Monster Beverage Corp - Quarter Report: 2020 September (Form 10-Q)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the quarterly period ended September 30, 2020 | Commission File Number 001-18761 |
MONSTER BEVERAGE CORPORATION
(Exact name of registrant as specified in its charter)
47-1809393 | ||
(State or other jurisdiction of | (I.R.S. Employer | |
incorporation or organization) | Identification No.) |
1 Monster Way
Corona, California 92879
(Address of principal executive offices) (Zip code)
(951) 739 - 6200
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class |
| Trading Symbol(s) |
| Name of each exchange on which registered |
Common Stock | MNST | Global Select Market |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes X No ___
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Yes X No ___
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer | ☒ | Accelerated filer | ☐ |
Non-accelerated filer | ☐ | Smaller reporting company | ☐ |
Emerging growth company | ☐ |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes ___ No
The registrant had 527,916,757 shares of common stock, par value $0.005 per share, outstanding as of October 30, 2020.
MONSTER BEVERAGE CORPORATION AND SUBSIDIARIES
SEPTEMBER 30, 2020
INDEX
2
PART I – FINANCIAL INFORMATION
ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
MONSTER BEVERAGE CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
AS OF SEPTEMBER 30, 2020 AND DECEMBER 31, 2019
(In Thousands, Except Par Value) (Unaudited)
September 30, | December 31, | |||||
| 2020 |
| 2019 | |||
ASSETS | ||||||
CURRENT ASSETS: | ||||||
Cash and cash equivalents | $ | 1,074,730 | $ | 797,957 | ||
Short-term investments |
| 599,326 |
|
| 533,063 | |
Accounts receivable, net |
| 740,813 |
|
| 540,330 | |
Inventories |
| 318,956 |
|
| 360,731 | |
Prepaid expenses and other current assets |
| 75,958 |
|
| 54,868 | |
Prepaid income taxes |
| 16,064 |
|
| 29,360 | |
Total current assets |
| 2,825,847 |
|
| 2,316,309 | |
INVESTMENTS |
| 20,571 |
|
| 12,905 | |
PROPERTY AND EQUIPMENT, net |
| 304,687 |
|
| 298,640 | |
DEFERRED INCOME TAXES, net |
| 84,777 |
|
| 84,777 | |
GOODWILL |
| 1,331,643 |
|
| 1,331,643 | |
OTHER INTANGIBLE ASSETS, net |
| 1,059,537 |
|
| 1,052,105 | |
OTHER ASSETS |
| 70,621 |
|
| 53,973 | |
Total Assets | $ | 5,697,683 |
| $ | 5,150,352 | |
LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||
CURRENT LIABILITIES: | ||||||
Accounts payable | $ | 281,522 |
| $ | 274,045 | |
Accrued liabilities |
| 168,398 |
|
| 114,075 | |
Accrued promotional allowances |
| 200,668 |
|
| 166,761 | |
Deferred revenue |
| 45,538 |
|
| 44,237 | |
Accrued compensation |
| 45,555 |
|
| 47,262 | |
Income taxes payable |
| 32,082 |
|
| 14,717 | |
Total current liabilities |
| 773,763 |
|
| 661,097 | |
DEFERRED REVENUE |
| 268,281 |
|
| 287,469 | |
OTHER LIABILITIES | 26,318 | 30,505 | ||||
COMMITMENTS AND CONTINGENCIES (Note 12) | ||||||
STOCKHOLDERS’ EQUITY: | ||||||
Common stock - $0.005 par value; 1,250,000 shares authorized; 638,458 shares issued and 527,893 shares outstanding as of September 30, 2020; 636,460 shares issued and 536,698 shares outstanding as of December 31, 2019 | 3,192 | 3,182 | ||||
Additional paid-in capital |
| 4,513,743 |
|
| 4,397,511 | |
Retained earnings |
| 5,960,338 |
|
| 5,022,480 | |
Accumulated other comprehensive loss |
| (32,529) |
|
| (32,387) | |
Common stock in treasury, at cost; 110,565 shares and 99,762 shares as of September 30, 2020 and December 31, 2019, respectively |
| (5,815,423) |
|
| (5,219,505) | |
Total stockholders’ equity |
| 4,629,321 |
|
| 4,171,281 | |
Total Liabilities and Stockholders’ Equity | $ | 5,697,683 |
| $ | 5,150,352 |
See accompanying notes to condensed consolidated financial statements.
3
MONSTER BEVERAGE CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
FOR THE THREE- AND NINE-MONTHS ENDED SEPTEMBER 30, 2020 AND 2019
(In Thousands, Except Per Share Amounts) (Unaudited)
Three-Months Ended | Nine-Months Ended | |||||||||||
September 30, | September 30, | |||||||||||
| 2020 |
| 2019 |
| 2020 |
| 2019 | |||||
NET SALES | $ | 1,246,362 | $ | 1,133,577 | $ | 3,402,355 | $ | 3,183,613 | ||||
COST OF SALES |
| 509,831 |
| 460,575 |
| 1,369,160 |
| 1,275,796 | ||||
GROSS PROFIT |
| 736,531 |
| 673,002 |
| 2,033,195 |
| 1,907,817 | ||||
OPERATING EXPENSES |
| 277,930 |
| 277,559 |
| 802,343 |
| 821,923 | ||||
OPERATING INCOME |
| 458,601 |
| 395,443 | 1,230,852 |
| 1,085,894 | |||||
INTEREST and OTHER (EXPENSE) INCOME, net |
| (4,568) |
| 3,121 |
| (5,491) |
| 8,835 | ||||
INCOME BEFORE PROVISION FOR INCOME TAXES |
| 454,033 |
| 398,564 | 1,225,361 |
| 1,094,729 | |||||
PROVISION FOR INCOME TAXES | 106,379 | 99,641 | 287,503 | 241,848 | ||||||||
NET INCOME | $ | 347,654 | $ | 298,923 | $ | 937,858 | $ | 852,881 | ||||
NET INCOME PER COMMON SHARE: | ||||||||||||
Basic | $ | 0.66 | $ | 0.55 | $ | 1.77 | $ | 1.57 | ||||
Diluted | $ | 0.65 | $ | 0.55 | $ | 1.75 | $ | 1.56 | ||||
WEIGHTED AVERAGE NUMBER OF SHARES OF COMMON STOCK AND COMMON STOCK EQUIVALENTS: | ||||||||||||
Basic |
| 527,637 |
| 544,469 |
| 530,194 |
| 543,804 | ||||
Diluted |
| 533,263 |
| 548,422 |
| 535,011 |
| 548,387 |
See accompanying notes to condensed consolidated financial statements.
