SEC Filing | Monster Energy Company

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Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

Quarterly Report Pursuant to Section 13 or 15(d)

of the Securities Exchange Act of 1934

For the quarterly period ended March 31, 2023

Commission File Number 001-18761

MONSTER BEVERAGE CORPORATION

(Exact name of registrant as specified in its charter)



Delaware		47-1809393
(State or other jurisdiction of		(I.R.S. Employer
incorporation or organization)		Identification No.)

1 Monster Way

Corona, California 92879

(Address of principal executive offices) (Zip code)

(951) 739 - 6200

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock	MNST	Nasdaq 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.

Yes X No __

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).

Yes X No __

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.


Large accelerated filer ☒		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 transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

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

Yes __ No X

The registrant had 1,046,711,932 shares of common stock, par value $0.005 per share, outstanding as of April 28, 2023.

Table of Contents

MONSTER BEVERAGE CORPORATION AND SUBSIDIARIES

MARCH 31, 2023

INDEX


Part I.	FINANCIAL INFORMATION	Page No.

Item 1.	Condensed Consolidated Financial Statements (Unaudited)

	Condensed Consolidated Balance Sheets as of March 31, 2023 and December 31, 2022	3

	Condensed Consolidated Statements of Income for the Three-Months Ended March 31, 2023 and 2022	4

	Condensed Consolidated Statements of Comprehensive Income for the Three-Months Ended March 31, 2023 and 2022	5

	Condensed Consolidated Statements of Stockholders’ Equity for the Three-Months Ended March 31, 2023 and 2022	6

	Condensed Consolidated Statements of Cash Flows for the Three-Months Ended March 31, 2023 and 2022	7

	Notes to Condensed Consolidated Financial Statements	9

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	32

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	47

Item 4.	Controls and Procedures	47

Part II.	OTHER INFORMATION

Item 1.	Legal Proceedings	48

Item 1A.	Risk Factors	48

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	48

Item 3.	Defaults Upon Senior Securities	48

Item 4.	Mine Safety Disclosures	48

Item 5.	Other Information	48

Item 6.	Exhibits	49

	Signatures	50

Table of Contents

PART I – FINANCIAL INFORMATION

ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

MONSTER BEVERAGE CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

AS OF MARCH 31, 2023 AND DECEMBER 31, 2022

(In Thousands, Except Par Value) (Unaudited)


	March 31,		December 31,
	2023		2022
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	1,672,660	$	1,307,141
Short-term investments		1,383,028		1,362,314
Accounts receivable, net		1,190,351		1,016,203
Inventories		906,723		935,631
Prepaid expenses and other current assets		110,958		109,823
Prepaid income taxes		30,889		33,785
Total current assets		5,294,609		4,764,897

INVESTMENTS		41,152		61,443
PROPERTY AND EQUIPMENT, net		545,922		516,897
DEFERRED INCOME TAXES, net		177,039		177,039
GOODWILL		1,417,941		1,417,941
OTHER INTANGIBLE ASSETS, net		1,222,598		1,220,410
OTHER ASSETS		145,101		134,478
Total Assets	$	8,844,362	$	8,293,105

LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES:
Accounts payable	$	491,249	$	444,265
Accrued liabilities		245,932		172,991
Accrued promotional allowances		308,094		255,631
Deferred revenue		44,440		43,311
Accrued compensation		42,673		72,463
Income taxes payable		55,123		13,317
Total current liabilities		1,187,511		1,001,978

DEFERRED REVENUE		219,764		223,800

OTHER LIABILITIES		41,727		42,286

COMMITMENTS AND CONTINGENCIES (Note 11)

