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SEGMENT INFORMATION
 9 Months Ended
Sep. 30, 2016
SEGMENT INFORMATION  
SEGMENT INFORMATION

17.                            SEGMENT INFORMATION

 

During the second quarter of 2016, the Company renamed and revised its reportable segments to reflect management’s current view of the business and to align its external financial reporting with its operating and internal financial model. Historical segment information has been revised to reflect the effect of this change.

 

The Company has three operating and reportable segments, (i) Monster Energy® Drinks segment (“Monster Energy® Drinks”), which is comprised of the Company’s Monster Energy® drink products (previously the Finished Products segment) as well as MutantTM Super Soda drink products, (ii) Strategic Brands (“Strategic Brands”), which include the various energy drink brands acquired from TCCC as a result of the TCCC Transaction (previously the Concentrate segment) and (iii) Other, (“Other”) the principal products of which include the non-energy brands disposed of as a result of the TCCC Transaction as well as certain products acquired as part of the AFF Transaction that are sold to independent third-parties.

 

The Company’s Monster Energy® Drinks segment generates net operating revenues by selling ready-to-drink packaged energy drinks to full service beverage distributors, retail grocery and specialty chains, wholesalers, club stores, drug chains, mass merchandisers, convenience chains, health food distributors, food service customers 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 and water, which are then filled in authorized containers bearing the Company’s respective trademarks and sold to customers directly (or in some cases through wholesalers or other bottlers). To a lesser extent, the Company’s Strategic Brands segment generates net operating revenues by selling ready-to-drink packaged energy drinks to full service beverage distributors, retail grocery and specialty chains, wholesalers, club stores, drug chains, mass merchandisers, convenience chains, health food distributors, food service customers and the military.

 

Generally, the Monster Energy® Drinks segment generates higher per case net operating revenues, but lower per case gross profit margins 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 for in the Company’s reportable segments as management does not measure or allocate such assets on a segment basis.

 

The net revenues derived from the Company’s reportable segments and other financial information related thereto for the three- and nine-months ended September 30, 2016 and 2015 are as follows:

 

 

 

Three-Months Ended

 

Nine-Months Ended

 

 

 

September 30,

 

September 30,

 

 

 

2016

 

2015

 

2016

 

2015

 

Net sales:

 

 

 

 

 

 

 

 

 

Monster Energy® Drinks(1)

 

  $

710,130

 

  $

686,684

 

  $

2,075,511

 

  $

1,933,467

 

Strategic Brands

 

72,138

 

69,935

 

207,990

 

82,913

 

Other

 

5,686

 

-

 

12,127

 

60,751

 

Corporate and unallocated

 

-

 

-

 

-

 

-

 

 

 

  $

787,954

 

  $

756,619

 

  $

2,295,628

 

  $

2,077,131

 

 

 

 

 

 

 

 

 

Three-Months Ended

 

Nine-Months Ended

 

 

 

September 30,

 

September 30,

 

 

 

2016

 

2015

 

2016

 

2015

 

Operating Income:

 

 

 

 

 

 

 

 

 

Monster Energy® Drinks(1) (2)

 

  $

308,493

 

  $

289,544

 

  $

874,822

 

  $

596,716

 

Strategic Brands

 

40,075

 

45,291

 

127,169

 

54,375

 

Other(3)

 

1,186

 

(283)

 

1,528

 

165,377

 

Corporate and unallocated

 

(59,379)

 

(43,114)

 

(169,909)

 

(151,263)

 

 

 

  $

290,375

 

  $

291,438

 

  $

833,610

 

  $

665,205

 

 

 

 

Three-Months Ended

 

Nine-Months Ended

 

 

 

September 30,

 

September 30,

 

 

 

2016

 

2015

 

2016

 

2015

 

Income before tax:

 

 

 

 

 

 

 

 

 

Monster Energy® Drinks(1) (2)

 

  $

308,612

 

  $

289,649

 

  $

875,024

 

  $

597,084

 

Strategic Brands

 

40,073

 

45,275

 

127,141

 

54,359

 

Other(3)

 

1,186

 

(284)

 

1,528

 

165,376

 

Corporate and unallocated

 

(60,533)

 

(46,564)

 

(170,734)

 

(154,758)

 

 

 

  $

289,338

 

  $

288,076

 

  $

832,959

 

  $

662,061

 

 

(1)     Includes $8.4 million and $8.2 million for the three-months ended September 30, 2016 and 2015, respectively, related to the recognition of deferred revenue. Includes $28.6 million and $54.7 million for the nine-months ended September 30, 2016 and 2015, respectively, related to the recognition of deferred revenue.

