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SEGMENT INFORMATION
 3 Months Ended
Mar. 31, 2017
SEGMENT INFORMATION  
SEGMENT INFORMATION

 

16.       SEGMENT INFORMATION

 

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® drinks as well as Mutant® Super Soda drinks, (ii) Strategic Brands segment (“Strategic Brands”), which is comprised of the various energy drink brands acquired from The Coca-Cola Company (“TCCC”) in 2015 and (iii) Other segment (“Other”), which is comprised of certain products sold by American Fruits & Flavors LLC, a wholly-owned subsidiary of the Company, to independent third-party customers.

 

The Company’s Monster Energy® Drinks segment generates net operating revenues by selling ready-to-drink packaged drinks primarily to bottlers and full service beverage distributors. In some cases, the Company sells directly to retail grocery and specialty chains, wholesalers, club stores, mass merchandisers, convenience chains, 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, water and other ingredients to produce ready-to-drink packaged energy drinks. The ready-to-drink packaged energy drinks are then sold to other bottlers, full service distributors or retailers, including, retail grocery and specialty chains, wholesalers, club stores, mass merchandisers, convenience chains, food service customers, drug stores and the military. To a lesser extent, the Company’s Strategic Brands segment generates net operating revenues by selling ready-to-drink packaged energy drinks to bottlers and full service beverage distributors.

 

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-months ended March 31, 2017 and 2016 are as follows:

 

 

 

Three-Months Ended

 

 

March 31,

 

 

2017

 

2016

Net sales:

 

 

 

 

Monster Energy® Drinks(1)

 

$
668,571

 

$
621,734

Strategic Brands

 
68,036

 
58,452

Other

 
5,539

 

-

Corporate and unallocated

 

-

 

-

 

 

 

 

 

 

 

$
742,146

 

$
680,186

 

 

 

 

 

 

 

 

 

 

Three-Months Ended

 

 

March 31,

 

 

2017

 

2016

Operating Income:

 

 

 

 

Monster Energy® Drinks(1) (2)

 

$
279,431

 

$
267,044

Strategic Brands

 
42,106

 
39,075

Other

 
1,416

 

-

Corporate and unallocated

 
(58,691)

 
(51,406)

 

 

 

 

 

 

 

$
264,262

 

$
254,713

 

 

 

 

 

 

 

 

 

 

Three-Months Ended

 

 

March 31,

 

 

2017

 

2016

Income before tax:

 

 

 

 

Monster Energy® Drinks(1) (2)

 

$
279,335

 

$
267,094

Strategic Brands

 
42,094

 
39,060

Other

 
1,416

 

-

Corporate and unallocated

 
(57,925)

 
(50,833)

 

 

 

 

 

 

 

$
264,920

 

$
255,321

 

 

 

 

 

 

 

 

(1)

Includes $10.0 million and $8.2 million for the three-months ended March 31, 2017 and 2016, respectively, related to the recognition of deferred revenue.

 

(2)

Includes $19.9 million and $3.4 million for the three-months ended March 31, 2017 and 2016, respectively, related to distributor termination costs.

 

 

 

Three-Months Ended

 

 

March 31,

 

 

2017

 

2016

Depreciation and amortization:

 

 

 

 

Monster Energy® Drinks

 

$
6,541

 

$
5,779

Strategic Brands

 
1,796

 
1,770

Other

 
1,153

 

-

Corporate and unallocated

 
1,693

 
1,475

 

 

 

 

 

 

 

$
11,183

 

$
9,024

 

 

 

 

 

 

 

 

 

 

March 31,
2017

 

December 31,
2016

Goodwill and other intangible assets:

 

 

 

 

Monster Energy® Drinks

 

$
1,337,398

 

$
1,334,494

Strategic Brands

 
1,000,175

 
1,001,749

Other

 
26,956

 
28,035

Corporate and unallocated

 

-

 

-

 

 

 

 

 

 

 

$
2,364,529

 

$
2,364,278

 

 

 

 

 

 

 

 

Corporate and unallocated expenses for the three-months ended March 31, 2017 include $37.6 million of payroll costs, of which $13.1 million was attributable to stock-based compensation expenses (see Note 13, “Stock-Based Compensation”), as well as $12.3 million attributable to professional service expenses, including accounting and legal costs, and $8.8 million of other operating expenses. Corporate and unallocated expenses for the three-months ended March 31, 2016 include $28.4 million of payroll costs, of which $10.1 million was attributable to stock-based compensation expenses (see Note 13, “Stock-Based Compensation”), as well as $16.0 million attributable to professional service expenses, including accounting and legal costs, and $7.0 million of other operating expenses.

 

TCCC, through certain wholly-owned subsidiaries (the “TCCC Subsidiaries”), accounted for approximately 34% and 46% of the Company’s net sales for the three-months ended March 31, 2017 and 2016, respectively.

 

Net sales to customers outside the United States amounted to $190.9 million and $149.1 million for the three-months ended March 31, 2017 and 2016, respectively.