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STOCK-BASED COMPENSATION | 9 Months Ended
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Sep. 30, 2012
STOCK-BASED COMPENSATION |
STOCK-BASED COMPENSATION |
12. STOCK-BASED COMPENSATION The Company has two stock-based compensation plans under which shares were available for grant at September 30, 2012: the Monster Beverage Corporation 2011 Omnibus Incentive Plan (the “2011 Omnibus Incentive Plan”) and the 2009 Monster Beverage Corporation Stock Incentive Plan for Non-Employee Directors (the “2009 Directors Plan”). The Company recorded $7.9 million and $4.9 million of compensation expense relating to outstanding options, restricted stock awards, stock appreciation rights and restricted stock units during the three-months ended September 30, 2012 and 2011, respectively. The Company recorded $21.6 million and $12.8 million of compensation expense relating to outstanding options, restricted stock awards, stock appreciation rights and restricted stock units during the nine-months ended September 30, 2012 and 2011, respectively. The excess tax benefit realized for tax deductions from non-qualified stock option exercises, disqualifying dispositions of incentive stock options, vesting of restricted stock units and restricted stock awards for the three-months ended September 30, 2012 and 2011 was $1.4 million and $2.2 million, respectively. The excess tax benefit realized for tax deductions from non-qualified stock option exercises, disqualifying dispositions of incentive stock options, vesting of restricted stock units and restricted stock awards for the nine-months ended September 30, 2012 and 2011 was $4.3 million and $3.4 million, respectively. Stock Options Under the Company’s stock-based compensation plans, all stock options granted as of September 30, 2012 were granted at prices based on the fair value of the Company’s common stock on the date of grant. The Company records compensation expense for employee stock options based on the estimated fair value of the options on the date of grant using the Black-Scholes-Merton option pricing formula with the assumptions included in the table below. The Company records compensation expense for non-employee stock options based on the estimated fair value of the options as of the earlier of (1) the date at which a commitment for performance by the non-employee to earn the stock option is reached or (2) the date at which the non-employee’s performance is complete, using the Black-Scholes-Merton option pricing formula with the assumptions included in the table below. The Company uses historical data to determine the exercise behavior, volatility and forfeiture rate of the options. The following weighted-average assumptions were used to estimate the fair value of options granted during:
|  | Three-Months Ended September 30, |  | Nine-Months Ended September 30,
|  | 2012 |  | 2011 |  | 2012 |  | 2011
Dividend yield |  | 0.0 % |  | 0.0 % |  | 0.0 % |  | 0.0 %
Expected volatility |  | 47.7 % |  | 52.7 % |  | 47.9 % |  | 54.1 %
Risk-free interest rate |  | 0.6 % |  | 1.3 % |  | 0.7 % |  | 1.7 %
Expected term |  | 5.4 Years |  | 5.7 Years |  | 5.4 Years |  | 5.9 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. The following table summarizes the Company’s activities with respect to its stock option plans as follows:
Options |  | Number of Shares (In Thousands) |  | Weighted- Average Exercise Price Per Share |  | Weighted- Average Remaining Contractual Term (In Years) |  | Aggregate Intrinsic Value |
Balance at January 1, 2012 |  | 18,569 |  | $ | 8.57 |  | 4.1 |  | $ | 696,371 |
Granted 01/01/12 - 03/31/12 |  | 120 |  | $ | 57.45 |  |  |  |  |
Granted 04/01/12 - 06/30/12 |  | 65 |  | $ | 66.43 |  |  |  |  |
Granted 07/01/12 - 09/30/12 |  | 207 |  | $ | 57.99 |  |  |  |  |
Exercised |  | (3,722) |  | $ | 2.25 |  |  |  |  |
Cancelled or forfeited |  | (147) |  | $ | 20.13 |  |  |  |  |
Outstanding at September 30, 2012 |  | 15,092 |  | $ | 11.33 |  | 4.1 |  | $ | 646,916 |
Vested and expected to vest in the future at September 30, 2012 |  | 14,568 |  | $ | 10.61 |  | 4.0 |  | $ | 634,377 |
Exercisable at September 30, 2012 |  | 11,627 |  | $ | 7.21 |  | 3.2 |  | $ | 544,650 |
