457 shares outstanding as of June 30, 2018; 629,255 shares issued and 566,298 shares outstanding as of December 31, 2017

 

 

3,152

 

 

3,146

 

Additional paid-in capital

 

 

4,194,676

 

 

4,150,628

 

Retained earnings

 

 

3,407,806

 

 

2,928,226

 

Accumulated other comprehensive loss

 

 

(25,196)

 

 

(16,659)

 

Common stock in treasury, at cost; 77,873 shares and 62,957 shares as of June 30, 2018 and December 31, 2017, respectively

 

 

(3,975,278)

 

 

(3,170,129)

 

Total stockholders’ equity

 

 

3,605,160

 

 

3,895,212

 

Total Liabilities and Stockholders’ Equity

 

  $

4,542,070

 

  $

4,791,012

 

 

See accompanying notes to condensed consolidated financial statements.

 

3



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MONSTER BEVERAGE CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

FOR THE THREE- AND SIX-MONTHS ENDED JUNE 30, 2018 AND 2017

(In Thousands, Except Per Share Amounts) (Unaudited)

 

 

 

 

Three-Months Ended

 

Six-Months Ended

 

 

 

June 30,

 

June 30,

 

 

 

2018

 

2017

 

2018

 

2017

 

 

 

 

 

 

 

 

 

 

 

NET SALES

 

  $

1,015,873

 

  $

907,068

 

  $

1,866,793

 

  $

1,649,214

 

 

 

 

 

 

 

 

 

 

 

COST OF SALES

 

395,615

 

323,571

 

731,279

 

584,843

 

 

 

 

 

 

 

 

 

 

 

GROSS PROFIT

 

620,258

 

583,497

 

1,135,514

 

1,064,371

 

 

 

 

 

 

 

 

 

 

 

OPERATING EXPENSES

 

262,637

 

233,456

 

497,979

 

450,068

 

 

 

 

 

 

 

 

 

 

 

OPERATING INCOME

 

357,621

 

350,041

 

637,535

 

614,303

 

 

 

 

 

 

 

 

 

 

 

INTEREST and OTHER INCOME (EXPENSE), net

 

476

 

(2,551)

 

2,281

 

(1,893)

 

 

 

 

 

 

 

 

 

 

 

INCOME BEFORE PROVISION FOR INCOME TAXES

 

358,097

 

347,490

 

639,816

 

612,410

 

 

 

 

 

 

 

 

 

 

 

PROVISION FOR INCOME TAXES

 

87,981

 

124,857

 

153,651

 

211,797

 

 

 

 

 

 

 

 

 

 

 

NET INCOME

 

  $

270,116

 

  $

222,633

 

  $

486,165

 

  $

400,613

 

 

 

 

 

 

 

 

 

 

 

NET INCOME PER COMMON SHARE:

 

 

 

 

 

 

 

 

 

Basic

 

  $

0.48

 

  $

0.39

 

  $

0.86

 

  $

0.71

 

Diluted

 

  $

0.48

 

  $

0.39

 

  $

0.85

 

  $

0.69

 

 

 

 

 

 

 

 

 

 

 

WEIGHTED AVERAGE NUMBER OF SHARES OF COMMON STOCK AND COMMON STOCK EQUIVALENTS:

 

 

 

 

 

 

 

 

 

Basic

 

559,867

 

567,910

 

562,917

 

567,384

 

Diluted

 

566,352

 

578,020

 

570,231

 

577,719

 

 

See accompanying notes to condensed consolidated financial statements.

 

4



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MONSTER BEVERAGE CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

FOR THE THREE- AND SIX-MONTHS ENDED JUNE 30, 2018 AND 2017

(In Thousands) (Unaudited)

 

 

 

 

Three-Months Ended
June 30,

 

Six-Months Ended
June 30,

 

 

 

2018

 

2017

 

2018

 

2017

 

Net income, as reported

 

  $

270,116

 

  $

222,633

 

  $

486,165

 

  $

400,613

 

Other comprehensive income:

 

 

 

 

 

 

 

 

 

Change in foreign currency translation adjustment

 

(11,988)

 

5,111

 

(9,265)

 

6,311

 

Available-for-sale investments:

 

 

 

 

 

 

 

 

 

Change in net unrealized gains (losses)

 

513

 

(26)

 

728

 

105

 

Reclassification adjustment for net gains included in net income

 

-

 

-

 

-

 

-

 

Net change in available-for-sale investments

 

513

 

(26)

 

728

 

105

 

Other comprehensive (loss) income

 

(11,475)

 

5,085

 

(8,537)

 

6,416

 

Comprehensive income

 

  $

258,641

 

  $

227,718

 

  $

477,628

 

  $

407,029

 

 

See accompanying notes to condensed consolidated financial statements.

 

5



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MONSTER BEVERAGE CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE SIX-MONTHS ENDED JUNE 30, 2018 AND 2017

(In Thousands) (Unaudited)

 

 

 

Six-Months Ended
June 30,

 

 

 

2018

 

2017

 

CASH FLOWS FROM OPERATING ACTIVITIES:

 

 

 

 

 

Net income

 

$

486,165

 

$

400,613

 

Adjustments to reconcile net income to net cash provided by operating activities:

 

 

 

 

 

Depreciation and amortization

 

28,185

 

22,775

 

Gain on disposal of property and equipment

 

(308)

 

(436)

 

Stock-based compensation

 

28,345

 

25,983

 

Deferred income taxes

 

(76)

 

1,862

 

Effect on cash of changes in operating assets and liabilities:

 

 

 

 

 

Accounts receivable

 

(154,369)

 

(75,178)

 

TCCC Transaction receivable

 

-

 

125,000

 

Distributor receivables

 

5,826

 

(1,452)

 

Inventories

 

(22,753)

 

(24,859)

 

Prepaid expenses and other current assets

 

(15,977)

 

(8,131)

 

Prepaid income taxes

 

104,969

 

60,696

 

Accounts payable

 

24,684

 

8,784

 

Accrued liabilities

 

(15,617)

 

(667)

 

Accrued promotional allowances

 

43,196

 

25,805

 

Accrued distributor terminations

 

398

 

(7,917)

 

Accrued compensation

 

(8,413)

 

(7,225)

 

Income taxes payable

 

8,043

 

(5,362)

 

Other liabilities

 

1,344

 

-

 

Deferred revenue

 

(12,342)

 

(7,069)

 

Net cash provided by operating activities

 

501,300

 

533,222

 

 

 

 

 

 

 

CASH FLOWS FROM INVESTING ACTIVITIES:

 

 

 

 

 

Sales of available-for-sale investments

 

807,396

 

172,528

 

Purchases of available-for-sale investments

 

(342,463)

 

(286,858)

 

Purchases of property and equipment

 

(34,619)

 

(40,477)

 

Proceeds from sale of property and equipment

 

3,590

 

733

 

Decrease (Increase) in intangibles

 

(42)

 

26

 

Increase in other assets

 

(7,684)

 

(632)

 

Net cash provided by (used in) investing activities

 

426,178

 

(154,680)

 

 

 

 

 

 

 

CASH FLOWS FROM FINANCING ACTIVITIES:

 

 

 

 

 

Principal payments on debt

 

(972)

 

(1,334)

 

Issuance of common stock

 

13,616

 

19,093

 

Purchases of common stock held in treasury

 

(805,149)

 

(302)

 

Net cash (used in) provided by financing activities

 

(792,505)

 

17,457

 

 

 

 

 

 

 

Effect of exchange rate changes on cash and cash equivalents

 

(3,908)

 

4,074

 

 

 

 

 

 

 

 

 

NET INCREASE IN CASH AND CASH EQUIVALENTS

 

131,065

 

400,073

 

CASH AND CASH EQUIVALENTS, beginning of period

 

528,622

 

377,582

 

CASH AND CASH EQUIVALENTS, end of period

 

$

659,687

 

$

777,655

 

 

 

 

 

 

 

 

 

SUPPLEMENTAL INFORMATION:

 

 

 

 

 

Cash paid during the period for:

 

 

 

 

 

Interest

 

$

28

 

$

38

 

Income taxes

 

$

41,780

 

$

156,039

 

 

See accompanying notes to condensed consolidated financial statements.

