Monster Beverage Corp - Quarter Report: 2022 September (Form 10-Q)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
Quarterly Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the quarterly period ended September 30, 2022 | Commission File Number 001-18761 |
MONSTER BEVERAGE CORPORATION
(Exact name of registrant as specified in its charter)
Delaware |
| 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 | Nasdaq 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 X
The registrant had 521,743,612 shares of common stock, par value $0.005 per share, outstanding as of October 31, 2022.
MONSTER BEVERAGE CORPORATION AND SUBSIDIARIES
SEPTEMBER 30, 2022
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, 2022 AND DECEMBER 31, 2021
(In Thousands, Except Par Value) (Unaudited)
September 30, | December 31, | |||||
| 2022 |
| 2021 | |||
ASSETS | ||||||
CURRENT ASSETS: | ||||||
Cash and cash equivalents | $ | 1,303,048 | $ | 1,326,462 | ||
Short-term investments |
| 1,346,781 |
|
| 1,749,727 | |
Accounts receivable, net |
| 1,051,642 |
|
| 896,658 | |
Inventories |
| 862,977 |
|
| 593,357 | |
Prepaid expenses and other current assets |
| 112,294 |
|
| 82,668 | |
Prepaid income taxes |
| 19,949 |
|
| 33,238 | |
Total current assets |
| 4,696,691 |
|
| 4,682,110 | |
INVESTMENTS |
| 72,373 |
|
| 99,419 | |
PROPERTY AND EQUIPMENT, net |
| 485,550 |
|
| 313,753 | |
DEFERRED INCOME TAXES, net |
| 195,511 |
|
| 225,221 | |
GOODWILL |
| 1,412,941 |
|
| 1,331,643 | |
OTHER INTANGIBLE ASSETS, net |
| 1,225,826 |
|
| 1,072,386 | |
OTHER ASSETS |
| 115,913 |
|
| 80,252 | |
Total Assets | $ | 8,204,805 |
| $ | 7,804,784 | |
LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||
CURRENT LIABILITIES: | ||||||
Accounts payable | $ | 520,198 |
| $ | 404,263 | |
Accrued liabilities |
| 198,692 |
|
| 210,964 | |
Accrued promotional allowances |
| 281,650 |
|
| 211,461 | |
Deferred revenue |
| 42,608 |
|
| 42,530 | |
Accrued compensation |
| 61,426 |
|
| 65,459 | |
Income taxes payable |
| 17,143 |
|
| 30,399 | |
Total current liabilities |
| 1,121,717 |
|
| 965,076 | |
DEFERRED REVENUE |
| 226,294 |
|
| 243,249 | |
OTHER LIABILITIES | 41,034 | 29,508 | ||||
COMMITMENTS AND CONTINGENCIES (Note 12) | ||||||
STOCKHOLDERS’ EQUITY: | ||||||
Common stock - $0.005 par value; 1,250,000 shares authorized; 641,245 shares issued and 523,965 shares outstanding as of September 30, 2022; 640,043 shares issued and 529,323 shares outstanding as of December 31, 2021 | 3,206 | 3,200 | ||||
Additional paid-in capital |
| 4,736,141 |
|
| 4,652,620 | |
Retained earnings |
| 8,699,499 |
|
| 7,809,549 | |
Accumulated other comprehensive loss |
| (224,455) |
|
| (69,165) | |
Common stock in treasury, at cost; 117,280 shares and 110,720 shares as of September 30, 2022 and December 31, 2021, respectively |
| (6,398,631) |
|
| (5,829,253) | |
Total stockholders’ equity |
| 6,815,760 |
|
| 6,566,951 | |
Total Liabilities and Stockholders’ Equity | $ | 8,204,805 |
| $ | 7,804,784 |
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, 2022 AND 2021
(In Thousands, Except Per Share Amounts) (Unaudited)
Three-Months Ended | Nine-Months Ended | |||||||||||
September 30, | September 30, | |||||||||||
| 2022 |
| 2021 |
| 2022 |
| 2021 | |||||
NET SALES | $ | 1,624,286 | $ | 1,410,557 | $ | 4,798,119 | $ | 4,116,308 | ||||
COST OF SALES |
| 790,561 |
| 621,399 |