4
MONSTER BEVERAGE CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
FOR THE THREE- AND NINE-MONTHS ENDED SEPTEMBER 30, 2020 AND 2019
(In Thousands) (Unaudited)
Three-Months Ended |
| Nine-Months Ended | ||||||||||
September 30, | September 30, | |||||||||||
| 2020 |
| 2019 |
| 2020 | 2019 | ||||||
Net income, as reported | $ | 347,654 | $ | 298,923 | $ | 937,858 | $ | 852,881 | ||||
Other comprehensive income (loss): | ||||||||||||
Change in foreign currency translation adjustment |
| 21,217 |
| (14,359) |
| (338) |
| (10,586) | ||||
Available-for-sale investments: | ||||||||||||
Change in net unrealized gains |
| (308) |
| 32 |
| 196 |
| 367 | ||||
Reclassification adjustment for net gains included in net income |
| — |
| — |
| — |
| — | ||||
Net change in available-for-sale investments |
| (308) |
| 32 |
| 196 |
| 367 | ||||
Other comprehensive income (loss) |
| 20,909 |
| (14,327) |
| (142) |
| (10,219) | ||||
Comprehensive income | $ | 368,563 | $ | 284,596 | $ | 937,716 | $ | 842,662 |
See accompanying notes to condensed consolidated financial statements.
5
MONSTER BEVERAGE CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
FOR THE THREE- AND NINE-MONTHS ENDED SEPTEMBER 30, 2020 AND 2019
(In Thousands) (Unaudited)
Accumulated | ||||||||||||||||||||||
Other | Total | |||||||||||||||||||||
Common stock | Additional | Retained | Comprehensive | Treasury stock | Stockholders’ | |||||||||||||||||
| Shares |
| Amount |
| Paid-in Capital |
| Earnings |
| Loss |
| Shares |
| Amount |
| Equity | |||||||
Balance, December 31, 2019 |
| 636,460 |
| $ | 3,182 |
| $ | 4,397,511 |
| $ | 5,022,480 |
| $ | (32,387) |
| (99,762) |
| $ | (5,219,505) |
| $ | 4,171,281 |
Stock-based compensation |
| — | — | 17,098 | — | — | — | — | 17,098 | |||||||||||||
Exercise of stock options |
| 644 | 4 | 13,971 | — | — | — | — | 13,975 | |||||||||||||
Unrealized gain, net on available-for-sale securities |
| — |
| — |
| — |
| — |
| 304 |
| — |
| — |
| 304 | ||||||
Repurchase of common stock |
| — | — | — | — | — | (10,503) | (579,948) | (579,948) | |||||||||||||
Foreign currency translation |
| — | — | — | — | (30,599) | — | — | (30,599) | |||||||||||||
Net income |
| — | — | — | 278,835 | — | — | — | 278,835 | |||||||||||||
Balance, March 31, 2020 |
| 637,104 |
| $ | 3,186 |
| $ | 4,428,580 |
| $ | 5,301,315 |
| $ | (62,682) | (110,265) |
| $ | (5,799,453) |
| $ | 3,870,946 | |
Stock-based compensation |
| — | — | 15,936 | — | — | — | — | 15,936 | |||||||||||||
Exercise of stock options |
| 820 | 4 | 29,863 | — | — | — | — | 29,867 | |||||||||||||
Unrealized gain, net on available-for-sale securities |
| — |
| — |
| — |
| — |
| 200 |
| — |
| — |
| 200 | ||||||
Repurchase of common stock |
| — | — | — | — | — | (298) | (15,822) | (15,822) | |||||||||||||
Foreign currency translation |
| — | — | — | — | 9,044 | — | — | 9,044 | |||||||||||||
Net income |
| — | — | — | 311,369 | — | — | — | 311,369 | |||||||||||||
Balance, June 30, 2020 |
| 637,924 |
| $ | 3,190 |
| $ | 4,474,379 |
| $ | 5,612,684 |
| $ | (53,438) | (110,563) |
| $ | (5,815,275) |
| $ | 4,221,540 | |
Stock-based compensation |
| — | — | 17,668 | — | — | — | — | 17,668 | |||||||||||||
Exercise of stock options |
| 534 | 2 | 21,696 | — | — | — | — | 21,698 | |||||||||||||
Unrealized loss, net on available-for-sale securities |
| — |
| — |
| — |
| — |
| (308) |
| — |
| — |
| (308) | ||||||
Repurchase of common stock |
| — | — | — | — | — | (2) | (148) | (148) | |||||||||||||
Foreign currency translation |
| — | — | — | — | 21,217 | — | — | 21,217 | |||||||||||||
Net income |
| — | — | — | 347,654 | — | — | — | 347,654 | |||||||||||||
Balance, September 30, 2020 |
| 638,458 | $ | 3,192 | $ | 4,513,743 | $ | 5,960,338 | $ | (32,529) | (110,565) | $ | (5,815,423) | $ | 4,629,321 |
Accumulated | ||||||||||||||||||||||
Other | Total | |||||||||||||||||||||
Common stock | Additional | Retained | Comprehensive | Treasury stock | Stockholders’ | |||||||||||||||||
| Shares |
| Amount |
| Paid-in Capital |
| Earnings |
| Loss |
| Shares |
| Amount |
| Equity | |||||||
Balance, December 31, 2018 |
| 630,970 |
| $ | 3,155 |
| $ | 4,238,170 |
| $ | 3,914,645 |
| $ | (32,864) |
| (87,294) |
| $ | (4,512,205) |
| $ | 3,610,901 |
Stock-based compensation |
| — | — | 15,324 | — | — | — | — | 15,324 | |||||||||||||
Exercise of stock options |
| 3,871 | 19 | 35,144 | — | — | — | — | 35,163 | |||||||||||||
Unrealized gain, net on available-for-sale securities |
| — |
| — |
| — |
| — |
| 120 |
| — |
| — |
| 120 | ||||||
Repurchase of common stock |
