UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form
Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the quarterly period ended | Commission File Number |
(Exact name of registrant as specified in its charter)
(State or other jurisdiction of | (I.R.S. Employer | |
incorporation or organization) | Identification No.) |
(Address of principal executive offices) (Zip code)
(
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class |
| Trading Symbol(s) |
| Name of each exchange on which registered |
Global Select Market |
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.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
☒ | Accelerated filer | ☐ | |
Non-accelerated filer | ☐ | Smaller reporting company | |
Emerging growth company |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes ___ No
The registrant had
MONSTER BEVERAGE CORPORATION AND SUBSIDIARIES
MARCH 31, 2021
INDEX
2
PART I – FINANCIAL INFORMATION
ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
MONSTER BEVERAGE CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
AS OF MARCH 31, 2021 AND DECEMBER 31, 2020
(In Thousands, Except Par Value) (Unaudited)
March 31, | December 31, | |||||
| 2021 |
| 2020 | |||
ASSETS | ||||||
CURRENT ASSETS: | ||||||
Cash and cash equivalents | $ | | $ | | ||
Short-term investments |
| |
|
| | |
Accounts receivable, net |
| |
|
| | |
Inventories |
| |
|
| | |
Prepaid expenses and other current assets |
| |
|
| | |
Prepaid income taxes |
| |
|
| | |
Total current assets |
| |
|
| | |
INVESTMENTS |
| |
|
| | |
PROPERTY AND EQUIPMENT, net |
| |
|
| | |
DEFERRED INCOME TAXES, net |
| |
|
| | |
GOODWILL |
| |
|
| | |
OTHER INTANGIBLE ASSETS, net |
| |
|
| | |
OTHER ASSETS |
| |
|
| | |
Total Assets | $ | |
| $ | | |
LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||
CURRENT LIABILITIES: | ||||||
Accounts payable | $ | |
| $ | | |
Accrued liabilities |
| |
|
| | |
Accrued promotional allowances |
| |
|
| | |
Deferred revenue |
| |
|
| | |
Accrued compensation |
| |
|
| | |
Income taxes payable |
| |
|
| | |
Total current liabilities |
| |
|
| | |
DEFERRED REVENUE |
| |
|
| | |
OTHER LIABILITIES | | | ||||
COMMITMENTS AND CONTINGENCIES (Note 12) | ||||||
STOCKHOLDERS’ EQUITY: | ||||||
Common stock - $ | | | ||||
Additional paid-in capital |
| |
|
| | |
Retained earnings |
| |
|
| | |
Accumulated other comprehensive (loss) income |
| ( |
|
| | |
Common stock in treasury, at cost; |
| ( |
|
| ( | |
Total stockholders’ equity |
| |
|
| | |
Total Liabilities and Stockholders’ Equity | $ | |
| $ | | |
See accompanying notes to condensed consolidated financial statements.
3
MONSTER BEVERAGE CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
FOR THE THREE-MONTHS ENDED MARCH 31, 2021 AND 2020
(In Thousands, Except Per Share Amounts) (Unaudited)
Three-Months Ended | ||||||
March 31, | ||||||
| 2021 |
| 2020 | |||
NET SALES | $ | | $ | | ||
COST OF SALES |
| |
| | ||
GROSS PROFIT |
| |
| | ||
OPERATING EXPENSES |
| |
| | ||
OPERATING INCOME |
| |
| | ||
INTEREST and OTHER (EXPENSE) INCOME, net |
| ( |
| | ||
INCOME BEFORE PROVISION FOR INCOME TAXES |
| |
| | ||
PROVISION FOR INCOME TAXES | | | ||||
NET INCOME | $ | | $ | | ||
NET INCOME PER COMMON SHARE: | ||||||
Basic | $ | | $ | | ||
Diluted | $ | | $ | | ||
WEIGHTED AVERAGE NUMBER OF SHARES OF COMMON STOCK AND COMMON STOCK EQUIVALENTS: | ||||||
Basic |
| |
| |||
Diluted |
| |
| |||
See accompanying notes to condensed consolidated financial statements.
4
MONSTER BEVERAGE CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
FOR THE THREE-MONTHS ENDED MARCH 31, 2021 AND 2020
(In Thousands) (Unaudited)
Three-Months Ended | ||||||
March 31, | ||||||
| 2021 |
| 2020 | |||
Net income, as reported | $ | | $ | | ||
Other comprehensive income (loss): | ||||||
Change in foreign currency translation adjustment |
| ( |
| ( | ||
Available-for-sale investments: | ||||||
Change in net unrealized gains |
| |
| | ||
Reclassification adjustment for net gains included in net income |
| — |
| — | ||
Net change in available-for-sale investments |
| |
| | ||
Other comprehensive income (loss) |
| ( |
| ( | ||
Comprehensive income | $ | | $ | | ||
See accompanying notes to condensed consolidated financial statements.
5
MONSTER BEVERAGE CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
FOR THE THREE-MONTHS ENDED MARCH 31, 2021 AND 2020
(In Thousands) (Unaudited)
Accumulated | ||||||||||||||||||||||
Other | Total | |||||||||||||||||||||
Common stock | Additional | Retained | Comprehensive | Treasury stock | Stockholders’ | |||||||||||||||||
| Shares |
| Amount |
| Paid-in Capital |
| Earnings |
| (Loss) Income |
| Shares |
| Amount |
| Equity | |||||||
Balance, December 31, 2020 |
| |
| $ | |
| $ | |
| $ | |
| $ | |
| ( |
| $ | ( |
| $ | |
Stock-based compensation |
| | | | | | | | | |||||||||||||
Exercise of stock options |
| | | | — | — | — | — | | |||||||||||||
Unrealized gain, net on available-for-sale securities |
| — |
| — |
| — |
| — |
| |
| — |
| — |
| | ||||||
Repurchase of common stock |
| — | — | — | — | — | ( | ( | ( | |||||||||||||
Foreign currency translation |
| — | — | — | — | ( | — | — | ( | |||||||||||||
Net income |
| — | — | — | | — | — | — | | |||||||||||||
Balance, March 31, 2021 |
| |
| $ | |
| $ | |
| $ | |
| $ | ( | ( |
| $ | ( |
| $ | | |
Accumulated | ||||||||||||||||||||||
Other | Total | |||||||||||||||||||||
Common stock | Additional | Retained | Comprehensive | Treasury stock | Stockholders’ | |||||||||||||||||
| Shares |
| Amount |
| Paid-in Capital |
| Earnings |
| (Loss) Income |
| Shares |
| Amount |
| Equity | |||||||
Balance, December 31, 2019 |
| |
| $ | |
| $ | |
| $ | |
| $ | ( |
| ( |
| $ | ( |
| $ | |
Stock-based compensation |
| — | — | | — | — | — | — | | |||||||||||||
Exercise of stock options |
| | | | — | — | — | — | | |||||||||||||
Unrealized gain, net on available-for-sale securities |
| — |
| — |
| — |
| — |
| |
| — |
| — |
| | ||||||
Repurchase of common stock |
| — | — | — | — | — | ( | ( | ( | |||||||||||||
Foreign currency translation |
| — | — | — | — | ( | — | — | ( | |||||||||||||
Net income |
| — | — | — | | — | — | — | | |||||||||||||
Balance, March 31, 2020 |
| |
| $ | |
| $ | |
| $ | |
| $ | ( | ( |
| $ | ( |
| $ | | |
See accompanying notes to condensed consolidated financial statements.
6
MONSTER BEVERAGE CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE-MONTHS ENDED MARCH 31, 2021 AND 2020
(In Thousands) (Unaudited)
Three-Months Ended | ||||||
March 31, | ||||||
| 2021 |
| 2020 | |||
CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||
Net income | $ | | $ | | ||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||
Depreciation and amortization | | | ||||
Gain on disposal of property and equipment | ( | ( | ||||
Impairment of intangibles | — | | ||||
Stock-based compensation | | | ||||
Effect on cash of changes in operating assets and liabilities: | ||||||
Accounts receivable | ( | ( | ||||
Distributor receivables | | | ||||
Inventories | ( | | ||||
Prepaid expenses and other assets | ( | ( | ||||
Prepaid income taxes | ( | | ||||
Accounts payable | | | ||||
Accrued liabilities | | | ||||
Accrued promotional allowances | | | ||||
Accrued distributor terminations | — | ( | ||||
Accrued compensation | ( | ( | ||||
Income taxes payable | ( | ( | ||||
Other liabilities | | ( | ||||
Deferred revenue | ( | ( | ||||
Net cash provided by operating activities | | | ||||
CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||
Sales of available-for-sale investments | | | ||||
Purchases of available-for-sale investments | ( | ( | ||||
Purchases of property and equipment | ( | ( | ||||
Proceeds from sale of property and equipment | ||||||
Additions to intangibles | ( | ( | ||||
Increase in other assets | ( | ( | ||||
Net cash (used in) provided by investing activities | ( | | ||||
CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||
Borrowings of (payments on) debt | | ( | ||||
Issuance of common stock | | | ||||
Purchases of common stock held in treasury | ( | ( | ||||
Net cash used in financing activities | ( | ( | ||||
Effect of exchange rate changes on cash and cash equivalents | ( | ( | ||||
NET DECREASE IN CASH AND CASH EQUIVALENTS | ( | ( | ||||
CASH AND CASH EQUIVALENTS, beginning of period | | | ||||
CASH AND CASH EQUIVALENTS, end of period | $ | | $ | | ||
SUPPLEMENTAL INFORMATION: | ||||||
Cash paid during the period for: | ||||||
Interest | $ | | $ | | ||
Income taxes | $ | | $ | | ||
See accompanying notes to condensed consolidated financial statements.
7
MONSTER BEVERAGE CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE-MONTHS ENDED MARCH 31, 2021 AND 2020
(In Thousands) (Unaudited) (Continued)
SUPPLEMENTAL DISCLOSURE OF NON-CASH ITEMS
Included in accrued liabilities as of March 31, 2021 and 2020 were $
Included in accounts payable as of March 31, 2021 were $
Included in accounts payable as of March 31, 2020 were $
See accompanying notes to condensed consolidated financial statements.
8
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, 2020 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-months ended March 31, 2021 and 2020, 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 |
In December 2019, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2019-12, “Simplifying the Accounting for Income Taxes”, as part of its simplification initiative to reduce the cost and complexity in accounting for income taxes. ASU No. 2019-12 removes certain exceptions related to the approach for intra-period tax allocation, the methodology for calculating income taxes in an interim period and the recognition of deferred tax liabilities for outside basis differences. ASU No. 2019-12 also amends other aspects of the guidance to help simplify and promote consistent application of GAAP. The guidance was effective for interim and annual periods beginning after December 15, 2020, with early adoption permitted. The adoption of ASU No. 2019-12 did not have a material impact on the Company’s financial position, results of operations and liquidity.
3. | REVENUE RECOGNITION |
The Company has
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 bottlers/distributors (“bottlers/distributors”). In some cases, the Company sells 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.
9
MONSTER BEVERAGE CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Tabular Dollars in Thousands, Except Per Share Amounts) (Unaudited)
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 March 31, 2021 and December 31, 2020.
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.
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, club stores and/or wholesalers; |
| ● | 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 directly by the Company to certain customers that fall within the bottlers’/distributors’ sales territories; and |
| ● | commissions to TCCC based on the Company’s sales to certain wholly-owned subsidiaries of TCCC (the “TCCC Subsidiaries”) and/or to certain companies accounted for under the equity method by TCCC (the “TCCC Related Parties”). |
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, typically 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 at the time of initial product sale for the Company’s anticipated 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 bottler/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.
Amounts received pursuant to new and/or amended distribution agreements entered into with certain bottlers/distributors relating to the costs associated with terminating the Company’s prior distributors, are accounted for as deferred revenue and recognized as revenue ratably over the anticipated life of the respective distribution agreements, generally over
The Company also enters into license agreements that generate revenues associated with third-party sales of non-beverage products bearing the Company’s trademarks including, but not limited to, clothing, hats, t-shirts, jackets, helmets and automotive wheels.
10
MONSTER BEVERAGE CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Tabular Dollars in Thousands, Except Per Share Amounts) (Unaudited)
Management believes that adequate provision has been made for cash discounts, returns and spoilage based on the Company’s historical experience.
Disaggregation of Revenue
The following tables disaggregate the Company’s revenue by geographical markets and reportable segments:
Three-Months Ended March 31, 2021 | |||||||||||||||
|
|
|
| Latin |
| ||||||||||
America |
| ||||||||||||||
U.S. and | and |
| |||||||||||||
Net Sales | Canada | EMEA1 | Asia Pacific | Caribbean | Total | ||||||||||
Monster Energy® Drinks | $ | | $ | | $ | | $ | | $ | | |||||
Strategic Brands |
| |
| |
| |
| |
| | |||||
Other |
| |
| — |
| — |
| — |
| | |||||
Total Net Sales | $ | | $ | | $ | | $ | | $ | | |||||
Three-Months Ended March 31, 2020 | |||||||||||||||
|
|
| Latin |
| |||||||||||
America | |||||||||||||||
U.S. and | and | ||||||||||||||
Net Sales | Canada | EMEA1 | Asia Pacific | Caribbean | Total | ||||||||||
Monster Energy® Drinks | $ | | $ | | $ | | $ | | $ | | |||||
Strategic Brands | |
| |
| |
| |
| | ||||||
Other | |
| — |
| — |
| — |
| | ||||||
Total Net Sales | $ | | $ | | $ | | $ | | $ | | |||||
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 March 31, 2021, the Company had $
4. | LEASES |
The Company leases identified assets comprising real estate and equipment. Real estate leases consist primarily of office and warehouse space and equipment leases consist of vehicles and warehouse equipment. At the inception of a contract, the Company assesses whether the contract is, or contains, a lease. The Company’s assessment is based on: (1) whether the contract involves the use of a distinct identified asset, (2) whether the Company obtains the right to substantially all the economic benefit from the use of the asset throughout the term, and (3) whether the Company has the right to direct the use of the asset. At inception of a lease, the Company allocates the consideration in the contract to each lease and non-lease component based on the component’s relative stand-alone price to determine the lease payments. Lease and non-lease components are accounted for separately.
Leases are classified as either finance leases or operating leases based on criteria in Accounting Standards Codification (“ASC”) 842. The Company’s operating leases are comprised of real estate and warehouse equipment, and the Company’s finance leases are comprised of vehicles.
11
MONSTER BEVERAGE CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Tabular Dollars in Thousands, Except Per Share Amounts) (Unaudited)
Right-of-use (“ROU”) assets and lease liabilities are recognized at the lease commencement date based on the present value of lease payments over the lease term. As the Company’s leases generally do not provide an implicit rate, the Company uses its incremental borrowing rate based on the estimated rate of interest for collateralized borrowing over a similar term of the lease payments at the commencement date. ROU assets also include any lease payments made and exclude lease incentives. Lease terms include options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option.
Certain of the Company’s real estate leases contain variable lease payments, including payments based on an index or rate. Variable lease payments based on an index or rate are initially measured using the index or rate in effect at the lease commencement date. Additional payments based on the change in an index or rate, or payments based on a change in the Company’s portion of real estate taxes and insurance, are recorded as a period expense when incurred.
Lease expense for operating leases, consisting of lease payments, is recognized on a straight-line basis over the lease term and is included in operating expenses in the condensed consolidated statement of income. Lease expense for finance leases consists of the amortization of the ROU asset on a straight-line basis over the asset’s estimated useful life and is included in operating expenses in the condensed consolidated statement of income. Interest expense on finance leases is calculated using the amortized cost basis and is included in interest and other (expense) income, net in the condensed consolidated statement of income.
The Company’s leases have remaining lease terms of less than
The components of lease cost were comprised of the following:
Three-Months | Three-Months | |||||
Ended March 31, | Ended March 31, | |||||
| 2021 |
| 2020 | |||
Operating lease cost | $ | | $ | | ||
Short-term lease cost |
| |
| | ||
Variable lease cost |
| |
| | ||
Finance leases: | ||||||
Amortization of ROU assets |
| |
| | ||
Interest on lease liabilities |
| |
| | ||
Finance lease cost |
| |
| | ||
Total lease cost | $ | | $ | | ||
12
MONSTER BEVERAGE CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Tabular Dollars in Thousands, Except Per Share Amounts) (Unaudited)
Supplemental cash flow information for the following periods:
Three-Months | Three-Months | |||||
Ended March 31, | Ended March 31, | |||||
| 2021 |
| 2020 | |||
Cash paid for amounts included in the measurement of lease liabilities: | ||||||
Operating cash outflows from operating leases | $ | | $ | | ||
Operating cash outflows from finance leases | | | ||||
Financing cash outflows from finance leases | | | ||||
ROU assets obtained in exchange for lease obligations: | ||||||
Finance leases | | | ||||
Operating leases | | | ||||
ROU assets for operating and finance leases recognized in the condensed consolidated balance sheets were comprised of the following at:
March 31, 2021 | |||||||||||
| Real Estate |
| Equipment |
| Total |
| Balance Sheet Location | ||||
Operating leases | $ | | $ | | $ | | Other Assets | ||||
Finance leases |
| — |
| |
| | Property and Equipment, net | ||||
December 31, 2020 | |||||||||||
| Real Estate |
| Equipment |
| Total |
| Balance Sheet Location | ||||
Operating leases | $ | | $ | | $ | | Other Assets | ||||
Finance leases |
| — |
| |
| | Property and Equipment, net | ||||
Operating and finance lease liabilities recognized in the condensed consolidated balance sheets were as follows at:
March 31, 2021 | ||||||
Operating Leases |
| Finance Leases | ||||
Accrued liabilities |
| $ | | $ | | |
Other liabilities |
| |
| | ||
Total | $ | | $ | | ||
December 31, 2020 | ||||||
| Operating Leases |
| Finance Leases | |||
Accrued liabilities |
| $ | |
| $ | |
Other liabilities |
| |
| | ||
Total | $ | | $ | | ||
The weighted-average remaining lease terms and weighted-average discount rates for operating and finance leases at March 31, 2021 and December 31, 2020 were as follows:
March 31, 2021 | |||||
| Operating Leases |
| Finance Leases |
| |
Weighted-average remaining lease term (years) |
| ||||
Weighted-average discount rate | | % | | % | |
13
MONSTER BEVERAGE CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Tabular Dollars in Thousands, Except Per Share Amounts) (Unaudited)
December 31, 2020 | |||||
| Operating Leases |
| Finance Leases | ||
Weighted-average remaining lease term (years) |
| ||||
Weighted-average discount rate |
| | % | | % |
The following table reconciles the undiscounted future lease payments for operating and finance leases to the operating and finance leases recorded in the condensed consolidated balance sheet at March 31, 2021:
| Undiscounted Future Lease Payments | |||||
Operating Leases |
| Finance Leases | ||||
2021 (excluding the three-months ended March 31, 2021) | $ | | $ | | ||
2022 | | | ||||
2023 |
| |
| | ||
2024 |
| |
| | ||
2025 |
| |
| — | ||
2026 and thereafter |
| |
| — | ||
Total lease payments |
| |
| | ||
Less imputed interest |
| ( |
| ( | ||
Total | $ | | $ | | ||
As of March 31, 2021, the Company did not have any significant additional operating or finance leases that have not yet commenced.