 

6



Table of Contents

 

MONSTER BEVERAGE CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE SIX-MONTHS ENDED JUNE 30, 2018 AND 2017

(In Thousands) (Unaudited) (Continued)

 

SUPPLEMENTAL DISCLOSURE OF NON-CASH ITEMS

 

The Company entered into capital leases for the acquisition of promotional vehicles of $0.7 million and $1.5 million for the six-months ended June 30, 2018 and 2017, respectively.

 

Included in accounts payable as of June 30, 2018 and 2017 were $1.5 million and $0.3 million, respectively, related to purchases of property and equipment.

 

Included in accrued liabilities as of June 30, 2018 and 2017 were $0.1 million and $12.1 million, respectively, related to purchases of property and equipment.

 

Included in accounts payable as of June 30, 2018 was $1.8 million related to additions to other intangible assets. No such amounts were included in accounts payable at June 30, 2017.

 

Included in accrued liabilities as of June 30, 2018 and 2017 were $9.5 million and $6.2 million, respectively, related to additions to other intangible assets.

 

See accompanying notes to condensed consolidated financial statements.

 

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Table of Contents

 

MONSTER BEVERAGE CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Tabular Dollars in Thousands, Except Per Share Amounts) (Unaudited)

 

1.                                    BASIS OF PRESENTATION

 

Reference is made to the Notes to Consolidated Financial Statements, in Monster Beverage Corporation and Subsidiaries (the “Company”) Annual Report on Form 10-K for the year ended December 31, 2017 (“Form 10-K”) for a summary of significant accounting policies utilized by the Company and its consolidated subsidiaries and other disclosures, which should be read in conjunction with this Quarterly Report on Form 10-Q (“Form 10-Q”).

 

The Company’s condensed consolidated financial statements included in this Form 10-Q have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and Securities and Exchange Commission (“SEC”) rules and regulations applicable to interim financial reporting. They do not include all the information and footnote disclosures normally included in annual financial statements prepared in accordance with GAAP. The information set forth in these interim condensed consolidated financial statements for the three- and six-months ended June 30, 2018 and 2017, respectively, is unaudited and reflects all adjustments, which include only normal recurring adjustments and which in the opinion of management are necessary to make the interim condensed consolidated financial statements not misleading. Results of operations for periods covered by this report may not necessarily be indicative of results of operations for the full year.

 

The preparation of financial statements in conformity with GAAP necessarily requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from these estimates.

 

2.                                    RECENT ACCOUNTING PRONOUNCEMENTS

 

Recently issued accounting pronouncements not yet adopted

 

In February 2018, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”) No. 2018-02 (ASU No. 2018-02), “Income Statement - Reporting Comprehensive Income (Topic 220)”, which amends the previous guidance to allow for certain tax effects “stranded” in accumulated other comprehensive income, which are impacted by the Tax Cuts and Jobs Act (the “Tax Reform Act”), to be reclassified from accumulated other comprehensive income into retained earnings. This amendment pertains only to those items impacted by the new tax law and will not apply to any future tax effects stranded in accumulated other comprehensive income. This standard is effective for fiscal years beginning after December 15, 2018, and allows for early adoption. The Company is currently evaluating the impact of ASU No. 2018-02 on its financial position, results of operations and liquidity.

 

In January 2017, the FASB issued ASU No. 2017-04, “Intangibles and Other (Topic 350): Simplifying the Test for Goodwill Impairment, which eliminates the requirement to calculate the implied fair value of goodwill, but rather requires an entity to record an impairment charge based on the excess of a reporting unit’s carrying value over its fair value. This amendment is effective for annual or interim goodwill impairment tests in fiscal years beginning after December 15, 2019. Early adoption is permitted. The Company is currently evaluating the impact of ASU No. 2017-04 on its financial position, results of operations and liquidity.

 

In June 2016, the FASB issued ASU No. 2016-13, “Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments”. The accounting standard changes the methodology for measuring credit losses on financial instruments and the timing when such losses are recorded. ASU No. 2016-13 is effective for fiscal years, and interim periods within those years, beginning after December 15, 2019. Early adoption is permitted for fiscal years, and interim periods within those years, beginning after December 15, 2018. The Company is currently evaluating the impact of ASU No. 2016-13 on its financial position, results of operations and liquidity.

 

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Table of Contents

 

MONSTER BEVERAGE CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Tabular Dollars in Thousands, Except Per Share Amounts) (Unaudited)

 

In February 2016, the FASB issued ASU No. 2016-02, “Leases (Topic 842)”. This update is intended to increase transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements. This update is effective for annual and interim reporting periods beginning after December 15, 2018, including interim periods within those fiscal years. Early adoption is permitted. The Company is currently evaluating the impact of ASU No. 2016-02 on its financial position, results of operations and liquidity.

 

Recently adopted accounting pronouncements

 

In October 2016, the FASB issued ASU No. 2016-16, “Income Taxes (Topic 740): Intra-Entity Transfers of Assets Other Than Inventory”, in an effort to improve the accounting for the income tax consequences of intra-entity transfers of assets other than inventory. Current GAAP prohibits the recognition of current and deferred income taxes for an intra-entity asset transfer until the asset has been sold to an outside party. FASB ASU No. 2016-16 establishes the requirement that an entity recognizes the income tax consequences of an intra-entity transfer of an asset other than inventory when the transfer occurs. ASU No. 2016-16 was effective for financial statements issued for annual periods beginning after December 15, 2017 and interim periods within those annual periods. The Company adopted ASU No. 2016-16 effective January 1, 2018 on a modified retrospective basis, resulting in a $6.6 million reclassification of the unrecognized income tax effects related to assets transfers that occurred prior to the adoption from deferred income taxes to opening retained earnings.

 

In May 2014, the FASB issued ASU No. 2014-09, “Revenue from Contracts with Customers (Topic 606)”, which superseded previous revenue recognition guidance. ASU No. 2014-09 and its amendments were included in Accounting Standards Codification (“ASC”) 606 “Revenue from Contracts with Customers”. ASC 606 requires that a company recognize revenue at an amount that reflects the consideration to which the company expects to be entitled in exchange for transferring goods or services to a customer. The Company adopted ASC 606 effective January 1, 2018, using the modified retrospective approach, with no impact to the opening retained earnings. Results for periods beginning on or after January 1, 2018 are presented under ASC 606, while prior periods are not adjusted and continue to be reported in accordance with the prior accounting guidance under ASC 605 “Revenue Recognition”. See Note 3.

 

3.                                    REVENUE RECOGNITION

 

The Company currently has three operating and reportable segments, (i) Monster Energy® Drinks segment (“Monster Energy® Drinks”), which is comprised of the Company’s Monster 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”), which is comprised of certain products sold by American Fruits & Flavors LLC, a wholly-owned subsidiary of the Company, to independent third-party customers.

 

The Company’s Monster Energy® Drinks segment generates net operating revenues by selling ready-to-drink packaged energy 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, mass merchandisers, convenience chains, drug stores, food service customers and the military.

 

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MONSTER BEVERAGE CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Tabular Dollars in Thousands, Except Per Share Amounts) (Unaudited)

 

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 and full service distributors and to retail grocery and specialty chains, wholesalers, club stores, mass merchandisers, convenience chains, food service customers, drug stores and the military. To a lesser extent, our Strategic Brands segment generates net operating revenues by selling certain ready-to-drink packaged energy drinks to bottlers and full service beverage distributors.