| — | — | — | — | — | (4,000) | (222,792) | (222,792) | |||||||||||||
Foreign currency translation |
| — | — | — | — | (1,381) | — | — | (1,381) | |||||||||||||
Net income |
| — | — | — | 261,485 | — | — | — | 261,485 | |||||||||||||
Balance, March 31, 2019 |
| 634,841 |
| $ | 3,174 |
| $ | 4,288,638 |
| $ | 4,176,130 |
| $ | (34,125) | (91,294) |
| $ | (4,734,997) |
| $ | 3,698,820 | |
Stock-based compensation |
| — | — | 15,575 | — | — | — | — | 15,575 | |||||||||||||
Exercise of stock options |
| 1,288 | 6 | 45,964 | — | — | — | — | 45,970 | |||||||||||||
Unrealized gain, net on available-for-sale securities |
| — |
| — |
| — |
| — |
| 215 |
| — |
| — |
| 215 | ||||||
Repurchase of common stock |
| — | — | — | — | — | (10) | (621) | (621) | |||||||||||||
Foreign currency translation |
| — | — | — | — | 5,154 | — | — | 5,154 | |||||||||||||
Net income |
| — | — | — | 292,473 | — | — | — | 292,473 | |||||||||||||
Balance, June 30, 2019 |
| 636,129 |
| $ | 3,180 |
| $ | 4,350,177 |
| $ | 4,468,603 |
| $ | (28,756) | (91,304) |
| $ | (4,735,618) |
| $ | 4,057,586 | |
Stock-based compensation |
| — | — | 15,991 | — | — | — | — | 15,991 | |||||||||||||
Exercise of stock options |
| 106 | 1 | 4,112 | — | — | — | — | 4,113 | |||||||||||||
Unrealized gain, net on available-for-sale securities |
| — |
| — |
| — |
| — |
| 32 |
| — |
| — |
| 32 | ||||||
Repurchase of common stock |
| — | — | — | — | — | (4,340) | (254,308) | (254,308) | |||||||||||||
Foreign currency translation |
| — | — | — | — | (14,359) | — | — | (14,359) | |||||||||||||
Net income |
| — | — | — | 298,923 | — | — | — | 298,923 | |||||||||||||
Balance, September 30, 2019 |
| 636,235 | $ | 3,181 | $ | 4,370,280 | $ | 4,767,526 | $ | (43,083) | (95,644) | $ | (4,989,926) | $ | 4,107,978 |
See accompanying notes to condensed consolidated financial statements.
6
MONSTER BEVERAGE CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE-MONTHS ENDED SEPTEMBER 30, 2020 AND 2019
(In Thousands) (Unaudited)
Nine-Months Ended | ||||||
September 30, | ||||||
2020 |
| 2019 | ||||
CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||
Net income | $ | 937,858 | $ | 852,881 | ||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||
Depreciation and amortization |
| 45,879 | 47,843 | |||
Gain on disposal of property and equipment |
| (210) | (7) | |||
Impairment of intangibles | 7,000 | — | ||||
Stock-based compensation |
| 53,042 | 46,890 | |||
Deferred income taxes |
| — | 540 | |||
Effect on cash of changes in operating assets and liabilities: | ||||||
Accounts receivable |
| (201,677) | (179,838) | |||
Distributor receivables |
| 341 | 5,813 | |||
Inventories |
| 39,490 | (44,947) | |||
Prepaid expenses and other assets |
| (20,446) | (16,121) | |||
Prepaid income taxes |
| 11,460 | 6,174 | |||
Accounts payable |
| (9,724) | 69,480 | |||
Accrued liabilities |
| 53,501 | (9,592) | |||
Accrued promotional allowances |
| 31,915 | 55,799 | |||
Accrued distributor terminations |
| (150) | 6 | |||
Accrued compensation |
| (1,214) | (3,901) | |||
Income taxes payable | 17,969 | 10,311 | ||||
Other liabilities |
| (562) | (631) | |||
Deferred revenue |
| (15,236) | (19,631) | |||
Net cash provided by operating activities | 949,236 | 821,069 | ||||
CASH FLOWS FROM INVESTING ACTIVITIES: |
| |||||
Sales of available-for-sale investments |
| 795,858 | 558,128 | |||
Purchases of available-for-sale investments |
| (849,276) | (835,964) | |||
Purchases of property and equipment |
| (42,062) | (44,392) | |||
Proceeds from sale of property and equipment |
| 880 | 810 | |||
Additions to intangibles |
| (19,686) | (5,478) | |||
Increase in other assets | (26,228) | (1,289) | ||||
Net cash used in investing activities | (140,514) | (328,185) | ||||
CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||
Principal payments on debt |
| (2,500) | (12,841) | |||
Issuance of common stock |
| 65,540 | 85,245 | |||
Purchases of common stock held in treasury |
| (595,918) | (477,721) | |||
Net cash used in financing activities |
| (532,878) | (405,317) | |||
Effect of exchange rate changes on cash and cash equivalents |
| 929 | (7,463) | |||
NET INCREASE IN CASH AND CASH EQUIVALENTS |
| 276,773 | 80,104 | |||
CASH AND CASH EQUIVALENTS, beginning of period |
| 797,957 | 637,513 | |||
CASH AND CASH EQUIVALENTS, end of period | $ | 1,074,730 | $ | 717,617 | ||
SUPPLEMENTAL INFORMATION: | ||||||
Cash paid during the period for: | ||||||
Interest | $ | 39 | $ | 306 | ||
Income taxes | $ | 257,563 | $ | 226,883 |
See accompanying notes to condensed consolidated financial statements.