5. | INVESTMENTS |
The following table summarizes the Company’s investments at:
Continuous | Continuous | |||||||||||||||||
Gross | Gross | Unrealized | Unrealized | |||||||||||||||
Unrealized | Unrealized | Loss Position | Loss Position | |||||||||||||||
Amortized | Holding | Holding | Fair | less than 12 | greater than 12 | |||||||||||||
March 31, 2021 |
| Cost |
| Gains |
| Losses |
| Value |
| Months |
| Months | ||||||
Available-for-sale | ||||||||||||||||||
Short-term: | ||||||||||||||||||
Commercial paper | $ | | $ | — | $ | — | $ | | $ | — | $ | — | ||||||
Certificates of deposit | | | — | | — | — | ||||||||||||
U.S. government agency securities |
| |
| |
| |
| |
| |
| — | ||||||
U.S. treasuries | |
| |
| |
| |
| |
| — | |||||||
Long-term: | ||||||||||||||||||
U.S. government agency securities | | — | | | | — | ||||||||||||
U.S. treasuries | | | | | | — | ||||||||||||
Total | $ | | $ | | $ | | $ | | $ | | $ | — | ||||||
14
MONSTER BEVERAGE CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Tabular Dollars in Thousands, Except Per Share Amounts) (Unaudited)
Continuous | Continuous | |||||||||||||||||
Gross | Gross | Unrealized | Unrealized | |||||||||||||||
Unrealized | Unrealized | Loss Position | Loss Position | |||||||||||||||
Amortized | Holding | Holding | Fair | less than 12 | greater than 12 | |||||||||||||
December 31, 2020 |
| Cost |
| Gains |
| Losses |
| Value |
| Months |
| Months | ||||||
Available-for-sale | ||||||||||||||||||
Short-term: | ||||||||||||||||||
Commercial paper | $ | | $ | — | $ | — | $ | | $ | — | $ | — | ||||||
Certificates of deposit | | — | — | | — | — | ||||||||||||
Municipal securities |
| |
| — |
| — |
| |
| — |
| — | ||||||
U.S. government agency securities |
| |
| |
| |
| |
| |
| — | ||||||
U.S. treasuries | | | | | | — | ||||||||||||
Long-term: | ||||||||||||||||||
U.S. government agency securities | | | — | | — | — | ||||||||||||
U.S. treasuries | | | | | | — | ||||||||||||
Total | $ | | $ | | $ | | $ | | $ | | $ | — | ||||||
During the three-months ended March 31, 2021 and 2020, realized gains or losses recognized on the sale of investments were not significant.
The Company’s investments at March 31, 2021 and December 31, 2020 carried investment grade credit ratings.
The following table summarizes the underlying contractual maturities of the Company’s investments at:
March 31, 2021 | December 31, 2020 | |||||||||||
| Amortized Cost |
| Fair Value |
| Amortized Cost |
| Fair Value | |||||
Less than 1 year: | ||||||||||||
Commercial paper | $ | | $ | |
| $ | | $ | | |||
Municipal securities |
| — |
| — |
|
| |
| | |||
U.S. government agency securities |
| |
| |
|
| |
| | |||
Certificates of deposit |
| |
| |
|
| |
| | |||
U.S. treasuries | | | | | ||||||||
Due 1 - 10 years: | ||||||||||||
U.S. treasuries | | | | | ||||||||
U.S. government agency securities |
| |
| |
|
| |
| | |||
Total | $ | | $ | |
| $ | | $ | | |||
6. | 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. |
15
MONSTER BEVERAGE CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Tabular Dollars in Thousands, Except Per Share Amounts) (Unaudited)
| ● | 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.
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:
March 31, 2021 |
| Level 1 |
| Level 2 |
| Level 3 |
| Total | ||||
Cash | $ | | $ | — | $ | — | $ | | ||||
Money market funds |
| |
| — |
| — |
| | ||||
Certificates of deposit | — | | — | | ||||||||
Commercial paper |
| — |
| |
| — |
| | ||||
U.S. government agency securities |
| — |
| |
| — |
| | ||||
U.S. treasuries | — | | — | | ||||||||
Foreign currency derivatives |
| — |
| ( |
| — |
| ( | ||||
Total | $ | | $ | | $ | — | $ | | ||||
Amounts included in: | ||||||||||||
Cash and cash equivalents | $ | | $ | | $ | — | $ | | ||||
Short-term investments |
| — |
| |
| — |
| | ||||
Accounts receivable, net |
| — |
| |
| — |
| | ||||
Investments |
| — |
| |
| — |
| | ||||
Accrued liabilities |
| — |
| ( |
| — |
| ( | ||||
Total | $ | | $ | | $ | — | $ | | ||||
December 31, 2020 |
| Level 1 |
| Level 2 |
| Level 3 |
| Total | ||||
Cash | $ | | $ | — | $ | — | $ | | ||||
Money market funds |
| |
| — |
| — |
| | ||||
Certificates of deposit | — | | — | | ||||||||
Commercial paper |
| — |
| |
| — |
| | ||||
Municipal securities |
| — |
| |
| — |
| | ||||
U.S. government agency securities |
| — |
| |
| — |
| | ||||
U.S. treasuries | — | | — | | ||||||||
Foreign currency derivatives |
| — |
| ( |
| — |
| ( | ||||
Total | $ | | $ | | $ | — | $ | | ||||
Amounts included in: | ||||||||||||
Cash and cash equivalents | $ | | $ | | $ | — | $ | | ||||
Short-term investments |
| — |
| |
| — |
| | ||||
Accounts receivable, net |
| — |
| |
| — |
| | ||||
Investments |
| — |
| |
| — |
| | ||||
Accrued liabilities |
| — |
| ( |
| — |
| ( | ||||
Total | $ | | $ | | $ | — | $ | | ||||
16
MONSTER BEVERAGE CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Tabular Dollars in Thousands, Except Per Share Amounts) (Unaudited)
All of the Company’s short-term and long-term investments are classified within Level 1 or Level 2 of the fair value hierarchy. The Company’s valuation of its Level 1 investments is based on quoted market prices in active markets for identical securities. The Company’s valuation of its Level 2 investments 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
7. | 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-months ended March 31, 2021 and the year-ended December 31, 2020, 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 March 31, 2021 have terms of
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 (expense) income, 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:
March 31, 2021 | ||||||||
Derivatives not designated as | ||||||||
hedging instruments under | Notional | Fair | ||||||
ASC 815-20 |
| Amount |
| Value |
| Balance Sheet Location | ||
Assets: | ||||||||
Foreign currency exchange contracts: | ||||||||
Receive USD/pay EUR | $ | | $ | | Accounts receivable, net | |||
Receive USD/pay AUD | | | Accounts receivable, net | |||||
Receive USD/pay DKK | | | Accounts receivable, net | |||||
Receive USD/pay SEK | | | Accounts receivable, net | |||||
Liabilities: | ||||||||
Foreign currency exchange contracts: | ||||||||
Receive USD/pay GBP | $ | | $ | ( |
| Accrued liabilities | ||
Receive USD/pay COP | |
| ( | Accrued liabilities | ||||
Receive RSD/pay USD | | ( | Accrued liabilities | |||||
Receive USD/pay RUB | | ( | Accrued liabilities | |||||
Receive USD/pay CNY | | ( | Accrued liabilities | |||||
Receive USD/pay ZAR | |
| ( |
| Accrued liabilities | |||
Receive USD/pay NOK | |
| ( |
| Accrued liabilities | |||
Receive USD/pay NZD | |
| ( |
| Accrued liabilities | |||
Receive SGD/pay USD | |
| ( |
| Accrued liabilities | |||
17
MONSTER BEVERAGE CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Tabular Dollars in Thousands, Except Per Share Amounts) (Unaudited)
December 31, 2020 | ||||||||
Derivatives not designated as | ||||||||
hedging instruments under | Notional | Fair | ||||||
FASB ASC 815-20 |
| Amount |
| Value |
| Balance Sheet Location | ||
Assets: | ||||||||
Foreign currency exchange contracts: | ||||||||
Receive SGD/pay USD | $ | | $ | |
| Accounts receivable, net | ||
Receive RSD/pay USD | | |
| Accounts receivable, net | ||||
Liabilities: | ||||||||
Foreign currency exchange contracts: | ||||||||
Receive EUR/pay USD | $ | | $ | ( | Accrued liabilities | |||
Receive USD/pay GBP | | ( |
| Accrued liabilities | ||||
Receive USD/pay AUD | |
| ( |
| Accrued liabilities | |||
Receive USD/pay ZAR | | ( | Accrued liabilities | |||||
Receive USD/pay COP | | ( | Accrued liabilities | |||||
Receive USD/pay CNY | |
| ( |
| Accrued liabilities | |||
Receive USD/pay RUB | |
| ( |
| Accrued liabilities | |||
Receive NOK/pay USD | |
| ( |
| Accrued liabilities | |||
Receive USD/pay NZD | | ( | Accrued liabilities | |||||
Receive SEK/pay USD | | ( | Accrued liabilities | |||||
Receive USD/pay DKK | |
| ( |
| Accrued liabilities | |||
The net (losses) gains on derivative instruments in the condensed consolidated statements of income were as follows:
Amount of (loss) gain | ||||||||
recognized in income on | ||||||||
derivatives | ||||||||
Derivatives not designated as | Location of (loss) gain | Three-months ended | ||||||
hedging instruments under | recognized in income on | March 31, | March 31, | |||||
ASC 815-20 |
| derivatives |
| 2021 |
| 2020 | ||
Foreign currency exchange contracts |
| Interest and other (expense) income, net | $ | ( | $ | | ||
8. | INVENTORIES |
Inventories consist of the following at:
| March 31, |
| December 31, | |||
| 2021 |
| 2020 | |||
Raw materials | $ | | $ | | ||
Finished goods |
| |
| | ||
$ | | $ | | |||
18
MONSTER BEVERAGE CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Tabular Dollars in Thousands, Except Per Share Amounts) (Unaudited)
9. | PROPERTY AND EQUIPMENT, NET |
Property and equipment consist of the following at:
| March 31, |
| December 31, | |||
| 2021 |
| 2020 | |||
Land | $ | | $ | | ||
Leasehold improvements |
| |
| | ||
Furniture and fixtures |
| |
| | ||
Office and computer equipment |
| |
| | ||
Computer software |
| |
| | ||
Equipment |
| |
| | ||
Buildings |
| |
| | ||
Vehicles |
| |
| | ||
| |
| | |||
Less: accumulated depreciation and amortization |
| ( |
| ( | ||
$ | | $ | | |||
Total depreciation and amortization expense recorded was $
10. GOODWILL AND OTHER INTANGIBLE ASSETS
The following is a roll-forward of goodwill for the three-months ended March 31, 2021 and 2020 by reportable segment:
Monster | ||||||||||||
Energy® | Strategic | |||||||||||
| Drinks |
| Brands |
| Other |
| Total | |||||
Balance at December 31, 2020 | $ | | $ | | $ | — | $ | | ||||
Acquisitions |
| — |
| — |
| — |
| — | ||||
Balance at March 31, 2021 | $ | | $ | | $ | — | $ | | ||||
Monster | ||||||||||||
Energy® | Strategic | |||||||||||
| Drinks |
| Brands |
| Other |
| Total | |||||
Balance at December 31, 2019 | $ | | $ | | $ | — | $ | | ||||
Acquisitions |
| — |
| — |
| — |
| — | ||||
Balance at March 31, 2020 | $ | | $ | | $ | — | $ | | ||||
Intangible assets consist of the following at:
| March 31, |
| December 31, | |||
2021 | 2020 | |||||
Amortizing intangibles | $ | | $ | | ||
Accumulated amortization |
| ( |
| ( | ||
| |
| | |||
Non-amortizing intangibles |
| |
| | ||
$ | | $ | | |||
19
MONSTER BEVERAGE CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Tabular Dollars in Thousands, Except Per Share Amounts) (Unaudited)
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 to
The following is the future estimated amortization expense related to amortizing intangibles as of March 31, 2021:
2021 (excluding the three-months ended March 31, 2021) | $ | | |
2022 | | ||
2023 | | ||
2024 | | ||
2025 | | ||
2026 and thereafter | | ||
$ | |
11. DISTRIBUTION AGREEMENTS
In the normal course of business, amounts received pursuant to new and/or amended distribution agreements entered into with certain bottlers/distributors, relating to the costs associated with terminating agreements with the Company’s prior distributors, or at the inception of certain sales/marketing programs are accounted for as deferred revenue and are recognized as revenue ratably over the anticipated life of the respective agreement, generally
12. COMMITMENTS AND CONTINGENCIES
The Company had purchase commitments aggregating approximately $
The Company had contractual obligations aggregating approximately $
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 $
Litigation — From time to time in the normal course of business, the Company is named in litigation, including labor and employment matters, personal injury matters, consumer class actions, intellectual property matters 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 aggregate will likely not have a material adverse effect on the Company’s financial position or results of operations. On September 18, 2020, a derivative complaint was filed on purported behalf of the Company in the United States District Court for the Central District of California. The action is styled Falat v. Sacks, et al., 8:20-cv-01782, and asserts claims against certain officers, current and former directors, and employees of the Company, including Rodney C. Sacks, Hilton H. Schlosberg, Guy P. Carling, Thomas J. Kelly, Emelie C. Tirre, Mark J. Hall, Kathleen E. Ciaramello, Gary P. Fayard, Jeanne P. Jackson, Steven G. Pizula, Benjamin M. Polk, Sydney Selati and Mark S. Vidergauz (collectively, the “Individual Defendants”). The Company is named as a nominal defendant.
20
MONSTER BEVERAGE CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Tabular Dollars in Thousands, Except Per Share Amounts) (Unaudited)
The derivative complaint alleges, among other things, that the Individual Defendants breached their fiduciary duties to the Company by allowing others to cause, or themselves causing, the Company to hide discrimination and failing to ensure sufficient diversity, including by permitting conduct to occur that was inconsistent with statements made in the Company’s policies and disclosures, and failing to ensure the Company’s compliance with laws regarding diversity and anti-discrimination. The complaint also asserts claims for abuse of control, unjust enrichment and violation of Section 14(a) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). The complaint seeks from the Individual Defendants an unspecified amount of damages, restitution, punitive damages and costs to be paid to the Company, and seeks to require the Company to adopt corporate governance reforms, and other equitable relief.
On January 15, 2021, the Company filed a motion to dismiss the action because the plaintiff failed to make a demand on the Company as required by Federal Rule of Civil Procedure 23.1 or to show that demand would have been futile. The Individual Defendants also filed a motion to dismiss the complaint for failure to state a claim against the Individual Defendants, among other reasons. On February 8, 2021, the court granted both motions to dismiss for failure adequately to allege demand futility. The court granted the plaintiff leave to amend; the court did not set a deadline by which an amended complaint must be filed. While the Company continues to evaluate these claims, management believes that such litigation 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, and any related insurance reimbursements. As of March 31, 2021, the Company’s condensed consolidated balance sheet included accrued loss contingencies of approximately $
13. ACCUMULATED OTHER COMPREHENSIVE (LOSS) INCOME
Changes in accumulated other comprehensive (loss) income by component, after tax, for the three-months ended March 31, 2021 and 2020 are as follows:
Unrealized | |||||||||
| Currency |
| Gains (Losses) |
| |||||
Translation | on Available-for- | ||||||||
Gains (Losses) | Sale Securities | Total | |||||||
Balance at December 31, 2020 | $ | | $ | | $ | | |||
Other comprehensive (loss) income before reclassifications |
| ( | | ( | |||||
Amounts reclassified from accumulated other comprehensive (loss) income |
| — | — | — | |||||
Net current-period other comprehensive (loss) income |
| ( | | ( | |||||
Balance at March 31, 2021 | $ | ( | $ | | $ | ( | |||
Unrealized | |||||||||
| Currency | Gains (Losses) | |||||||
| Translation |
| on Available-for- |
| |||||
Losses | Sale Securities | Total | |||||||
Balance at December 31, 2019 | $ | ( | $ | | $ | ( | |||
Other comprehensive (loss) income before reclassifications |
| ( | | ( | |||||
Amounts reclassified from accumulated other comprehensive (loss) income |
| — | — | — | |||||
Net current-period other comprehensive (loss) income |
| ( | | ( | |||||
Balance at March 31, 2020 | $ | ( | $ | | $ | ( | |||
14. TREASURY STOCK
On March 13, 2020, the Company’s Board of Directors authorized a new share repurchase program for the purchase of up to $
21
MONSTER BEVERAGE CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Tabular Dollars in Thousands, Except Per Share Amounts) (Unaudited)
During the three-months ended March 31, 2021,
15. STOCK-BASED COMPENSATION
The Company has
The Company recorded $
The tax benefit for tax deductions from non-qualified stock option exercises, disqualifying dispositions of incentive stock options and vesting of restricted stock units and performance share units for the three-months ended March 31, 2021 and 2020 was $
Stock Options
Under the Company’s stock-based compensation plans, all stock options granted as of March 31, 2021 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 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 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 March 31, | |||||
| 2021 |
| 2020 |
| |
Dividend yield | | % | | % | |
Expected volatility | | % | | % | |
Risk-free interest rate | | % | | % | |
Expected term | years | 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.
22
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:
Weighted- | ||||||||||
Weighted- | Average | |||||||||
Average | Remaining | |||||||||
Number of | Exercise | Contractual | Aggregate | |||||||
Shares (in | Price Per | Term (in | Intrinsic | |||||||
Options |
| thousands) |
| Share |
| years) |
| Value | ||
Outstanding at January 1, 2021 |
| | $ | |
| $ | | |||
Granted 01/01/21 - 03/31/21 |
| | $ | | ||||||
Exercised |
| ( | $ | | ||||||
Cancelled or forfeited |
| ( | $ | | ||||||
Outstanding at March 31, 2021 |
| | $ | |
| $ | | |||
Vested and expected to vest in the future at March 31, 2021 |
| | $ | |
| $ | | |||
Exercisable at March 31, 2021 |
| | $ | |
| $ | | |||
The weighted-average grant-date fair value of options granted during the three-months ended March 31, 2021 and 2020 was $
The total intrinsic value of options exercised during the three-months ended March 31, 2021 and 2020 was $
Cash received from option exercises under all plans for the three-months ended March 31, 2021 and 2020 was $
At March 31, 2021, there was $
Restricted Stock Units and Performance Share Units
The cost of stock-based compensation for restricted stock units and performance share 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 or performance share unit in cash, the award is classified as a liability and revalued at each balance sheet date.
