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SEGMENT INFORMATION | 9 Months Ended
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Sep. 30, 2018
SEGMENT INFORMATION |
SEGMENT INFORMATION | 17.SEGMENT INFORMATION The Company has three operating and reportable segments, (i) Monster Energy® Drinks segment, which is primarily comprised of the Company’s Monster Energy® drinks, (ii) Strategic Brands segment, which is comprised of the various energy drink brands acquired from TCCC in 2015, and (iii) Other segment, 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 primarily 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, foodservice 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, foodservice customers, drug stores and the military. To a lesser extent, the Company’s Strategic Brands segment generates net operating revenues by selling certain 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 margin percentages 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 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, 2018 and 2017 are as follows:
|  | Three-Months Ended |  | Nine-Months Ended |
|  | September 30, |  | September 30, |
|  | 2018 |  | 2017 |  | 2018 |  | 2017 |
Net sales: |  |  |  |  |  |  |  |  |
Monster Energy® Drinks(1) |  | $ | 935,146 |  | $ | 827,690 |  | $ | 2,645,089 |  | $ | 2,311,521 |
Strategic Brands |  | 74,441 |  | 76,586 |  | 220,011 |  | 230,255 |
Other |  | 6,573 |  | 5,200 |  | 17,853 |  | 16,914 |
Corporate and unallocated |  | - |  | - |  | - |  | - |
|  | $ | 1,016,160 |  | $ | 909,476 |  | $ | 2,882,953 |  | $ | 2,558,690 |
|  | Three-Months Ended |  | Nine-Months Ended |
|  | September 30, |  | September 30, |
|  | 2018 |  | 2017 |  | 2018 |  | 2017 |
Operating Income: |  |  |  |  |  |  |  |  |
Monster Energy® Drinks(1) (2) |  | $ | 359,090 |  | $ | 333,210 |  | $ | 1,033,895 |  | $ | 968,864 |
Strategic Brands |  | 41,661 |  | 42,663 |  | 135,054 |  | 137,945 |
Other |  | 1,742 |  | 1,451 |  | 4,539 |  | 4,585 |
Corporate and unallocated |  | (62,920) |  | (59,952) |  | (196,380) |  | (179,719) |
|  | $ | 339,573 |  | $ | 317,372 |  | $ | 977,108 |  | $ | 931,675 |
|  | Three-Months Ended |  | Nine-Months Ended |
|  | September 30, |  | September 30, |
|  | 2018 |  | 2017 |  | 2018 |  | 2017 |
Income before tax: |  |  |  |  |  |  |  |  |
Monster Energy® Drinks(1) (2) |  | $ | 359,216 |  | $ | 333,065 |  | $ | 1,034,521 |  | $ | 968,716 |
Strategic Brands |  | 41,659 |  | 42,663 |  | 135,075 |  | 137,931 |
Other |  | 1,742 |  | 1,451 |  | 4,539 |  | 4,585 |
Corporate and unallocated |  | (60,056) |  | (55,811) |  | (191,758) |  | (177,454) |
|  | $ | 342,561 |  | $ | 321,368 |  | $ | 982,377 |  | $ | 933,778 |
| (1) |  | Includes $11.1 million and $11.4 million for the three-months ended September 30, 2018 and 2017, respectively, related to the recognition of deferred revenue. Includes $33.3 million and $31.6 million for the nine-months ended September 30, 2018 and 2017, respectively, related to the recognition of deferred revenue.
| (2) |  | Includes $14.1 million and $15.9 million for the three-months ended September 30, 2018 and 2017, respectively, related to distributor termination costs. Includes $26.6 million and $35.9 million for the nine-months ended September 30, 2018 and 2017, respectively, related to distributor termination costs.