 

(2)     Includes $4.7 million and $2.5 million for the three-months ended September 30, 2016 and 2015, respectively, related to distributor termination costs. Includes $33.4 million and $220.7 million for the nine-months ended September 30, 2016 and 2015, respectively, related to distributor termination costs.

 

(3)     Includes $161.5 million gain on the sale of Monster Non-Energy for the nine-months ended September 30, 2015.

 

 

 

 

Three-Months Ended

 

Nine-Months Ended

 

 

 

September 30,

 

September 30,

 

 

 

2016

 

2015

 

2016

 

2015

 

Depreciation and amortization:

 

 

 

 

 

 

 

 

 

Monster Energy® Drinks

 

  $

5,974

 

  $

5,408

 

  $

17,651

 

  $

15,556

 

Strategic Brands

 

1,777

 

1,757

 

5,325

 

2,102

 

Other

 

1,151

 

-

 

2,305

 

232

 

Corporate and unallocated

 

1,522

 

1,341

 

4,593

 

3,867

 

 

 

  $

10,424

 

  $

8,506

 

  $

29,874

 

  $

21,757

 

 

 

 

 

September 30,
2016

 

December 31,
2015

 

Goodwill and other intangible assets:

 

 

 

 

 

Monster Energy® Drinks

 

  $

1,331,931

 

  $

699,346

 

Strategic Brands

 

1,003,355

 

1,008,355

 

Other

 

29,170

 

-

 

Corporate and unallocated

 

-

 

-

 

 

 

  $

2,364,456

 

  $

1,707,701

 

 

Corporate and unallocated expenses for the three-months ended September 30, 2016 include $33.2 million of payroll costs, of which $12.1 million was attributable to stock-based compensation expense (see Note 14, “Stock-Based Compensation”), as well as $16.9 million attributable to professional service expenses, including accounting and legal costs, and $9.3 million of other operating expenses.  Corporate and unallocated expenses for the three-months ended September 30, 2015 include $27.1 million of payroll costs, of which $8.9 million was attributable to stock-based compensation expense (see Note 14, “Stock-Based Compensation”), as well as $10.3 million attributable to professional service expenses, including accounting and legal costs, of which $0.3 million was attributable to TCCC Transaction expenses, and $5.7 million of other operating expenses.

 

Corporate and unallocated expenses for the nine-months ended September 30, 2016 include $92.7 million of payroll costs, of which $33.7 million was attributable to stock-based compensation expense (see Note 14, “Stock-Based Compensation”), as well as $52.4 million attributable to professional service expenses, including accounting and legal costs, of which $4.5 million was attributable to AFF Transaction expenses, and $24.8 million of other operating expenses.  Corporate and unallocated expenses for the nine-months ended September 30, 2015 include $83.9 million of payroll costs, of which $23.7 million was attributable to stock-based compensation expense (see Note 14, “Stock-Based Compensation”), as well as $46.6 million attributable to professional service expenses, including accounting and legal costs, of which $15.4 million was attributable to TCCC Transaction expenses, and $20.8 million of other operating expenses.

 

TCCC, through certain wholly-owned subsidiaries (the “TCCC Subsidiaries”), accounted for approximately 41% and 42% of the Company’s net sales for the three-months ended September 30, 2016 and 2015, respectively. The TCCC Subsidiaries accounted for approximately 43% and 41% of the Company’s net sales for the nine-months ended September 30, 2016 and 2015, respectively.

 

Net sales to customers outside the United States amounted to $190.8 million and $170.6 million for the three-months ended September 30, 2016 and 2015, respectively. Net sales to customers outside the United States amounted to $540.2 million and $435.1 million for the nine-months ended September 30, 2016 and 2015, respectively.