The following table summarizes the Company’s activities with respect to non-vested restricted stock units and performance share units as follows:
Weighted | |||||
Number of | Average | ||||
Shares (in | Grant-Date | ||||
| thousands) |
| Fair Value | ||
Non-vested at January 1, 2021 | | $ | | ||
Granted 01/01/21 - 03/31/211 | | $ | | ||
Vested | ( | $ | | ||
Forfeited/cancelled | ( | $ | | ||
Non-vested at March 31, 2021 | | $ | | ||
1The grant activity for performance share units is recorded based on the target performance level earning
23
MONSTER BEVERAGE CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Tabular Dollars in Thousands, Except Per Share Amounts) (Unaudited)
The weighted-average grant-date fair value of restricted stock units and/or performance share units granted during the three-months ended March 31, 2021 and 2020 was $
As of March 31, 2021,
At March 31, 2021, total unrecognized compensation expense relating to non-vested restricted stock units and performance share units was $
Other Share-Based Awards
The Company has granted other share-based awards to certain employees that are payable in cash. These awards are classified as liabilities and are valued based on the fair value of the award at the grant date and are remeasured at each reporting date until settlement, with compensation expense being recognized in proportion to the completed requisite service period up until date of settlement. At March 31, 2021, other share-based awards outstanding included grants that vest over three years payable in the first quarters of 2022, 2023 and 2024.
At March 31, 2021, there was $
16. INCOME TAXES
The following is a roll-forward of the Company’s total gross unrecognized tax benefits, not including interest and penalties, for the three-months ended March 31, 2021:
| Gross Unrecognized Tax | ||
Benefits | |||
Balance at December 31, 2020 | $ | | |
Additions for tax positions related to the current year | | ||
Additions for tax positions related to the prior years | | ||
Decreases related to settlement with taxing authority |
| | |
Balance at March 31, 2021 | $ | | |
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 March 31, 2021, the Company had approximately $
The Company is subject to U.S. federal income tax as well as to income tax in multiple state and foreign jurisdictions.
The Company is in various stages of examination with certain states and certain foreign jurisdictions, including the United Kingdom and Ireland. The Company’s 2017 through 2020 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 2016 through 2020 tax years.
24
MONSTER BEVERAGE CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Tabular Dollars in Thousands, Except Per Share Amounts) (Unaudited)
17. 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 | ||||
March 31, | ||||
| 2021 |
| 2020 | |
Weighted-average shares outstanding: | ||||
Basic | |
| | |
Dilutive | |
| | |
Diluted | |
| | |
For the three-months ended March 31, 2021 and 2020, options and awards outstanding totaling
18. SEGMENT INFORMATION
The Company has
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 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.
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.
25
MONSTER BEVERAGE CORPORATION AND SUBSIDIARIES
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-months ended March 31, 2021 and 2020 are as follows:
Three-Months Ended | ||||||
March 31, | ||||||
| 2021 |
| 2020 | |||
Net sales: | ||||||
Monster Energy® Drinks⁽¹⁾ | $ | | $ | | ||
Strategic Brands |
| |
| | ||
Other |
| |
| | ||
Corporate and unallocated |
| — |
| — | ||
$ | | $ | | |||
Three-Months Ended | ||||||
March 31, | ||||||
| 2021 |
| 2020 | |||
Operating Income: | ||||||
Monster Energy® Drinks⁽¹⁾ | $ | | $ | | ||
Strategic Brands |
| |
| | ||
Other |
| |
| | ||
Corporate and unallocated |
| ( |
| ( | ||
$ | | $ | | |||
Three-Months Ended | ||||||
March 31, | ||||||
| 2021 |
| 2020 | |||
Income before tax: | ||||||
Monster Energy® Drinks⁽¹⁾ | $ | | $ | | ||
Strategic Brands |
| |
| | ||
Other |
| |
| | ||
Corporate and unallocated |
| ( |
| ( | ||
$ | | $ | | |||
| (1) | Includes $ |
Three-Months Ended | ||||||
March 31, | ||||||
| 2021 |
| 2020 | |||
Depreciation and amortization: | ||||||
Monster Energy® Drinks | $ | | $ | | ||
Strategic Brands |
| |
| | ||
Other |
| |
| | ||
Corporate and unallocated |
| |
| | ||
$ | | $ | | |||
26
MONSTER BEVERAGE CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Tabular Dollars in Thousands, Except Per Share Amounts) (Unaudited)
Corporate and unallocated expenses for the three-months ended March 31, 2021 include $
Coca-Cola Consolidated, Inc. accounted for approximately
Reyes Coca-Cola Bottling, LLC accounted for approximately
Coca-Cola European Partners accounted for approximately
Net sales to customers outside the United States amounted to $
Goodwill and other intangible assets for the Company’s reportable segments as of March 31, 2021 and December 31, 2020 are as follows:
| March 31, |
| December 31, | |||
| 2021 |
| 2020 | |||
Goodwill and other intangible assets: | ||||||
Monster Energy® Drinks | $ | | $ | | ||
Strategic Brands |
| |
| | ||
Other |
| |
| | ||
Corporate and unallocated |
| — |
| — | ||
$ | | $ | | |||
19. RELATED PARTY TRANSACTIONS
TCCC controls approximately
TCCC commissions, based on sales to the TCCC Subsidiaries and the TCCC Related Parties, were $
TCCC commissions, based on sales to certain TCCC independent bottlers/distributors, were $
Net sales to the TCCC Subsidiaries for the three-months ended March 31, 2021 and 2020 were $
The Company also purchases concentrates from TCCC which are then sold to certain of the Company’s bottlers/distributors. Concentrate purchases from TCCC were $
27
MONSTER BEVERAGE CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Tabular Dollars in Thousands, Except Per Share Amounts) (Unaudited)
Certain TCCC Subsidiaries also contract manufacture certain of the Company’s energy drinks. Such contract manufacturing expenses were $
Accounts receivable, accounts payable, accrued promotional allowances and accrued liabilities related to the TCCC Subsidiaries are as follows at:
March 31, | December 31, | |||||
| 2021 |
| 2020 | |||
Accounts receivable, net | $ | | $ | | ||
Accounts payable | $ | ( | $ | ( | ||
Accrued promotional allowances | $ | ( | $ | ( | ||
Accrued liabilities | $ | ( | $ | ( | ||
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
28
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Our Business
When this report uses the words “the Company”, “we”, “us”, and “our”, these words refer to Monster Beverage Corporation and its subsidiaries, unless the context otherwise requires. Based in Corona, California, Monster Beverage Corporation is a holding company and conducts no operating business except through its consolidated subsidiaries. The Company’s subsidiaries primarily develop and market energy drinks.
The COVID – 19 Pandemic
The current COVID-19 pandemic has presented a substantial public health and economic challenge around the world and is affecting our employees, communities and business operations, as well as the global economy and financial markets. The human and economic consequences of the COVID-19 pandemic as well as the measures taken or that may be taken in the future by governments, and consequently businesses (including the Company and its suppliers, full service beverage bottlers/distributors (“bottlers/distributors”), co-packers and other service providers) and the public at large to limit the COVID-19 pandemic, has directly and indirectly impacted our business. The duration and severity of this impact will depend on future developments that are highly uncertain and cannot be accurately predicted, including new information that may emerge concerning the COVID-19 pandemic, the actions taken to limit its spread and the economic impact on local, regional, national and international markets. “Part I, Item 1A – Risk Factors” in our Form 10-K.”
We continue to address the COVID-19 pandemic with a global task force team working to mitigate the potential impacts on our people and business.
We are incredibly proud of the teamwork exhibited by our employees, co-packers and bottlers/distributors around the world who are ensuring the integrity of our supply chain. Despite the ongoing impact of the COVID-19 pandemic, we achieved record first quarter net sales.
We have recently seen a resurgence of the COVID-19 pandemic in the Southern Hemisphere and South Asia. A number of countries have reinstituted lockdowns and other restrictions, which could impact customer demand.
A reduction in demand for our products or changes in consumer purchasing and consumption patterns, as well as continued economic uncertainty as a result of the COVID-19 pandemic, could adversely affect the financial conditions of retailers and consumers, resulting in reduced or canceled orders for our products, purchase returns and closings of retail or wholesale establishments or other locations in which our products are sold.
As of the date of this filing, we do not foresee a material impact on the ability of our co-packers to manufacture and our bottlers/distributors to distribute our products as a result of the COVID-19 pandemic. Our supply chain remains largely intact. Depending on the duration of any COVID-19 pandemic related issues, we may experience material disruptions in our supply chain as the pandemic continues.
We are experiencing shortages in our aluminum can requirements in North America and Europe, given our volume growth and the current supply constraints in the aluminum can industry. We have taken steps to source additional quantities of aluminum cans from South America and Asia, however, logistical issues, including ocean freight, port of entry congestion could delay such supply. Logistical issues in relation to the importation of certain other raw materials and ingredients could impact future supply. To meet consumer demand, we experienced freight inefficiencies in the United States and in Europe, which resulted in increased cost of sales as well as increased operating expenses in the 2021 first quarter. Furthermore, we are continuing to experience freight inefficiencies, and like other beverage companies, are incurring increased aluminum can and other costs in the current environment.
As of the date of this filing, we expect to maintain substantial liquidity as we manage through the current environment as described in the “Liquidity and Capital Resources” section below.
29
Overview
We develop, market, sell and distribute energy drink beverages and concentrates for energy drink beverages, primarily under the following brand names:
● Monster Energy® | ● NOS® |
● Monster Energy Ultra® | ● Full Throttle® |
● Monster Rehab® | ● Burn® |
● Monster MAXX® | ● Mother® |
● Java Monster® | ● Nalu® |
● Muscle Monster® | ● Ultra Energy® |
● Espresso Monster® | ● Play® and Power Play® (stylized) |
● Punch Monster® | ● Relentless® |
● Juice Monster® | ● BPM® |
● Monster Hydro® Energy Water | ● BU® |
● Monster Hydro® Super Sport | ● Gladiator® |
● Monster HydroSport Super Fuel® | ● Samurai® |
● Monster Super Fuel® | ● Live+® |
● Monster Dragon Tea® | ● Predator® |
● Reign Total Body Fuel® | ● Fury® |
● Reign Inferno® Thermogenic Fuel | |
We have three operating and reportable segments, (i) Monster Energy® Drinks segment (“Monster Energy® Drinks”), which is primarily comprised of our Monster Energy® drinks and Reign Total Body Fuel® high performance energy drinks, (ii) Strategic Brands segment (“Strategic Brands”), which is comprised primarily of the various energy drink brands acquired from The Coca-Cola Company (“TCCC”) in 2015 as well as our affordable energy brands, and (iii) Other segment (“Other”), which is comprised of certain products sold by American Fruits and Flavors LLC, a wholly-owned subsidiary, to independent third-party customers (the “AFF Third-Party Products”).
During the three-months ended March 31, 2021, we continued to expand our existing energy drink portfolio by adding additional products to our portfolio in a number of countries and further developed our distribution markets. During the three-months ended March 31, 2021, we sold the following new products to our bottlers/distributors:
| ● | Monster Energy® Super Cola® (Japan) |
| ● | Monster Energy Ultra GoldTM |
| ● | Monster Hydro® Energy Water Watermelon |
| ● | Monster Hydro® Super SportTM Killer KiwiTM |
| ● | Monster Hydro® Super SportTM Macho MangoTM |
| ● | Monster Rehab® Strawberry Lemonade + Energy |
| ● | Reign Total Body Fuel® Cherry Limeade |
| ● | Reign Total Body Fuel® White Gummy Bear |
| ● | Reign Inferno® Thermogenic Fuel Watermelon Warlord |
| ● | Fury® Mean Green |
In the normal course of business, we discontinue certain products and/or product lines. Those products or product lines discontinued in the three-months ended March 31, 2021, either individually or in aggregate, did not have a material adverse impact on our financial position, results of operations or liquidity.
Our net sales of $1.24 billion for the three-months ended March 31, 2021 represented record sales for our first fiscal quarter. Net changes in foreign currency exchange rates had a favorable impact on net sales of approximately $9.3 million for the three-months ended March 31, 2021.
30
The vast majority of our net sales are derived from our Monster Energy® Drinks segment. Net sales of our Monster Energy® Drinks segment were $1.17 billion for the three-months ended March 31, 2021. Net sales of our Strategic Brands segment were $67.8 million for the three-months ended March 31, 2021. Our Monster Energy® Drinks segment represented 94.1% and 93.4% of our net sales for the three-months ended March 31, 2021 and 2020, respectively. Our Strategic Brands segment represented 5.5% and 6.1% of our net sales for the three-months ended March 31, 2021 and 2020, respectively. Our Other segment represented 0.4% and 0.5% of our net sales for the three-months ended March 31, 2021 and 2020, respectively.
Our growth strategy includes expanding our international business. Net sales to customers outside the United States were $459.4 million for the three-months ended March 31, 2021, an increase of approximately $102.6 million, or 28.8% higher than net sales to customers outside of the United States of $356.8 million for the three-months ended March 31, 2020. Such sales were approximately 37% and 34% of net sales for the three-months ended March 31, 2021 and 2020, respectively.
Our customers are primarily full service beverage bottlers/distributors, retail grocery and specialty chains, wholesalers, club stores, mass merchandisers, convenience chains, foodservice customers, value stores, e-commerce retailers and the military. Percentages of our gross billings to our various customer types for the three-months ended March 31, 2021 and 2020 are reflected below. Such information includes sales made by us directly to the customer types concerned, which include our full service beverage bottlers/distributors in the United States. Such full service beverage bottlers/distributors in turn sell certain of our products to some of the same customer types listed below. We limit our description of our customer types to include only our sales to our full service bottlers/distributors without reference to such bottlers/distributors’ sales to their own customers.
Three-Months Ended | |||||
March 31, | |||||
| 2021 | 2020 |
| ||
U.S. full service bottlers/distributors |
| 50 | % | 55 | % |
International full service bottlers/distributors |
| 38 | % | 35 | % |
Club stores and e-commerce retailers |
| 10 | % | 8 | % |
Retail grocery, direct convenience, specialty chains and wholesalers |
| 1 | % | 1 | % |
Direct value stores and other |
| 1 | % | 1 | % |
Our customers include Coca-Cola Canada Bottling Limited, Coca-Cola Consolidated, Inc., Coca-Cola Bottling Company United, Inc., Reyes Coca-Cola Bottling, LLC, Great Lakes Coca-Cola Distribution, LLC, Coca-Cola Southwest Beverages LLC, The Coca-Cola Bottling Company of Northern New England, Inc., Swire Pacific Holdings, Inc. (USA), Liberty Coca-Cola Beverages, LLC, Coca-Cola European Partners, Coca-Cola Hellenic, Coca-Cola FEMSA, Coca-Cola Amatil, Swire Coca-Cola (China), COFCO Coca-Cola, Coca-Cola Beverages Africa, Coca-Cola İçecek and certain other TCCC network bottlers, Asahi Soft Drinks, Co., Ltd., Wal-Mart, Inc. (including Sam’s Club), Costco Wholesale Corporation and Amazon.com, Inc. A decision by any large customer to decrease amounts purchased from us or to cease carrying our products could have a material adverse effect on our financial condition and consolidated results of operations.
Coca-Cola Consolidated, Inc. accounted for approximately 12% of our net sales for both the three-months ended March 31, 2021 and 2020.
Reyes Coca-Cola Bottling, LLC accounted for approximately 9% and 11% of our net sales for the three-months ended March 31, 2021 and 2020, respectively.
Coca-Cola European Partners accounted for approximately 11% and 10% of our net sales for the three-months ended March 31, 2021 and 2020, respectively.
31
Results of Operations
The following table sets forth key statistics for the three-months ended March 31, 2021 and 2020.
| Three-Months Ended |
| Percentage | ||||||
(In thousands, except per share amounts) | March 31, | Change | |||||||
| 2021 | 2020 |
| 21 vs. 20 | |||||
Net sales1 | $ | 1,243,816 | $ | 1,062,097 | 17.1 | % | |||
Cost of sales |
| 528,881 |
| 424,901 | 24.5 | % | |||
Gross profit*1 |
| 714,935 |
| 637,196 | 12.2 | % | |||
Gross profit as a percentage of net sales |
| 57.5 | % |
| 60.0 | % |
| ||
Operating expenses |
| 300,789 |
| 272,208 | 10.5 | % | |||
Operating expenses as a percentage of net sales |
| 24.2 | % |
| 25.6 | % |
| ||
Operating income1 |
| 414,146 |
| 364,988 | 13.5 | % | |||
Operating income as a percentage of net sales |
| 33.3 | % |
| 34.4 | % | |||
Interest and other (expense) income, net |
| (759) |
| 872 | (187.0) | % | |||
Income before provision for income taxes1 |
| 413,387 |
| 365,860 | 13.0 | % | |||
Provision for income taxes |
| 98,193 |
| 87,025 | 12.8 | % | |||
Income taxes as a percentage of income before taxes |
| 23.8 | % |
| 23.8 | % |
| ||
Net income | $ | 315,194 | $ | 278,835 | 13.0 | % | |||
Net income as a percentage of net sales |
| 25.3 | % |
| 26.3 | % |
| ||
Net income per common share: |
|
|
|
|
| ||||
Basic | $ | 0.60 | $ | 0.52 | 14.7 | % | |||
Diluted | $ | 0.59 | $ | 0.52 | 14.2 | % | |||
Case sales (in thousands) (in 192‑ounce case equivalents) |
| 138,566 |
| 115,599 | 19.9 | % | |||
¹Includes $10.4 million and $10.6 million for the three-months ended March 31, 2021 and 2020, respectively, related to the recognition of deferred revenue.
*Gross profit may not be comparable to that of other entities since some entities include all costs associated with their distribution process in cost of sales, whereas others exclude certain costs and instead include such costs within another line item such as operating expenses. We include out-bound freight and warehouse costs in operating expenses rather than in cost of sales.
Results of Operations for the Three-Months Ended March 31, 2021 Compared to the Three-Months Ended March 31, 2020.
Net Sales. Net sales were $1.24 billion for the three-months ended March 31, 2021, an increase of approximately $181.7 million, or 17.1% higher than net sales of $1.06 billion for the three-months ended March 31, 2020. We do not believe that the COVID-19 pandemic had a material adverse impact on our net sales for the three-months ended March 31, 2021. Net changes in foreign currency exchange rates had a favorable impact on net sales of approximately $9.3 million for the three-months ended March 31, 2021.
Net sales for the Monster Energy® Drinks segment were $1.17 billion for the three-months ended March 31, 2021, an increase of approximately $177.8 million, or 17.9% higher than net sales of $992.5 million for the three-months ended March 31, 2020. Net sales for the Monster Energy® Drinks segment increased primarily due to increased worldwide sales by volume of our Monster Energy® brand energy drinks as a result of increased consumer demand. Net changes in foreign currency exchange rates had a favorable impact on net sales for the Monster Energy® Drinks segment of approximately $9.3 million for the three-months ended March 31, 2021.
32
Net sales for the Strategic Brands segment were $67.8 million for the three-months ended March 31, 2021, an increase of approximately $3.3 million, or 5.1% higher than net sales of $64.5 million for the three-months ended March 31, 2020. Net sales for the Strategic Brands segment increased primarily due to increased worldwide sales by volume of our Predator® and Mother® brand energy drinks as a result of increased consumer demand. Net changes in foreign currency exchange rates had no significant impact on net sales for the Strategic Brands segment for the three-months ended March 31, 2021.
