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SEGMENT INFORMATION
 9 Months Ended
Sep. 30, 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, Monster HydroTM energy drinks and 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- and nine-months ended September 30, 2017 and 2016 are as follows:

 

 

 

Three-Months Ended

 

Nine-Months Ended

 

 

 

September 30,

 

September 30,

 

 

 

2017

 

2016

 

2017

 

2016

 

Net sales:

 

 

 

 

 

 

 

 

 

Monster Energy® Drinks(1)

 

  $
827,690

 

  $
710,130

 

  $
2,311,521

 

  $
2,075,511

 

Strategic Brands

 
76,586

 
72,138

 
230,255

 
207,990

 

Other

 
5,200

 
5,686

 
16,914

 
12,127

 

Corporate and unallocated

 

-

 

-

 

-

 

-

 

 

 

 

 

 

 

 

 

 

 

 

 

  $
909,476

 

  $
787,954

 

  $
2,558,690

 

  $
2,295,628

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three-Months Ended

 

Nine-Months Ended

 

 

 

September 30,

 

September 30,

 

 

 

2017

 

2016

 

2017

 

2016

 

Operating Income:

 

 

 

 

 

 

 

 

 

Monster Energy® Drinks(1) (2)

 

  $
333,210

 

  $
308,493

 

  $
968,864

 

  $
874,822

 

Strategic Brands

 
42,663

 
40,075

 
137,945

 
127,169

 

Other

 
1,451

 
1,186

 
4,585

 
1,528

 

Corporate and unallocated

 
(59,952)

 
(59,379)

 
(179,719)

 
(169,909)

 

 

 

 

 

 

 

 

 

 

 

 

 

  $
317,372

 

  $
290,375

 

  $
931,675

 

  $
833,610

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three-Months Ended

 

Nine-Months Ended

 

 

 

September 30,

 

September 30,

 

 

 

2017

 

2016

 

2017

 

2016

 

Income before tax:

 

 

 

 

 

 

 

 

 

Monster Energy® Drinks(1) (2)

 

  $
333,065

 

  $
308,612

 

  $
968,716

 

  $
875,024

 

Strategic Brands

 
42,663

 
40,073

 
137,931

 
127,141

 

Other

 
1,451

 
1,186

 
4,585

 
1,528

 

Corporate and unallocated

 
(55,811)

 
(60,533)

 
(177,454)

 
(170,734)

 

 

 

 

 

 

 

 

 

 

 

 

 

  $
321,368

 

  $
289,338

 

  $
933,778

 

  $
832,959

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1)

Includes $11.4 million and $8.4 million for the three-months ended September 30, 2017 and 2016, respectively, related to the recognition of deferred revenue. Includes $31.6 million and $28.6 million for the nine-months ended September 30, 2017 and 2016, respectively, related to the recognition of deferred revenue.

 

(2)

Includes $15.9 million and $4.7 million for the three-months ended September 30, 2017 and 2016, respectively, related to distributor termination costs. Includes $35.9 million and $33.4 million for the nine-months ended September 30, 2017 and 2016, respectively, related to distributor termination costs.

 

 

 

Three-Months Ended

 

Nine-Months Ended

 

 

 

September 30,

 

September 30,

 

 

 

2017

 

2016

 

2017

 

2016

 

Depreciation and amortization:

 

 

 

 

 

 

 

 

 

Monster Energy® Drinks

 

  $
7,546

 

  $
5,974

 

  $
20,959

 

  $
17,651

 

Strategic Brands

 
1,836

 
1,777

 
5,474

 
5,325

 

Other

 
1,152

 
1,151

 
3,458

 
2,305

 

Corporate and unallocated

 
1,795

 
1,522

 
5,213

 
4,593

 

 

 

 

 

 

 

 

 

 

 

 

 

  $
12,329

 

  $
10,424

 

  $
35,104

 

  $
29,874

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

September 30,
2017

 

December 31,
2016

 

Goodwill and other intangible assets:

 

 

 

 

 

Monster Energy® Drinks

 

  $
1,343,437

 

  $
1,334,494

 

Strategic Brands

 
997,054

 
1,001,749

 

Other

 
24,633

 
28,035

 

Corporate and unallocated

 

-

 

-

 

 

 

 

 

 

 

 

 

  $
2,365,124

 

  $
2,364,278

 

 

 

 

 

 

 

 

 

 

Corporate and unallocated expenses for the three-months ended September 30, 2017 include $37.9 million of payroll costs, of which $13.3 million was attributable to stock-based compensation expenses (see Note 13, “Stock-Based Compensation”), as well as $11.9 million attributable to professional service expenses, including accounting and legal costs, and $10.1 million of other operating expenses. 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 expenses (see Note 13, “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 nine-months ended September 30, 2017 include $114.0 million of payroll costs, of which $39.3 million was attributable to stock-based compensation expenses (see Note 13, “Stock-Based Compensation”), as well as $38.3 million attributable to professional service expenses, including accounting and legal costs, and $27.5 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 expenses (see Note 13, “Stock-Based Compensation”), as well as $52.4 million attributable to professional service expenses, including accounting and legal costs, and $24.8 million of other operating expenses.

 

TCCC, through certain wholly-owned subsidiaries (the “TCCC Subsidiaries”), accounted for approximately 14% and 41% of the Company’s net sales for the three-months ended September 30, 2017 and 2016, respectively. The TCCC Subsidiaries accounted for approximately 21% and 43% of the Company’s net sales for the nine-months ended September 30, 2017 and 2016, respectively. As part of TCCC’s North America Refranchising initiative (the “North America Refranchising”), the territories of certain TCCC Subsidiaries have been transitioned to certain independent/non wholly-owned TCCC bottlers/distributors. Accordingly, the Company’s percentage of net sales classified as sales to the TCCC Subsidiaries decreased for three- and nine-months ended September 30, 2017.  CCBCC Operations, LLC accounted for approximately 14% and 9% of the Company’s net sales for the three-months ended September 30, 2017 and 2016, respectively.  CCBCC Operations, LLC accounted for approximately 13% and 8% of the Company’s net sales for the nine-months ended September 30, 2017 and 2016, respectively.

 

Net sales to customers outside the United States amounted to $260.1 million and $190.8 million for the three-months ended September 30, 2017 and 2016, respectively. Net sales to customers outside the United States amounted to $698.9 million and $540.2 million for the nine-months ended September 30, 2017 and 2016, respectively.