7
MONSTER BEVERAGE CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE-MONTHS ENDED SEPTEMBER 30, 2020 AND 2019
(In Thousands) (Unaudited) (Continued)
SUPPLEMENTAL DISCLOSURE OF NON-CASH ITEMS
Included in accrued liabilities as of September 30, 2020 and 2019 were $14.3 million and $8.6 million, respectively, related to additions to other intangible assets.
Included in accounts payable as of September 30, 2020 and 2019 were available-for-sale short-term investment purchases of $20.3 million and $3.0 million, respectively.
See accompanying notes to condensed consolidated financial statements.
8
MONSTER BEVERAGE CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Tabular Dollars in Thousands, Except Per Share Amounts) (Unaudited)
1. | BASIS OF PRESENTATION |
Reference is made to the Notes to Consolidated Financial Statements, in Monster Beverage Corporation and Subsidiaries (the “Company”) Annual Report on Form 10-K for the year ended December 31, 2019 for a summary of significant accounting policies utilized by the Company and its consolidated subsidiaries and other disclosures, which should be read in conjunction with this Quarterly Report on Form 10-Q (“Form 10-Q”).
The Company’s condensed consolidated financial statements included in this Form 10-Q have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and Securities and Exchange Commission (“SEC”) rules and regulations applicable to interim financial reporting. They do not include all the information and footnote disclosures normally included in annual financial statements prepared in accordance with GAAP. The information set forth in these interim condensed consolidated financial statements for the three- and nine-months ended September 30, 2020 and 2019, respectively, is unaudited and reflects all adjustments, which include only normal recurring adjustments and which in the opinion of management are necessary to make the interim condensed consolidated financial statements not misleading. Results of operations for periods covered by this report may not necessarily be indicative of results of operations for the full year.
The preparation of financial statements in conformity with GAAP necessarily requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from these estimates.
2. | RECENT ACCOUNTING PRONOUNCEMENTS |
Recently issued accounting pronouncements not yet adopted
In December 2019, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2019-12, “Simplifying the Accounting for Income Taxes”, as part of its simplification initiative to reduce the cost and complexity in accounting for income taxes. ASU No. 2019-12 removes certain exceptions related to the approach for intra-period tax allocation, the methodology for calculating income taxes in an interim period and the recognition of deferred tax liabilities for outside basis differences. ASU No. 2019-12 also amends other aspects of the guidance to help simplify and promote consistent application of GAAP. The guidance is effective for interim and annual periods beginning after December 15, 2020, with early adoption permitted. The Company is currently evaluating the impact of ASU No. 2019-12 on its financial position, results of operations and liquidity.
Recently adopted accounting pronouncements
In August 2018, the FASB issued ASU No. 2018-15, “Intangibles–Goodwill and Other–Internal–Use Software (Topic 350): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That is a Service Contract.” ASU No. 2018-15 aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract, with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software. ASU No. 2018-15 was effective for the Company on a prospective or retrospective basis beginning on January 1, 2020. The adoption of ASU No. 2018-15 did not have a material impact on the Company’s financial position, results of operations and liquidity.
In August 2018, the FASB issued ASU No. 2018-14, “Compensation–Retirement Benefits–Defined Benefit Plans–General (Topic 715): Disclosure Framework–Changes to the Disclosure Requirements for Defined Benefit Plans.” ASU No. 2018-14 removes certain disclosures that are not considered cost beneficial, clarifies certain required disclosures and requires certain additional disclosures. ASU No. 2018-14 is effective for the Company on a retrospective basis beginning in the year ending December 31, 2020. The adoption of ASU No. 2018-14 did not have a material impact on the Company’s financial position, results of operations and liquidity.
9
MONSTER BEVERAGE CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Tabular Dollars in Thousands, Except Per Share Amounts) (Unaudited)
In August 2018, the FASB issued ASU No. 2018-13, “Fair Value Measurement (Topic 820): Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement.” ASU No. 2018-13 removes certain disclosure requirements related to the fair value hierarchy, modifies existing disclosure requirements related to measurement uncertainty and adds new disclosure requirements. ASU No. 2018-13 disclosure requirements include disclosing the changes in unrealized gains and losses for the period included in other comprehensive income for recurring Level 3 fair value measurements held at the end of the reporting period and the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements. ASU No. 2018-13 was effective for the Company beginning on January 1, 2020. Certain disclosures in the new guidance will need to be applied on a retrospective basis and others on a prospective basis. The adoption of ASU No. 2018-13 did not have a material impact on the Company’s financial position, results of operations and liquidity.
In January 2017, the FASB issued ASU No. 2017-04, “Intangibles and Other (Topic 350): Simplifying the Test for Goodwill Impairment”, which eliminates the requirement to calculate the implied fair value of goodwill, but rather requires an entity to record an impairment charge based on the excess of a reporting unit’s carrying value over its fair value. This amendment is effective for annual or interim goodwill impairment tests in fiscal years beginning after December 15, 2019. The adoption of ASU No. 2017-04 did not have a material impact on the Company’s financial position, results of operations and liquidity.
In June 2016, the FASB issued ASU No. 2016-13, “Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments.” The accounting standard changes the methodology for measuring credit losses on financial instruments and the timing when such losses are recorded. ASU No. 2016-13 was effective for fiscal years, and interim periods within those years, beginning after December 15, 2019. The adoption of ASU No. 2016-13 did not have a material impact on the Company’s disclosures, financial position, results of operations and liquidity.
3. | REVENUE RECOGNITION |
The Company has three
and reportable segments: (i) Monster Energy® Drinks segment (“Monster Energy® Drinks”), which is primarily comprised of the Company’s Monster Energy® drinks and Reign Total Body Fuel® high performance energy drinks (ii) Strategic Brands segment (“Strategic Brands”), which is primarily comprised of the various energy drink brands acquired from The Coca-Cola Company (“TCCC”) in 2015 as well as the Company’s affordable energy brands, and (iii) Other segment (“Other”), which is comprised of certain products sold by American Fruits and Flavors, LLC, a wholly-owned subsidiary of the Company, to independent third-party customers (the “AFF Third-Party Products”).The Company’s Monster Energy® Drinks segment generates net operating revenues by selling ready-to-drink packaged energy drinks primarily to bottlers and full service beverage bottlers/distributors (“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.