Net sales for the Other segment were $5.7 million for the three-months ended March 31, 2021, an increase of approximately $0.6 million, or 12.2% higher than net sales of $5.1 million for the three-months ended March 31, 2020.
Case sales, in 192-ounce case equivalents, were 138.6 million cases for the three-months ended March 31, 2021, an increase of approximately 23.0 million cases or 19.9% higher than case sales of 115.6 million cases for the three-months ended March 31, 2020. The overall average net sales per case (excluding net sales of AFF Third-Party Products of $5.7 million and $5.1 million for the three-months ended March 31, 2021 and 2020, respectively, as these sales do not have unit case equivalents) decreased to $8.94 for the three-months ended March 31, 2021, which was 2.3% lower than the average net sales per case of $9.14 for the three-months ended March 31, 2020. The decrease in the average net sales per case was primarily the result of geographical sales mix and higher promotional allowances as a percentage of net sales.
Gross Profit. Gross profit was $714.9 million for the three-months ended March 31, 2021, an increase of approximately $77.7 million, or 12.2% higher than the gross profit of $637.2 million for the three-months ended March 31, 2020. The increase in gross profit dollars was primarily the result of the $181.7 million increase in net sales for the three-months ended March 31, 2021.
Gross profit as a percentage of net sales decreased to 57.5% for the three-months ended March 31, 2021 from 60.0% for the three-months ended March 31, 2020. The decrease for the three-months ended March 31, 2021 was primarily the result of increased input costs (mainly increased raw material freight-in costs), geographical sales mix, and higher promotional allowances as a percentage of net sales.
Operating Expenses. Total operating expenses were $300.8 million for the three-months ended March 31, 2021, an increase of approximately $28.6 million, or 10.5% higher than total operating expenses of $272.2 million for the three-months ended March 31, 2020. As a percentage of net sales, operating expenses for the three-months ended March 31, 2021 were 24.2% as compared to 25.6% for the three-months ended March 31, 2020. The increase in operating expenses was primarily due to increased out-bound freight and warehouse costs of $15.6 million, increased payroll expenses of $13.7 million (of which $0.9 million was related to an increase in stock-based compensation), increased expenditures of $6.1 million for social media and digital marketing, and increased expenditures of $4.2 million for professional service expenses, including accounting and legal costs. The increase in operating expenses was partially offset by decreased expenditures of $5.8 million for travel and entertainment largely as a consequence of the COVID-19 pandemic.
Operating Income. Operating income was $414.1 million for the three-months ended March 31, 2021, an increase of approximately $49.2 million, or 13.5% higher than operating income of $365.0 million for the three-months ended March 31, 2020. Operating income as a percentage of net sales decreased to 33.3% for the three-months ended March 31, 2021 from 34.4% for the three-months ended March 31, 2020. Operating income was $92.1 million and $71.7 million for the three-months ended March 31, 2021 and 2020, respectively, for our operations in EMEA, Asia Pacific and South America.
Operating income for the Monster Energy® Drinks segment, exclusive of corporate and unallocated expenses, was $464.8 million for the three-months ended March 31, 2021, an increase of approximately $53.7 million, or 13.1% higher than operating income of $411.1 million for the three-months ended March 31, 2020. The increase in operating income for the Monster Energy® Drinks segment was primarily the result of the $177.8 million increase in net sales for the three-months ended March 31, 2021.
Operating income for the Strategic Brands segment, exclusive of corporate and unallocated expenses, was $45.1 million for the three-months ended March 31, 2021, an increase of approximately $8.4 million, or 22.9% higher than operating income of $36.7 million for the three-months ended March 31, 2020. The increase in operating income for the Strategic Brands segment was primarily the result of the $3.3 million increase in net sales as well as a $3.0 million Strategic Brand trademark impairment charge that was recorded in the comparative 2020 first quarter.
Operating income for the Other segment, exclusive of corporate and unallocated expenses, was $1.8 million for the three-months ended March 31, 2021, an increase of approximately $1.0 million, or 128.0% higher than operating income of $0.8 million for the three-months ended March 31, 2020.
33
Interest and Other (Expense) Income, net. Interest and other non-operating (expense) income, net, was ($0.8) million for the three-months ended March 31, 2021, as compared to interest and other non-operating (expense) income, net, of $0.9 million for the three-months ended March 31, 2020. Foreign currency transaction losses were $0.8 million and $2.9 million for the three-months ended March 31, 2021 and 2020, respectively. Interest income was $1.1 million and $4.5 million for the three-months ended March 31, 2021 and 2020, respectively.
Provision for Income Taxes. Provision for income taxes was $98.2 million for the three-months ended March 31, 2021, an increase of $11.2 million, or 12.8% higher than the provision for income taxes of $87.0 million for the three-months ended March 31, 2020. The effective combined federal, state and foreign tax rate was 23.8% for both the three-months ended March 31, 2021 and 2020.
Net Income. Net income was $315.2 million for the three-months ended March 31, 2021, an increase of $36.4 million, or 13.0% higher than net income of $278.8 million for the three-months ended March 31, 2020. The increase in net income for the three-months ended March 31, 2021 was primarily due to the $77.7 million increase in gross profit for the three-months ended March 31, 2021, partially offset by the $28.6 million increase in operating expenses and the $11.2 million increase in the provision for incomes taxes.
Key Business Metrics
We use certain key metrics and financial measures not prepared in accordance with United States Generally Accepted Accounting Principles (“GAAP”) to evaluate and manage our business. For a further discussion of how we use key metrics and certain non-GAAP financial measures, see “Non-GAAP Financial Measures and Other Key Metrics”.
Non-GAAP Financial Measures and Other Key Metrics
Three-Months Ended March 31, 2021 Compared to the Three-Months Ended March 31, 2020.
Gross Billings**. Gross billings were $1.45 billion for the three-months ended March 31, 2021, an increase of approximately $224.5 million, or 18.3% higher than gross billings of $1.23 billion for the three-months ended March 31, 2020. We do not believe that the COVID-19 pandemic had a material adverse impact on our gross billings for the three-months ended March 31, 2021. Net changes in foreign currency exchange rates had a favorable impact on gross billings of approximately $13.8 million for the three-months ended March 31, 2021.
Gross billings for the Monster Energy® Drinks segment were $1.37 billion for the three-months ended March 31, 2021, an increase of approximately $218.9 million, or 19.1% higher than gross billings of $1.15 billion for the three-months ended March 31, 2020. Gross billings for the Monster Energy® Drinks segment increased primarily due to increased worldwide sales by volume of our Monster Energy® brand energy drinks as a result of increased consumer demand. Net changes in foreign currency exchange rates had a favorable impact on gross billings for the Monster Energy® Drinks segment of approximately $13.9 million for the three-months ended March 31, 2021.
Gross billings for the Strategic Brands segment were $78.4 million for the three-months ended March 31, 2021, an increase of $5.0 million, or 6.8% higher than gross billings of $73.4 million for the three-months ended March 31, 2020. Net changes in foreign currency exchange rates had an unfavorable impact on gross billings in the Strategic Brands segment of approximately $0.1 million for the three-months ended March 31, 2021.
Gross billings for the Other segment were $5.7 million for the three-months ended March 31, 2021, an increase of $0.6 million, or 12.2% higher than gross billings of $5.1 million for the three-months ended March 31, 2020.
Promotional allowances, commissions and other expenses, as described in the footnote below, were $216.7 million for the three-months ended March 31, 2021, an increase of $42.7 million, or 24.5% higher than promotional allowances, commissions and other expenses of $174.0 million for the three-months ended March 31, 2020. Promotional allowances, commissions and other expenses as a percentage of gross billings increased to 14.9% from 14.2% for the three-months ended March 31, 2021 and 2020, respectively.
34
**Gross Billings represent amounts invoiced to customers net of cash discounts and returns. Gross billings are used internally by management as an indicator of and to monitor operating performance, including sales performance of particular products, salesperson performance, product growth or declines and is useful to investors in evaluating overall Company performance. The use of gross billings allows evaluation of sales performance before the effect of any promotional items, which can mask certain performance issues. We therefore believe that the presentation of gross billings provides a useful measure of our operating performance. The use of gross billings is not a measure that is recognized under GAAP and should not be considered as an alternative to net sales, which is determined in accordance with GAAP, and should not be used alone as an indicator of operating performance in place of net sales. Additionally, gross billings may not be comparable to similarly titled measures used by other companies, as gross billings has been defined by our internal reporting practices. In addition, gross billings may not be realized in the form of cash receipts as promotional payments and allowances may be deducted from payments received from certain customers.
The following table reconciles the non-GAAP financial measure of gross billings with the most directly comparable GAAP financial measure of net sales:
| Three-Months Ended |
| Percentage |
| |||||
March 31, | Change | ||||||||
(In thousands) |
| 2021 |
| 2020 |
| 21 vs. 20 | |||
Gross Billings | $ | 1,450,036 | $ | 1,225,504 | 18.3 | % | |||
Deferred Revenue | 10,440 | 10,556 | (1.1) | % | |||||
Less: Promotional allowances, commissions and other expenses*** |
| 216,660 |
| 173,963 | 24.5 | % | |||
Net Sales | $ | 1,243,816 | $ | 1,062,097 | 17.1 | % | |||
***Although the expenditures described in this line item are determined in accordance with GAAP and meet GAAP requirements, the presentation thereof does not conform to GAAP presentation requirements. Additionally, our definition of promotional and other allowances may not be comparable to similar items presented by other companies. Promotional and other allowances primarily include consideration given to our bottlers/distributors or retail customers including, but not limited to the following: (i) discounts granted off list prices to support price promotions to end-consumers by retailers; (ii) reimbursements given to our 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; (iii) our agreed share of fees given to bottlers/distributors and/or directly to retailers for advertising, in-store marketing and promotional activities; (iv) our agreed share of slotting, shelf space allowances and other fees given directly to retailers, club stores and/or wholesalers; (v) incentives given to our bottlers/distributors and/or retailers for achieving or exceeding certain predetermined sales goals; (vi) discounted or free products; (vii) contractual fees given to our bottlers/distributors related to sales made by us direct to certain customers that fall within the bottlers’/distributors’ sales territories; and (viii) certain commissions based on sales to our bottlers/distributors. The presentation of promotional and other allowances facilitates an evaluation of their impact on the determination of net sales and the spending levels incurred or correlated with such sales. Promotional and other allowances constitute a material portion of our marketing activities. Our promotional allowance programs with our numerous 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 primary drivers of our promotional and other allowance activities for the three-months ended March 31, 2021 and 2020 were (i) to increase sales volume and trial, (ii) to address market conditions, and (iii) to secure shelf and display space at retail.
Sales
The table below discloses selected quarterly data regarding sales for the three-months ended March 31, 2021 and 2020, respectively. Data from any one or more quarters or periods is not necessarily indicative of annual results or continuing trends.
Sales of beverages are expressed in unit case volume. A “unit case” means a unit of measurement equal to 192 U.S. fluid ounces of finished beverage (24 eight-ounce servings). Unit case volume means the number of unit cases (or unit case equivalents) of finished products or concentrates as if converted into finished products sold by us.
35
Our quarterly results of operations reflect seasonal trends that are primarily the result of increased demand in the warmer months of the year. It has been our experience that beverage sales tend to be lower during the first and fourth quarters of each calendar year. However, our experience with our energy drink products suggests they may be less seasonal than the seasonality of traditional beverages. In addition, our continued growth internationally may further reduce the impact of seasonality on our business. Quarterly fluctuations may also be affected by other factors including the introduction of new products, the opening of new markets where temperature fluctuations are more pronounced, the addition of new bottlers/distributors, changes in the sales mix of our products and changes in advertising and promotional expenses. The COVID-19 pandemic may also have an impact on consumer behavior and change the seasonal fluctuation of our business.
Three-Months Ended | ||||||
March 31, | ||||||
(In thousands, except average net sales per case) |
| 2021 |
| 2020 | ||
Net sales | $ | 1,243,816 | $ | 1,062,097 | ||
Less: AFF third-party sales |
| (5,727) |
| (5,105) | ||
Adjusted net sales1 | $ | 1,238,089 | $ | 1,056,992 | ||
Case sales by segment: |
|
|
|
| ||
Monster Energy® Drinks |
| 117,936 |
| 98,252 | ||
Strategic Brands |
| 20,630 |
| 17,346 | ||
Other |
| — |
| — | ||
Total case sales |
| 138,566 |
| 115,598 | ||
Average net sales per case | $ | 8.94 | $ | 9.14 | ||
1Excludes Other segment net sales of $5.7 million and $5.1 million for the three-months ended March 31, 2021 and 2020, respectively, comprised of net sales of AFF Third-Party Products to independent third-party customers, as these sales do not have unit case equivalents.
See Item 2, “Management’s Discussion and Analysis of Financial Condition and Results of Operations - Our Business” for additional information related to the increase in sales.
Liquidity and Capital Resources
Cash and cash equivalents, short-term and long-term investments. We believe that cash available from operations, including our cash resources and access to credit, will be sufficient for our working capital needs, including purchase commitments for raw materials and inventory, increases in accounts receivable, payments of tax liabilities, expansion and development needs, purchases of capital assets, purchases of equipment, purchases of real property and purchases of shares of our common stock, through at least the next 12 months. Our sources and uses of cash were not materially impacted by the COVID-19 pandemic in the three-months ended March 31, 2021 and, to date, we have not identified any material liquidity deficiencies as a result of the COVID-19 pandemic. Based on the information currently available to us, we do not expect the impact of the COVID-19 pandemic to have a material impact on our liquidity. We will continue to monitor and assess the impact the COVID-19 pandemic may have on our business, financial condition and/or operating results.
At March 31, 2021, we had $1.18 billion in cash and cash equivalents, $980.1 million in short-term investments and $63.8 million in long-term investments, including certificates of deposit, commercial paper, U.S. government agency securities and U.S. treasuries. We maintain our investments for cash management purposes and not for purposes of speculation. Our risk management policies emphasize credit quality (primarily based on short-term ratings by nationally recognized statistical organizations) in selecting and maintaining our investments. We regularly assess market risk of our investments and believe our current policies and investment practices adequately limit those risks. However, certain of these investments are subject to general credit, liquidity, market and interest rate risks. These market risks associated with our investment portfolio may have an adverse effect on our future results of operations, liquidity and financial condition.
Based on our current plans, at this time we estimate that capital expenditures (exclusive of common stock repurchases) are likely to be less than $200.0 million through March 31, 2022. However, future business opportunities may cause a change in this estimate.
36
Cash flows provided by operating activities. Cash provided by operating activities was $175.5 million for the three-months ended March 31, 2021, as compared with cash provided by operating activities of $191.1 million for the three-months ended March 31, 2020.
For the three-months ended March 31, 2021, cash provided by operating activities was primarily attributable to net income earned of $315.2 million and adjustments for certain non-cash expenses, consisting of $18.4 million of stock-based compensation and $13.8 million of depreciation and amortization. For the three-months ended March 31, 2021, cash provided by operating activities also increased due to a $36.9 million increase in accounts payable, a $32.4 million increase in accrued liabilities and a $14.0 million increase in accrued promotional allowances. For the three-months ended March 31, 2021, cash used in operating activities was primarily attributable to a $147.5 million increase in accounts receivable, a $39.5 million increase in inventories, a $24.4 million decrease in accrued compensation, an $18.5 million increase in prepaid expenses and other assets, a $13.3 million decrease in income taxes payable, a $7.1 million increase in prepaid income taxes and a $5.3 million decrease in deferred revenue.
For the three-months ended March 31, 2020, cash provided by operating activities was primarily attributable to net income earned of $278.8 million and adjustments for certain non-cash expenses, consisting of $17.1 million of stock-based compensation, $16.5 million of depreciation and amortization and $3.0 million of intangible asset impairment. For the three-months ended March 31, 2020, cash provided by operating activities also increased due to a $34.5 million increase in accrued liabilities, a $19.3 million increase in accounts payable, a $9.4 million increase in accrued promotional allowances, an $8.1 million decrease in prepaid income taxes and a $1.0 million decrease in inventories. For the three-months ended March 31, 2020, cash used in operating activities was primarily attributable to a $147.7 million increase in accounts receivable, a $24.8 million decrease in accrued compensation, an $18.1 million increase in prepaid expenses and other assets, a $4.3 million decrease in deferred revenue and a $1.6 million decrease in income tax payable.
Cash flows (used in) provided by investing activities. Cash used in investing activities was $149.1 million for the three-months ended March 31, 2021 as compared to cash provided by investing activities of $280.0 million for the three-months ended March 31, 2020.
For both the three-months ended March 31, 2021 and 2020, cash provided by investing activities was primarily attributable to sales of available-for-sale investments. For both the three-months ended March 31, 2021 and 2020, cash used in investing activities was primarily attributable to purchases of available-for-sale investments. For both the three-months ended March 31, 2021 and 2020, cash used in investing activities also included the acquisitions of fixed assets consisting of vans and promotional vehicles, coolers and other equipment to support our marketing and promotional activities, production equipment, furniture and fixtures, office and computer equipment, computer software, equipment used for sales and administrative activities, certain leasehold improvements, as well as acquisitions of and/or improvements to real property. We expect to continue to use a portion of our cash in excess of our requirements for operations for purchasing short-term and long-term investments, leasehold improvements, the acquisition of capital equipment (specifically, vans, trucks and promotional vehicles, coolers, other promotional equipment, merchandise displays, warehousing racks as well as items of production equipment required to produce certain of our existing and/or new products) to develop our brand in international markets and for other corporate purposes. From time to time, we may also use cash to purchase additional real property related to our beverage business and/or acquire compatible businesses.
Cash flows used in financing activities. Cash used in financing activities was $5.7 million for the three-months ended March 31, 2021 as compared to cash used in financing activities of $546.0 million for the three-months ended March 31, 2020. The cash used in financing activities for both the three-months ended March 31, 2021 and 2020 was primarily the result of the repurchases of our common stock. The cash provided by financing activities for both the three-months ended March 31, 2021, and 2020 was primarily attributable to the issuance of our common stock under our stock-based compensation plans.
Purchases of inventories, increases in accounts receivable and other assets, acquisition of property and equipment (including real property, personal property and coolers), leasehold improvements, advances for or the purchase of equipment for our bottlers, acquisition and maintenance of trademarks, payments of accounts payable, income taxes payable and purchases of our common stock are expected to remain our principal recurring use of cash.
Of our $1.18 billion of cash and cash equivalents held at March 31, 2021, $476.8 million was held by our foreign subsidiaries. No short-term or long-term investments were held by our foreign subsidiaries at March 31, 2021.
