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SEGMENT INFORMATION
 3 Months Ended
Mar. 31, 2015
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.” No asset information has been provided for the Company’s reportable segments as management does not measure or allocate assets on a segment basis. Following the consummation of the TCCC Transaction, the Company anticipates that it will have two operating and reporting segments: Finished Products, the principal products of which will likely include the Company’s Monster Energy® drink products that currently make up the majority of the DSD segment, and Concentrate, the principal products of which will likely include the various energy drink brands transferred to the Company from TCCC.

 

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

 

 

 

Three-Months Ended March 31, 2015

 

 

 

DSD

 

Warehouse

 

Corporate and
Unallocated

 

Total

 

Net sales

 

$
605,811 

(1)

$
20,980 

 

$

 -

 

$
626,791 

(1)

Contribution margin*

 
57,660 

(2)
(40)

 

-

 
57,620 

(2)

Corporate and unallocated expenses

 

-

 

-

 
(49,991)

 
(49,991)

 

Operating income

 

 

 

 

 

 

 
7,629 

(1), (2)

Interest and other income, net

 
42 

 

-

 
1,191 

 
1,233 

 

Income before provision for income taxes

 

 

 

 

 

 

 
8,862 

(1), (2)

Depreciation and amortization

 
(5,119)

 
(75)

 
(1,276)

 
(6,470)

 

 

 

 

 

 

 

Three-Months Ended March 31, 2014

 

 

 

DSD

 

Warehouse

 

Corporate and
Unallocated

 

Total

 

Net sales

 

$
514,355 

(1)

$
21,774 

 

$

 -

 

$
536,129 

(1)

Contribution margin*

 
186,468 

(2)
296 

 

-

 
186,764 

(2)

Corporate and unallocated expenses

 

-

 

-

 
(37,901)

 
(37,901)

 

Operating income

 

 

 

 

 

 

 
148,863 

(1), (2)

Other income (expense)

 
26 

 

-

 
128 

 
154 

 

Income before provision for income taxes

 

 

 

 

 

 

 
149,017 

(1), (2)

Depreciation and amortization

 
(4,944)

 
(81)

 
(1,428)

 
(6,453)

 

 

(1) Includes $43.3 million and $3.7 million for the three-months ended March 31, 2015 and 2014, respectively, related to the recognition of deferred revenue. Included in the $43.3 million recognition of deferred revenue for the three-months ended March 31, 2015, is $39.8 million related to the accelerated amortization of the deferred revenue balances associated with certain of the Company’s prior distributors who were sent notices of termination during the first quarter of 2015.

 

(2) Includes $206.0 million and $0.01 million for the three-months ended March 31, 2015 and 2014, respectively, related to distributor termination costs.

 

*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 $50.0 million for the three-months ended March 31, 2015 and included $28.5 million of payroll costs, of which $6.4 million was attributable to stock-based compensation expense (see Note 14, “Stock-Based Compensation”), $14.5 million of professional service expenses, including accounting and legal costs and $7.0 million of other operating expenses.  Corporate and unallocated expenses were $37.9 million for the three-months ended March 31, 2014 and included $21.1 million of payroll costs, of which $7.0 million was attributable to stock-based compensation expense (see Note 14, “Stock-Based Compensation”), $10.1 million attributable to professional service expenses, including accounting and legal costs, and $6.7 million attributable to other operating expenses.

 

Coca-Cola Refreshments USA Inc. (“CCR”), a customer of the DSD segment, accounted for approximately 35% and 31% of the Company’s net sales for the three-months ended March 31, 2015 and 2014, respectively.

 

Net sales to customers outside the United States amounted to $113.0 million and $115.8 million for the three-months ended March 31, 2015 and 2014, respectively.

 

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

 

 

 

Three-Months Ended

 

 

March 31,

Product Line

 

2015

 

2014

Energy drinks

 

$
552,729 

 

$
499,013 

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

 
24,513 

 
26,446 

Carbonated (primarily soda beverages)

 
6,202 

 
7,014 

Other

 
43,347 

 
3,656 

 

 

$
626,791 

 

$
536,129