| 2,407,867 |
| 1,775,375 | ||||
GROSS PROFIT |
| 833,725 |
| 789,158 |
| 2,390,252 |
| 2,340,933 | ||||
OPERATING EXPENSES |
| 415,795 |
| 344,694 |
| 1,199,883 |
| 956,346 | ||||
OPERATING INCOME |
| 417,930 |
| 444,464 | 1,190,369 |
| 1,384,587 | |||||
INTEREST and OTHER INCOME (EXPENSE), net |
| 2,149 |
| (2,290) |
| (11,932) |
| (2,179) | ||||
INCOME BEFORE PROVISION FOR INCOME TAXES |
| 420,079 |
| 442,174 | 1,178,437 |
| 1,382,408 | |||||
PROVISION FOR INCOME TAXES | 97,692 | 104,969 | 288,487 | 326,247 | ||||||||
NET INCOME | $ | 322,387 | $ | 337,205 | $ | 889,950 | $ | 1,056,161 | ||||
NET INCOME PER COMMON SHARE: | ||||||||||||
Basic | $ | 0.61 | $ | 0.64 | $ | 1.68 | $ | 2.00 | ||||
Diluted | $ | 0.60 | $ | 0.63 | $ | 1.66 | $ | 1.97 | ||||
WEIGHTED AVERAGE NUMBER OF SHARES OF COMMON STOCK AND COMMON STOCK EQUIVALENTS: | ||||||||||||
Basic |
| 526,797 |
| 528,997 |
| 528,263 |
| 528,618 | ||||
Diluted |
| 533,300 |
| 535,915 |
| 534,599 |
| 535,554 |
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, 2022 AND 2021
(In Thousands) (Unaudited)
Three-Months Ended |
| Nine-Months Ended | ||||||||||
September 30, | September 30, | |||||||||||
| 2022 |
| 2021 |
| 2022 |
| 2021 | |||||
Net income, as reported | $ | 322,387 | $ | 337,205 | $ | 889,950 | $ | 1,056,161 | ||||
Other comprehensive income (loss): | ||||||||||||
Change in foreign currency translation adjustment |
| (68,822) |
| (26,716) |
| (147,450) |
| (46,412) | ||||
Available-for-sale investments: | ||||||||||||
Change in net unrealized (losses) gains |
| (2,675) |
| 43 |
| (7,840) |
| (117) | ||||
Reclassification adjustment for net gains included in net income |
| — |
| — |
| — |
| — | ||||
Net change in available-for-sale investments |
| (2,675) |
| 43 |
| (7,840) |
| (117) | ||||
Other comprehensive income (loss) |
| (71,497) |
| (26,673) |
| (155,290) |
| (46,529) | ||||
Comprehensive income | $ | 250,890 | $ | 310,532 | $ | 734,660 | $ | 1,009,632 |
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, 2022 AND 2021
(In Thousands) (Unaudited)
Accumulated Other | Total | |||||||||||||||||||||
Common stock | Additional | Retained | Comprehensive (Loss) | Treasury stock | Stockholders’ | |||||||||||||||||
| Shares |
| Amount |
| Paid-in Capital |
| Earnings |
| Income |
| Shares |
| Amount |
| Equity | |||||||
Balance, December 31, 2021 |
| 640,043 |
| $ | 3,200 |
| $ | 4,652,620 |
| $ | 7,809,549 |
| $ | (69,165) | (110,720) |
| $ | (5,829,253) |
| $ | 6,566,951 | |
Stock-based compensation |
| — | — | 16,175 | — | — | — | — | 16,175 | |||||||||||||
Exercise of stock options |
| 485 | 3 | 4,507 | — | — | — | — | 4,510 | |||||||||||||
Unrealized loss, net on available-for-sale securities |
| — | — | — | — | (4,059) | — | — | (4,059) | |||||||||||||
Repurchase of common stock |
| — | — | — | — | — | (166) | (12,187) | (12,187) | |||||||||||||
Foreign currency translation |
| — | — | — | — | 1,079 | — | — | 1,079 | |||||||||||||
Net income | — | — | — | 294,203 | — | — | — | 294,203 | ||||||||||||||
Balance, March 31, 2022 | 640,528 | 3,203 | 4,673,302 | 8,103,752 | (72,145) | (110,886) | (5,841,440) | 6,866,672 | ||||||||||||||
Stock-based compensation | — | — | 16,157 | — | — | — | — | 16,157 | ||||||||||||||
Exercise of stock options | 416 | 2 | 18,110 | — | — | — | — | 18,112 | ||||||||||||||