37
The following represents a summary of the Company’s contractual commitments and related scheduled maturities as of March 31, 2021:
Payments due by period (in thousands) | |||||||||||||||
|
| Less than |
| 1‑3 |
| 3‑5 |
| More than | |||||||
Obligations | Total | 1 year |
| years |
| years |
| 5 years | |||||||
Contractual Obligations1 | $ | 215,843 | $ | 152,699 | $ | 63,101 | $ | 43 | $ | — | |||||
Finance Leases |
| 1,641 |
| 1,619 |
| 22 |
| — |
| — | |||||
Operating Leases |
| 23,369 |
| 3,655 |
| 5,114 |
| 3,393 |
| 11,207 | |||||
Purchase Commitments2 |
| 83,122 |
| 83,122 |
| — |
| — |
| — | |||||
$ | 323,975 | $ | 241,095 | $ | 68,237 | $ | 3,436 | $ | 11,207 | ||||||
1Contractual obligations include our obligations related to sponsorships and other commitments.
2Purchase commitments include obligations made by us and our subsidiaries to various suppliers for raw materials used in the production of our products. These obligations vary in terms, but are generally satisfied within one year.
In addition, approximately $0.7 million of unrecognized tax benefits have been recorded as liabilities as of March 31, 2021. It is expected that the amount of unrecognized tax benefits will not significantly change within the next 12 months. As of March 31, 2021, we had $0.1 million of accrued interest and penalties related to unrecognized tax benefits.
Critical Accounting Policies
There have been no material changes to our critical accounting policies from the information provided in Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations”, included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2020 (“Form 10-K”).
Recent Accounting Pronouncements
The information required by this Item is incorporated herein by reference to the Notes to Condensed Consolidated Financial Statements - Note 2. Recent Accounting Pronouncements, in Part I, Item 1, of this Quarterly Report on Form 10-Q.
Inflation
We believe inflation did not have a significant impact on our results of operations for the periods presented.
Forward-Looking Statements
Certain statements made in this report may constitute forward-looking statements (within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended) (the “Exchange Act”) regarding the expectations of management with respect to revenues, profitability, adequacy of funds from operations and our existing credit facility, among other things. All statements containing a projection of revenues, income (loss), earnings (loss) per share, capital expenditures, dividends, capital structure or other financial items, a statement of management’s plans and objectives for future operations, or a statement of future economic performance contained in management’s discussion and analysis of financial condition and results of operations, including statements related to new products, volume growth and statements encompassing general optimism about future operating results and non-historical information, are forward-looking statements within the meaning of the Exchange Act. Without limiting the foregoing, the words “believes,” “thinks,” “anticipates,” “plans,” “expects,” and similar expressions are intended to identify forward-looking statements.
38
Management cautions that these statements are qualified by their terms and/or important factors, many of which are outside our control, and involve a number of risks, uncertainties and other factors, that could cause actual results and events to differ materially from the statements made including, but not limited to, the following:
| ● | The human and economic consequences of the COVID-19 pandemic, as well as the measures taken or that may be taken in the future by governments, and consequently, businesses (including the Company and its suppliers, bottlers/ distributors, co-packers and other service providers) and the public at large to limit the COVID-19 pandemic; |
| ● | Fluctuations in growth and/or growth rates and/or decline in sales of the domestic and international energy drink categories generally, including in the convenience and gas channel (which is our largest channel) and the impact on demand for our products resulting from deteriorating economic conditions and/or financial uncertainties due to the COVID-19 pandemic; |
| ● | The impact of temporary plant closures, production slowdowns and disruptions in operations experienced by our suppliers, bottlers/distributors and/or co-packers as a result of the COVID-19 pandemic, including any material disruptions on the production and distribution of our products; |
| ● | The impact of the reduction in our sponsorship and endorsement activities as well as our sampling activities as a result of COVID-19 on our future sales and market share; |
| ● | The impact on consumer demand of the recent resurgence of the COVID-19 pandemic in the Southern Hemisphere and South Asia; |
| ● | The impact of countries being in lockdown due to the COVID-19 pandemic at various times; |
| ● | Delays in the availability and/or administration and/or acceptance of vaccines may prolong the COVID-19 pandemic; |
| ● | We have extensive commercial arrangements with TCCC and, as a result, our future performance is substantially dependent on the success of our relationship with TCCC; |
| ● | The impact of TCCC’s bottlers/distributors distributing Coca-Cola brand energy drinks and possible reductions in the number of our SKUs carried by such bottlers/distributors and/or such bottlers/distributors imposing limitations on distributing new product SKUs; |
| ● | Closures of, and continued restrictions on, on-premise retailers and other establishments which sell our products as the result of the COVID-19 pandemic; |
| ● | The limitation or reduction by our suppliers, bottlers/distributors and/or co-packers of their activities and/or operations during the COVID-19 pandemic; |
| ● | The impact of the COVID-19 pandemic on our product sampling programs; |
| ● | The effect of TCCC being one of our significant stockholders and the potential divergence of TCCC’s interests from those of our other stockholders; |
| ● | Our ability to maintain relationships with TCCC system bottlers/distributors and manage their ongoing commitment to focus on our products; |
| ● | Disruption in distribution channels and/or decline in sales due to the termination and/or insolvency of existing and/or new domestic and/or international bottlers/distributors; |
| ● | Lack of anticipated demand for our products in domestic and/or international markets; |
| ● | Fluctuations in the inventory levels of our bottlers/distributors, planned or otherwise, and the resultant impact on our revenues; |
| ● | Unfavorable regulations, including taxation requirements, age restrictions imposed on the sale, purchase, or consumption of our products, marketing restrictions, product registration requirements, tariffs, trade restrictions, container size limitations and/or ingredient restrictions; |
| ● | The effect of inquiries from, and/or actions by, state attorneys general, the Federal Trade Commission (the “FTC”), the Food and Drug Administration (the “FDA”), municipalities, city attorneys, other government agencies, quasi-government agencies, government officials (including members of U.S. Congress) and/or analogous central and local agencies and other authorities in the foreign countries in which our products are manufactured and/or distributed, into the advertising, marketing, promotion, ingredients, sale and/or consumption of our energy drink products, including voluntary and/or required changes to our business practices; |
| ● | Our ability to comply with laws, regulations and evolving industry standards regarding consumer privacy and data use and security, including with respect to the General Data Protection Regulation and the California Consumer Privacy Act of 2018; |
| ● | Our ability to achieve profitability and/or repatriate cash from certain of our operations outside the United States; |
| ● | Our ability to manage legal and regulatory requirements in foreign jurisdictions, potential difficulties in staffing and managing foreign operations and potentially higher incidence of fraud or corruption and credit risk of foreign customers and/or bottlers/distributors; |
39
| ● | Changes in U.S. tax laws as a result of any legislation proposed by the new U.S. Presidential Administration or U.S. Congress, which may include efforts to change or repeal the 2017 Tax Cuts and Jobs Act and the federal corporate income tax rate reduction; |
| ● | Our ability to produce our products in international markets in which they are sold, thereby reducing freight costs and/or product damages; |
| ● | Our ability to absorb, reduce or pass on to our bottlers/distributors increases in commodity costs generally as well as increases in freight costs; |
| ● | Our ability to effectively manage our inventories and/or our accounts receivables; |
| ● | Our foreign currency exchange rate risk with respect to our sales, expenses, profits, assets and liabilities denominated in currencies other than the U.S. dollar, which will continue to increase as foreign sales increase; |
| ● | Uncertainties surrounding the long-term impact of the United Kingdom’s departure from the European Union (or “Brexit”); |
| ● | Changes in accounting standards may affect our reported profitability; |
| ● | Implications of the Organization for Economic Cooperation and Development’s base erosion and profit shifting project; |
| ● | Any proceedings which may be brought against us by the Securities and Exchange Commission (the “SEC”), the FDA, the FTC or other governmental agencies or bodies; |
| ● | The outcome and/or possibility of future shareholder derivative actions or shareholder securities litigation that may be filed against us and/or against certain of our officers and directors, and the possibility of other private shareholder litigation; |
| ● | The outcome of product liability or consumer fraud litigation and/or class action litigation (or its analog in foreign jurisdictions) regarding the safety of our products and/or the ingredients in and/or claims made in connection with our products and/or alleging false advertising, marketing and/or promotion, and the possibility of future product liability and/or class action lawsuits; |
| ● | Exposure to significant liabilities due to litigation, legal or regulatory proceedings; |
| ● | Intellectual property injunctions; |
| ● | Unfavorable resolution of tax matters; |
| ● | Uncertainty and volatility in the domestic and global economies, including risk of counterparty default or failure; |
| ● | Our ability to address any significant deficiencies or material weakness in our internal controls over financial reporting; |
| ● | Our ability to continue to generate sufficient cash flows to support our expansion plans and general operating activities; |
| ● | Decreased demand for our products resulting from changes in consumer preferences, including changes in demand for different packages, sizes and configurations, obesity and other perceived health concerns, including concerns relating to certain ingredients in our products or packaging, product safety concerns and/or from decreased consumer discretionary spending power; |
| ● | Adverse publicity surrounding obesity and health concerns related to our products, product safety and quality, water usage, environmental impact and sustainability, human rights, our culture, workforce and labor and workplace laws; |
| ● | Changes in demand that are weather related and/or for other reasons, including changes in product category and/or package consumption and changes in cost and availability of certain key ingredients including aluminum cans, as well as disruptions to the supply chain, as a result of climate change and extreme weather conditions; |
| ● | The impact of unstable political conditions, civil unrest, large scale terrorist acts, the outbreak or escalation of armed hostilities, major natural disasters and extreme weather conditions, or widespread outbreaks of infectious diseases (such as the COVID-19 pandemic); |
| ● | The impact on our business of competitive products and pricing pressures and our ability to gain or maintain our share of sales in the marketplace as a result of actions by competitors, including unsubstantiated and/or misleading claims, false advertising claims and tortious interference, as well as competitors selling misbranded products; |
| ● | The impact on our business of trademark and trade dress infringement proceedings brought against us relating to our brands, including our Reign Total Body Fuel® high performance energy drinks, which could result in an injunction barring us from selling certain of our products and/or require changes to be made to our current trade dress; |
| ● | Our ability to introduce new products and the impact of the COVID-19 pandemic on our innovation activities; |
| ● | Our ability to implement and/or maintain price increases; |
| ● | An inability to achieve volume growth through product and packaging initiatives; |
| ● | Our ability to sustain the current level of sales and/or achieve growth for our Monster Energy® brand energy drinks and/or our other products, including our Strategic Brands; |
40
| ● | The impact of criticism of our energy drink products and/or the energy drink market generally and/or legislation enacted (whether as a result of such criticism or otherwise) that restricts the marketing or sale of energy drinks (including prohibiting the sale of energy drinks at certain establishments or pursuant to certain governmental programs), limits caffeine content in beverages, requires certain product labeling disclosures and/or warnings, imposes excise and/or sales taxes, limits product sizes and/or imposes age restrictions for the sale of energy drinks; |
| ● | Our ability to comply with and/or resulting lower consumer demand and/or lower profit margins for energy drinks due to proposed and/or future U.S. federal, state and local laws and regulations and/or proposed or existing laws and regulations in certain foreign jurisdictions and/or any changes therein, including changes in taxation requirements (including tax rate changes, new tax laws, new and/or increased excise, sales and/or other taxes on our products and revised tax law interpretations) and environmental laws, as well as the Federal Food, Drug, and Cosmetic Act and regulations or rules made thereunder or in connection therewith by the FDA, as well as changes in any other food, drug or similar laws in the United States and internationally, especially those changes that may restrict the sale of energy drinks (including prohibiting the sale of energy drinks at certain establishments or pursuant to certain governmental programs), limit caffeine content in beverages, require certain product labeling disclosures and/or warnings, impose excise taxes, impose sugar taxes, limit product sizes, or impose age restrictions for the sale of energy drinks, as well as laws and regulations or rules made or enforced by the Bureau of Alcohol, Tobacco, Firearms and Explosives and/or the FTC or their foreign counterparts; |
| ● | Disruptions in the timely import or export of our products and/or ingredients due to port strikes and related labor issues; |
| ● | Our ability to satisfy all criteria set forth in any model energy drink guidelines, including, without limitation, those adopted by the American Beverage Association, of which we are a member, and/or any international beverage associations and the impact of our failure to satisfy such guidelines may have on our business; |
| ● | The effect of unfavorable or adverse public relations, press, articles, comments and/or media attention; |
| ● | Changes in the cost, quality and availability of containers, packaging materials, aluminum cans, the Midwest and other premiums, raw materials and other ingredients and juice concentrates, and our ability to obtain and/or maintain favorable supply arrangements and relationships and procure timely and/or sufficient production of all or any of our products to meet customer demand; |
| ● | Any shortages that may be experienced in the procurement of containers and/or other raw materials including, without limitation, aluminum cans generally, PET containers used for our Monster Hydro® energy drinks, 24-ounce aluminum cap cans and 550ml BRE aluminum cans with resealable ends; |
| ● | The impact on our cost of sales of corporate activity among the limited number of suppliers from whom we purchase certain raw materials; |
| ● | Our ability to pass on to our customers all or a portion of any increases in the costs of raw materials, ingredients, commodities and/or other cost inputs affecting our business; |
| ● | Our ability to achieve both internal domestic and international forecasts, which may be based on projected volumes and sales of many product types and/or new products, certain of which are more profitable than others; there can be no assurance that we will achieve projected levels of sales as well as forecasted product and/or geographic mixes; |
| ● | Our ability to penetrate new domestic and/or international markets and/or gain approval or mitigate the delay in securing approval for the sale of our products in various countries; |
| ● | The effectiveness of sales and/or marketing efforts by us and/or by the bottlers/distributors of our products, most of whom distribute products that may be regarded as competitive with our products; |
| ● | Unilateral decisions by bottlers/distributors, buying groups, convenience chains, grocery chains, mass merchandisers, specialty chain stores, e-commerce retailers, e-commerce websites, club stores and other customers to discontinue carrying all or any of our products that they are carrying at any time, restrict the range of our products they carry, impose restrictions or limitations on the sale of our products and/or devote less resources to the sale of our products; |
| ● | The impact of possible trading disputes between our bottler/distributors and their customers and/or one or more buying groups which may result in the delisting of certain of the Company products, temporarily or otherwise; |
| ● | The effects of retailer consolidation on our business and our ability to successfully adapt to the rapidly changing retail landscape; |
| ● | Our ability to adapt to the changing retail landscape with the rapid growth in e-commerce retailers; |
| ● | The effects of bottler/distributor consolidation on our business; |
| ● | The costs and/or effectiveness, now or in the future, of our advertising, marketing and promotional strategies; |
| ● | The success of our sports marketing, social media and other general marketing endeavors both domestically and internationally; |
| ● | Our ability to successfully adapt to the changing landscape of advertising, marketing, promotional, sponsorship and endorsement opportunities created by the COVID-19 pandemic; |
| ● | Unforeseen economic and political changes and local or international catastrophic events; |
41
| ● | Possible product recalls and/or reformulations of certain of our products and/or market withdrawals of certain of our products due to defective and/or non-compliant formulas or production in one or more jurisdictions; |
| ● | Our ability to make suitable arrangements and/or procure sufficient capacity for the co-packing of any of our products both domestically and internationally, the timely replacement of discontinued co-packing arrangements and/or limitations on co-packing availability, including for retort production; |
| ● | Our ability to make suitable arrangements for the timely procurement of non-defective raw materials; |
| ● | Our inability to protect and/or the loss of our intellectual property rights and/or our inability to use our trademarks, trade names or designs and/or trade dress in certain countries; |
| ● | Volatility of stock prices which may restrict stock sales, stock purchases or other opportunities as well as negatively impact the motivation of equity award grantees; |
| ● | Provisions in our organizational documents and/or control by insiders which may prevent changes in control even if such changes would be beneficial to other stockholders; |
| ● | The failure of our bottlers and/or co-packers to manufacture our products on a timely basis or at all; |
| ● | The impact of any reductions in productivity and disruptions to our business routines while most office-based employees of the Company are working remotely; |
| ● | Other effects of the COVID-19 pandemic on our employees, such as mental health challenges that employees may face; |
| ● | Any disruption in and/or lack of effectiveness of our information technology systems, including a breach of cyber security, that disrupts our business or negatively impacts customer relationships, as well as cybersecurity incidents involving data shared with third parties; and |
| ● | Recruitment and retention of senior management, other key employees and our employee base in general. |
The foregoing list of important factors and other risks detailed from time to time in our reports filed with the SEC is not exhaustive. See the section entitled “Risk Factors” in our Form 10-K and in Item 1A of this Quarterly Report for a more complete discussion of these risks and uncertainties and for other risks and uncertainties. Those factors and the other risk factors described therein are not necessarily all of the important factors that could cause actual results or developments to differ materially from those expressed in any of our forward-looking statements. Other unknown or unpredictable factors also could harm our results. Consequently, our actual results could be materially different from the results described or anticipated by our forward-looking statements, due to the inherent uncertainty of estimates, forecasts and projections and may be better or worse than anticipated. Given these uncertainties, you should not rely on forward-looking statements. Forward-looking statements represent our estimates and assumptions only as of the date that they were made. We expressly disclaim any duty to provide updates to forward-looking statements, and the estimates and assumptions associated with them, after the date of this report, in order to reflect changes in circumstances or expectations or the occurrence of unanticipated events except to the extent required by applicable securities laws.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
There have been no material changes in our market risks during the three-months ended March 31, 2021 compared with the disclosures in Part II, Item 7A of our Form 10-K.
ITEM 4. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures – Under the supervision and with the participation of the Company’s management, including our Co-Chief Executive Officers and Chief Financial Officer, we have evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13(a)-15(e) and 15(d)-15(e) of the Exchange Act) as of the end of the period covered by this report. Based upon this evaluation, the Co-Chief Executive Officers and Chief Financial Officer have concluded that our disclosure controls and procedures are adequate and effective to ensure that information we are required to disclose in reports that we file or submit under the Exchange Act is (1) recorded, processed, summarized and reported within the time periods specified in rules and forms of the SEC and (2) accumulated and communicated to our management, including its principal executive and principal financial officers, as appropriate, to allow timely decisions regarding required disclosures.
Changes in Internal Control Over Financial Reporting – There were no changes in the Company’s internal controls over financial reporting during the quarter ended March 31, 2021, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
42
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The information required by this Item is incorporated herein by reference to the Notes to Condensed Consolidated Financial Statements - Note 12. Commitments and Contingencies: Legal Proceedings in Part I, Item 1, of this Quarterly Report on Form 10-Q.
ITEM 1A. RISK FACTORS
In addition to the other information set forth in this Quarterly Report on Form 10-Q, including Management’s Discussion and Analysis of Financial Condition and Results of Operations and the condensed consolidated financial statements and related notes, you should carefully consider the risks discussed in “Part I, Item 1A – Risk Factors” in our Form 10-K. There have been no material changes with respect to the risk factors disclosed in our Form 10-K.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
During the three-months ended March 31, 2021, 0.2 million 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 $13.4 million. While such purchases are considered common stock repurchases, they are not counted as purchases against our authorized share repurchase programs. Such shares are included in common stock in treasury in the accompanying condensed consolidated balance sheet at March 31, 2021.
On March 13, 2020, the Company’s Board of Directors authorized a new share repurchase program for the purchase of up to $500.0 million of the Company’s outstanding common stock (the “March 2020 Repurchase Plan”). During the three-months ended March 31, 2021, no shares were purchased by the Company under the March 2020 Repurchase Plan. As of May 7, 2021, $441.5 million remained available for repurchase under the March 2020 Repurchase Plan.