 

The majority of the Company’s revenue is recognized when it satisfies a single performance obligation by transferring control of its products to a customer. Control is generally transferred when the Company’s products are either shipped or delivered based on the terms contained within the underlying contracts or agreements. Certain of the Company’s bottlers/distributors may also perform a separate function as a co-packer on the Company’s behalf. In such cases, control of the Company’s products passes to such bottlers/distributors when they notify the Company that they have taken possession or transferred the relevant portion of the Company’s finished goods. The Company’s general payment terms are short-term in duration. The Company does not have significant financing components or payment terms. The Company did not have any material unsatisfied performance obligations as of June 30, 2018 or December 31, 2017.

 

The Company excludes from revenues all taxes assessed by a governmental authority that are imposed on the sale of its products and collected from customers.

 

Distribution expenses to transport the Company’s products, where applicable, and warehousing expense after manufacture are accounted for within operating expenses.

 

There were no changes to the Company’s accounting for variable consideration under ASC 606. Promotional and other allowances (variable consideration) recorded as a reduction to net sales, primarily include consideration given to the Company’s bottlers/distributors or retail customers including, but not limited to the following:

 

·

 

discounts granted off list prices to support price promotions to end-consumers by retailers;

·

 

reimbursements given to the Company’s bottlers/distributors for agreed portions of their promotional spend with retailers, including slotting, shelf space allowances and other fees for both new and existing products;

·

 

the Company’s agreed share of fees given to bottlers/distributors and/or directly to retailers for advertising, in-store marketing and promotional activities;

·

 

the Company’s agreed share of slotting, shelf space allowances and other fees given directly to retailers;

·

 

incentives given to the Company’s bottlers/distributors and/or retailers for achieving or exceeding certain predetermined sales goals;

·

 

discounted or free products;

·

 

contractual fees given to the Company’s bottlers/distributors related to sales made by the Company direct to certain customers that fall within the bottlers’/distributors’ sales territories; and

·

 

certain commissions paid based on sales to the Company’s bottlers/distributors.

 

The Company’s promotional allowance programs with its bottlers/distributors and/or retailers are executed through separate agreements in the ordinary course of business. These agreements generally provide for one or more of the arrangements described above and are of varying durations, ranging from one week to one year. The Company’s promotional and other allowances are calculated based on various programs with bottlers/distributors and retail customers, and accruals are established during the year for its anticipated

 

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Table of Contents

 

MONSTER BEVERAGE CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Tabular Dollars in Thousands, Except Per Share Amounts) (Unaudited)

 

 

liabilities. These accruals are based on agreed upon terms as well as the Company’s historical experience with similar programs and require management’s judgment with respect to estimating consumer participation and/or distributor and retail customer performance levels. Differences between such estimated expenses and actual expenses for promotional and other allowance costs have historically been insignificant and are recognized in earnings in the period such differences are determined.

 

Upon adoption of ASC 606, commissions paid to TCCC based on sales to certain of the Company’s bottlers/distributors who are (i) consolidated subsidiaries of TCCC (the “TCCC Subsidiaries”), (ii) accounted for under the equity method by TCCC (the “TCCC Related Parties”) and (iii) those not included in (i) or (ii) (the “TCCC Independent Bottlers”) are accounted for as follows:

 

 

 

Three- and Six-Months Ended June 30, 2018

Commissions Related To:

 

As Reported

 

Without Adoption of
ASC 606

TCCC Subsidiaries

 

Reduction to net sales

 

Reduction to net sales

TCCC Related Parties

 

Reduction to net sales

 

Operating expenses

TCCC Independent Bottlers

 

Operating expenses

 

Operating expenses

 

The impact of the adoption of ASC 606 on the Company’s condensed consolidated statement of income for the three- and six-months ended June 30, 2018 was as follows:

 

 

 

Three-Months Ended June 30, 2018

 

 

 

As Reported

 

Without Adoption
of ASC 606

 

Decrease due to
Adoption of ASC
606

 

Net Sales

 

$

1,015,873

 

$

1,028,085

 

$

(12,212)

1

Operating Expenses

 

$

262,637

 

$

274,849

 

$

(12,212)

1

 

 

 

Six-Months Ended June 30, 2018

 

 

 

As Reported

 

Without Adoption
of ASC 606

 

Decrease due to
Adoption of ASC
606

 

Net Sales

 

$

1,866,793

 

$

1,888,945

 

$

(22,152)

1

Operating Expenses

 

$

497,979

 

$

520,131

 

$

(22,152)

1

 

1 TCCC Commissions based on sales to the TCCC Related Parties. There were no other identified changes to our revenue recognition policies as a result of the adoption of ASC 606.

 

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MONSTER BEVERAGE CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Tabular Dollars in Thousands, Except Per Share Amounts) (Unaudited)

 

Disaggregation of Revenue

 

The following table disaggregates the Company’s revenue by geographical markets and reportable segments:

 

 

 

Three-Months Ended June 30, 2018

 

Net Sales

 

U.S. and
Canada

 

EMEA1

 

Asia Pacific

 

Latin
America
and
Caribbean

 

Total

 

Monster Energy® Drinks

 

$

695,963

 

$

138,608

 

$

60,606

 

$

34,262

 

$

929,439

 

Strategic Brands

 

50,133

 

22,967

 

6,368

 

343

 

79,811

 

Other

 

6,623

 

-

 

-

 

-

 

6,623

 

Total Net Sales

 

$

752,719

 

$

161,575

 

$

66,974

 

$

34,605

 

$

1,015,873

 

 

 

 

Six-Months Ended June 30, 2018

 

Net Sales

 

U.S. and
Canada

 

EMEA1

 

Asia Pacific

 

Latin
America
and
Caribbean

 

Total

 

Monster Energy® Drinks

 

$

1,284,778

 

$

249,538

 

$

108,037

 

$

67,590

 

$

1,709,943

 

Strategic Brands

 

89,857

 

42,280

 

11,916

 

1,517

 

145,570

 

Other

 

11,280

 

-

 

-

 

-

 

11,280

 

Total Net Sales

 

$

1,385,915

 

$

291,818

 

$

119,953

 

$

69,107

 

$

1,866,793

 

 

1Europe, Middle East and Africa (“EMEA”)

 

Contract Liabilities

 

Amounts received from certain bottlers/distributors at inception of their distribution contracts or at the inception of certain sales/marketing programs are accounted for as deferred revenue. As of June 30, 2018, the Company had $364.1 million of deferred revenue, which is included in current and long-term deferred revenue in the Company’s condensed consolidated balance sheet. As of December 31, 2017, the Company had $377.6 million of deferred revenue, which is included in current and long-term deferred revenue in the Company’s condensed consolidated balance sheet. During the three- and six-months ended June 30, 2018, $11.0 million and $22.2 million, respectively, of deferred revenue was recognized in net sales. See Note 10.

 

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MONSTER BEVERAGE CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Tabular Dollars in Thousands, Except Per Share Amounts) (Unaudited)

 

4.                                    INVESTMENTS

 

The following table summarizes the Company’s investments at:

 

June 30, 2018

 

Amortized
Cost

 

Gross
Unrealized
Holding
Gains

 

Gross
Unrealized
Holding
Losses

 

Fair
Value

 

Continuous
Unrealized
Loss Position
less than 12
Months

 

Continuous
Unrealized
Loss Position
greater than 12
Months

 

Available-for-sale

 

 

 

 

 

 

 

 

 

 

 

 

 

Short-term:

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial paper

 

   $

15,177  

 

   $

-  

 

   $

-  

 

   $

15,177  

 

   $

-  

 

   $

-

 

Municipal securities

 

149,048  

 

5  

 

56  

 

148,997  

 

56  

 

-

 

U.S. government agency securities

 

46,982  

 

-  

 

63  

 

46,919  

 

63  

 

-

 

Variable rate demand notes

 

-  

 

-  

 

-  

 

-  

 

-  

 

-

 

Total

 

   $

211,207  

 

   $

5  

 

   $

119  

 

   $

211,093  

 

   $

119  

 