Unrealized loss, net on available-for-sale securities | — | — | — | — | (1,106) | — | — | (1,106) | ||||||||||||||
Repurchase of common stock | — | — | — | — | — | (3,286) | (284,311) | (284,311) | ||||||||||||||
Foreign currency translation | — | — | — | — | (79,707) | — | — | (79,707) | ||||||||||||||
Net income |
| — | — | — | 273,360 | — | — | — | 273,360 | |||||||||||||
Balance, June 30, 2022 |
| 640,944 | 3,205 | 4,707,569 | 8,377,112 | (152,958) | (114,172) | (6,125,751) | 6,809,177 | |||||||||||||
Stock-based compensation | — | — | 16,436 | — | — | — | — | 16,436 | ||||||||||||||
Exercise of stock options | 301 | 1 | 12,136 | — | — | — | — | 12,137 | ||||||||||||||
Unrealized loss, net on available-for-sale securities | — | — | — | — | (2,675) | — | — | (2,675) | ||||||||||||||
Repurchase of common stock | — | — | — | — | — | (3,108) | (272,880) | (272,880) | ||||||||||||||
Foreign currency translation | — | — | — | — | (68,822) | — | — | (68,822) | ||||||||||||||
Net income | — | — | — | 322,387 | — | — | — | 322,387 | ||||||||||||||
Balance, September 30, 2022 | 641,245 | $ | 3,206 | $ | 4,736,141 | $ | 8,699,499 | $ | (224,455) | (117,280) | $ | (6,398,631) | $ | 6,815,760 |
Accumulated Other | Total | |||||||||||||||||||||
Common stock | Additional | Retained | Comprehensive (Loss) | Treasury stock | Stockholders’ | |||||||||||||||||
| Shares |
| Amount |
| Paid-in Capital |
| Earnings |
| Income |
| Shares |
| Amount |
| Equity | |||||||
Balance, December 31, 2020 | 638,662 | $ | 3,193 | $ | 4,537,982 | $ | 6,432,074 | $ | 3,034 | (110,565) | $ | (5,815,423) | $ | 5,160,860 | ||||||||
Stock-based compensation |
| — | — | 17,949 | — | — | — | — | 17,949 | |||||||||||||
Exercise of stock options |
| 492 | 3 | 6,758 | — | — | — | — | 6,761 | |||||||||||||
Unrealized gain, net on available-for-sale securities |
| — |
| — |
| — |
| — |
| 24 |
| — |
| — |
| 24 | ||||||
Repurchase of common stock |
| — | — | — | — | — | (150) | (13,419) | (13,419) | |||||||||||||
Foreign currency translation |
| — | — | — | — | (27,932) | — | — | (27,932) | |||||||||||||
Net income |
| — | — | — | 315,194 | — | — | — | 315,194 | |||||||||||||
Balance, March 31, 2021 |
| 639,154 |
| 3,196 |
| 4,562,689 |
| 6,747,268 |
| (24,874) | (110,715) |
| (5,828,842) |
| 5,459,437 | |||||||
Stock-based compensation |
| — | — | 16,921 | — | — | — | — | 16,921 | |||||||||||||
Exercise of stock options |
| 422 | 2 | 17,723 | — | — | — | — | 17,725 | |||||||||||||
Unrealized loss, net on available-for-sale securities |
| — |
| — |
| — |
| — |
| (183) |
| — |
| — |
| (183) | ||||||
Repurchase of common stock |
| — | — | — | — | — | (4) | (399) | (399) | |||||||||||||
Foreign currency translation | — | — | — | — | 8,235 | — | — | 8,235 | ||||||||||||||
Net income | — | — | — | 403,762 | — | — | — | 403,762 | ||||||||||||||
Balance, June 30, 2021 |
| 639,576 |
| 3,198 |
| 4,597,333 |
| 7,151,030 |
| (16,822) | (110,719) |
| (5,829,241) |
| 5,905,498 | |||||||
Stock-based compensation |
| — | — | 16,293 | — | — | — | — | 16,293 | |||||||||||||
Exercise of stock options |
| 275 | 1 | 12,673 | — | — | — | — | 12,674 | |||||||||||||
Unrealized gain, net on available-for-sale securities |
| — |
| — |
| — |
| — |
| 43 |
| — |
| — |
| 43 | ||||||
Foreign currency translation |
| — | — | — | — | (26,716) | — | — | (26,716) | |||||||||||||
Net income | — | — | — | 337,205 | — | — | — | 337,205 | ||||||||||||||