The majority of the Company’s revenue is recognized when it satisfies a single performance obligation by transferring control of its products to a customer. Control is generally transferred when the Company’s products are either shipped or delivered based on the terms contained within the underlying contracts or agreements. Certain of the Company’s bottlers/distributors may also perform a separate function as a co-packer on the Company’s behalf. In such cases, control of the Company’s products passes to such bottlers/distributors when they notify the Company that they have taken possession or transferred the relevant portion of the Company’s finished goods. The Company’s general payment terms are short-term in duration. The Company does not have significant financing components or payment terms. The Company did not have any material unsatisfied performance obligations as of September 30, 2020 and December 31, 2019.
10
MONSTER BEVERAGE CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Tabular Dollars in Thousands, Except Per Share Amounts) (Unaudited)
The Company excludes from revenues all taxes assessed by a governmental authority that are imposed on the sale of its products and collected from customers.
Distribution expenses to transport the Company’s products, where applicable, and warehousing expense after manufacture are accounted for within operating expenses.
Promotional and other allowances (variable consideration) recorded as a reduction to net sales, primarily include consideration given to the Company’s bottlers/distributors or retail customers including, but not limited to the following:
● | discounts granted off list prices to support price promotions to end-consumers by retailers; |
● | reimbursements given to the Company’s bottlers/distributors for agreed portions of their promotional spend with retailers, including slotting, shelf space allowances and other fees for both new and existing products; |
● | the Company’s agreed share of fees given to bottlers/distributors and/or directly to retailers for advertising, in-store marketing and promotional activities; |
● | the Company’s agreed share of slotting, shelf space allowances and other fees given directly to retailers, club stores and/or wholesalers; |
● | incentives given to the Company’s bottlers/distributors and/or retailers for achieving or exceeding certain predetermined sales goals; |
● | discounted or free products; |
● | contractual fees given to the Company’s bottlers/distributors related to sales made directly by the Company to certain customers that fall within the bottlers’/distributors’ sales territories; and |
● | commissions to TCCC based on the Company’s sales to certain wholly-owned subsidiaries of TCCC (the “TCCC Subsidiaries”) and/or to certain companies accounted for under the equity method by TCCC (the “TCCC Related Parties”). |
The Company’s promotional allowance programs with its bottlers/distributors and/or retailers are executed through separate agreements in the ordinary course of business. These agreements generally provide for one or more of the arrangements described above and are of varying durations, typically ranging from one week to one year. The Company’s promotional and other allowances are calculated based on various programs with bottlers/distributors and retail customers, and accruals are established at the time of initial product sale for the Company’s anticipated liabilities. These accruals are based on agreed upon terms as well as the Company’s historical experience with similar programs and require management’s judgment with respect to estimating consumer participation and/or bottler/distributor and retail customer performance levels. Differences between such estimated expenses and actual expenses for promotional and other allowance costs have historically been insignificant and are recognized in earnings in the period such differences are determined.
Amounts received pursuant to new and/or amended distribution agreements entered into with certain bottlers/distributors relating to the costs associated with terminating the Company’s prior distributors, are accounted for as revenue ratably over the anticipated life of the respective distribution agreements, generally over 20 years.
The Company also enters into license agreements that generate revenues associated with third-party sales of non-beverage products bearing the Company’s trademarks including, but not limited to, clothing, hats, t-shirts, jackets, helmets and automotive wheels.
Management believes that adequate provision has been made for cash discounts, returns and spoilage based on the Company’s historical experience.
11
MONSTER BEVERAGE CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Tabular Dollars in Thousands, Except Per Share Amounts) (Unaudited)
Disaggregation of Revenue
The following tables disaggregate the Company’s revenue by geographical markets and reportable segments:
Three-Months Ended September 30, 2020 | |||||||||||||||
|
|
| Latin |
| |||||||||||
America |
| ||||||||||||||
U.S. and | and |
| |||||||||||||
Net Sales | Canada | EMEA1 | Asia Pacific | Caribbean | Total | ||||||||||
Monster Energy® Drinks | $ | 786,960 | $ | 206,947 | $ | 120,589 | $ | 48,924 | $ | 1,163,420 | |||||
Strategic Brands |
| 46,005 |
| 19,192 |
| 6,658 |
| 2,469 |
| 74,324 | |||||
Other |
| 8,618 |
| — |
| — |
| — |
| 8,618 | |||||
Total Net Sales | $ | 841,583 | $ | 226,139 | $ | 127,247 | $ | 51,393 | $ | 1,246,362 |
Three-Months Ended September 30, 2019 | |||||||||||||||