STOCKHOLDERS’ EQUITY¹:
Common stock - $0.005 par value; 1,250,000 shares authorized; 1,117,392 shares issued and 1,046,616 shares outstanding as of March 31, 2023; 1,283,688 shares issued and 1,044,600 shares outstanding as of December 31, 2022		5,587		6,418
Additional paid-in capital		4,829,301		4,776,804
Retained earnings		4,706,192		9,001,173
Accumulated other comprehensive loss		(147,911)		(159,073)
Common stock in treasury, at cost; 70,776 shares and 239,088 shares as of March 31, 2023 and December 31, 2022, respectively		(1,997,809)		(6,600,281)
Total stockholders’ equity		7,395,360		7,025,041
Total Liabilities and Stockholders’ Equity	$	8,844,362	$	8,293,105

¹ Stock Split - On February 28, 2023, the Company announced a two-for-one stock split of its common stock to be effected in the form of a 100% stock dividend. The stock dividend was issued on March 27, 2023 (the “Stock Split”). The accompanying condensed consolidated financial statements and notes thereto have been retroactively updated to reflect the Stock Split. See Note 1 for additional information.

See accompanying notes to condensed consolidated financial statements.

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MONSTER BEVERAGE CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

FOR THE THREE-MONTHS ENDED MARCH 31, 2023 AND 2022

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


	Three-Months Ended
	March 31,
	2023		2022

NET SALES	$	1,698,930	$	1,518,574

COST OF SALES		801,081		741,907

GROSS PROFIT		897,849		776,667

OPERATING EXPENSES		412,785		377,178

OPERATING INCOME		485,064		399,489

INTEREST and OTHER INCOME (EXPENSE), net		12,496		(7,300)

INCOME BEFORE PROVISION FOR INCOME TAXES		497,560		392,189

PROVISION FOR INCOME TAXES		100,116		97,986

NET INCOME	$	397,444	$	294,203

NET INCOME PER COMMON SHARE¹:
Basic	$	0.38	$	0.28
Diluted	$	0.38	$	0.27

WEIGHTED AVERAGE NUMBER OF SHARES OF COMMON STOCK AND COMMON STOCK EQUIVALENTS¹:
Basic		1,044,909		1,058,810
Diluted		1,059,069		1,071,108

¹ Stock Split - The accompanying condensed consolidated financial statements and notes thereto have been retroactively updated to reflect the Stock Split. See Note 1 for additional information.

See accompanying notes to condensed consolidated financial statements.

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MONSTER BEVERAGE CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

FOR THE THREE-MONTHS ENDED MARCH 31, 2023 AND 2022

(In Thousands) (Unaudited)


	Three-Months Ended
	March 31,
	2023		2022
Net income, as reported	$	397,444	$	294,203
Other comprehensive income (loss):
Change in foreign currency translation adjustment		7,981		1,079
Available-for-sale investments:
Change in net unrealized gains (losses)		3,181		(4,059)
Other comprehensive income (loss)		11,162		(2,980)
Comprehensive income	$	408,606	$	291,223

See accompanying notes to condensed consolidated financial statements.

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MONSTER BEVERAGE CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

FOR THE THREE-MONTHS ENDED MARCH 31, 2023 AND 2022

(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, 2022	1,283,688	$	6,418	$	4,776,804	$	9,001,173	$	(159,073)	(239,088)	$	(6,600,281)	$	7,025,041
Stock-based compensation	—		—		15,743		—		—	—		—		15,743
Stock options/awards	3,704		19		36,329		—		—	—		—		36,348
Unrealized gain (loss), net on available-for-sale securities	—		—		—		—		3,181	—		—		3,181
Repurchase of common stock	—		—		—		—		—	(1,688)		(90,378)		(90,378)
Retirement of treasury stock	(170,000)		(850)		425		(4,692,425)		—	170,000		4,692,850		—
Foreign currency translation	—		—		—		—		7,981	—		—		7,981
Net income	—		—		—		397,444		—	—		—		397,444
Balance, March 31, 2023	1,117,392	$	5,587	$	4,829,301	$	4,706,192	$	(147,911)	(70,776)	$	(1,997,809)	$	7,395,360



