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STOCK-BASED COMPENSATION

9 Months Ended

Sep. 30, 2019

15. STOCK-BASED COMPENSATION

The Company has two stock-based compensation plans under which shares were available for grant at September 30, 2019: the Monster Beverage Corporation 2011 Omnibus Incentive Plan, including the Monster Beverage Corporation Deferred Compensation Plan as a sub plan thereunder, and the Monster Beverage Corporation 2017 Compensation Plan for Non-Employee Directors, including the Monster Beverage Corporation Deferred Compensation Plan for Non-Employee Directors as a sub plan thereunder.

The Company recorded $16.0 million and $14.1 million of compensation expense relating to outstanding options and restricted stock units during the three-months ended September 30, 2019 and 2018, respectively. The Company recorded $46.9 million and $42.4 million of compensation expense relating to outstanding options and restricted stock units during the nine-months ended September 30, 2019 and 2018, respectively.

The tax benefit for tax deductions from non-qualified stock option exercises, disqualifying dispositions of incentive stock options and vesting of restricted stock units for the three-months ended September 30, 2019 and 2018 was $0.5 million and $3.1 million, respectively. The tax benefit for tax deductions from non-qualified stock option exercises, disqualifying dispositions of incentive stock options and vesting of restricted stock units for the nine-months ended September 30, 2019 and 2018 was $26.7 million and $7.7 million, respectively.

Stock Options

Under the Company’s stock-based compensation plans, all stock options granted as of September 30, 2019 were granted at prices based on the fair value of the Company’s common stock on the date of grant. The Company records compensation expense for stock options based on the estimated fair value of the options on the date of grant using the Black-Scholes-Merton option pricing formula with the assumptions included in the table below. The Company uses historical data to determine the exercise behavior, volatility and forfeiture rate of the options.

The following weighted-average assumptions were used to estimate the fair value of options granted during:


	Three-Months Ended September 30,				Nine-Months Ended September 30,
	2019		2018		2019		2018
Dividend yield	0	%	0	%	0	%	0	%
Expected volatility	30.2	%	34.5	%	30.2	%	34.9	%
Risk-free interest rate	1.4	%	2.9	%	2.4	%	2.8	%
Expected term	5.8	years	6.1	years	6.0	years	6.1	years

Expected Volatility: The Company uses historical volatility as it provides a reasonable estimate of the expected volatility. Historical volatility is based on the most recent volatility of the stock price over a period of time equivalent to the expected term of the option.

Risk-Free Interest Rate: The risk-free interest rate is based on the U.S. treasury zero-coupon yield curve in effect at the time of grant for the expected term of the option.

Expected Term: The Company’s expected term represents the weighted-average period that the Company’s stock options are expected to be outstanding. The expected term is based on the expected time to post-vesting exercise of options by employees. The Company uses historical exercise patterns of previously granted options to derive employee behavioral patterns used to forecast expected exercise patterns.

The following table summarizes the Company’s activities with respect to its stock option plans as follows:


				Weighted-
		Weighted-		Average
		Average		Remaining
	Number of	Exercise		Contractual
	Shares (in	Price Per		Term (In	Aggregate
Options	thousands)	Share		years)	Intrinsic Value
Outstanding at January 1, 2019	18,890	$	34.61	5.8	$	303,627
Granted 01/01/19 - 03/31/19	1,570	$	59.52
Granted 04/01/19 - 06/30/19	—	$	—
Granted 07/01/19 - 09/30/19	52	$	58.54
Exercised	(4,999)	$	17.05
Cancelled or forfeited	(373)	$	50.42
Outstanding at September 30, 2019	15,140	$	42.69	6.5	$	237,041
Vested and expected to vest in the future at September 30, 2019	14,290	$	41.98	6.4	$	233,489
Exercisable at September 30, 2019	7,557	$	33.14	5.2	$	188,583

The weighted-average grant-date fair value of options granted during the three-months ended September 30, 2019 and 2018 was $18.32 per share and $22.80 per share, respectively. The weighted-average grant-date fair value of options granted during the nine-months ended September 30, 2019 and 2018 was $20.24 per share and $22.51 per share, respectively.

The total intrinsic value of options exercised during the three-months ended September 30, 2019 and 2018 was $2.4 million and $19.2 million, respectively. The total intrinsic value of options exercised during the nine-months ended September 30, 2019 and 2018 was $213.8 million and $52.1 million, respectively.

Cash received from option exercises under all plans for the three-months ended September 30, 2019 and 2018 was $4.1 million and $10.9 million, respectively. Cash received from option exercises under all plans for the nine-months ended September 30, 2019 and 2018 was $85.2 million and $24.5 million, respectively.

At September 30, 2019, there was $90.4 million of total unrecognized compensation expense related to non-vested options granted to employees under the Company’s stock-based payment plans. That cost is expected to be recognized over a weighted-average period of 2.5 years.

Restricted Stock Units

The cost of stock-based compensation for restricted stock units is measured based on the closing fair market value of the Company’s common stock at the date of grant. In the event that the Company has the option and intent to settle a restricted stock unit in cash, the award is classified as a liability and revalued at each balance sheet date.

The following table summarizes the Company’s activities with respect to non-vested restricted stock units as follows:


		Weighted
	Number of	Average
	Shares (in	Grant-Date
	thousands)	Fair Value
Non-vested at January 1, 2019	529	$	51.55
Granted 01/01/19 - 03/31/19	548	$	59.66
Granted 04/01/19 - 06/30/19	18	$	63.48
Granted 07/01/19 - 09/30/19	1	$	66.00
Vested	(265)	$	50.10
Forfeited/cancelled	(6)	$	59.67
Non-vested at September 30, 2019	825	$	57.63

The weighted-average grant-date fair value of restricted stock units granted during the three-months ended September 30, 2019 and 2018 was $66.00 per share and $58.72 per share, respectively. The weighted-average grant-date fair value of restricted stock units granted during the nine-months ended September 30, 2019 and 2018 was $59.79 per share and $57.59 per share, respectively. As of September 30, 2019, 0.7 million of restricted stock units are expected to vest over their respective terms.

At September 30, 2019, total unrecognized compensation expense relating to non-vested restricted stock units was $33.4 million, which is expected to be recognized over a weighted-average period of 2.9 years.