|  | Three-Months Ended |  | Nine-Months Ended
|  | September 30, |  | September 30,
|  | 2018 |  | 2017 |  | 2018 |  | 2017
Depreciation and amortization: |  |  |  |  |  |  |  |
Monster Energy® Drinks |  | $ | 9,157 |  | $ | 7,546 |  | $ | 26,926 |  | $ | 20,959
Strategic Brands |  | 1,947 |  | 1,836 |  | 5,819 |  | 5,474
Other |  | 1,167 |  | 1,152 |  | 3,493 |  | 3,458
Corporate and unallocated |  | 2,014 |  | 1,795 |  | 6,231 |  | 5,213
|  | $ | 14,285 |  | $ | 12,329 |  | $ | 42,469 |  | $ | 35,104
Corporate and unallocated expenses for the three-months ended September 30, 2018 include $42.1 million of payroll costs, of which $14.0 million was attributable to stock-based compensation expenses (see Note 14, “Stock-Based Compensation”), as well as $12.3 million attributable to professional service expenses, including accounting and legal costs, and $8.5 million of other operating expenses. 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 14, “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 nine-months ended September 30, 2018 include $129.9 million of payroll costs, of which $42.4 million was attributable to stock-based compensation expenses (see Note 14, “Stock-Based Compensation”), as well as $36.5 million attributable to professional service expenses, including accounting and legal costs, and $30.0 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 14, “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. TCCC, through the TCCC Subsidiaries, accounted for approximately 4% and 14% of the Company’s net sales for the three-months ended September 30, 2018 and 2017, respectively. TCCC, through the TCCC Subsidiaries, accounted for approximately 4% and 21% of the Company’s net sales for the nine-months ended September 30, 2018 and 2017, 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 TCCC bottlers/distributors and/or TCCC Related Parties. Accordingly, the Company’s percentage of net sales classified as sales to the TCCC Subsidiaries significantly decreased for three- and nine-months ended September 30, 2018. CCBCC Operations, LLC accounted for approximately 14% of the Company’s net sales for both the three-months ended September 30, 2018 and 2017. CCBCC Operations, LLC accounted for approximately 14% and 13% of the Company’s net sales for the nine-months ended September 30, 2018 and 2017, respectively. Reyes Coca-Cola Bottling accounted for approximately 13% and 5% of the Company’s net sales for the three-months ended September 30, 2018 and 2017, respectively. Reyes Coca-Cola Bottling accounted for approximately 13% and 5% of the Company’s net sales for the nine-months ended September 30, 2018 and 2017, respectively. Coca-Cola European Partners accounted for approximately 9% and 10% of the Company’s net sales for the three-months ended September 30, 2018 and 2017, respectively. Coca-Cola European Partners accounted for approximately 9% of the Company’s net sales for both the nine-months ended September 30, 2018 and 2017. Net sales to customers outside the United States amounted to $283.0 million and $260.1 million for the three-months ended September 30, 2018 and 2017, respectively. Net sales to customers outside the United States amounted to $818.8 million and $698.9 million for the nine-months ended September 30, 2018 and 2017, respectively. Goodwill and other intangible assets for the Company’s reportable segments as of September 30, 2018 and December 31, 2017 are as follows:
|  | September 30, |  | December 31,
|  | 2018 |  | 2017
Goodwill and other intangible assets: |  |  |  |
Monster Energy® Drinks |  | $ | 1,362,448 |  | $ | 1,346,648
Strategic Brands |  | 991,352 |  | 995,582
Other |  | 20,091 |  | 23,498
Corporate and unallocated |  | - |  | -
|  | $ | 2,373,891 |  | $ | 2,365,728

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- Definition The entire disclosure for reporting segments including data and tables. Reportable segments include those that meet any of the following quantitative thresholds a) it's reported revenue, including sales to external customers and intersegment sales or transfers is 10 percent or more of the combined revenue, internal and external, of all operating segments b) the absolute amount of its reported profit or loss is 10 percent or more of the greater, in absolute amount of 1) the combined reported profit of all operating segments that did not report a loss or 2) the combined reported loss of all operating segments that did report a loss c) its assets are 10 percent or more of the combined assets of all operating segments. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 280 -URI http://asc.fasb.org/topic&trid=2134510 + Details
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