								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, 2021	1,280,086	$	6,400	$	4,649,420	$	7,809,549	$	(69,165)	(221,440)	$	(5,829,253)	$	6,566,951
Stock-based compensation	—		—		16,175		—		—	—		—		16,175
Stock options/awards	970		6		4,504		—		—	—		—		4,510
Unrealized gain (loss), net on available-for-sale securities	—		—		—		—		(4,059)	—		—		(4,059)
Repurchase of common stock	—		—		—		—		—	(332)		(12,187)		(12,187)
Foreign currency translation	—		—		—		—		1,079	—		—		1,079
Net income	—		—		—		294,203		—	—		—		294,203
Balance, March 31, 2022	1,281,056	$	6,406	$	4,670,099	$	8,103,752	$	(72,145)	(221,772)	$	(5,841,440)	$	6,866,672

¹ Stock Split - The accompanying condensed consolidated financial statements and notes thereto have been retroactively updated to reflect the Stock Split. See Note 1 for additional information.

See accompanying notes to condensed consolidated financial statements.

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MONSTER BEVERAGE CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE THREE-MONTHS ENDED MARCH 31, 2023 AND 2022

(In Thousands) (Unaudited)


	Three-Months Ended
	March 31,
	2023		2022
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	397,444	$	294,203
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation and amortization		16,808		14,599
Non-cash lease expense		2,160		1,481
Gain on disposal of property and equipment		(385)		(6)
Stock-based compensation		16,051		16,332
Effect on cash of changes in operating assets and liabilities net of acquisition:
Accounts receivable		(167,512)		(134,433)
Inventories		35,495		(208,673)
Prepaid expenses and other assets		1,273		(29,621)
Prepaid income taxes		3,986		(5,885)
Accounts payable		51,124		18,329
Accrued liabilities		14,207		20,603
Accrued promotional allowances		48,265		61,171
Accrued compensation		(30,261)		(32,122)
Income taxes payable		41,617		(9,818)
Other liabilities		(751)		(596)
Deferred revenue		(5,046)		(5,915)
Net cash provided by (used in) operating activities		424,475		(351)

CASH FLOWS FROM INVESTING ACTIVITIES:
Sales of available-for-sale investments		522,501		504,808
Purchases of available-for-sale investments		(518,751)		(441,925)
Acquisition of CANarchy, net of cash		—		(330,356)
Purchases of property and equipment		(40,100)		(21,511)
Proceeds from sale of property and equipment		564		14
Additions to intangibles		(3,952)		(8,419)
Increase in other assets		(13,028)		(6,241)
Net cash used in investing activities		(52,766)		(303,630)

CASH FLOWS FROM FINANCING ACTIVITIES:
(Payments) borrowings on debt		(7,271)		3,454
Issuance of common stock		36,348		4,510
Purchases of common stock held in treasury		(35,126)		(12,187)
Net cash used in financing activities		(6,049)		(4,223)

Effect of exchange rate changes on cash and cash equivalents		(141)		(3,472)

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS		365,519		(311,676)
CASH AND CASH EQUIVALENTS, beginning of period		1,307,141		1,326,462
CASH AND CASH EQUIVALENTS, end of period	$	1,672,660	$	1,014,786

SUPPLEMENTAL INFORMATION:
Cash paid during the period for:
Interest	$	96	$	91
Income taxes	$	56,985	$	112,863

See accompanying notes to condensed consolidated financial statements.

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MONSTER BEVERAGE CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE THREE-MONTHS ENDED MARCH 31, 2023 AND 2022

(In Thousands) (Unaudited) (Continued)

SUPPLEMENTAL DISCLOSURE OF NON-CASH ITEMS

Included in accrued liabilities as of March 31, 2023 and 2022 were $9.6 million and $11.3 million, respectively, related to net additions to other intangible assets.

Included in accounts payable as of March 31, 2023 and 2022 were $2.5 million and $4.0 million, respectively, related to equipment purchases.

Included in accrued liabilities as of March 31, 2023 was $55.3 million of withholding taxes due related to common stock purchased from employees.

See accompanying notes to condensed consolidated financial statements.

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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, 2022 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, 2023 and 2022, 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.