   $

-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31, 2017

 

Amortized
Cost

 

Gross
Unrealized
Holding
Gains

 

Gross
Unrealized
Holding
Losses

 

Fair
Value

 

Continuous
Unrealized
Loss Position
less than 12
Months

 

Continuous
Unrealized
Loss Position
greater than 12
Months

 

Available-for-sale

 

 

 

 

 

 

 

 

 

 

 

 

 

Short-term:

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial paper

 

   $

81,026  

 

   $

-  

 

   $

-  

 

   $

81,026  

 

   $

-  

 

   $

-

 

Certificates of deposit

 

11,869  

 

-  

 

-  

 

11,869  

 

-  

 

-

 

Municipal securities

 

469,604  

 

1  

 

740  

 

468,865  

 

740  

 

-

 

U.S. government agency securities

 

61,307  

 

-  

 

88  

 

61,219  

 

88  

 

-

 

Variable rate demand notes

 

49,954  

 

-  

 

-  

 

49,954  

 

-  

 

-

 

Long-term:

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. government agency securities

 

2,369  

 

-  

 

3  

 

2,366  

 

3  

 

-

 

Total

 

   $

676,129  

 

   $

1  

 

   $

831  

 

   $

675,299  

 

   $

831  

 

   $

-

 

 

During the six-months ended June 30, 2018 and 2017, realized gains or losses recognized on the sale of investments were not significant.

 

The Company’s investments at June 30, 2018 and December 31, 2017 in commercial paper, certificates of deposit, municipal securities, U.S. government agency securities and/or variable rate demand notes (“VRDNs”) carried investment grade credit ratings. VRDNs are floating rate municipal bonds with embedded put options that allow the bondholder to sell the security at par plus accrued interest. All of the put options are secured by a pledged liquidity source. While they are classified as marketable investment securities, the put option allows the VRDNs to be liquidated at par on a same day, or more generally, on a seven-day settlement basis.

 

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Table of Contents

 

MONSTER BEVERAGE CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Tabular Dollars in Thousands, Except Per Share Amounts) (Unaudited)

 

The following table summarizes the underlying contractual maturities of the Company’s investments at:

 

 

 

June 30, 2018

 

December 31, 2017

 

 

 

 

 

 

 

 

 

Amortized Cost

 

Fair Value

 

Amortized Cost

 

Fair Value

 

Less than 1 year:

 

 

 

 

 

 

 

 

 

Commercial paper

 

  $

15,177  

 

  $

15,177  

 

  $

81,026  

 

  $

81,026

 

Municipal securities

 

149,048  

 

148,997  

 

469,604  

 

468,865

 

U.S. government agency securities

 

46,982  

 

46,919  

 

61,307  

 

61,219

 

Certificates of deposit

 

-  

 

-  

 

11,869  

 

11,869

 

Due 1 -10 years:

 

 

 

 

 

 

 

 

 

U.S. government agency securities

 

-  

 

-  

 

2,369  

 

2,366

 

Variable rate demand notes

 

-  

 

-  

 

6,366  

 

6,366

 

Due 11 - 20 years:

 

 

 

 

 

 

 

 

 

Variable rate demand notes

 

-  

 

-  

 

28,377  

 

28,377

 

Due 21 - 30 years:

 

 

 

 

 

 

 

 

 

Variable rate demand notes

 

-  

 

-  

 

15,211  

 

15,211

 

Total

 

  $

211,207  

 

  $

211,093  

 

  $

676,129  

 

  $

675,299

 

 

5.                                    FAIR VALUE OF CERTAIN FINANCIAL ASSETS AND LIABILITIES

 

ASC 820 provides a framework for measuring fair value and requires disclosures regarding fair value measurements. ASC 820 defines fair value as the price that would be received on the sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. ASC 820 also establishes a fair value hierarchy that requires an entity to maximize the use of observable inputs, where available. The three levels of inputs required by the standard that the Company uses to measure fair value are summarized below.

 

·                 Level 1: Quoted prices in active markets for identical assets or liabilities.

 

·                 Level 2: Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities, quoted prices in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the related assets or liabilities.

 

·                 Level 3: Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

 

ASC 820 requires the use of observable market inputs (quoted market prices) when measuring fair value and requires a Level 1 quoted price to be used to measure fair value whenever possible.

 

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Table of Contents

 

MONSTER BEVERAGE CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Tabular Dollars in Thousands, Except Per Share Amounts) (Unaudited)

 

The following tables present the fair value of the Company’s financial assets and liabilities that are recorded at fair value on a recurring basis, segregated among the appropriate levels within the fair value hierarchy at:

 

June 30, 2018

 

Level 1

 

Level 2

 

Level 3

 

Total

 

Cash

 

  $

358,788

 

$

-

 

$

-

 

$

358,788

 

Money market funds

 

299,949

 

-

 

-

 

299,949

 

Commercial paper

 

-

 

16,127

 

-

 

16,127

 

Municipal securities

 

-

 

148,997

 

-

 

148,997

 

U.S. government agency securities

 

-

 

46,919

 

-

 

46,919

 

Foreign currency derivatives

 

-

 

(996

)

-

 

(996

)

Total

 

  $

658,737

 

$

211,047

 

$

-

 

$

869,784

 

 

 

 

 

 

 

 

 

 

 

Amounts included in:

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

  $

658,737

 

$

950

 

$

-

 

$

659,687

 

Short-term investments

 

-

 

211,093

 

-

 

211,093

 

Accounts receivable, net

 

-

 

21

 

-

 

21

 

Investments

 

-

 

-

 

-

 

-

 

Accrued liabilities

 

-

 

(1,017

)

-

 

(1,017

)

Total

 

  $

658,737

 

$

211,047

 

$

-

 

$

869,784

 

 

 

 

 

 

 

 

 

 

 

December 31, 2017

 

Level 1

 

Level 2

 

Level 3

 

Total

 

Cash

 

  $

310,885

 

$

-

 

$

-

 

$

310,885

 

Money market funds

 

112,848

 

-

 

-

 

112,848

 

Certificates of deposit

 

-

 

15,720

 

-

 

15,720

 

Commercial paper

 

-

 

99,903

 

-

 

99,903

 

Variable rate demand notes

 

-

 

49,954

 

-

 

49,954

 

Municipal securities

 

-

 

529,984

 

-

 

529,984

 

U.S. government agency securities

 

-

 

81,230

 

-

 

81,230

 

U.S. Treasuries

 

-

 

3,397

 

-

 

3,397

 

Foreign currency derivatives

 

-

 

(1,484

)

-

 

(1,484

)

Total

 

  $

423,733

 

$

778,704

 

$

-

 

$

1,202,437

 

 

 

 

 

 

 

 

 

 

 

Amounts included in:

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

  $

423,733

 

$

104,889

 

$

-

 

$

528,622

 

Short-term investments

 

-

 

672,933

 

-

 

672,933

 

Accounts receivable, net

 

-

 

95

 

-

 

95

 

Investments

 

-

 

2,366

 

-

 

2,366

 

Accrued liabilities

 

-

 

(1,579

)

-

 

(1,579

)

Total

 

  $

423,733

 

$

778,704

 

$

-

 

$

1,202,437

 

 

All of the Company’s short-term investments are classified within Level 1 or Level 2 of the fair value hierarchy.  The Company’s valuation of its Level 1 investments, which include money market funds, is based on quoted market prices in active markets for identical securities. The Company’s valuation of its Level 2 investments, which include municipal securities, commercial paper, certificates of deposit, VRDNs, U.S. Treasuries and U.S. government agency securities, is based on other observable inputs, specifically a market approach which utilizes valuation models, pricing systems, mathematical tools and other relevant information for the same or similar securities. The Company’s valuation of its Level 2 foreign currency exchange contracts is based on quoted market prices of the same or similar instruments, adjusted for counterparty risk. There were no transfers between Level 1 and Level 2 measurements during the six-months ended June 30, 2018 or the year ended December 31, 2017, and there were no changes in the Company’s valuation techniques.

