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SEGMENT INFORMATION

6 Months Ended

Jun. 30, 2019

18. 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 and Reign Total Body Fuel^TM high performance energy drinks, (ii) Strategic Brands segment, which is comprised primarily of the various energy drink brands acquired from TCCC in 2015 as well as the Company’s affordable energy brands, and (iii) Other segment, which is comprised of the AFF Third-Party Products.

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 by such bottlers 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 six-months ended June 30, 2019 and 2018 are as follows:


	Three-Months Ended				Six-Months Ended
	June 30,				June 30,
	2019		2018		2019		2018
Net sales:
Monster Energy® Drinks⁽¹⁾	$	1,019,110	$	929,439	$	1,889,495	$	1,709,943
Strategic Brands		79,144		79,811		149,430		145,570
Other		5,791		6,623		11,112		11,280
Corporate and unallocated		-		-		-		-
	$	1,104,045	$	1,015,873	$	2,050,037	$	1,866,793


	Three-Months Ended				Six-Months Ended
	June 30,				June 30,
	2019		2018		2019		2018
Operating Income:
Monster Energy®Drinks^{(1) (2)}	$	410,804	$	373,103	$	753,803	$	674,805
Strategic Brands		50,075		50,791		95,656		93,393
Other		1,119		1,826		2,021		2,797
Corporate and unallocated		(83,008)		(68,099)		(161,028)		(133,460)
	$	378,990	$	357,621	$	690,452	$	637,535


	Three-Months Ended				Six-Months Ended
	June 30,				June 30,
	2019		2018		2019		2018
Income before tax:
Monster Energy®Drinks^{(1) (2)}	$	410,897	$	373,342	$	753,913	$	675,305
Strategic Brands		50,075		50,833		95,651		93,416
Other		1,124		1,826		2,026		2,797
Corporate and unallocated		(80,133)		(67,904)		(155,424)		(131,702)
	$	381,963	$	358,097	$	696,166	$	639,816

(1)

Includes $10.6 million and $11.0 million for the three-months ended June 30, 2019 and 2018, respectively, related to the recognition of deferred revenue. Includes $24.8 million and $22.2 million for the six-months ended June 30, 2019 and 2018, respectively, related to the recognition of deferred revenue.

(2)

Includes $0.3 million and $5.5 million for the three-months ended June 30, 2019 and 2018, respectively, related to distributor termination costs. Includes $11.0 million and $12.5 million for the six-months ended June 30, 2019 and 2018, respectively, related to distributor termination costs.


	Three-Months Ended				Six-Months Ended
	June 30,				June 30,
	2019		2018		2019		2018
Depreciation and amortization:
Monster Energy®Drinks	$	10,332	$	8,960	$	20,129	$	17,770
Strategic Brands		1,972		1,946		3,935		3,872
Other		1,157		1,167		2,313		2,326
Corporate and unallocated		2,168		2,121		4,122		4,217
	$	15,629	$	14,194	$	30,499	$	28,185

Corporate and unallocated expenses for the three-months ended June 30, 2019 include $50.5 million of payroll costs, of which $15.6 million was attributable to stock-based compensation expenses (see Note 15 "Stock-Based Compensation"), as well as $18.4 million attributable to professional service expenses, including accounting and legal costs, and $14.1 million of other operating expenses. Corporate and unallocated expenses for the three-months ended June 30, 2018 include $44.7 million of payroll costs, of which $14.9 million was attributable to stock-based compensation expenses (see Note 15, “Stock-Based Compensation”), as well as $11.8 million attributable to professional service expenses, including accounting and legal costs, and $11.6 million of other operating expenses.

Corporate and unallocated expenses for the six-months ended June 30, 2019 include $100.9 million of payroll costs, of which $30.9 million was attributable to stock-based compensation expenses (see Note 15 "Stock-Based Compensation"), as well as $35.9 million attributable to professional service expenses, including accounting and legal costs, and $24.2 million of other operating expenses. Corporate and unallocated expenses for the six-months ended June 30, 2018 include $87.8 million of payroll costs, of which $28.3 million was attributable to stock-based compensation expenses (see Note 15, "Stock-Based Compensation"), as well as $24.2 million attributable to professional service expenses, including accounting and legal costs, and $21.4 million of other operating expenses.

CCBCC Operations, LLC accounted for approximately 13% of the Company's net sales for both the three-months ended June 30, 2019 and 2018. CCBCC Operations, LLC accounted for approximately 13% of the Company's net sales for both the six-months ended June 30, 2019 and 2018.

Reyes Coca-Cola Bottling accounted for approximately 11% and 12% of the Company's net sales for the three-months ended June 30, 2019 and 2018, respectively. Reyes Coca-Cola Bottling accounted for approximately 11% and 13% of the Company's net sales for the six-months ended June 30, 2019 and 2018, respectively.

Coca-Cola European Partners accounted for approximately 10% and 9% of the Company's net sales for the three-months ended June 30, 2019 and 2018, respectively. Coca-Cola European Partners accounted for approximately 10% of the Company's net sales for both the six-months ended June 30, 2019 and 2018.

Net sales to customers outside the United States amounted to $343.3 million and $293.8 million for the three-months ended June 30, 2019 and 2018, respectively. Such sales were approximately 31% and 29% of net sales for the three-months ended June 30, 2019 and 2018, respectively. Net sales to customers outside the United States amounted to $627.3 million and $535.9 million for the six-months ended June 30, 2019 and 2018, respectively. Such sales were approximately 31% and 29% of net sales for the six-months ended June 30, 2019 and 2018, respectively.

Goodwill and other intangible assets for the Company's reportable segments as of June 30, 2019 and December 31, 2018 are as follows:


	June 30,		December 31,
	2019		2018
Goodwill and other intangible assets:
Monster Energy®Drinks	$	1,373,608	$	1,368,620
Strategic Brands		987,159		989,944
Other		16,686		18,957
Corporate and unallocated		-		-
	$	2,377,453	$	2,377,521