Balance, September 30, 2021 |
| 639,851 | $ | 3,199 | $ | 4,626,299 | $ | 7,488,235 | $ | (43,495) | (110,719) | $ | (5,829,241) | $ | 6,244,997 |
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, 2022 AND 2021
(In Thousands) (Unaudited)
Nine-Months Ended | ||||||
September 30, | ||||||
| 2022 |
| 2021 | |||
CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||
Net income | $ | 889,950 | $ | 1,056,161 | ||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||
Depreciation and amortization | 46,040 | 37,854 | ||||
Non-cash lease expense | 5,180 | 2,862 | ||||
Gain on disposal of property and equipment | (253) | (984) | ||||
Stock-based compensation | 49,167 | 52,391 | ||||
Deferred income taxes | 29,710 | 353 | ||||
Effect on cash of changes in operating assets and liabilities net of acquisition: | ||||||
Accounts receivable | (202,447) | (199,481) | ||||
Inventories | (297,140) | (149,414) | ||||
Prepaid expenses and other assets | (39,204) | (41,162) | ||||
Prepaid income taxes | 7,867 | (7,365) | ||||
Accounts payable | 52,663 | 106,570 | ||||
Accrued liabilities | (2,572) | 39,387 | ||||
Accrued promotional allowances | 89,236 | 51,022 | ||||
Accrued compensation | (6,636) | (2,888) | ||||
Income taxes payable | (12,823) | (114) | ||||
Other liabilities | (3,492) | 574 | ||||
Deferred revenue | (16,060) | (17,784) | ||||
Net cash provided by operating activities | 589,186 | 927,982 | ||||
CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||
Sales of available-for-sale investments | 1,823,943 | 1,016,556 | ||||
Purchases of available-for-sale investments | (1,393,910) | (1,343,351) | ||||
Acquisition of CANarchy, net of cash | (329,472) | — | ||||
Purchases of property and equipment | (136,158) | (28,131) | ||||
Proceeds from sale of property and equipment | 603 | 1,246 | ||||
Additions to intangibles | (3,578) | (5,211) | ||||
Increase in other assets | (19,171) | (22,809) | ||||
Net cash used in investing activities | (57,743) | (381,700) | ||||
CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||
Payments on debt | (719) | (1,814) | ||||
Issuance of common stock | 34,759 | 37,160 | ||||
Purchases of common stock held in treasury | (493,315) | (13,818) | ||||
Net cash (used in) provided by financing activities | (459,275) | 21,528 | ||||
Effect of exchange rate changes on cash and cash equivalents | (95,582) | (35,552) | ||||
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS | (23,414) | 532,258 | ||||
CASH AND CASH EQUIVALENTS, beginning of period | 1,326,462 | 1,180,413 | ||||
CASH AND CASH EQUIVALENTS, end of period | $ | 1,303,048 | $ | 1,712,671 | ||
SUPPLEMENTAL INFORMATION: | ||||||
Cash paid during the period for: | ||||||
Interest | $ | 359 | $ | 99 | ||
Income taxes | $ | 297,526 | $ | 338,584 |
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, 2022 AND 2021
(In Thousands) (Unaudited) (Continued)
SUPPLEMENTAL DISCLOSURE OF NON-CASH ITEMS
Included in accrued liabilities as of September 30, 2022 and 2021 were $14.4 million and $13.0 million, respectively, related to net additions to other intangible assets.
Included in accounts payable as of September 30, 2022 and 2021 were $2.6 million and $0.5 million, respectively, related to equipment purchases.
Included in accounts payable as of September 30, 2021 were $2.0 million related to additions to other intangible assets.