Treasury Stock Retirement – On March 10, 2023, the Company retired 170.0 million shares (stock split adjusted) of treasury stock owned by the Company. The retired treasury stock had a carrying value of approximately $4.69 billion. The Company’s accounting policy upon the formal retirement of treasury stock is to deduct its par value from common stock and to reflect any excess of cost over par as a deduction from retained earnings.

Stock Split – On February 28, 2023, the Company announced a two-for-one stock split of the Company’s common stock to be effected in the form of a 100% stock dividend. The common stock dividend was issued on March 27, 2023 (the “Stock Split”) and the Company’s common stock began trading at the split adjusted price on March 28, 2023. Accordingly, all per share amounts, average common stock outstanding, common stock outstanding, common stock repurchased and equity-based compensation presented in the condensed consolidated financial statements and notes have been adjusted retroactively, where applicable, to reflect the Stock Split. Stockholders’ equity has been retroactively adjusted, where applicable, to give effect to the Stock Split for all periods presented by reclassifying the par value of the additional shares issued in connection with the Stock Split to Common Stock from Retained Earnings and Additional Paid-in Capital.

Recent Accounting Pronouncements

There have been no changes in recently issued or adopted accounting pronouncements that would materially impact the Company from those disclosed in our Annual Report on Form 10-K for the fiscal year ended December 31, 2022.

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MONSTER BEVERAGE CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

2.	REVENUE RECOGNITION

Revenues are accounted for in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 606, “Revenue from Contracts with Consumers”. The Company has four operating and reportable segments: (i) Monster Energy® Drinks segment (“Monster Energy® Drinks”), which is primarily comprised of the Company’s Monster Energy® drinks, Reign Total Body Fuel® high performance energy drinks, Monster® Tour Water^TM and Reign Storm® total wellness energy drinks, (ii) Strategic Brands segment (“Strategic Brands”), which is primarily comprised of the various energy drink brands acquired from The Coca-Cola Company (“TCCC”) in 2015 as well as the Company’s affordable energy brands, (iii) Alcohol Brands segment (“Alcohol Brands”), which is primarily comprised of the various craft beers and hard seltzers purchased as part of the acquisition of CANarchy Craft Brewery Collective LLC (“CANarchy”) on February 17, 2022 (the “CANarchy Transaction”) as well as The Beast Unleashed^TM flavored malt beverages (“FMBs”) and (iv) Other segment (“Other”), which is comprised of certain products sold by American Fruits and Flavors, LLC, a wholly-owned subsidiary of the Company, to independent third-party customers (the “AFF Third-Party Products”).

The Company’s Monster Energy® Drinks segment primarily 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 ready-to-drink packaged energy drinks directly to retail grocery and specialty chains, wholesalers, club stores, mass merchandisers, convenience and gas 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 and gas 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.

The Company’s Alcohol Brands segment primarily generates operating revenues by selling kegged and ready-to-drink canned beers, hard seltzers and FMBs primarily to beer distributors in the United States.

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, 2023 and December 31, 2022.

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 for the Company’s energy drink products primarily include consideration given to the Company’s non-alcohol 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;

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MONSTER BEVERAGE CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

●

the Company’s 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 wholly-owned subsidiaries of TCCC (the “TCCC Subsidiaries”) and/or to TCCC bottlers/distributors accounted for under the equity method by TCCC (the “TCCC Related Parties”).

The Company’s promotional allowance programs for its energy drink products 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 for its energy drink products 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. Promotional and other allowances for our Alcohol Brands segment primarily include price promotions where permitted.

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 20 years.

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.

Management believes that adequate provision has been made for cash discounts, returns and spoilage based on the Company’s historical experience.

