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SEGMENT INFORMATION

6 Months Ended

Jun. 30, 2020

SEGMENT INFORMATION

SEGMENT INFORMATION

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® high performance energy drinks, (ii) Strategic Brands segment, which is primarily comprised 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/distributors. In some cases, the Company sells directly to retail grocery and specialty chains, wholesalers, club stores, mass merchandisers, convenience chains, drug stores, foodservice customers, value stores, e-commerce retailers 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/distributors and to retail grocery and specialty chains, wholesalers, club stores, mass merchandisers, convenience chains, foodservice customers, drug stores, value stores, e-commerce retailers and the military. To a lesser extent, the Strategic Brands segment generates net operating revenues by selling certain ready-to-drink packaged energy drinks to bottlers/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, 2020 and 2019 are as follows:


		Three-Months Ended						Six-Months Ended
		June 30,						June 30,
		2020			2019			2020			2019
Net sales:
Monster Energy® Drinks⁽¹⁾		$	1,027,686		$	1,019,110		$	2,020,140		$	1,889,495
Strategic Brands			59,566			79,144			124,104			149,430
Other			6,644			5,791			11,749			11,112
Corporate and unallocated			—			—			—			—
		$	1,093,896		$	1,104,045		$	2,155,993		$	2,050,037


		Three-Months Ended						Six-Months Ended
		June 30,						June 30,
		2020			2019			2020			2019
Operating Income:
Monster Energy®Drinks^{(1) (2)}		$	453,388		$	410,804		$	864,528		$	753,803
Strategic Brands			37,692			50,075			74,411			95,656
Other			1,626			1,119			2,412			2,021
Corporate and unallocated			(85,442)			(83,008)			(169,099)			(161,028)
		$	407,264		$	378,990		$	772,252		$	690,452


		Three-Months Ended						Six-Months Ended
		June 30,						June 30,
		2020			2019			2020			2019
Income before tax:
Monster Energy®Drinks^{(1) (2)}		$	453,418		$	410,897		$	864,596		$	753,913
Strategic Brands			37,692			50,075			74,411			95,651
Other			1,626			1,124			2,412			2,026
Corporate and unallocated			(87,268)			(80,133)			(170,090)			(155,424)
		$	405,468		$	381,963		$	771,329		$	696,166

(1)

Includes $10.5 million and $10.6 million for the three-months ended June 30, 2020 and 2019, respectively, related to the recognition of deferred revenue. Includes $21.1 million and $24.8 million for the six-months ended June 30, 2020 and 2019, respectively, related to the recognition of deferred revenue.

(2)

Includes $0.2 million and $0.3 million for the three-months ended June 30, 2020 and 2019, respectively, related to distributor termination costs. Includes $0.2 million and $11.0 million for the six-months ended June 30, 2020 and 2019, respectively, related to distributor termination costs.


		Three-Months Ended						Six-Months Ended
		June 30,						June 30,
		2020			2019			2020			2019
Depreciation and amortization:
Monster Energy®Drinks		$	9,322		$	10,332		$	18,974		$	20,129
Strategic Brands			1,675			1,972			3,705			3,935
Other			1,194			1,157			2,358			2,313
Corporate and unallocated			2,574			2,168			5,053			4,122
		$	14,765		$	15,629		$	30,090		$	30,499

Corporate and unallocated expenses for the three- months ended June 30, 2020 include $56.5 million of payroll costs, of which $15.9 million was attributable to stock-based compensation expenses (see Note 15 “Stock-Based Compensation”), as well as $17.1 million attributable to professional service expenses, including accounting and legal costs, and $11.8 million of other operating expenses. 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 six-months ended June 30, 2020 include $111.8 million of payroll costs, of which $33.0 million was attributable to stock-based compensation expenses (see Note 15 "Stock-Based Compensation"), as well as $33.5 million attributable to professional service expenses, including accounting and legal costs, and $23.8 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.

Coca-Cola Consolidated, Inc. accounted for approximately 13% of the Company’s net sales for both the three- months ended June 30, 2020 and 2019. Coca-Cola Consolidated, Inc. accounted for approximately 12% and 13% of the Company's net sales for the six- months ended June 30, 2020 and 2019, respectively.

Reyes Coca-Cola Bottling, LLC accounted for approximately 11% of the Company’s net sales for both the three- months ended June 30, 2020 and 2019. Reyes Coca-Cola Bottling, LLC accounted for approximately 11% of the Company's net sales for both the six-months ended June 30, 2020 and 2019.

Coca-Cola European Partners accounted for approximately 8% and 10% of the Company’s net sales for the three- months ended June 30, 2020 and 2019, respectively. Coca-Cola European Partners accounted for approximately 9% and 10% of the Company's net sales for the six- months ended June 30, 2020 and 2019, respectively.

Net sales to customers outside the United States amounted to $328.3 million and $343.3 million for the three- months ended June 30, 2020 and 2019, respectively. Such sales were approximately 30% and 31% of net sales for the three- months ended June 30, 2020 and 2019, respectively. Net sales to customers outside the United States amounted to $685.1 million and $627.3 million for the six-months ended June 30, 2020 and 2019, respectively. Such sales were approximately 32% and 31% of net sales for the six-months ended June 30, 2020 and 2019, respectively.

Goodwill and other intangible assets for the Company’s reportable segments as of June 30, 2020 and December 31, 2019 are as follows:


		June 30,			December 31,
		2020			2019
Goodwill and other intangible assets:
Monster Energy®Drinks		$	1,397,016		$	1,384,940
Strategic Brands			978,014			984,393
Other			12,157			14,415
Corporate and unallocated			—			—
		$	2,387,187		$	2,383,748