 

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Table of Contents

 

MONSTER BEVERAGE CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Tabular Dollars in Thousands, Except Per Share Amounts) (Unaudited)

 

6.                                    DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES

 

The Company is exposed to foreign currency exchange rate risks related primarily to its foreign business operations. During the three- and six-months ended June 30, 2018 and the year ended December 31, 2017, the Company entered into forward currency exchange contracts with financial institutions to create an economic hedge to specifically manage a portion of the foreign exchange risk exposure associated with certain consolidated subsidiaries’ non-functional currency denominated assets and liabilities. All foreign currency exchange contracts of the Company that were outstanding as of June 30, 2018 have terms of one month or less. The Company does not enter into forward currency exchange contracts for speculation or trading purposes.

 

The Company has not designated its foreign currency exchange contracts as hedge transactions under ASC 815. Therefore, gains and losses on the Company’s foreign currency exchange contracts are recognized in interest and other income (expense), net, in the condensed consolidated statements of income, and are largely offset by the changes in the fair value of the underlying economically hedged item.

 

The notional amount and fair value of all outstanding foreign currency derivative instruments in the condensed consolidated balance sheets consist of the following at:

 

June 30, 2018

 

Derivatives not designated as
hedging instruments under
FASB ASC 815-20

 

Notional
Amount

 

Fair
Value

 

Balance Sheet Location

 

 

 

 

 

 

 

 

 

Assets:

 

 

 

 

 

 

 

Foreign currency exchange contracts:

 

 

 

 

 

 

 

Receive SGD/pay USD

 

  $

5,279

 

  $

7

 

Accounts receivable, net

 

Receive USD/pay NZD

 

2,719

 

12

 

Accounts receivable, net

 

Receive NOK/pay USD

 

918

 

2

 

Accounts receivable, net

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Liabilities:

 

 

 

 

 

 

 

Foreign currency exchange contracts:

 

 

 

 

 

 

 

Receive USD/pay EUR

 

  $

50,572

 

  $

(408)

 

Accrued liabilities

 

Receive USD/pay GBP

 

37,904

 

(129)

 

Accrued liabilities

 

Receive USD/pay ZAR

 

16,633

 

(192)

 

Accrued liabilities

 

Receive USD/pay AUD

 

14,118

 

(82)

 

Accrued liabilities

 

Receive USD/pay TRY

 

5,277

 

(92)

 

Accrued liabilities

 

Receive USD/pay COP

 

3,567

 

(30)

 

Accrued liabilities

 

Receive USD/pay MXN

 

3,035

 

(54)

 

Accrued liabilities

 

Receive USD/pay RUB

 

2,774

 

(30)

 

Accrued liabilities

 

 

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Table of Contents

 

MONSTER BEVERAGE CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Tabular Dollars in Thousands, Except Per Share Amounts) (Unaudited)

 

December 31, 2017

 

Derivatives not designated as
hedging instruments under
FASB ASC 815-20

 

Notional
Amount

 

Fair
Value

 

Balance Sheet Location

 

 

 

 

 

 

 

 

 

Assets:

 

 

 

 

 

 

 

Foreign currency exchange contracts:

 

 

 

 

 

 

 

Receive CAD/pay USD

 

  $

4,892

 

  $

61

 

Accounts receivable, net

 

Receive USD/pay COP

 

2,803

 

13

 

Accounts receivable, net

 

Receive USD/pay BRL

 

1,806

 

1

 

Accounts receivable, net

 

Receive NOK/pay USD

 

1,534

 

18

 

Accounts receivable, net

 

Receive SGD/pay USD

 

223

 

2

 

Accounts receivable, net

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Liabilities:

 

 

 

 

 

 

 

Foreign currency exchange contracts:

 

 

 

 

 

 

 

Receive USD/pay EUR

 

  $

65,131

 

  $

(642)

 

Accrued liabilities

 

Receive USD/pay GBP

 

31,342

 

(334)

 

Accrued liabilities

 

Receive USD/pay ZAR

 

21,311

 

(222)

 

Accrued liabilities

 

Receive USD/pay AUD

 

17,238

 

(177)

 

Accrued liabilities

 

Receive USD/pay MXN

 

7,720

 

(126)

 

Accrued liabilities

 

Receive USD/pay TRY

 

5,483

 

(52)

 

Accrued liabilities

 

Receive USD/pay NZD

 

1,826

 

(18)

 

Accrued liabilities

 

Receive USD/pay CLP

 

1,112

 

(8)

 

Accrued liabilities

 

 

The net gains (losses) on derivative instruments in the condensed consolidated statements of income were as follows:

 

 

 

 

 

Amount of gain (loss)
recognized in income on
derivatives

 

 

 

 

Three-months ended

Derivatives not designated as
 hedging instruments under
 FASB ASC 815-20

 

Location of gain (loss)
recognized in income on
derivatives

 

June 30, 2018

 

June 30, 2017

 

 

 

 

 

 

 

Foreign currency exchange contracts

 

Interest and other income (expense), net

 

  $

10,393

 

  $

(4,439)

 

 

 

 

 

Amount of gain (loss)
recognized in income on
derivatives

 

 

 

 

Six-months ended

Derivatives not designated as
 hedging instruments under
 FASB ASC 815-20

 

Location of gain (loss)
recognized in income on
derivatives

 

June 30, 2018

 

June 30, 2017

 

 

 

 

 

 

 

Foreign currency exchange contracts

 

Interest and other income (expense), net

 

  $

5,734

 

  $

(9,467)

 

17



Table of Contents

 

MONSTER BEVERAGE CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Tabular Dollars in Thousands, Except Per Share Amounts) (Unaudited)

 

7.                                    INVENTORIES

 

Inventories consist of the following at:

 

 

 

June 30,
2018

 

December 31,
2017

 

Raw materials

 

  $

89,362

 

  $

78,834

 

Finished goods

 

186,204

 

176,911

 

 

 

  $

275,566

 

  $

255,745

 

 

8.                                    PROPERTY AND EQUIPMENT, NET

 

Property and equipment consist of the following at:

 

 

 

June 30,

2018

 

December 31,
2017

 

Land

 

  $

44,261

 

  $

47,373

 

Leasehold improvements

 

3,278

 

3,109

 

Furniture and fixtures

 

6,732

 

6,461

 

Office and computer equipment

 

17,683

 

14,506

 

Computer software

 

3,334

 

3,650

 

Equipment

 

165,861

 

148,434

 

Buildings

 

116,143

 

107,374

 

Vehicles

 

39,967

 

38,179

 

 

 

397,259

 

369,086

 

Less: accumulated depreciation and amortization

 

(156,601)

 

(138,810)

 

 

 

  $

240,658

 

  $

230,276

 

 

Total depreciation and amortization expense recorded was $11.2 million and $8.6 million for the three-months ended June 30, 2018 and 2017, respectively. Total depreciation and amortization expense recorded was $22.2 million and $16.8 million for the six-months ended June 30, 2018 and 2017, respectively.