ITEM 3.DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4.MINE SAFETY DISCLOSURES
Not applicable.
ITEM 5.OTHER INFORMATION
None.
43
ITEM 6.EXHIBITS
10.1+* | |
10.2+* | |
10.3+* | |
10.4+* | |
31.1* | |
31.2* | |
31.3* | Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 |
32.1* | |
32.2* | |
32.3* | |
101* | The following financial information from Monster Beverage Corporation’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2021, formatted in iXBRL (Inline eXtensible Business Reporting Language): (i) Condensed Consolidated Balance Sheets as of March 31, 2021 and December 31, 2020, (ii) Condensed Consolidated Statements of Income for the three-months ended March 31, 2021 and 2020, (iii) Condensed Consolidated Statements of Comprehensive Income for the three-months ended March 31, 2021 and 2020, (iv) Condensed Consolidated Statements of Stockholders’ Equity for the three-months ended March 31, 2021 and 2020, (v) Condensed Consolidated Statements of Cash Flows for the three-months ended March 31, 2021 and 2020, and (vi) the Notes to Condensed Consolidated Financial Statements. |
104* | The cover page from Monster Beverage Corporation’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2021, formatted in iXBRL (Inline eXtensible Business Reporting Language) and contained in Exhibit 101. |
* Filed herewith
+ Management contract or compensatory plans or arrangements
44
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
MONSTER BEVERAGE CORPORATION | |
Registrant | |
Date: May 7, 2021 | /s/ RODNEY C. SACKS |
Rodney C. Sacks | |
Chairman of the Board of Directors | |
and Co-Chief Executive Officer | |
Date: May 7, 2021 | /s/ HILTON H. SCHLOSBERG |
Hilton H. Schlosberg | |
Vice Chairman of the Board of Directors | |
and Co-Chief Executive Officer | |
45
Exhibit 10.1
OPTION AWARD AGREEMENT
This Option Award Agreement (this “Agreement”), is made as of [_______], 20[___] (the “Grant Date”) by and between Monster Beverage Corporation, a Delaware corporation (the “Company”), and [___________] (“Participant”).
Preliminary Recitals
A.Participant is an Employee of the Company or its Subsidiaries.
B.Pursuant to the Monster Beverage Corporation 2020 Omnibus Incentive Plan, as in effect and as amended from time to time (the “Plan”), the Company desires to grant Participant an Option to purchase Shares.
C.Capitalized terms not otherwise defined in this Agreement shall have the meaning given to them in the Plan.
NOW, THEREFORE, the Company and Participant agree as follows:
1.Grant of the Option Award. The Company hereby grants to Participant, subject to the terms and conditions set forth herein and in the Plan, an incentive stock option (“ISO”) to purchase [______] Shares, at the purchase price of $[_____] per Share, which price is equal to the Fair Market Value of the Shares on the Grant Date (the “Option Award”), such Option Award to be exercisable and exercised as hereinafter provided. If for any reason the Option Award or any portion of the Option Award shall not qualify as an ISO, then, to the extent of such nonqualification, the Option Award (or portion thereof) shall be regarded as a nonqualified stock option granted under the Plan, provided that such Option Award (or portion thereof) otherwise complies with the Plan’s requirements relating to nonqualified stock options. In no event shall any member of the Committee or the Company or its Subsidiaries (or their respective employees, officers or directors) have any liability to Participant (or any other person) due to the failure of an Option Award (or any portion thereof) to qualify for any reason as an ISO.
2.Exercise Period. The unvested portion of the Option Award shall expire upon the termination of Participant’s employment with, or services to, the Company or its Subsidiaries as an Employee or a Director (the “Services”) without consideration therefor, and the vested portion of the Option Award shall remain exercisable for (i) six (6) months following the termination of the Services by reason of death or Disability or (ii) three (3) months following termination of the Services for any reason other than by reason of death or Disability, and other than a termination of the Services by the Company for Cause (as defined below); provided that, in each of the foregoing cases, the Option Award shall not remain exercisable any later than the expiration date specified in Section 3(b) below. If the Services are terminated by the Company for Cause, then both the unvested and the vested portion of the Option Award shall automatically expire upon the termination of the Services by the Company for Cause without consideration therefor. “Cause” means (a) the Company or an Affiliate having “cause” to terminate the Services, as defined in any employment or consulting agreement or similar services agreement between
Participant and the Company or an Affiliate in effect at the time of such termination, or (b) in the absence of any such employment, consulting or similar services agreement (or the absence of any definition of “Cause” contained therein), means, as determined by the Committee, Participant’s (i) act(s) of fraud or dishonesty, (ii) knowing and material failure to comply with applicable laws or regulations or satisfactorily perform Participant’s services with the Company or its Affiliates, (iii) insubordination or (iv) drug or alcohol abuse. For the avoidance of doubt, if a consultant becomes an employee or a Director or an employee becomes a consultant or a Director, without a break in service to the Company, the “Services” shall include both employment as an employee and service as a consultant or a Director and no termination of Service shall occur.
3.Vesting; Exercisability.
(a)Subject to the other terms of this Agreement regarding the exercisability of the Option Award, provided that Participant is providing the Services to the Company or its Subsidiaries on the relevant “Vesting Date” set forth below, the Option Award may be exercised in respect of the number of Shares listed in Column “A” on the corresponding Vesting Date listed in Column “B,” as set forth below:
Column “A” |
| Column “B” |
Number of Shares | | Vesting Date |
[___]% of the number of Shares subject to the Option Award | | On the first anniversary of the Grant Date |
[___]% of the number of Shares subject to the Option Award | | On the second anniversary of the Grant Date |
[___]% of the number of Shares subject to the Option Award | | On the third anniversary of the Grant Date |
[___]% of the number of Shares subject to the Option Award | | On the fourth anniversary of the Grant Date |
[___]% of the number of Shares subject to the Option Award | | On the fifth anniversary of the Grant Date |
(b)Subject to the earlier expiration of the Option Award pursuant to Section 2, the Option Award granted pursuant to this Agreement shall expire on the tenth anniversary of the Grant Date.
2
4.Manner of Exercisability.
(a)The Option Award may be exercised, to the extent exercisable by the terms of this Agreement and the Plan, as applicable, from time to time in whole or in part at any time prior to the expiration thereof. Any exercise shall be accompanied by a written notice to the Company specifying the number of Shares to which this Option Award is being exercised (the “Option Shares”). Notwithstanding the foregoing, any exercise shall also be permitted to be accompanied by an electronic notice to the brokerage firm designated or approved by the Company which will state Participant’s election to exercise the Option Award and the number of Option Shares. Notations of any partial exercise or installment exercise shall be made by the Company in its records.
(b)At the time of any exercise of all or a portion of the Option Award, the purchase price shall be paid in full to the Company in any of the following ways or in any combination of the following ways:
(i)By cash, check or other immediately available funds;
(ii)With property consisting of previously acquired Shares (provided that such Shares are not subject to any pledge or other security interest and are held for the applicable period as determined by the Company’s auditors to avoid adverse accounting charges); and/or
(iii)By such other method as the Committee may permit in accordance with applicable law, in its sole discretion including by (A) a broker-assisted “cashless exercise” pursuant to which the Company is delivered a copy of irrevocable instructions to a broker to sell the Shares otherwise deliverable upon the exercise of the Option Award and to deliver promptly to the Company an amount equal to the exercise price; or (B) by a “net exercise” method whereby the Company withholds from the delivery of the Option Shares for which the Option Award were exercised, that number of Shares having a Fair Market Value equal to the aggregate exercise price for the Shares for which the Option Award was exercised.
5.Purchase for Investment; Resale Restrictions. Unless at the time of exercise of the Option Award there shall be a valid and effective registration statement under the Securities Act and appropriate qualification and registration under applicable state securities laws relating to the Option Shares being acquired, Participant shall upon exercise of the Option Award, in whole or in part, give a representation that Participant is acquiring such Shares for Participant’s own account for investment and not with a view to, or for sale in connection with, the resale or distribution of any such Shares. In the absence of such registration statement, Participant (i) shall execute a written affirmation, in a form reasonably satisfactory to the Company, of such investment intent, and (ii) will not sell or transfer any Option Shares until (x) Participant requests and receives an opinion of the Company’s counsel or other counsel reasonably satisfactory to the Company to the effect that such proposed sale or transfer will not result in a violation of the
3
Securities Act, or (y) a registration statement covering the sale or transfer of the Shares has been declared effective by the Securities and Exchange Commission, or (z) Participant obtains a no-action letter from the Securities and Exchange Commission with respect to the proposed transfer. Participant shall notify the Company in writing promptly after the date Participant makes a disqualifying disposition of any Shares acquired pursuant to the exercise of such ISO. A disqualifying disposition is any disposition (including any sale) of such Shares before the later of (i) two (2) years after the Grant Date; or (ii) one (1) year after the date of exercise of the ISO upon which such Shares were issued. The Company may, if determined by the Committee and in accordance with procedures established by the Committee, retain possession of any Shares acquired pursuant to the exercise of an ISO as agent for Participant until the end of the period described in the preceding sentence.
6.Transferability. The Option Award may only be transferred pursuant to the requirements under Section 11.3 of the Plan.
7.Adjustments; Change in Control.
(a)Subject to Section 7(b) below and Section 11.2 of the Plan, in the event of any merger, reorganization, consolidation, recapitalization, dividend or distribution (whether in cash, shares or other property, other than a regular cash dividend), stock split, reverse stock split, spin-off or similar transaction or other change in corporate structure affecting the Shares or the value thereof, such adjustments and other substitutions shall be made to the Option Award as the Committee deems equitable or appropriate to prevent dilution or enlargement of the rights of Participants under the Plan, taking into consideration the accounting and tax consequences. Any adjustment under this Section 7(a) shall be made by the Committee, whose determination as to what adjustments shall be made, if any, and the extent thereof, will be final, binding and conclusive.
(b)Notwithstanding anything else herein to the contrary, in the event of a Change in Control, the Option Award shall have the treatment set forth in Section 10.1 of the Plan.
8.No Rights as Stockholder. Participant shall have no rights as a stockholder with respect to any Shares subject to the Option Award prior to the date of issuance to Participant of a certificate or certificates for such Shares (or a corresponding book entry is made). Shares received upon exercise of the Option Award granted herein shall remain subject to the terms of the Plan and this Agreement.
9.No Right to Continue the Services. This Agreement shall not confer upon Participant any right with respect to continuance of the Services nor shall it interfere in any way with the right of the Company or its Subsidiaries to terminate the Services at any time.
10.Compliance with Law and Regulation. This Agreement and the obligation of the Company to sell and deliver Shares hereunder shall be subject to all applicable federal and state
4
laws, rules and regulations and to such approvals by any government or regulatory agency as may be required. If at any time the Board shall determine that (i) the listing, registration or qualification of the Shares subject or related thereto upon any securities exchange or under any state or federal law, or (ii) the consent or approval of any government regulatory body, is necessary or desirable as a condition of or in connection with the issuance or purchase of Shares hereunder, the Option Award may not be exercised in whole or in part unless such listing, registration, qualification, consent, approval or agreement shall have been effected or obtained free of any conditions not acceptable to the Board.
11.Tax Withholding. The Company shall have the right to require Participant to remit to the Company an amount sufficient to satisfy any federal, state or local withholding tax requirements prior to the delivery of any certificate or certificates for Shares and to take such other action as may be necessary in the opinion of the Committee to satisfy all obligations for the payment of such withholding taxes.
12.Fractional Shares. Notwithstanding any other provision of this Agreement, no fractional Shares shall be issued upon the exercise of the Option Award, and the Company shall not be under any obligation to compensate Participant in any way for such fractional shares; provided that, to the extent any fractional Shares are settled in respect of the Option Award, such fractional Shares shall be settled in cash.
13.Notices. Any notice required or permitted to be given hereunder to the Company shall be addressed as follows:
Monster Beverage Corporation
Attn: [_____________]
1 Monster Way
Corona, CA 92879
HumanResources@Monsterenergy.com
Any notice required or permitted to be given hereunder to Participant shall be addressed to Participant at the latest address the Company has for Participant in its records. Such notice shall be deemed to have been duly given if (i) delivered personally, (ii) sent by certified, registered or express mail, postage prepaid, return receipt requested, or (iii) by a reputable overnight delivery service. Any such notice shall be deemed to have been received (x) if by personal delivery, on the day after such delivery, (y) if by certified or registered mail, on the fifth business day after the mailing thereof, or (z) if by express mail or overnight delivery service, on the day delivered. Notwithstanding the foregoing, any notice required or permitted hereunder from the Company to Participant (or vice-versa) may be made by electronic means, including by electronic mail to the Company-maintained electronic mailbox of Participant (or the Company-maintained electronic mailbox for the Company’s Human Resources department, which electronic mailbox address is set forth above), and Participant and the Company hereby consent to receive such notice by electronic delivery. To the extent permitted in an electronically delivered notice described in the previous sentence, Participant and the Company shall be permitted to respond to such notice or communication by way of a responsive electronic communication, including by electronic mail.
5
14.Amendment. No modification, amendment or waiver of any of the provisions of this Agreement shall be effective unless in writing specifically referring hereto, and signed by both parties.
15.Binding Effect. This Agreement shall be binding upon and inure to the benefit of the parties to this Agreement and their respective successors and assigns. Nothing in this Agreement, express or implied, is intended or shall be construed to give any person other than the parties to this Agreement or their respective successors or assigns any legal or equitable right, remedy or claim under or in respect of any agreement or any provision contained herein.
16.Governing Law. This Agreement shall be construed according to the laws of the State of Delaware and all provisions hereof shall be administered according to and its validity shall be determined under, the laws of such State, except where preempted by federal laws.
17.Waiver; Cumulative Rights. The failure or delay of either party to require performance by the other party of any provision hereof shall not affect its right to require performance of such provision unless and until such performance has been waived in writing. Each and every right hereunder is cumulative and may be exercised in part or in whole from time to time.
18.Counterparts; Electronic Delivery and Acceptance. This Agreement may be signed (including by electronic signature methods) in two (2) counterparts, each of which shall be an original, but both of which shall constitute but one and the same instrument. The Company may, in its sole discretion, decide to deliver any document related to current or future participation in the Plan by electronic means. Participant and the Company each agrees and acknowledges that the use of electronic media (including, without limitation, an electronic signature or a clickthrough button or checkbox on a website of the Company or a third party administrator designated by the Company) to indicate Participant’s confirmation, consent, signature, agreement and delivery of this Agreement and the Option Award is legally valid and has the same legal force and effect as if Participant and the Company signed and executed this Agreement in paper form. The same use of electronic media may be used for any amendment or waiver of this Agreement.
19.Headings. The headings contained in this Agreement are for reference purposes only and shall not affect the meaning or interpretation of this Agreement.
20.Severability. If any provision of this Agreement shall for any reason be held to be invalid or unenforceable, such invalidity or unenforceability shall not affect any other provision hereof, and this Agreement shall be construed as if such invalid or unenforceable provision were omitted.
21.Plan. The terms and conditions of the Plan (including the forfeiture events under Section 12.4 of the Plan) are incorporated in this Agreement by reference. In the event of a
6
conflict or inconsistency between the terms and conditions of the Plan and the terms and conditions of this Agreement, the Plan shall govern and control.
22.Entire Agreement. This Agreement and the Plan constitute the entire understanding between Participant and the Company regarding the Option Award. This Agreement and the Plan supersede any prior agreements, commitments, or negotiations concerning the Option Award.
[Signature Page Follows]
7
IN WITNESS WHEREOF, the Company has caused this Agreement to be executed by a duly authorized officer and Participant has executed this Agreement both as of the day and year first above written.
|
| MONSTER BEVERAGE CORPORATION | ||
| | | ||
| | | ||
| | By: | | |
[_____________] | | | Name: | [_____________] |
| | | Title: | [_____________] |
| | | | |
EXHIBIT 10.2
ANNUAL INCENTIVE AWARD AGREEMENT
This Annual Incentive Award Agreement (along with Exhibit A hereto, this “Agreement”), is made as of [_______], 20[__] by and between Monster Beverage Corporation, a Delaware corporation (the “Company”) and [___________] (“Participant”).
Preliminary Recitals
A.Participant is an Employee of the Company or its Subsidiaries.
B.Pursuant to the Monster Beverage Corporation 2020 Omnibus Incentive Plan, as in effect and as amended from time to time (the “Plan”), the Company desires to grant Participant the Annual Incentive Award (as such term is defined below) subject to the terms and conditions of the Plan and subject further to the terms and conditions set forth below.
C. Capitalized terms not defined in this Agreement shall have the meaning set forth in the Plan.
NOW, THEREFORE, the Company and Participant agree as follows:
1.Grant of the Annual Incentive Award. The Company hereby grants to Participant, subject to the terms and conditions set forth herein and in the Plan, the annual incentive award for the Company’s 20[__] fiscal year pursuant to Exhibit A (the “Annual Incentive Award”).
2.Payment of the Annual Incentive Award. Subject to the terms and conditions contained in this Agreement (including Section 4 of this Agreement), the Annual Incentive Award (if any) will be paid in cash or Shares (or a combination thereof), as determined by the Committee, no later than March 15, 20[__].
3.Termination of the Services. In the event of Participant’s termination of employment or services with the Company or its Subsidiaries as an Employee (the “Services”) during the Company’s 20[__] fiscal year due to death, Disability, termination by the Company and its Subsidiaries without Cause or termination by Participant for Good Reason, Participant shall be entitled to a prorated payment equal to the product of (x) the Annual Incentive Award, if any, that Participant would have earned for the 20[__] fiscal year (calculated without regard to such termination) based on achievement of the applicable performance goals (as described in Exhibit A) and (y) a fraction, the numerator of which is the number of days that Participant was employed by or providing services to the Company or its Affiliates during the 20[__] fiscal year and the denominator of which is 365 (the “Pro-Rata Annual Incentive Award”). The Pro-Rata Annual Incentive Award (if any) shall be paid at the same time and subject to the same terms under Section 3 of this Agreement. Notwithstanding anything in this Agreement to the contrary, Participant shall forfeit the Annual Incentive Award (or the Pro-Rata Annual Incentive Award, as applicable) and have no right to payment hereunder if the Services are terminated for Cause or Participant voluntarily terminates the Services without Good Reason, at any time during the Company’s 20[__] fiscal year; provided that if Participant’s employment is terminated for any reason following the end of the Company’s 20[__] fiscal year but prior to payment of the Annual Incentive Award (or Pro-Rata Annual Incentive Award), if any, such payment will remain payable to Participant pursuant to Section 3 of this Agreement. “Cause” means (a) the Company or an Affiliate having “cause” to terminate the Services, as defined in any employment or consulting agreement or similar services agreement between Participant and the Company or an Affiliate in effect at the time of such termination, or (b) in the absence of any such employment, consulting or similar services agreement (or the absence of any definition of “Cause”
contained therein), means, as determined by the Committee, Participant’s (i) act(s) of fraud or dishonesty, (ii) knowing and material failure to comply with applicable laws or regulations or satisfactorily perform Participant’s services with the Company or its Affiliates, (iii) insubordination or (iv) drug or alcohol abuse.