|
|
| Latin |
| |||||||||||
America | |||||||||||||||
U.S. and | and | ||||||||||||||
Net Sales | Canada | EMEA1 | Asia Pacific | Caribbean | Total | ||||||||||
Monster Energy® Drinks | $ | 737,457 | $ | 178,569 | $ | 97,153 | $ | 48,205 | $ | 1,061,384 | |||||
Strategic Brands | 43,205 | 16,673 | 6,243 | 212 | 66,333 | ||||||||||
Other | 5,860 | — | — | — | 5,860 | ||||||||||
Total Net Sales | $ | 786,522 | $ | 195,242 | $ | 103,396 | $ | 48,417 | $ | 1,133,577 |
Nine-Months Ended September 30, 2020 | |||||||||||||||
|
|
|
| Latin |
| ||||||||||
America |
| ||||||||||||||
U.S. and | and |
| |||||||||||||
Net Sales | Canada | EMEA1 | Asia Pacific | Caribbean | Total | ||||||||||
Monster Energy® Drinks | $ | 2,223,925 | $ | 501,639 | $ | 319,325 | $ | 138,671 | $ | 3,183,560 | |||||
Strategic Brands | 125,030 | 52,333 | 17,161 | 3,904 | 198,428 | ||||||||||
Other | 20,367 | — | — | — | 20,367 | ||||||||||
Total Net Sales | $ | 2,369,322 | $ | 553,972 | $ | 336,486 | $ | 142,575 | $ | 3,402,355 |
Nine-Months Ended September 30, 2019 | |||||||||||||||
|
|
|
| Latin |
| ||||||||||
America |
| ||||||||||||||
U.S. and | and |
| |||||||||||||
Net Sales | Canada | EMEA1 | Asia Pacific | Caribbean | Total | ||||||||||
Monster Energy® Drinks | $ | 2,118,835 | $ | 458,655 | $ | 242,561 | $ | 130,826 | $ | 2,950,877 | |||||
Strategic Brands | 132,375 | 62,374 | 20,024 | 990 | 215,763 | ||||||||||
Other | 16,973 | — | — | — | 16,973 | ||||||||||
Total Net Sales | $ | 2,268,183 | $ | 521,029 | $ | 262,585 | $ | 131,816 | $ | 3,183,613 |
1Europe, Middle East and Africa (“EMEA”)
12
MONSTER BEVERAGE CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Tabular Dollars in Thousands, Except Per Share Amounts) (Unaudited)
Contract Liabilities
Amounts received from certain bottlers/distributors at inception of their distribution contracts or at the inception of certain sales/marketing programs are accounted for as deferred revenue. As of September 30, 2020, the Company had $313.8 million of deferred revenue, which is included in current and long-term deferred revenue in the Company’s condensed consolidated balance sheet. As of December 31, 2019, the Company had $331.7 million of deferred revenue, which is included in current and long-term deferred revenue in the Company’s condensed consolidated balance sheet. During the three-months ended September 30, 2020 and 2019, $10.5 million and $10.7 million, respectively, of deferred revenue was recognized in net sales. See Note 11. During the nine-months ended September 30, 2020 and 2019, $31.6 million and $35.6 million, respectively, of deferred revenue was recognized in net sales. See Note 11.
4. | LEASES |
The Company leases identified assets comprising real estate and equipment. Real estate leases consist primarily of office and warehouse space and equipment leases consist of vehicles and warehouse equipment. At the inception of a contract, the Company assesses whether the contract is, or contains, a lease. The Company’s assessment is based on: (1) whether the contract involves the use of a distinct identified asset, (2) whether the Company obtains the right to substantially all the economic benefit from the use of the asset throughout the term, and (3) whether the Company has the right to direct the use of the asset. At inception of a lease, the Company allocates the consideration in the contract to each lease and non-lease component based on the component’s relative stand-alone price to determine the lease payments. Lease and non-lease components are accounted for separately.
Leases are classified as either finance leases or operating leases based on criteria in Accounting Standards Codification (“ASC”) 842. The Company’s operating leases are comprised of real estate and warehouse equipment, and the Company’s finance leases are comprised of vehicles.
Right-of-use (“ROU”) assets and lease liabilities are recognized at the lease commencement date based on the present value of lease payments over the lease term. As the Company’s leases generally do not provide an implicit rate, the Company uses its incremental borrowing rate based on the estimated rate of interest for collateralized borrowing over a similar term of the lease payments at the commencement date. ROU assets also include any lease payments made and exclude lease incentives. Lease terms include options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option.
Certain of the Company’s real estate leases contain variable lease payments, including payments based on an index or rate. Variable lease payments based on an index or rate are initially measured using the index or rate in effect at the lease commencement date. Additional payments based on the change in an index or rate, or payments based on a change in the Company’s portion of real estate taxes and insurance, are recorded as a period expense when incurred.
Lease expense for operating leases, consisting of lease payments, is recognized on a straight-line basis over the lease term and is included in operating expenses in the condensed consolidated statement of income. Lease expense for finance leases consists of the amortization of the ROU asset on a straight-line basis over the asset’s estimated useful life and is included in operating expenses in the condensed consolidated statement of income. Interest expense on finance leases is calculated using the amortized cost basis and is included in interest and other (expense) income, net in the condensed consolidated statement of income.
