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SEGMENT INFORMATION
 9 Months Ended
Sep. 30, 2014
SEGMENT INFORMATION  
SEGMENT INFORMATION

17.                            SEGMENT INFORMATION

 

The Company has two operating and reportable segments, namely Direct Store Delivery (“DSD”), whose principal products comprise energy drinks, and Warehouse (“Warehouse”), whose principal products comprise juice-based and soda beverages.  The DSD segment develops, markets and sells products primarily through an exclusive distributor network, whereas the Warehouse segment develops, markets and sells products primarily direct to retailers. Corporate and unallocated amounts that do not relate to DSD or Warehouse segments have been allocated to “Corporate & Unallocated.”

 

The net revenues derived from the DSD and Warehouse segments and other financial information related thereto are as follows:

 

 

 

Three-Months Ended September 30, 2014

 

 

DSD

 

Warehouse

 

Corporate and
Unallocated

 

Total

Net sales

 

 $

609,938

 

 $

26,034

 

 $

-

 

 $

635,972

Contribution margin*

 

232,666

 

604

 

-

 

233,270

Corporate and unallocated expenses

 

-

 

-

 

(43,363)

 

(43,363)

Operating income

 

 

 

 

 

 

 

189,907

Other income (expense)

 

231

 

-

 

(1,269)

 

(1,038)

Income before provision for income taxes

 

 

 

 

 

 

 

188,869

Depreciation and amortization

 

(4,626)

 

(85)

 

(1,419)

 

(6,130)

 

 

 

Three-Months Ended September 30, 2013

 

 

DSD

 

Warehouse

 

Corporate and
Unallocated

 

Total

Net sales

 

 $

566,768

 

 $

23,654

 

 $

-

 

 $

590,422

Contribution margin*

 

194,915

 

(2,193)

 

-

 

192,722

Corporate and unallocated expenses

 

-

 

-

 

(41,293)

 

(41,293)

Operating income

 

 

 

 

 

 

 

151,429

Other income (expense)

 

180

 

-

 

(886)

 

(706)

Income before provision for income taxes

 

 

 

 

 

 

 

150,723

Depreciation and amortization

 

(5,069)

 

(78)

 

(961)

 

(6,108)

 

*Contribution margin is defined as gross profit less certain operating expenses deemed by management to be directly attributable to the respective reportable segment. Contribution margin is used by management as a key indicator of reportable segment profitability.

 

Revenue is derived from sales to external customers.  Operating expenses that pertain to each segment are allocated to the appropriate segment.

 

Corporate and unallocated expenses were $43.4 million for the three-months ended September 30, 2014 and included $21.9 million of payroll costs, of which $7.4 million was attributable to stock-based compensation expense (see Note 14, “Stock-Based Compensation”), $12.7 million of professional service expenses, including accounting and legal costs and $8.8 million of other operating expenses.  Corporate and unallocated expenses were $41.3 million for the three-months ended September 30, 2013 and included $19.8 million of payroll costs, of which $7.2 million was attributable to stock-based compensation expense (see Note 14, “Stock-Based Compensation”), $10.9 million attributable to professional service expenses, including accounting and legal costs, and $10.6 million attributable to other operating expenses.

 

Coca-Cola Refreshments USA Inc. (“CCR”), a customer of the DSD segment, accounted for approximately 28% and 29% of the Company’s net sales for the three-months ended September 30, 2014 and 2013, respectively.

 

Net sales to customers outside the United States amounted to $136.3 million and $121.1 million for the three-months ended September 30, 2014 and 2013, respectively.

 

The net revenues derived from the DSD and Warehouse segments and other financial information related thereto are as follows:

 

 

 

Nine-Months Ended September 30, 2014

 

 

DSD

 

Warehouse

 

Corporate and
Unallocated

 

Total

Net sales

 

 $

1,784,398

 

 $

74,903

 

 $

-

 

 $

1,859,301

Contribution margin*

 

675,281

 

2,221

 

-

 

677,502

Corporate and unallocated expenses

 

-

 

-

 

(122,918)

 

(122,918)

Operating income

 

 

 

 

 

 

 

554,584

Other income (expense)

 

529

 

(1)

 

(1,235)

 

(707)

Income before provision for income taxes

 

 

 

 

 

 

 

553,877

Depreciation and amortization

 

(14,588)

 

(248)

 

(4,288)

 

(19,124)

 

 

 

Nine-Months Ended September 30, 2013

 

 

DSD

 

Warehouse

 

Corporate and
Unallocated

 

Total

Net sales

 

 $

1,627,936

 

 $

77,643

 

 $

-

 

 $

1,705,579

Contribution margin*

 

548,906

 

(682)

 

-

 

548,224

Corporate and unallocated expenses

 

-

 

-

 

(110,064)

 

(110,064)

Operating income

 

 

 

 

 

 

 

438,160

Other income (expense)

 

468

 

(1)

 

(6,476)

 

(6,009)

Income before provision for income taxes

 

 

 

 

 

 

 

432,151

Depreciation and amortization

 

(14,091)

 

(201)

 

(2,152)

 

(16,444)

 

*Contribution margin is defined as gross profit less certain operating expenses deemed by management to be directly attributable to the respective reportable segment. Contribution margin is used by management as a key indicator of reportable segment profitability.

 

Revenue is derived from sales to external customers.  Operating expenses that pertain to each segment are allocated to the appropriate segment.

 

Corporate and unallocated expenses were $122.9 million for the nine-months ended September 30, 2014 and included $64.6 million of payroll costs, of which $22.5 million was attributable to stock-based compensation expense (see Note 14, “Stock-Based Compensation”), $33.9 million of professional service expenses, including accounting and legal costs and $24.4 million of other operating expenses.  Corporate and unallocated expenses were $110.1 million for the nine-months ended September 30, 2013 and included $60.6 million of payroll costs, of which $21.6 million was attributable to stock-based compensation expense (see Note 14, “Stock-Based Compensation”), $27.9 million attributable to professional service expenses, including accounting and legal costs, and $21.6 million attributable to other operating expenses.

 

Coca-Cola Refreshments USA Inc. (“CCR”), a customer of the DSD segment, accounted for approximately 29% of the Company’s net sales for both the nine-months ended September 30, 2014 and 2013.

 

Net sales to customers outside the United States amounted to $400.4 million and $354.9 million for the nine-months ended September 30, 2014 and 2013, respectively.

 

The Company’s net sales by product line were as follows:

 

 

 

Three-Months Ended

 

Nine-Months Ended

 

 

September 30,

 

September 30,

Product Line

 

2014

 

2013

 

2014

 

2013

Energy drinks

 

 $

591,358

 

 $

548,109

 

 $

1,730,602

 

 $

1,577,034

 

 

 

 

 

 

 

 

 

Non-carbonated (primarily juice based beverages and Peace Tea® iced teas)

 

33,626

 

30,622

 

94,698

 

94,760

Carbonated (primarily soda beverages)

 

7,216

 

8,067

 

22,756

 

22,732

Other

 

3,772

 

3,624

 

11,245

 

11,053

 

 

 $

635,972

 

 $

590,422

 

 $

1,859,301

 

 $

1,705,579