The weighted-average grant-date fair value of options granted during the three-months ended September 30, 2012 and 2011 was $24.88 per share and $19.79 per share, respectively. The weighted-average grant-date fair value of options granted during the nine-months ended September 30, 2012 and 2011 was $25.73 per share and $17.64 per share, respectively. The total intrinsic value of options exercised during the three-months ended September 30, 2012 and 2011 was $84.6 million and $9.9 million, respectively. The total intrinsic value of options exercised during the nine-months ended September 30, 2012 and 2011 was $204.3 million and $19.4 million, respectively. Cash received from option exercises under all plans for the three-months ended September 30, 2012 and 2011 was approximately $1.9 million and $6.5 million, respectively. Cash received from option exercises under all plans for the nine-months ended September 30, 2012 and 2011 was approximately $8.4 million and $17.8 million, respectively. At September 30, 2012, there was $36.8 million of total unrecognized compensation expense related to non-vested options granted under the Company’s share-based payment plans. That cost is expected to be recognized over a weighted-average period of 2.4 years. Restricted Stock Awards and Restricted Stock Units Stock-based compensation cost for restricted stock awards and restricted stock units is measured based on the closing fair market value of the Company’s common stock at the date of grant. In the event that the Company has the option and intent to settle a restricted stock unit in cash, the award is classified as a liability and revalued at each balance sheet date. Total cash paid to settle restricted stock unit liabilities and the increase in the liabilities for future cash settlements during the nine-months ended September 30, 2012 and the year ended December 31, 2011 were not material. The following table summarizes the Company’s activities with respect to non-vested restricted stock awards and non-vested restricted stock units as follows:
|  | Number of Shares (in thousands) |  |  |  | Weighted- Average Grant-Date Fair Value |
Non-vested at January 1, 2012 |  | 724 |  |  |  | $ | 41.66 |
Granted 01/01/12 - 03/31/12 |  | 91 |  |  |  | $ | 57.45 |
Granted 04/01/12 - 06/30/12 |  | 60 |  |  |  | $ | 69.98 |
Granted 07/01/12 - 09/30/12 |  | 10 |  |  |  | $ | 59.87 |
Vested |  | (248 | ) |  |  | $ | 41.38 |
Forfeited/cancelled |  | - |  |  |  | $ | - |
Non-vested at September 30, 2012 |  | 637 |  |  |  | $ | 47.00 |
The weighted-average grant-date fair value of restricted stock units and restricted stock awards granted during the three-months ended September 30, 2012 and 2011 was $59.87 and $42.04, respectively. The weighted-average grant-date fair value of restricted stock units and restricted stock awards granted during the nine-months ended September 30, 2012 and 2011 was $62.31 and $41.56, respectively. As of September 30, 2012, 0.5 million restricted stock units and restricted stock awards are expected to vest in the future. At September 30, 2012, total unrecognized compensation expense relating to non-vested restricted stock awards and non-vested restricted stock units was $27.5 million, which is expected to be recognized over a weighted-average period of 2.4 years.

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- Definition The entire disclosure for compensation-related costs for equity-based compensation, which may include disclosure of policies, compensation plan details, allocation of equity compensation, incentive distributions, equity-based arrangements to obtain goods and services, deferred compensation arrangements, employee stock ownership plan details and employee stock purchase plan details. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 718 -SubTopic 10 -Section 50 -Paragraph 4 -URI http://asc.fasb.org/extlink&oid=6415400&loc=d3e5444-113901 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher AICPA -Name Statement of Position (SOP) -Number 93-6 -Paragraph 53 -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy. Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher SEC -Name Staff Accounting Bulletin (SAB) -Number Topic 14 Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 123R -Paragraph 64, 65, A240 -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy. Reference 5: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 718 -SubTopic 40 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=6418621&loc=d3e17540-113929 Reference 6: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 718 -SubTopic 10 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=6415400&loc=d3e5047-113901 Reference 7: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 505 -SubTopic 50 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=6406099&loc=d3e25284-112666 Reference 8: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 718 -SubTopic 10 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=6415400&loc=d3e5070-113901 + Details
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