The Company’s leases have remaining lease terms of less than one year to 13 years,
of include options to extend the for up to five years, and some of which include options to terminate the within one year. The Company has elected not to recognize ROU assets and lease liabilities for short-term operating leases that have a term of 12 months or less.13
MONSTER BEVERAGE CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Tabular Dollars in Thousands, Except Per Share Amounts) (Unaudited)
The components of lease cost were comprised of the following:
Three-Months | Three-Months | Nine-Months | Nine-Months | |||||||||
Ended September 30, | Ended September 30, | Ended September 30, | Ended September 30, | |||||||||
| 2020 |
| 2019 |
| 2020 |
| 2019 | |||||
Operating lease cost | $ | 1,161 | $ | 1,223 | $ | 3,499 | $ | 3,548 | ||||
Short-term lease cost |
| 856 |
| 993 |
| 2,440 |
| 2,552 | ||||
Variable lease cost |
| 242 |
| 168 |
| 564 |
| 503 | ||||
Finance leases: | ||||||||||||
Amortization of ROU assets |
| 177 |
| 172 |
| 511 |
| 346 | ||||
Interest on lease liabilities |
| 9 |
| 13 |
| 34 |
| 43 | ||||
Finance lease cost |
| 186 |
| 185 |
| 545 |
| 389 | ||||
Total lease cost | $ | 2,445 | $ | 2,569 | $ | 7,048 | $ | 6,992 |
Supplemental cash flow information for the following periods:
| | Nine-Months | Nine-Months | |||
| | Ended September 30, | Ended September 30, | |||
|
| 2020 |
| 2019 | ||
Cash paid for amounts included in the measurement of lease liabilities: | ||||||
Operating cash outflows from operating leases | $ | 3,081 | $ | 3,026 | ||
Operating cash outflows from finance leases | 33 | 43 | ||||
Financing cash outflows from finance leases | 2,500 | 1,497 | ||||
| | |||||
ROU assets obtained in exchange for lease obligations: | ||||||
Finance leases | 2,231 | 2,499 | ||||
Operating leases | 2,117 | 27,965 |
ROU assets for operating and finance leases recognized in the condensed consolidated balance sheets were comprised of the following at:
| | September 30, 2020 | | | |||||||
| | Real Estate |
| Equipment |
| Total |
| Balance Sheet Location | |||
Operating leases | $ | 22,783 | $ | 214 | $ | 22,997 | Other Assets | ||||
Finance leases |
| — |
| 2,781 |
| 2,781 | Property and Equipment, net |
December 31, 2019 |
| ||||||||||
| Real Estate |
| Equipment |
| Total |
| Balance Sheet Location | ||||
Operating leases |
| $ | 30,926 |
| $ | 416 |
| $ | 31,342 |
| Other Assets |
Finance leases |
| — |
| 2,632 |
| 2,632 |
| Property and Equipment, net |
14
MONSTER BEVERAGE CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Tabular Dollars in Thousands, Except Per Share Amounts) (Unaudited)
Operating and finance lease liabilities recognized in the condensed consolidated balance sheets were as follows at:
September 30, 2020 | ||||||
Operating Leases |
| Finance Leases | ||||
Accrued liabilities |
| $ | 2,982 | $ | 1,214 | |
Other liabilities |
| 17,535 |
| — | ||
Total | $ | 20,517 | $ | 1,214 |
December 31, 2019 | ||||||
| Operating Leases |
| Finance Leases | |||
Accrued liabilities |
| $ | 2,812 |
| $ | 1,485 |
Other liabilities |
| 25,651 |
| — | ||
Total | $ | 28,463 | $ | 1,485 |
The weighted-average remaining lease terms and weighted-average discount rates for operating and finance leases at September 30, 2020 and December 31, 2019 were as follows:
| | September 30, 2020 | |||
| | Operating Leases |
| Finance Leases |
|
Weighted-average remaining lease term (years) | 9.7 |
| 0.6 | ||
Weighted-average discount rate | 3.6 | % | 2.1 | % |
| December 31, 2019 | |||||
| Operating Leases |
| Finance Leases | |||
Weighted-average remaining lease term (years) |
| 10.1 | 0.6 | | ||
Weighted-average discount rate |
| 3.1 | % | 2.9 | % |
The following table reconciles the undiscounted future lease payments for operating and finance leases to the operating and finance leases recorded in the condensed consolidated balance sheet at September 30, 2020:
| Undiscounted Future Lease Payments | |||||
| Operating Leases |
| Finance Leases | |||
2020 (excluding the nine-months ended September 30, 2020) | $ | 811 | $ | 588 | ||
2021 |
| 3,573 |
| 633 | ||
2022 |
| 2,898 |
| — | ||
2023 |
| 2,185 |
| — | ||
2024 |
| 1,890 |
| — | ||
2025 and thereafter |
| 13,188 |
| — | ||
Total lease payments |
| 24,545 |
| 1,221 | ||
Less imputed interest |
| (4,028) |
| (7) | ||
Total | $ | 20,517 | $ | 1,214 |
As of September 30, 2020, the Company did not have any significant additional operating or finance leases that have not yet commenced.
15
MONSTER BEVERAGE CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Tabular Dollars in Thousands, Except Per Share Amounts) (Unaudited)
5. | INVESTMENTS |
The following table summarizes the Company’s investments at:
Continuous | Continuous | |||||||||||||||||
Gross | Gross | Unrealized | Unrealized | |||||||||||||||
Unrealized | Unrealized | Loss Position | Loss Position | |||||||||||||||
Amortized | Holding | Holding | Fair | less than 12 | greater than 12 | |||||||||||||
September 30, 2020 |
| Cost |
| Gains |
| Losses |
| Value |
| Months |
| Months | ||||||
Available-for-sale | ||||||||||||||||||
Short-term: | ||||||||||||||||||
Commercial paper | $ | 91,445 | $ | — | $ | — | $ | 91,445 | $ | — | $ | — | ||||||
Certificates of deposit | 19,959 | — | — | 19,959 | — | — | ||||||||||||
U.S. government agency securities |
| 66,435 |
| 21 |
| 3 |
| 66,453 |
| 3 |
| — | ||||||
U.S. treasuries | 421,093 | 398 | 22 | 421,469 | 22 | — | ||||||||||||
Long-term: | ||||||||||||||||||
U.S. government agency securities | 10,205 | — | 1 | 10,204 | 1 | — | ||||||||||||
U.S. treasuries | 10,370 | — | 3 | 10,367 | 3 | — | ||||||||||||
Total | $ | 619,507 | $ | 419 | $ | 29 | $ | 619,897 | $ | 29 | $ | — |
Continuous | Continuous | |||||||||||||||||
Gross | Gross | Unrealized | Unrealized | |||||||||||||||
Unrealized | Unrealized | Loss Position | Loss Position | |||||||||||||||
Amortized | Holding | Holding | Fair | less than 12 | greater than 12 | |||||||||||||
December 31, 2019 |
| Cost |
| Gains |
| Losses |
| Value |
| Months |
| Months | ||||||
Available-for-sale | ||||||||||||||||||
Short-term: | ||||||||||||||||||
Commercial paper | $ | 83,478 | $ | — | $ | — | $ | 83,478 | $ | — | $ | — | ||||||
Certificates of deposit | 28,049 | — | — | 28,049 | — | — | ||||||||||||
Municipal securities |
| 147,983 |
| 145 |
| 20 |
| 148,108 |
| 20 |
| — | ||||||
U.S. government agency securities |
| 40,620 |
| 5 |
| 35 |
| 40,590 |
| 35 |
| — | ||||||
U.S. treasuries | 211,055 | 134 | 31 | 211,158 | 31 | — | ||||||||||||
Variable rate demand notes |
| 21,680 |
| — |
| — |
| 21,680 |
| — |
| — | ||||||
Long-term: | ||||||||||||||||||
Municipal securities | 1,562 | — | 1 | 1,561 | 1 | — | ||||||||||||
U.S. government agency securities | 5,267 | — | 1 | 5,266 | 1 | — | ||||||||||||
U.S. treasuries | 6,077 | 1 | — | 6,078 | — | — | ||||||||||||
Total | $ | 545,771 | $ | 285 | $ | 88 | $ | 545,968 | $ | 88 | $ | — |
During the three- and nine-months ended September 30, 2020 and 2019, realized gains or losses recognized on the sale of investments were not significant.