4.Transferability. The Annual Incentive Award may only be transferred pursuant to the requirements under Section 11.3 of the Plan.
5.No Rights as Stockholder. Participant shall have no rights as a stockholder with respect to any Share that may be otherwise delivered pursuant to the Annual Incentive Award unless and until Participant becomes the holder of record or the beneficial owner of such Share, and no adjustment shall be made for dividends or distributions or other rights in respect of such Share for which the record date is prior to the date upon which Participant becomes the holder of record or the beneficial owner thereof.
6.Tax Withholding. All amounts payable to Participant under this Agreement shall be subject to all applicable withholding taxes, normal payroll withholding, and any other deductions, if required by law to be withheld.
7.Notices. Any notice required or permitted to be given hereunder to the Company shall be addressed as follows:
|
| Monster Beverage Corporation |
| |
| | Attn: [_____________] | | |
| | 1 Monster Way | | |
| | Corona, CA 92879 | | |
| | HumanResources@Monsterenergy.com | | |
Any notice required or permitted to be given hereunder to Participant shall be addressed to Participant at the latest address the Company has for Participant in its records. Such notice shall be deemed to have been duly given if (i) delivered personally, (ii) sent by certified, registered or express mail, postage prepaid, return receipt requested, or (iii) by a reputable overnight delivery service. Any such notice shall be deemed to have been received (x) if by personal delivery, on the day after such delivery, (y) if by certified or registered mail, on the fifth business day after the mailing thereof, or (z) if by express mail or overnight delivery service, on the day delivered. Notwithstanding the foregoing, any notice required or permitted hereunder from the Company to Participant (or vice-versa) may be made by electronic means, including by electronic mail to the Company-maintained electronic mailbox of Participant (or the Company-maintained electronic mailbox for the Company’s Human Resources department, which electronic mailbox address is set forth above), and Participant and the Company hereby consent to receive such notice by electronic delivery. To the extent permitted in an electronically delivered notice described in the previous sentence, Participant and the Company shall be permitted to respond to such notice or communication by way of a responsive electronic communication, including by electronic mail.
8.No Right to Continue the Services. This Agreement shall not confer upon Participant any right with respect to continuance of the Services nor shall it interfere in any way with the right of the Company or its Subsidiaries to terminate the Services at any time.
9.Compliance with Law and Regulation. This Agreement and the obligation of the Company to award and pay the Annual Incentive Award, and any other obligations of the Company under this
2
Agreement, shall be subject to all applicable federal and state laws, rules and regulations and to such approvals by any government or regulatory agency as may be required.
10.Amendment. No modification, amendment or waiver of any of the provisions of this Agreement shall be effective unless in writing specifically referring hereto, and signed by both parties.
11.Binding Effect. This Agreement shall be binding upon and inure to the benefit of the parties to this Agreement and their respective successors and assigns. Nothing in this Agreement, express or implied, is intended or shall be construed to give any person other than the parties to this Agreement or their respective successors or assigns any legal or equitable right, remedy or claim under or in respect of any agreement or any provision contained herein.
12.Governing Law. This Agreement shall be construed according to the laws of the State of Delaware and all provisions hereof shall be administered according to and its validity shall be determined under, the laws of such State, except where preempted by federal laws.
13.Waiver; Cumulative Rights. The failure or delay of either party to require performance by the other party of any provision hereof shall not affect its right to require performance of such provision unless and until such performance has been waived in writing. Each and every right hereunder is cumulative and may be exercised in part or in whole from time to time.
14.Counterparts; Electronic Delivery and Acceptance. This Agreement may be signed (including by electronic signature methods) in two (2) counterparts, each of which shall be an original, but both of which shall constitute but one and the same instrument. The Company may, in its sole discretion, decide to deliver any document related to current or future participation in the Plan by electronic means. Participant and the Company each agrees and acknowledges that the use of electronic media (including, without limitation, an electronic signature or a clickthrough button or checkbox on a website of the Company or a third party administrator designated by the Company) to indicate Participant’s confirmation, consent, signature, agreement and delivery of this Agreement and the Annual Incentive Award is legally valid and has the same legal force and effect as if Participant and the Company signed and executed this Agreement in paper form. The same use of electronic media may be used for any amendment or waiver of this Agreement.
15.Headings. The headings contained in this Agreement are for reference purposes only and shall not affect the meaning or interpretation of this Agreement.
16.Severability. If any provision of this Agreement shall for any reason be held to be invalid or unenforceable, such invalidity or unenforceability shall not affect any other provision hereof, and this Agreement shall be construed as if such invalid or unenforceable provision were omitted.
17.Plan. The terms and conditions of the Plan (including the forfeiture events under Section 12.4 of the Plan) are incorporated in this Agreement by reference. In the event of a conflict or inconsistency between the terms and conditions of the Plan and the terms and conditions of this Agreement, the Plan shall govern and control.
18.Section 409A of the Code. It is intended that the Annual Incentive Award be exempt from or compliant with Section 409A of the Code (together with any Department of Treasury regulation and other interpretive guidance issued thereunder, including without limitation any such regulation or other
3
guidance that may be issued after the date hereof, “Section 409A”) and this Agreement shall be interpreted, construed, and operated to reflect such intent. However, notwithstanding any other provision of this Agreement, if at any time the Committee determines that the Annual Incentive Award (or any portion thereof) may be subject to Section 409A, the Committee shall have the right in its sole discretion (without any obligation to do so or to indemnify Participant or any other person for failure to do so) to adopt such amendments to this Agreement, or adopt other policies and procedures (including amendments, policies, and procedures with retroactive effect), or take any other action, as the Committee determines is necessary or appropriate either for the Annual Incentive Award to be exempt from the application of Section 409A or to comply with the requirements of Section 409A.
19.Entire Agreement. This Agreement constitutes the entire understanding between Participant and the Company regarding the Annual Incentive Award. This Agreement supersedes any prior agreements, commitments, or negotiations concerning the Annual Incentive Award.
[Signature page follows]
4
IN WITNESS WHEREOF, the Company has caused this Agreement to be executed by a duly authorized officer and Participant has executed this Agreement both as of the day and year first above written.
|
| MONSTER BEVERAGE CORPORATION | |
| | | |
| | | |
| | By: | |
[_____________] | | | Name: [_____________] |
| | | Title: [_____________] |
Exhibit A to Annual Incentive Award Agreement
20[__] Award
The Annual Incentive Award will be based on both an Adjusted Operating Income (as such term is defined below) performance component (pursuant to the table below) (75% weighting) and a component based on Participant’s and/or the Company’s performance during the 20[__] fiscal year, as determined by the Committee (25% weighting). The target bonus payable under this Agreement is [___]% of Participant’s 20[__] base salary (the “Target”).
Adjusted Operating Income Component (75% weighting)
Performance Level | 20[__] Adjusted Operating Income | Adjusted Operating Income Component |
Below Threshold | Below $[___] | [_]% |
Threshold | $[___] | [_]%* |
Target | $[___] | [_]%* |
Maximum | $[___] | [_]%* |
* Linear interpolation applies between threshold/target and target/maximum performance levels.
“Adjusted Operating Income” means [_].
Discretionary Component (25% weighting)
Following the conclusion of the Company’s 20[__] fiscal year, the Committee will make a determination as to Participant’s overall performance for the year, considering financial, operational, stock price, strategic initiatives and other company and individual performance considerations. The Committee will determine the achievement of this discretionary component, expressed as a percentage of the Target based on the following table:
Performance Level | Discretionary Component Achievement |
Below Threshold | [_]% |
Threshold | [_]% |
Target | [_]% |
Maximum | [_]% |
Payout Calculation
The Annual Incentive Award payout will be equal to the weighted sum of achievements under the Adjusted Operating Income component and the discretionary component described above. Achievement levels under the Adjusted Operating Income component and the discretionary component described above are independent of each other (i.e., payment can be achieved under one component even if no payout is made under the other component).
A-1
Exhibit 10.3
PERFORMANCE SHARE UNIT AWARD AGREEMENT
This Performance Share Unit Award Agreement (along with Exhibit A hereto, this “Agreement”), is made as of [_______], 20[___] by and between Monster Beverage Corporation, a Delaware corporation (the “Company”), and [___________] (“Participant”).
Preliminary Recitals
A.Participant is an Employee of the Company or its Subsidiaries.
B.Pursuant to the Monster Beverage Corporation 2020 Omnibus Incentive Plan, as in effect and as amended from time to time (the “Plan”), the Company desires to grant Participant the Performance Award (as such term is defined below) subject to the terms and conditions of the Plan and subject further to the terms and conditions set forth below.
C.Capitalized terms not otherwise defined in this Agreement shall have the meaning given to them in the Plan.
NOW, THEREFORE, the Company and Participant agree as follows:
1.Grant of the Performance Award. The Company hereby grants to Participant, subject to the terms and conditions set forth herein and in the Plan, the Award of “Performance Share Units” set forth in Exhibit A (the “Performance Award”).
2.Vesting. Subject to Participant’s continued employment with, or services to, the Company or its Affiliates, as an Employee (the “Services”) on the relevant “Vesting Date” set forth in Exhibit A, and the satisfaction of the performance goals set forth in Exhibit A, the Performance Award shall vest (in whole or in part, as applicable) on the Vesting Date.
3.Settlement of the Performance Award. On the earliest practicable date (but no later than March 15th of the year following the Vesting Date of the applicable “Performance Period” set forth in Exhibit A, unless otherwise specified in Section 4 below) after the applicable Vesting Date, the Company shall issue Shares to Participant with respect to the portion of the Performance Award corresponding to the level of performance achieved during the Performance Period, as set forth in Exhibit A; provided that, Participant has not previously forfeited the Performance Award in accordance with Section 4 below.
4.Termination of the Services. Except as may be provided in an employment agreement or in any other agreement with the Company or one of its Affiliates, or as the Committee may otherwise determine in its sole discretion, in the event that the Services terminate for any reason prior to the Vesting Date (including a termination of the Services by the Company for Cause (as defined below)), the entire portion of the Performance Award shall be forfeited without the payment of consideration; provided that, subject to Section 7.4 of the Plan, if the Services are terminated on or after the Vesting Date set forth in Exhibit A but the portion of the Performance Award that vested on such Vesting Date remains unpaid, Participant shall remain eligible to receive the vested portion of the Performance Award pursuant to Section 3. For purposes of this Agreement, “Cause” means (a) the Company or an Affiliate having “cause” to terminate the Services, as defined in any employment or consulting agreement or similar services agreement between Participant and the Company or an Affiliate in effect at the time of such termination, or (b) in the absence of any such employment, consulting or similar services agreement (or the absence of any definition of “Cause” contained therein), means, as determined by the Committee,
Participant’s (i) act(s) of fraud or dishonesty, (ii) knowing and material failure to comply with applicable laws or regulations or satisfactorily perform Participant’s services with the Company or its Affiliates, (iii) insubordination or (iv) drug or alcohol abuse. For the avoidance of doubt, if a consultant becomes an employee or a Director or an employee becomes a consultant or a Director, without a break in service to the Company, the “Services” shall include both employment as an employee and service as a consultant or a Director and no termination of the Services shall occur.
5.Transferability. The Performance Award may only be transferred pursuant to the requirements under Section 11.3 of the Plan.
6.Adjustments; Change in Control.
a.Subject to Sections 6(b) and 6(c) below and Section 11.2 of the Plan, in the event of any merger, reorganization, consolidation, recapitalization, dividend or distribution (whether in cash, shares or other property, other than a regular cash dividend), stock split, reverse stock split, spin-off or similar transaction or other change in corporate structure affecting the Shares or the value thereof, such adjustments and other substitutions shall be made to the Performance Award as the Committee deems equitable or appropriate to prevent dilution or enlargement of the rights of Participants under the Plan, taking into consideration the accounting and tax consequences. Any adjustment under this Section 6(a) shall be made by the Committee, whose determination as to what adjustments shall be made, if any, and the extent thereof, will be conclusive and binding for all purposes.
b.In the event of a Change in Control in which the successor company assumes or replaces the Performance Award (or in which the Company is the ultimate parent corporation and continues the Performance Award), and such Change in Control occurs within the first calendar year of the Performance Period (as such term is defined in Exhibit A), the entire Performance Award shall automatically convert into Restricted Stock Units, and the number of Shares underlying such Restricted Stock Units to be delivered to Participant shall be based on the number of Shares deliverable at “Target Performance” (as described in Exhibit A); provided that, if the Change in Control occurs within the second calendar year or third calendar year of the Performance Period, the entire Performance Award shall automatically convert into Restricted Stock Units, and the number of Shares underlying such Restricted Stock Units to be delivered to Participant shall be based on the number of Shares deliverable at the actual level of performance for the portion of the Performance Period which has elapsed as of the date of the Change in Control, which performance shall be determined by the results of the performance measures outlined in Exhibit A. Any Restricted Stock Unit under this Section 6(c) will remain unvested until the applicable Vesting Date; provided that, in the event that Participant’s employment or service with such successor company (or a subsidiary thereof) terminates other than due to a termination of the Services by the Company for Cause within twenty four (24) months following such Change in Control, the Restricted Stock Units shall be one hundred percent (100%) vested as of such termination date.
c.In the event of a Change in Control in which the successor company does not assume or replace the Performance Award (or the Company is the ultimate parent corporation and does not continue the Performance Award), and such Change in Control occurs within the first calendar year of the Performance Period, the entire Performance Award shall be considered to be earned and payable at “Target Performance” and any other restriction shall lapse and the Performance Award shall be immediately settled or distributed; provided that, if the Change in Control occurs within the second calendar year or third calendar year of the Performance Period, the Performance Award shall be considered to be earned and payable at the actual level of performance for the portion of the Performance Period which has elapsed as of the date of the Change in Control, which performance shall be based on the results
2
of the performance measures outlined in Exhibit A, and any other restriction shall lapse and the Performance Award shall be immediately settled or distributed.
7.No Rights as Stockholder. Participant shall have no rights as a stockholder with respect to any Share underlying a Performance Award unless and until Participant becomes the holder of record or the beneficial owner of such Share, and, subject to Section 8 of this Agreement, no adjustment shall be made for dividends or distributions or other rights in respect of such Share for which the record date is prior to the date upon which Participant becomes the holder of record or the beneficial owner thereof.
8.Dividend Equivalents. The Company will credit the Performance Award (or a portion thereof, as applicable) with Dividend Equivalent payments following the payment by the Company of dividends on Shares. The Company will provide such Dividend Equivalents in Shares having a Fair Market Value per Share, as of the date of such dividend payment, equal to the per-Share amount of such applicable dividend, and shall be payable at the same time as (and only if) the Performance Award (or a portion thereof, as applicable) is settled in accordance with Section 3 above. In the event that the Performance Award is forfeited by its terms, Participant shall have no right to Dividend Equivalent payments in respect of the Performance Award.
9.Tax Withholding. The Company shall have the right to require Participant to remit to the Company an amount sufficient to satisfy any federal, state or local withholding tax requirements related to any payment or benefit under this Agreement and to take such other action as may be necessary in the opinion of the Committee to satisfy all obligations for the payment of such withholding taxes.
10.Fractional Shares. Notwithstanding any other provision of this Agreement, no fractional Shares shall be issued upon settlement of the Performance Award, and the Company shall not be under any obligation to compensate Participant in any way for such fractional shares; provided that, to the extent any fractional Shares are settled in respect of the Performance Award, such fractional Shares shall be settled in cash.
11.Notices. Any notice required or permitted to be given hereunder to the Company shall be addressed as follows:
Monster Beverage Corporation
Attn: [_____________]
1 Monster Way
Corona, CA 92879
HumanResources@Monsterenergy.com
Any notice required or permitted to be given hereunder to Participant shall be addressed to Participant at the latest address the Company has for Participant in its records. Such notice shall be deemed to have been duly given if (i) delivered personally, (ii) sent by certified, registered or express mail, postage prepaid, return receipt requested, or (iii) by a reputable overnight delivery service. Any such notice shall be deemed to have been received (x) if by personal delivery, on the day after such delivery, (y) if by certified or registered mail, on the fifth business day after the mailing thereof, or (z) if by express mail or overnight delivery service, on the day delivered. Notwithstanding the foregoing, any notice required or permitted hereunder from the Company to Participant (or vice-versa) may be made by electronic means, including by electronic mail to the Company-maintained electronic mailbox of Participant (or the Company-maintained electronic mailbox for the Company’s Human Resources department, which electronic mailbox address is set forth above), and Participant and the Company hereby consent to receive
3
such notice by electronic delivery. To the extent permitted in an electronically delivered notice described in the previous sentence, Participant and the Company shall be permitted to respond to such notice or communication by way of a responsive electronic communication, including by electronic mail.
12.No Right to Continue the Services. This Agreement shall not confer upon Participant any right with respect to continuance of the Services nor shall it interfere in any way with the right of the Company or its Subsidiaries to terminate the Services at any time.
13.Compliance with Law and Regulation. This Agreement and the obligation of the Company to deliver Shares hereunder shall be subject to all applicable federal and state laws, rules and regulations and to such approvals by any government or regulatory agency as may be required. If at any time the Board shall determine that the (i) listing, registration or qualification of the Shares subject or related thereto upon any securities exchange or under any state or federal law, or (ii) consent, approval or agreement of any government regulatory body, is necessary or desirable as a condition of or in connection with the distribution of Shares pursuant to the Performance Award, such Shares will not be distributed in whole or in part unless such listing, registration, qualification, consent, approval or agreement shall have been effected or obtained free of any conditions not acceptable to the Board.
14.Amendment. No modification, amendment or waiver of any of the provisions of this Agreement shall be effective unless in writing specifically referring hereto, and signed by both parties.
15.Binding Effect. This Agreement shall be binding upon and inure to the benefit of the parties to this Agreement and their respective successors and assigns. Nothing in this Agreement, express or implied, is intended or shall be construed to give any person other than the parties to this Agreement or their respective successors or assigns any legal or equitable right, remedy or claim under or in respect of any agreement or any provision contained herein.
16.Governing Law. This Agreement shall be construed according to the laws of the State of Delaware and all provisions hereof shall be administered according to and its validity shall be determined under, the laws of such State, except where preempted by federal laws.
17.Waiver; Cumulative Rights. The failure or delay of either party to require performance by the other party of any provision hereof shall not affect its right to require performance of such provision unless and until such performance has been waived in writing. Each and every right hereunder is cumulative and may be exercised in part or in whole from time to time.
18.Counterparts; Electronic Delivery and Signature. This Agreement may be signed (including by electronic signature methods) in two (2) counterparts, each of which shall be an original, but both of which shall constitute but one and the same instrument. The Company may, in its sole discretion, decide to deliver any document related to current or future participation in the Plan by electronic means. Participant and the Company each agrees and acknowledges that the use of electronic media (including, without limitation, an electronic signature or a clickthrough button or checkbox on a website of the Company or a third party administrator designated by the Company) to indicate Participant’s confirmation, consent, signature, agreement and delivery of this Agreement and the Performance Award is legally valid and has the same legal force and effect as if Participant and the Company signed and executed this Agreement in paper form. The same use of electronic media may be used for any amendment or waiver of this Agreement.