 

9.                                    GOODWILL AND OTHER INTANGIBLE ASSETS

 

The following is a roll-forward of goodwill for the six-months ended June 30, 2018 and 2017 by reportable segment:

 

 

 

Monster
Energy®
Drinks

 

Strategic
Brands

 

Other

 

Total

 

Balance at December 31, 2017

 

$

693,644

 

$

637,999

 

$

-

 

$

1,331,643

 

Acquisitions

 

-

 

-

 

-

 

-

 

Balance at June 30, 2018

 

$

693,644

 

$

637,999

 

$

-

 

$

1,331,643

 

 

 

 

Monster
Energy®
Drinks

 

Strategic
Brands

 

Other

 

Total

 

Balance at December 31, 2016

 

$

693,644

 

$

637,999

 

$

-

 

$

1,331,643

 

Acquisitions

 

-

 

-

 

-

 

-

 

Balance at June 30, 2017

 

$

693,644

 

$

637,999

 

$

-

 

$

1,331,643

 

 

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MONSTER BEVERAGE CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Tabular Dollars in Thousands, Except Per Share Amounts) (Unaudited)

 

Intangible assets consist of the following at:

 

 

 

June 30,
2018

 

December 31,
2017

 

Amortizing intangibles

 

$

71,355

 

$

71,400

 

Accumulated amortization

 

(32,387)

 

(26,383)

 

 

 

38,968

 

45,017

 

Non-amortizing intangibles

 

1,000,433

 

989,068

 

 

 

$

1,039,401

 

$

1,034,085

 

 

Amortizing intangibles primarily consist of customer relationships. All amortizing intangibles have been assigned an estimated finite useful life and such intangibles are amortized on a straight-line basis over the number of years that approximate their respective useful lives, generally five to seven years. Total amortization expense recorded was $3.0 million for both the three-months ended June 30, 2018 and 2017. Total amortization expense recorded was $6.0 million for both the six-months ended June 30, 2018 and 2017.

 

10.                            DISTRIBUTION AGREEMENTS

 

In accordance with ASC No. 420 “Exit or Disposal Cost Obligations”, the Company expenses distributor termination costs in the period in which the written notification of termination occurs. The Company incurred termination costs of $5.5 million and $0.2 million for the three-months ended June 30, 2018 and 2017, respectively. The Company incurred termination costs of $12.5 million and $20.1 million for the six-months ended June 30, 2018 and 2017, respectively. Such termination costs have been expensed in full and are included in operating expenses for the three- and six-months ended June 30, 2018 and 2017.

 

In the normal course of business, amounts received pursuant to new and/or amended distribution agreements entered into with certain distributors, relating to the costs associated with terminating agreements with the Company’s prior distributors, are accounted for as deferred revenue and are recognized as revenue ratably over the anticipated life of the respective distribution agreement, generally 20 years. Revenue recognized was $11.0 million and $10.2 million for the three-months ended June 30, 2018 and 2017, respectively. Revenue recognized was $22.2 million and $20.1 million for the six-months ended June 30, 2018 and 2017, respectively.

 

11.                            COMMITMENTS AND CONTINGENCIES

 

The Company had purchase commitments aggregating approximately $50.0 million at June 30, 2018, which represented commitments made by the Company and its subsidiaries to various suppliers of raw materials for the production of its products. These obligations vary in terms, but are generally satisfied within one year.

 

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Tabular Dollars in Thousands, Except Per Share Amounts) (Unaudited)

 

The Company had contractual obligations aggregating approximately $154.2 million at June 30, 2018, which related primarily to sponsorships and other marketing activities.

 

The Company had operating lease commitments aggregating approximately $16.3 million at June 30, 2018, which related primarily to warehouse and office space.

 

In February 2018, the working capital line limit for the Company’s credit facility with HSBC Bank (China) Company Limited, Shanghai Branch was increased from $9.0 million to $15.0 million. At June 30, 2018, the interest rate on borrowings under the line of credit was 5.5%. As of June 30, 2018, the Company had $11.2 million outstanding on this line of credit, including interest, which is included in accounts payable in the condensed consolidated balance sheet.

 

Legal Proceedings

 

Litigation The Company has been named a defendant in personal injury lawsuits, claiming that the death or other serious injury of the plaintiffs was caused by consumption of Monster Energy® brand energy drinks. The plaintiffs in these lawsuits allege strict product liability, negligence, fraudulent concealment, breach of implied warranties and wrongful death. The Company believes that each complaint is without merit and plans a vigorous defense. The Company also believes that any damages, if awarded, would not have a material adverse effect on the Company’s financial position or results of operations.

 

Furthermore, from time to time in the normal course of business, the Company is named in other litigation, including consumer class actions, intellectual property litigation and claims from prior distributors. Although it is not possible to predict the ultimate outcome of such litigation, based on the facts known to the Company, management believes that such litigation in the aggregate will likely not have a material adverse effect on the Company’s financial position or results of operations.

 

The Company evaluates, on a quarterly basis, developments in legal proceedings and other matters that could cause an increase or decrease in the amount of the liability that is accrued, if any, or in the amount of any related insurance reimbursements recorded. As of June 30, 2018, the Company’s condensed consolidated balance sheet includes accrued loss contingencies of approximately $3.3 million.

 

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Tabular Dollars in Thousands, Except Per Share Amounts) (Unaudited)

 

12.                            ACCUMULATED OTHER COMPREHENSIVE LOSS

 

Changes in accumulated other comprehensive loss by component, after tax, for the six-months ended June 30, 2018 are as follows:

 

 

 

Currency
Translation
Losses

 

Unrealized
(Gains) Losses
on Available-for-
Sale Securities

 

Total

 

Balance at December 31, 2017

 

$

15,818

 

$

841

 

$

16,659

 

Other comprehensive loss (gain) before reclassifications

 

9,265

 

(728)

 

8,537

 

Amounts reclassified from accumulated other comprehensive loss (gain)

 

-

 

-

 

-

 

Net current-period other comprehensive loss (gain)

 

9,265

 

(728)

 

8,537

 

Balance at June 30, 2018

 

$

25,083

 

$

113

 

$

25,196

 

 

 

 

 

 

 

 

 

 

13.                            TREASURY STOCK

 

On February 27, 2018, the Company’s Board of Directors authorized a share repurchase program for the purchase of up to $250.0 million of the Company’s outstanding common stock (the “February 2018 Repurchase Program”). During the three-months ended June 30, 2018, the Company purchased 5.0 million shares of common stock at an average purchase price of $49.81 per share, for a total amount of $249.9 million (excluding broker commissions), which exhausted the availability under the February 2018 Repurchase Program. Such shares are included in common stock in treasury in the accompanying condensed consolidated balance sheet at June 30, 2018.

 

On May 29, 2018, the Company’s Board of Directors authorized a share repurchase program for the purchase of up to $500.0 million of the Company’s outstanding common stock (the “May 2018 Repurchase Program”). During the three-months ended June 30, 2018, the Company purchased 5.5 million shares of common stock at an average purchase price of $54.78 per share, for a total amount of $303.2 million (excluding broker commissions), under the May 2018 Repurchase Program. Such shares are included in common stock in treasury in the accompanying condensed consolidated balance sheet at June 30, 2018. As of August 9, 2018, $196.7 million remained available for repurchase under the May 2018 Repurchase Program.

 

On August 7, 2018, the Company’s Board of Directors authorized a new repurchase program for the repurchase of up to an additional $500.0 million of the Company’s outstanding common stock (the “August 2018 Repurchase Program”). As of August 9, 2018, $500.0 million remained available for repurchase under the August 2018 Repurchase Program.

 

During the three-months ended June 30, 2018, 504 shares of common stock were purchased from employees in lieu of cash payments for options exercised or withholding taxes due, for a total amount of $0.03 million. While such purchases are considered common stock repurchases, they are not counted as purchases against the Company’s authorized share repurchase programs. Such shares are included in common stock in treasury in the accompanying condensed consolidated balance sheet at June 30, 2018.

 

14.                            STOCK-BASED COMPENSATION

 

The Company has two stock-based compensation plans under which shares were available for grant at June 30, 2018: the Monster Beverage Corporation 2011 Omnibus Incentive Plan (the “2011 Omnibus Incentive Plan”), including the Monster Beverage Deferred Compensation Plan (the “Deferred Compensation Plan”) as a sub plan thereunder, and the Monster Beverage Corporation 2017 Compensation Plan for Non-Employee Directors (the “2017 Directors Plan”), including the Monster Beverage Deferred Compensation Plan for Non-Employee Directors (the “Non-Employee Director Deferral Plan”) as a sub plan thereunder.