The Company’s investments at September 30, 2020 and December 31, 2019 carried investment grade credit ratings.
Variable rate demand notes (“VRDNs”) are floating rate municipal bonds with embedded put options that allow the bondholder to sell the security at par plus accrued interest. All of the put options are secured by a pledged liquidity source. While they are classified as marketable investment securities, the put option allows the VRDNs to be liquidated at par on a same day, or more generally, on a seven-day settlement basis.
16
MONSTER BEVERAGE CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Tabular Dollars in Thousands, Except Per Share Amounts) (Unaudited)
The following table summarizes the underlying contractual maturities of the Company’s investments at:
September 30, 2020 | December 31, 2019 | |||||||||||
| Amortized Cost |
| Fair Value |
| Amortized Cost |
| Fair Value | |||||
Less than 1 year: | ||||||||||||
Commercial paper | $ | 91,445 | $ | 91,445 |
| $ | 83,478 | $ | 83,478 | |||
Municipal securities |
| — |
| — |
|
| 147,983 |
| 148,108 | |||
U.S. government agency securities |
| 66,435 |
| 66,453 |
|
| 40,620 |
| 40,590 | |||
Certificates of deposit |
| 19,959 |
| 19,959 |
|
| 28,049 |
| 28,049 | |||
U.S. treasuries | 421,093 | 421,469 | 211,055 | 211,158 | ||||||||
Due 1 -10 years: | ||||||||||||
Municipal securities |
| — |
| — |
|
| 1,562 |
| 1,561 | |||
U.S. treasuries | 10,370 | 10,367 | 6,077 | 6,078 | ||||||||
U.S. government agency securities |
| 10,205 |
| 10,204 |
|
| 5,267 |
| 5,266 | |||
Variable rate demand notes | — | — | 3,905 | 3,905 | ||||||||
Due 11 - 20 years: | ||||||||||||
Variable rate demand notes |
| — |
| — |
|
| 8,886 |
| 8,886 | |||
Due 21 - 30 years: | ||||||||||||
Variable rate demand notes |
| — |
| — |
|
| 6,885 |
| 6,885 | |||
Due 31 - 40 years: | ||||||||||||
Variable rate demand notes | — | — | 2,004 | 2,004 | ||||||||
Total | $ | 619,507 | $ | 619,897 |
| $ | 545,771 | $ | 545,968 |
6. | FAIR VALUE OF CERTAIN FINANCIAL ASSETS AND LIABILITIES |
ASC 820 provides a framework for measuring fair value and requires disclosures regarding fair value measurements. ASC 820 defines fair value as the price that would be received on the sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. ASC 820 also establishes a fair value hierarchy that requires an entity to maximize the use of observable inputs, where available. The three levels of inputs required by the standard that the Company uses to measure fair value are summarized below.
● | Level 1: Quoted prices in active markets for identical assets or liabilities. |
● | Level 2: Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities, quoted prices in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the related assets or liabilities. |
● | Level 3: Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. |
ASC 820 requires the use of observable market inputs (quoted market prices) when measuring fair value and requires a Level 1 quoted price to be used to measure fair value whenever possible.
17
MONSTER BEVERAGE CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Tabular Dollars in Thousands, Except Per Share Amounts) (Unaudited)
The following tables present the fair value of the Company’s financial assets and liabilities that are recorded at fair value on a recurring basis, segregated among the appropriate levels within the fair value hierarchy at:
September 30, 2020 |
| Level 1 |
| Level 2 |
| Level 3 |
| Total | ||||
Cash | $ | 719,429 | $ | — | $ | — | $ | 719,429 | ||||
Money market funds |
| 319,984 |
| — |
| — |
| 319,984 | ||||
Certificates of deposit | — | 19,959 | — | 19,959 | ||||||||
Commercial paper |
| — |
| 91,445 |
| — |
| 91,445 | ||||
U.S. government agency securities |
| — |
| 76,657 |
| — |
| 76,657 | ||||
U.S. treasuries | — | 467,153 | — | 467,153 | ||||||||
Foreign currency derivatives |
| — |
| (770) |
| — |
| (770) | ||||
Total | $ | 1,039,413 | $ | 654,444 | $ | — | $ | 1,693,857 | ||||
Amounts included in: | ||||||||||||
Cash and cash equivalents | $ | 1,039,413 | $ | 35,317 | $ | — | $ | 1,074,730 | ||||
Short-term investments |
| — |
| 599,326 |
| — |
| 599,326 | ||||
Accounts receivable, net |
| — |
| 185 |
| — |
| 185 | ||||
Investments |
| — |
| 20,571 |
| — |
| 20,571 | ||||
Accrued liabilities |
| — |
| (955) |
| — |
| (955) | ||||
Total | $ | 1,039,413 | $ | 654,444 | $ | — | $ | 1,693,857 |
December 31, 2019 |
| Level 1 |
| Level 2 |
| Level 3 |
| Total | ||||
Cash | $ | 518,178 | $ | — | $ | — | $ | 518,178 | ||||
Money market funds |
| 191,131 |
| — |
| — |
| 191,131 | ||||
Certificates of deposit | — | 28,049 | — | 28,049 | ||||||||
Commercial paper |
| — |
| 96,867 |
| — |
| 96,867 | ||||
Variable rate demand notes | — | 21,680 | — | 21,680 | ||||||||
Municipal securities |
| — |
| 167,224 |