19.Headings. The headings contained in this Agreement are for reference purposes only and shall not affect the meaning or interpretation of this Agreement.
4
20.Severability. If any provision of this Agreement shall for any reason be held to be invalid or unenforceable, such invalidity or unenforceability shall not affect any other provision hereof, and this Agreement shall be construed as if such invalid or unenforceable provision were omitted.
21.Plan. The terms and conditions of the Plan (including the forfeiture events under Section 12.4 of the Plan) are incorporated in this Agreement by reference. In the event of a conflict or inconsistency between the terms and conditions of the Plan and the terms and conditions of this Agreement, the Plan shall govern and control.
22.Section 409A of the Code. It is intended that the Performance Award be exempt from or compliant with Section 409A of the Code (together with any Department of Treasury regulation and other interpretive guidance issued thereunder, including without limitation any such regulation or other guidance that may be issued after the date hereof, “Section 409A”) and this Agreement shall be interpreted, construed, and operated to reflect such intent. However, notwithstanding any other provision of the Plan or this Agreement, if at any time the Committee determines that the Performance Award (or any portion thereof) may be subject to Section 409A, the Committee shall have the right in its sole discretion (without any obligation to do so or to indemnify Participant or any other person for failure to do so) to adopt such amendments to the Plan or this Agreement, or adopt other policies and procedures (including amendments, policies, and procedures with retroactive effect), or take any other action, as the Committee determines is necessary or appropriate either for the Performance Award to be exempt from the application of Section 409A or to comply with the requirements of Section 409A. A termination of the Services shall not be deemed to have occurred for purposes of any provision of this Agreement providing for the payment of any amounts subject to Section 409A upon or following a termination of the Services unless such termination is also a “separation from service” within the meaning of Section 409A, and for purposes of any such provision of this Agreement, references to a “resignation,” “termination,” “terminate” or like terms shall mean separation from service. If Participant is a “specified employee” (as defined under Section 409A) and should any portion of the Shares that would otherwise be settled under the Performance Award be determined to be payments that are not exempt from Section 409A, such Shares, to the extent otherwise payable within six (6) months after a “separation from service” (as defined under Section 409A), and to the extent necessary to avoid the imposition of taxes under Section 409A, will be settled on the earlier of the date that is six (6) months and one day after the date of such separation from service or the date of Participant’s death.
23.Entire Agreement. This Agreement and the Plan constitute the entire understanding between Participant and the Company regarding the Performance Award. This Agreement and the Plan supersede any prior agreements, commitments, or negotiations concerning the Performance Award.
[Signature page follows]
5
IN WITNESS WHEREOF, the Company has caused this Agreement to be executed by a duly authorized officer and Participant has executed this Agreement both as of the day and year first above written.
|
| MONSTER BEVERAGE CORPORATION | ||
| | | ||
| | | ||
| | By: | | |
[_____________] | | | Name: | [_____________] |
| | | Title: | [_____________] |
| | | ||
Exhibit A to Performance Share Unit Award Agreement
Performance Goals for 20[__]-20[__] Performance Period
For purposes of this Agreement, the performance goals for the Performance Period indicated below are as follows:
Performance Level | Performance Goals Cumulative EPS For the Following Performance Period: 1/1/20[__]-12/31/20[__] | EPS Performance Percentage |
Below Threshold | | [_]% |
Threshold | | [_]%* |
Target | | [_]%* |
Maximum | | [_]%* |
* Linear interpolation applies between threshold/target and target/maximum performance levels.
Performance Period | Threshold | Target | Maximum | Vesting Date |
20[__]-20[__] (3 years) | [___] | [___] | [___] | 12/31/20[__] |
“Adjusted EPS” means [_].
“Cumulative EPS” means the sum of the Adjusted EPS during the Performance Period or portion thereof.
“EPS” means earnings per share.
“EPS Performance Percentage” means [_].
A-1
EXHIBIT 10.4
RESTRICTED STOCK UNIT AWARD AGREEMENT
This Restricted Stock Unit Award Agreement (this “Agreement”), is made as of [_______], 20[__] (the “Grant Date”) by and between Monster Beverage Corporation, a Delaware corporation (the “Company”), and [___________] (“Participant”).
Preliminary Recitals
A.Participant is an Employee of the Company or its Subsidiaries.
B.Pursuant to the Monster Beverage Corporation 2020 Omnibus Incentive Plan, as in effect and as amended from time to time (the “Plan”), the Company desires to grant Participant an award of Restricted Stock Units, subject to the terms and conditions of the Plan and subject further to the terms and conditions set forth below.
C.Capitalized terms not otherwise defined in this Agreement shall have the meaning given to them in the Plan.
NOW, THEREFORE, the Company and Participant agree as follows:
1.Grant of the RSU Award. The Company hereby grants to Participant, subject to the terms and conditions set forth herein and in the Plan, [________] Restricted Stock Units, each of which shall be deemed to be the equivalent of one Share (the “RSU Award”).
2.Vesting. Subject to Participant’s continued employment with, or services to, the Company or its Affiliates, as an Employee or a Director (the “Services”) on the relevant “Vesting Date” set forth below, the RSU Award shall vest with respect to the number of Restricted Stock Units listed in Column “A” on the corresponding Vesting Date listed in Column “B.”
Column “A” | Column “B” | |
Number of Restricted Stock Units | Vesting Date | |
[__] | On the first anniversary of the Grant Date | |
[__] | On the second anniversary of the Grant Date | |
[__] | On the third anniversary of the Grant Date | |
[__] | On the fourth anniversary of the Grant Date | |
[__] | On the fifth anniversary of the Grant Date | |
3.Settlement of Restricted Stock Units; Deferrals of Restricted Stock Units.
(a)On the earliest practicable date (but no later than thirty (30) days) after the applicable Vesting Date (as set forth in Section 2 above), the Company shall deliver to Participant, or such Participant’s beneficiary, without charge, one Share for each such Restricted Stock Unit that has vested as of such Vesting Date.
(b)If and to the extent permitted by the Committee, Participant may elect, at such times and in accordance with rules and procedures (or sub-plan) adopted by the Committee (which shall comply with Section 409A of the Code, as applicable), to receive all or any portion of Participant’s compensation, whether payable in cash or in equity, on a deferred basis. Notwithstanding the foregoing, Participant may elect, on a subsequent deferral election form adopted by the Company, to make a subsequent deferral of all or any portion of the Restricted Stock Units subject to the RSU Award in a manner that complies with Section 409A of the Code and applicable Treasury Regulations thereunder (including, without limitation, Treasury Regulation Section 1.409A-2, as may be applicable). Further notwithstanding, the Committee may reject in writing, at a time and in a manner that does not violate Section 409A of the Code, any proposed subsequent deferral election prior to it becoming effective for any or no reason in which case such election will become null and void without further action. Neither the Company nor any affiliate, Committee, director, member or employee thereof or their respective affiliates shall have any liability with respect to any subsequent deferral election described herein or under Section 409A of the Code with respect to the Restricted Stock Units subject to the RSU Award.
4.Termination of the Services.
(a)Death or Disability. If the Services terminate due to death or Disability, prior to the applicable Vesting Date, the RSU Award shall be deemed vested to the extent of the number of Restricted Stock Units that would have vested had the Services continued until the next Vesting Date immediately following the date of Participant’s death or the effective date of the termination of the Services due to Disability. Any remaining unvested Restricted Stock Units shall immediately be forfeited and canceled effective as of the date of Participant’s death or effective date of the termination of the Services due to Disability.
(b)Other Terminations. Notwithstanding anything else herein to the contrary, and except as may be provided in an employment agreement or in any other agreement with the Company or one of its Affiliates, or as the Committee may otherwise determine in its sole discretion, in the event that the Services terminate for any reason other than due to death or Disability prior to an applicable Vesting Date, the unvested portion of the RSU Award shall be forfeited without the payment of consideration. For the avoidance of doubt, if a consultant becomes an employee or a Director or an employee becomes a consultant or a Director, without a break in service to the Company, the “Services” shall include both employment as an employee and service as a consultant or a Director and no termination of the Services shall occur.
5.Transferability. The RSU Award may only be transferred pursuant to the requirements under Section 11.3 of the Plan.
2
6.Adjustments; Change in Control.
(a)Subject to Section 6(b) below and Section 11.2 of the Plan, in the event of any merger, reorganization, consolidation, recapitalization, dividend or distribution (whether in cash, shares or other property, other than a regular cash dividend), stock split, reverse stock split, spin-off or similar transaction or other change in corporate structure affecting the Shares or the value thereof, such adjustments and other substitutions shall be made to the RSU Award as the Committee deems equitable or appropriate to prevent dilution or enlargement of the rights of Participants under the Plan, taking into consideration the accounting and tax consequences. Any adjustment under this Section 6(a) shall be made by the Committee, whose determination as to what adjustments shall be made, if any, and the extent thereof, will be final, binding and conclusive for all purposes.
(b)Notwithstanding anything else herein to the contrary, in the event of a Change in Control, the RSU Award shall have the treatment set forth in Section 10.1 of the Plan.
7.No Rights as Stockholder. Participant shall have no rights as a stockholder with respect to the RSU Award. Participant’s right to receive payment in settlement of any portion of the RSU Award shall be an unfunded entitlement and shall be an unsecured claim against the general assets of the Company. Participant has only the status of a general unsecured creditor hereunder, and this Agreement constitutes only a promise by the Company to settle the value of the Restricted Stock Units that have vested on the applicable settlement date in the manner set forth in Section 3 and Section 6(b) of this Agreement. In the event that Shares are issued to Participant in settlement of the Restricted Stock Units underlying the RSU Award, Participant shall not have any rights as a stockholder with respect to such Shares prior to the date of issuance to Participant of a certificate or certificates for such shares. Shares received upon settlement of Restricted Stock Units shall remain subject to the terms of the Plan and this Agreement.
8.Tax Withholding. The Company shall have the right to require Participant to remit to the Company an amount sufficient to satisfy any federal, state or local withholding tax requirements related to any payment or benefit under this Agreement and to take such other action as may be necessary in the opinion of the Committee to satisfy all obligations for the payment of such withholding taxes.
9.Fractional Shares. Notwithstanding any other provision of this Agreement, no fractional Shares shall be issued upon settlement of the Restricted Stock Units subject to the RSU Award, and the Company shall not be under any obligation to compensate Participant in any way for such fractional shares; provided that, to the extent any fractional Shares are settled in respect of the Restricted Stock Units subject to the RSU Award, such fractional Shares shall be settled in cash.
10.Notices. Any notice required or permitted to be given hereunder to the Company shall be addressed as follows:
|
| Monster Beverage Corporation |
| |
3
| | Attn: [___________] | | |
| | 1 Monster Way | | |
| | Corona, CA 92879 | | |
| | HumanResources@Monsterenergy.com | | |
Any notice required or permitted to be given hereunder to Participant shall be addressed to Participant at the latest address the Company has for Participant in its records. Such notice shall be deemed to have been duly given if (i) delivered personally, (ii) sent by certified, registered or express mail, postage prepaid, return receipt requested, or (iii) by a reputable overnight delivery service. Any such notice shall be deemed to have been received (x) if by personal delivery, on the day after such delivery, (y) if by certified or registered mail, on the fifth business day after the mailing thereof, or (z) if by express mail or overnight delivery service, on the day delivered. Notwithstanding the foregoing, any notice required or permitted hereunder from the Company to Participant (or vice-versa) may be made by electronic means, including by electronic mail to the Company-maintained electronic mailbox of Participant (or the Company-maintained electronic mailbox for the Company’s Human Resources department, which electronic mailbox address is set forth above), and Participant and the Company hereby consent to receive such notice by electronic delivery. To the extent permitted in an electronically delivered notice described in the previous sentence, Participant and the Company shall be permitted to respond to such notice or communication by way of a responsive electronic communication, including by electronic mail.
11.No Right to Continue the Services. This Agreement shall not confer upon Participant any right with respect to continuance of the Services nor shall it interfere in any way with the right of the Company or its Affiliates to terminate the Services at any time.
12.Compliance with Law and Regulation. This Agreement and the obligation of the Company to grant and settle the Restricted Stock Units subject to the RSU Award, and any other obligations of the Company under this Agreement, shall be subject to all applicable federal and state laws, rules and regulations and to such approvals by any government or regulatory agency as may be required.
13.Amendment. No modification, amendment or waiver of any of the provisions of this Agreement shall be effective unless in writing specifically referring hereto, and signed by both parties.
14.Binding Effect. This Agreement shall be binding upon and inure to the benefit of the parties to this Agreement and their respective successors and assigns. Nothing in this Agreement, express or implied, is intended or shall be construed to give any person other than the parties to this Agreement or their respective successors or assigns any legal or equitable right, remedy or claim under or in respect of any agreement or any provision contained herein.
15.Governing Law. This Agreement shall be construed according to the laws of the State of Delaware and all provisions hereof shall be administered according to and its validity shall be determined under, the laws of such State, except where preempted by federal laws.
16.Waiver; Cumulative Rights. The failure or delay of either party to require performance by the other party of any provision hereof shall not affect its right to require
4
performance of such provision unless and until such performance has been waived in writing. Each and every right hereunder is cumulative and may be exercised in part or in whole from time to time.
17.Counterparts; Electronic Delivery and Acceptance. This Agreement may be signed (including by electronic signature methods) in two (2) counterparts, each of which shall be an original, but both of which shall constitute but one and the same instrument. The Company may, in its sole discretion, decide to deliver any document related to current or future participation in the Plan by electronic means. Participant and the Company each agrees and acknowledges that the use of electronic media (including, without limitation, an electronic signature or a clickthrough button or checkbox on a website of the Company or a third party administrator designated by the Company) to indicate Participant’s confirmation, consent, signature, agreement and delivery of this Agreement and the RSU Award is legally valid and has the same legal force and effect as if Participant and the Company signed and executed this Agreement in paper form. The same use of electronic media may be used for any amendment or waiver of this Agreement.
18.Headings. The headings contained in this Agreement are for reference purposes only and shall not affect the meaning or interpretation of this Agreement.
19.Severability. If any provision of this Agreement shall for any reason be held to be invalid or unenforceable, such invalidity or unenforceability shall not affect any other provision hereof, and this Agreement shall be construed as if such invalid or unenforceable provision were omitted.
20.Plan. The terms and conditions of the Plan (including the forfeiture events under Section 12.4 of the Plan) are incorporated in this Agreement by reference. In the event of a conflict or inconsistency between the terms and conditions of the Plan and the terms and conditions of this Agreement, the Plan shall govern and control.
21.Entire Agreement. This Agreement and the Plan constitute the entire understanding between Participant and the Company regarding the RSU Award. This Agreement and the Plan supersede any prior agreements, commitments, or negotiations concerning the RSU Award.
[Signature Page Follows]
5
IN WITNESS WHEREOF, the Company has caused this Agreement to be executed by a duly authorized officer and Participant has executed this Agreement both as of the day and year first above written.
|
| MONSTER BEVERAGE CORPORATION | |
| | | |
| | | |
| | By: | |
[___________] | | | Name: [___________] |
| | | Title: [___________] |
EXHIBIT 31.1
CERTIFICATION PURSUANT TO RULE 13A-14(a) OR 15D-14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934, AS ADOPTED PURSUANT TO SECTION 302 OF THE
SARBANES-OXLEY ACT OF 2002
I, Rodney Sacks, certify that:
| 1. | I have reviewed this quarterly report on Form 10-Q of Monster Beverage Corporation; |
| 2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
| 3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
| 4. | The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
| a. | designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
| b. | designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
| c. | evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
| d. | disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and |
| 5. | The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function): |
| a. | all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and |
| b. | any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. |
Date: | May 7, 2021 |
| /s/Rodney C. Sacks |
| | | Rodney C. Sacks |
| | | Chairman of the Board of Directors |
| | | and Co-Chief Executive Officer |
EXHIBIT 31.2
CERTIFICATION PURSUANT TO RULE 13A-14(a) OR 15D-14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934, AS ADOPTED PURSUANT TO SECTION 302 OF THE
SARBANES-OXLEY ACT OF 2002
I, Hilton Schlosberg, certify that:
| 1. | I have reviewed this quarterly report on Form 10-Q of Monster Beverage Corporation; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a. | designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b. | designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c. | evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d. | disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and |
5. | The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function): |
| a. | all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and |
| b. | any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. |
Date: | May 7, 2021 |
| /s/ Hilton H. Schlosberg |
| | | Hilton H. Schlosberg |
| | | Vice Chairman of the Board of Directors |
| | | and Co-Chief Executive Officer |
EXHIBIT 31.3
CERTIFICATION PURSUANT TO RULE 13A-14(a) OR 15D-14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934, AS ADOPTED PURSUANT TO SECTION 302 OF THE
SARBANES-OXLEY ACT OF 2002
I, Thomas Kelly, certify that:
1. | I have reviewed this quarterly report on Form 10-Q of Monster Beverage Corporation; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
| a. | designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
| b. | designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
| c. | evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
| d. | disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and |
5. | The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function): |
| a. | all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and |
| b. | any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. |
Date: | May 7, 2021 |
| /s/ Thomas J. Kelly | |
| | | Thomas J. Kelly | |
| | | Chief Financial Officer | |
EXHIBIT 32.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the quarterly report of Monster Beverage Corporation (the "Company") on Form 10-Q for the quarter ended March 31, 2021 as filed with the Securities and Exchange Commission (the "Report"), the undersigned, Rodney C. Sacks, Chairman of the Board of Directors and Co-Chief Executive Officer of the Company, certifies, pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
Date: | May 7, 2021 |
| /s/ Rodney C. Sacks |
| | | Rodney C. Sacks |
| | | Chairman of the Board of Directors |
| | | and Co-Chief Executive Officer |
EXHIBIT 32.2
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the quarterly report of Monster Beverage Corporation (the "Company") on Form 10-Q for the quarter ended March 31, 2021 as filed with the Securities and Exchange Commission (the "Report"), the undersigned, Hilton H. Schlosberg, Vice Chairman of the Board of Directors and Co-Chief Executive Officer of the Company, certifies, pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
Date: | May 7, 2021 |
| /s/ Hilton H. Schlosberg | |
| | | Hilton H. Schlosberg | |
| | | Vice Chairman of the Board of Directors and Co- | |
| | | Chief Executive Officer | |
EXHIBIT 32.3
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the quarterly report of Monster Beverage Corporation (the "Company") on Form 10-Q for the quarter ended March 31, 2021 as filed with the Securities and Exchange Commission (the "Report"), the undersigned, Thomas J. Kelly, Chief Financial Officer of the Company, certifies, pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
Date: | May 7, 2021 |
| /s/ Thomas J. Kelly |
| | | Thomas J. Kelly |
| | | Chief Financial Officer |