 

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MONSTER BEVERAGE CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Tabular Dollars in Thousands, Except Per Share Amounts) (Unaudited)

 

The Company recorded $14.9 million and $12.8 million of compensation expense relating to outstanding options and restricted stock units during the three-months ended June 30, 2018 and 2017, respectively. The Company recorded $28.3 million and $26.0 million of compensation expense relating to outstanding options and restricted stock units during the six-months ended June 30, 2018 and 2017, respectively.

 

The excess tax benefit for tax deductions from non-qualified stock option exercises, disqualifying dispositions of incentive stock options and vesting of restricted stock units for the three-months ended June 30, 2018 and 2017 was $1.7 million and $1.9 million, respectively. The excess tax benefit for tax deductions from non-qualified stock option exercises, disqualifying dispositions of incentive stock options and vesting of restricted stock units for the six-months ended June 30, 2018 and 2017 was $4.5 million and $11.3 million, respectively.

 

Stock Options

 

Under the Company’s stock-based compensation plans, all stock options granted as of June 30, 2018 were granted at prices based on the fair value of the Company’s common stock on the date of grant. The Company records compensation expense for employee stock options based on the estimated fair value of the options on the date of grant using the Black-Scholes-Merton option pricing formula with the assumptions included in the table below. The Company records compensation expense for non-employee stock options based on the estimated fair value of the options as of the earlier of (1) the date at which a commitment for performance by the non-employee to earn the stock option is reached or (2) the date at which the non-employee’s performance is complete, using the Black-Scholes-Merton option pricing formula with the assumptions included in the table below. The Company uses historical data to determine the exercise behavior, volatility and forfeiture rate of the options.

 

The following weighted-average assumptions were used to estimate the fair value of options granted during:

 

 

 

Three-Months Ended June 30,

 

Six-Months Ended June 30,

 

 

 

2018

 

2017

 

2018

 

2017

 

Dividend yield

 

0.0%

 

0.0%

 

0.0%

 

0.0%

 

Expected volatility

 

34.9%

 

36.5%

 

34.9%

 

36.6%

 

Risk-free interest rate

 

2.7%

 

1.8%

 

2.8%

 

2.1%

 

Expected term

 

6.1 years

 

6.1 years

 

6.1 years

 

6.1 years

 

 

 

 

 

 

 

 

 

 

 

 

Expected Volatility: The Company uses historical volatility as it provides a reasonable estimate of the expected volatility. Historical volatility is based on the most recent volatility of the stock price over a period of time equivalent to the expected term of the option.

 

Risk-Free Interest Rate: The risk-free interest rate is based on the U.S. Treasury zero coupon yield curve in effect at the time of grant for the expected term of the option.

 

Expected Term: The Company’s expected term represents the weighted-average period that the Company’s stock options are expected to be outstanding. The expected term is based on the expected time to post-vesting exercise of options by employees. The Company uses historical exercise patterns of previously granted options to derive employee behavioral patterns used to forecast expected exercise patterns.

 

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MONSTER BEVERAGE CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Tabular Dollars in Thousands, Except Per Share Amounts) (Unaudited)

 

The following table summarizes the Company’s activities with respect to its stock option plans as follows:

 

Options

 

Number of
Shares (In
thousands)

 

Weighted-
Average
Exercise
Price Per
Share

 

Weighted-
Average
Remaining
Contractual
Term (In
years)

 

Aggregate
Intrinsic Value

 

Outstanding at January 1, 2018

 

17,819

 

$

29.62

 

6.1

 

$

600,032

 

Granted 01/01/18 - 03/31/18

 

2,615

 

$

58.76

 

 

 

 

 

Granted 04/01/18 - 06/30/18

 

360

 

$

51.72

 

 

 

 

 

Exercised

 

(814)

 

$

16.73

 

 

 

 

 

Cancelled or forfeited

 

(216)

 

$

42.60

 

 

 

 

 

Outstanding at June 30, 2018

 

19,764

 

$

34.26

 

6.2

 

$

459,527

 

Vested and expected to vest in the

 

 

 

 

 

 

 

 

 

future at June 30, 2018

 

18,673

 

$

33.32

 

6.1

 

$

451,327

 

Exercisable at June 30, 2018

 

10,639

 

$

22.40

 

4.5

 

$

371,252

 

 

The weighted-average grant-date fair value of options granted during the three-months ended June 30, 2018 and 2017 was $20.20 per share and $18.97 per share, respectively. The weighted-average grant-date fair value of options granted during the six-months ended June 30, 2018 and 2017 was $22.51 per share and $18.01 per share, respectively. The total intrinsic value of options exercised during the three-months ended June 30, 2018 and 2017 was $14.7 million and $8.5 million, respectively. The total intrinsic value of options exercised during the six-months ended June 30, 2018 and 2017 was $32.9 million and $40.9 million, respectively.

 

Cash received from option exercises under all plans for the three-months ended June 30, 2018 and 2017 was approximately $7.1 million and $5.5 million, respectively. Cash received from option exercises under all plans for the six-months ended June 30, 2018 and 2017 was approximately $13.6 million and $19.1 million, respectively.

 

At June 30, 2018, there was $121.1 million of total unrecognized compensation expense related to non-vested options granted to employees under the Company’s share-based payment plans. That cost is expected to be recognized over a weighted-average period of 3.0 years.

 

Restricted Stock Units

 

The cost of stock-based compensation for restricted stock units is measured based on the closing fair market value of the Company’s common stock at the date of grant. In the event that the Company has the option and intent to settle a restricted stock unit in cash, the award is classified as a liability and revalued at each balance sheet date.

 

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Tabular Dollars in Thousands, Except Per Share Amounts) (Unaudited)

 

The following table summarizes the Company’s activities with respect to non-vested restricted stock units as follows:

 

 

 

Number of
Shares (in
thousands)

 

Weighted
Average
Grant-Date
Fair Value

 

Non-vested at January 1, 2018

 

530

 

$

45.09

 

Granted 01/01/18- 03/31/18

 

221

 

$

58.75

 

Granted 04/01/18- 06/30/18

 

48

 

$

52.31

 

Vested

 

(262)

 

$

45.36

 

Forfeited/cancelled

 

(6)

 

$

32.17

 

Non-vested at June 30, 2018

 

531

 

$

51.45

 

 

The weighted-average grant-date fair value of restricted stock units granted during the three-months ended June 30, 2018 and 2017 was $52.31 per share and $50.86 per share, respectively. The weighted-average grant-date fair value of restricted stock units granted during the six-months ended June 30, 2018 and 2017 was $57.59 per share and $46.65 per share, respectively.  As of June 30, 2018, 0.5 million of restricted stock units are expected to vest over their respective terms.

 

At June 30, 2018, total unrecognized compensation expense relating to non-vested restricted stock units was $22.2 million, which is expected to be recognized over a weighted-average period of 2.1 years.

 

15.                            INCOME TAXES

 

On December 22, 2017, the President of the United States signed into law the Tax Reform Act.  The legislation significantly changes U.S. tax law by, among other things, lowering corporate income tax rates, implementing a territorial tax system and imposing a repatriation tax on deemed repatriated earnings of foreign subsidiaries. The Tax Reform Act permanently reduces the U.S. corporate income tax rate from a maximum of 35% to a flat 21% rate, effective January 1, 2018. The SEC staff issued Staff Accounting Bulletin No. 118 (“SAB 118”) to address the application of U.S. GAAP in situations when a registrant does not have the necessary information available, prepared, or analyzed (including computations) in reasonable detail to complete the accounting for certain income tax effects of the Tax Reform Act. A company may select between one of three scenarios to determine a reasonable estimate for certain income tax effects arising from the Tax Reform Act. Those scenarios are (i) a final estimate which effectively closes the measurement window; (ii) a reasonable estimate leaving the measurement window open for future revisions; and (iii) no estimate as the law is still being analyzed. The Company was able to provide a reasonable estimate for the revaluation of deferred taxes and the effects of the toll charge on undistributed foreign subsidiary earnings and profits (“E&P”). As a result of the reduction in the U.S. corporate income tax rate from 35% to 21% under the Tax Reform Act, the Company revalued its net deferred tax assets at December 31, 2017, resulting in a provisional $39.8 million charge included in the provision for income taxes for the year ended December 31, 2017. The Tax Reform Act also provided for a one-time deemed mandatory repatriation of Post-1986 E&P through the year ended December 31, 2017.  As a result, the Company recognized a provisional $2.1 million charge in the provision for income taxes for the year ended December 31, 2017 related to such deemed mandatory repatriation.