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MONSTER BEVERAGE CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

Disaggregation of Revenue

The following tables disaggregate the Company’s revenue by geographical markets and reportable segments:


	Three-Months Ended March 31, 2023
							Latin
							America
	U.S. and						and
Net Sales	Canada		EMEA¹		Asia Pacific		Caribbean		Total
Monster Energy® Drinks	$	1,021,328	$	277,111	$	121,994	$	141,235	$	1,561,668
Strategic Brands		43,043		30,951		8,983		3,381		86,358
Alcohol Brands		46,290		—		—		—		46,290
Other		4,614		—		—		—		4,614
Total Net Sales	$	1,115,275	$	308,062	$	130,977	$	144,616	$	1,698,930


	Three-Months Ended March 31, 2022
							Latin
							America
	U.S. and						and
Net Sales	Canada		EMEA¹		Asia Pacific		Caribbean		Total
Monster Energy® Drinks	$	925,680	$	260,889	$	110,556	$	107,722	$	1,404,847
Strategic Brands		53,051		30,176		6,662		2,704		92,593
Alcohol Brands²		15,207		—		—		—		15,207
Other		5,927		—		—		—		5,927
Total Net Sales	$	999,865	$	291,065	$	117,218	$	110,426	$	1,518,574

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

²Effectively from February 17, 2022 to March 31, 2022

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, 2023, the Company had $264.2 million of deferred revenue, which is included in current and long-term deferred revenue in the Company’s condensed consolidated balance sheet. As of December 31, 2022, the Company had $267.1 million of deferred revenue, which is included in current and long-term deferred revenue in the Company’s condensed consolidated balance sheet. During the three-months ended March 31, 2023 and 2022, $9.9 million and $10.0 million, respectively, of deferred revenue was recognized in net sales. See Note 10.

LEASES

The Company leases identified assets comprised of 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 ASC 842, “Leases”. The Company’s operating leases are comprised of real estate and warehouse equipment, and the Company’s finance leases are comprised of vehicles.

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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 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 consolidated statement of income. Interest expense on finance leases is calculated using the amortized cost basis and is included in other income (expense), net in the consolidated statement of income.

The Company’s leases have remaining lease terms of less than one year to 11 years, some of which include options to extend the leases for up to five years, and some of which include options to terminate the leases within one year. The Company has elected not to recognize ROU assets and lease liabilities for short-term operating leases that have a term of 12 months or less.

The components of lease cost were comprised of the following:


	Three-Months		Three-Months
	Ended		Ended
	March 31,		March 31,
	2023		2022
Operating lease cost	$	2,467	$	1,694

Short-term lease cost		979		929

Variable lease cost		215		183

Finance leases:
Amortization of ROU assets		123		127
Interest on lease liabilities		14		3
Finance lease cost		137		130

Total lease cost	$	3,798	$	2,936

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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,
	2023		2022
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash outflows from operating leases	$	2,391	$	1,652
Operating cash outflows from finance leases		14		3
Financing cash outflows from finance leases		598		592

ROU assets obtained in exchange for lease obligations:
Finance leases		2,227		832
Operating leases		313		13,197

ROU assets for operating and finance leases recognized in the Company’s condensed consolidated balance sheets were comprised of the following at:


	March 31, 2023
	Real Estate		Equipment		Total		Balance Sheet Location
Operating leases	$	35,953	$	256	$	36,209	Other Assets
Finance leases		—		3,694		3,694	Property and Equipment, net


	December 31, 2022
	Real Estate		Equipment		Total		Balance Sheet Location
Operating leases	$	37,682	$	330	$	38,012	Other Assets
Finance leases		—		1,598		1,598	Property and Equipment, net

Operating and finance lease liabilities recognized in the Company’s condensed consolidated balance sheets were as follows at:


	March 31, 2023
	Operating Leases		Finance Leases
Accrued liabilities	$	7,642	$	2,393
Other liabilities		27,958		33
Total	$	35,600	$	2,426


	December 31, 2022
	Operating Leases		Finance Leases
Accrued liabilities	$	7,747	$	757
Other liabilities		29,586		41
Total	$	37,333	$	798

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MONSTER BEVERAGE CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

The weighted-average remaining lease terms and weighted-average discount rates for operating and finance leases at March 31, 2023 and December 31, 2022 were as follows:


		March 31, 2023