 

The Company has not made additional measurement window adjustments to these items during the three- and six-months ended June 30, 2018. The Company continues to evaluate the various provisions of the Tax Reform Act, including, the global intangible low-taxed income (“GILTI”) and the foreign derived intangible income (“FDII”) provisions. The ultimate impact of the Tax Reform Act may differ from these provisional amounts, possibly materially, due to, among other things, additional analysis, changes in interpretations and assumptions the Company has made, additional regulatory guidance that may be issued, as well as any related actions the Company may take. The measurement window begins in the reporting period that includes the enactment date and ends when an entity has obtained, prepared and analyzed the information needed in order to complete the accounting requirements under ASC Topic 740.

 

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Tabular Dollars in Thousands, Except Per Share Amounts) (Unaudited)

 

The following is a roll-forward of the Company’s total gross unrecognized tax benefits, not including interest and penalties, for the six-months ended June 30, 2018:

 

 

 

Gross Unrecognized Tax
Benefits

 

Balance at December 31, 2017

 

  $

6,540

 

Additions for tax positions related to the current year

 

210

 

Additions for tax positions related to the prior year

 

1,172

 

Decreases related to settlement with taxing authority

 

(2,665)

 

Balance at June 30, 2018

 

  $

5,257

 

 

The Company recognizes accrued interest and penalties related to unrecognized tax benefits in the provision for income taxes in the Company’s condensed consolidated financial statements. As of June 30, 2018, the Company had approximately $1.0 million in accrued interest and penalties related to unrecognized tax benefits. If the Company were to prevail on all uncertain tax positions, the resultant impact on the Company’s effective tax rate would not be significant. It is expected that any change in the amount of unrecognized tax benefits within the next 12 months will not be significant.

 

The Company is subject to U.S. federal income tax as well as to income tax in multiple state and foreign jurisdictions.

 

On October 18, 2016, the IRS began its examination of the Company’s U.S. federal income tax return for the year ended December 31, 2014. On March 27, 2017, the IRS began its examination of the Company’s U.S. federal income tax return for the year ended December 31, 2015.

 

The Company is in various stages of examination with certain states and certain foreign jurisdictions. The Company’s 2014 through 2017 U.S. federal income tax returns are subject to examination by the IRS. The Company’s state income tax returns are subject to examination for the 2013 through 2017 tax years.

 

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Tabular Dollars in Thousands, Except Per Share Amounts) (Unaudited)

 

16.                            EARNINGS PER SHARE

 

A reconciliation of the weighted-average shares used in the basic and diluted earnings per common share computations is presented below (in thousands):

 

 

 

Three-Months Ended

 

Six-Months Ended

 

 

 

June 30,

 

June 30,

 

 

 

2018

 

2017

 

2018

 

2017

 

Weighted-average shares outstanding:

 

 

 

 

 

 

 

 

 

Basic

 

559,867

 

567,910

 

562,917

 

567,384

 

Dilutive

 

6,485

 

10,110

 

7,314

 

10,335

 

Diluted

 

566,352

 

578,020

 

570,231

 

577,719

 

 

For the three-months ended June 30, 2018 and 2017, options and awards outstanding totaling 6.4 million shares and 8.8 million shares, respectively, were excluded from the calculations as their effect would have been antidilutive. For the six-months ended June 30, 2018 and 2017, options and awards outstanding totaling 2.6 million shares and 8.4 million shares, respectively, were excluded from the calculations as their effect would have been antidilutive.

 

17.                            SEGMENT INFORMATION

 

The Company currently has three operating and reportable segments, (i) Monster Energy® Drinks segment, which is comprised of the Company’s Monster Energy® drinks and Mutant® Super Soda drinks, (ii) Strategic Brands segment, which is comprised of the various energy drink brands acquired from TCCC in 2015, and (iii) Other segment, which is comprised of certain products sold by American Fruits & Flavors LLC, a wholly-owned subsidiary of the Company, to independent third-party customers.

 

The Company’s Monster Energy® Drinks segment primarily 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, 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 certain 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.

 

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Tabular Dollars in Thousands, Except Per Share Amounts) (Unaudited)

 

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, 2018 and 2017 are as follows:

 

 

 

Three-Months Ended

 

Six-Months Ended

 

 

 

June 30,

 

June 30,

 

 

 

2018

 

2017

 

2018

 

2017

 

Net sales:

 

 

 

 

 

 

 

 

 

Monster Energy® Drinks(¹)

 

   $

929,439

 

   $

815,261

 

   $

1,709,943

 

   $

1,483,831

 

Strategic Brands

 

79,811

 

85,633

 

145,570

 

153,669

 

Other

 

6,623

 

6,174

 

11,280

 

11,714

 

Corporate and unallocated

 

-

 

-

 

-

 

-

 

 

 

   $

1,015,873

 

   $

907,068

 

   $

1,866,793

 

   $

1,649,214

 

 

 

 

Three-Months Ended

 

Six-Months Ended

 

 

 

June 30,

 

June 30,

 

 

 

2018

 

2017

 

2018

 

2017

 

Operating Income:

 

 

 

 

 

 

 

 

 

Monster Energy® Drinks(¹) (2)

 

   $

373,103

 

   $

356,223

 

   $

674,805

 

   $

635,654

 

Strategic Brands

 

50,791

 

53,175

 

93,393

 

95,281

 

Other

 

1,826

 

1,718

 

2,797

 

3,134

 

Corporate and unallocated

 

(68,099)

 

(61,075)

 

(133,460)

 

(119,766)

 

 

 

   $

357,621

 

   $

350,041

 

   $

637,535

 

   $

614,303

 

 

 

 

Three-Months Ended

 

Six-Months Ended

 

 

 

June 30,

 

June 30,

 

 

 

2018

 

2017

 

2018

 

2017

 

Income before tax:

 

 

 

 

 

 

 

 

 

Monster Energy® Drinks(¹) (2)

 

   $

373,342

 

   $

356,316

 

   $

675,305

 

   $

635,651

 

Strategic Brands

 

50,833

 

53,174

 

93,416

 

95,268

 

Other

 

1,826

 

1,718

 

2,797

 

3,134

 

Corporate and unallocated

 

(67,904)

 

(63,718)

 

(131,702)

 

(121,643)

 

 

 

   $

358,097

 

   $

347,490

 

   $

639,816

 

   $

612,410

 

 

(1)          Includes $11.0 million and $10.2 million for the three-months ended June 30, 2018 and 2017, respectively, related to the recognition of deferred revenue. Includes $22.2 million and $20.1 million for the six-months ended June 30, 2018 and 2017, respectively, related to the recognition of deferred revenue.

 

(2)          Includes $5.5 million and $0.2 million for the three-months ended June 30, 2018 and 2017, respectively, related to distributor termination costs. Includes $12.5 million and $20.1 million for the six-months ended June 30, 2018 and 2017, respectively, related to distributor termination costs.

 

27



Table of Contents

 

MONSTER BEVERAGE CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Tabular Dollars in Thousands, Except Per Share Amounts) (Unaudited)

 

 

 

Three-Months Ended

 

Six-Months Ended

 

 

June 30,

 

June 30,

 

 

2018

 

2017

 

2018

 

2017

Depreciation and amortization:

 

 

 

 

 

 

 

 

Monster Energy® Drinks

 

   $

8,960