Included in accounts payable as of September 30, 2022 were available-for-sale short-term investment purchases of $7.9 million.
Included in accounts payable as of September 30, 2022 were purchases of common stock held in treasury of $76.1 million.
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, 2021 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, 2022 and 2021, 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.
Recent Accounting Pronouncements
There have been no changes in recently issued or adopted accounting pronouncements that would materially impact the Company from those disclosed in our Annual Report on Form 10-K for the fiscal year ended December 31, 2021.
2. | ACQUISITIONS |
On February 17, 2022, the Company completed its acquisition of CANarchy Craft Brewery Collective LLC (“CANarchy”), a craft beer and hard seltzer company, for $330.4 million in cash, subject to adjustments (the “CANarchy Transaction”). The CANarchy Transaction facilitates the Company’s entry into the alcohol beverage sector and brings the Cigar CityTM family of brands including Jai Alai® IPA and Florida ManTM IPA, the Oskar BluesTM family of brands including Dale’s Pale Ale® and Wild BasinTM Hard Seltzers, the Deep EllumTM family of brands including Dallas Blonde® and Deep EllumTM IPA, the Perrin BrewingTM family of brands including Black Ale, the Squatters® family of brands including Hop Rising® Double IPA and Juicy IPA, the Wasatch® family of brands including Apricot Hefeweizen, as well as certain other brands (collectively the “CANarchy Brands”) to the Company’s beverage portfolio. The transaction did not include CANarchy’s stand-alone restaurants. The Company’s organizational structure for its existing energy beverage business remains unchanged. CANarchy is functioning independently, retaining its own organizational structure and team.
The Company accounted for the CANarchy Transaction in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 805 “Business Combinations”.
9
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 fair value allocations of the CANarchy Transaction:
Identifiable | ||||||
Assets Acquired | ||||||
and Liabilities | Consideration | |||||
Assumed | Transferred | |||||
Intangibles - trademarks (non-amortizing) | $ | 94,500 | $ | — | ||
Intangibles - customer relationships (amortizing) | 54,500 |
| — | |||
Intangibles - permits (non-amortizing) | 6,000 |
| — | |||
Property and equipment, net | 81,285 |
| — | |||
Inventory | 18,300 |
| — | |||
Right-of -use assets | 12,836 |
| — | |||
Operating lease liabilities | (12,836) |
| — | |||
Working capital (excluding inventory) | (5,640) |
| — | |||
Other | (770) |
| — | |||
Goodwill | 81,298 |
| — | |||
Cash |
| 3,248 |
| 332,721 | ||
Total | $ | 332,721 | $ | 332,721 |
The Company determined the fair values as follows:
● | Trademarks – relief-from-royalty method of the income approach |
● | Customer relationships – distributor method of the income approach |
● | Permits – with-and-without method of the income approach |
● | Property and equipment – cost approach |
● | Inventory – comparative sales method and replacement cost method |
The book value of the working capital (excluding inventory) approximates fair value due to the short-term nature of the accounts.
The Company has determined goodwill in accordance with ASC 805, which requires the recognition of goodwill for the excess of the aggregate consideration over the net amounts of identifiable assets acquired and liabilities assumed as of the acquisition date.
For tax purposes, the CANarchy Transaction was recorded as an asset purchase. As such, the Company received a step-up in tax basis of the CANarchy assets, net, equal to the purchase price.
In accordance with Regulation S-X, pro forma unaudited condensed financial information for the CANarchy Transaction has not been provided as the impact of the transaction on the Company’s financial position, results of operations and liquidity was not material.
On May 5, 2022, the Company acquired certain real property and equipment in Norwalk, California for a purchase price of $62.5 million. The acquisition was treated as an asset acquisition for accounting purposes. The fair value allocations include $50.6 million for land, $10.0 million for building and $1.9 million for equipment. The Company intends to utilize the property as a manufacturing facility for certain of its products.
10
MONSTER BEVERAGE CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Tabular Dollars in Thousands, Except Per Share Amounts) (Unaudited)
3. | REVENUE RECOGNITION |
The Company has four operating and
segments: (i) Monster Energy® Drinks segment (“Monster Energy® Drinks”), which is primarily comprised of the Company’s Monster Energy® drinks, Reign Total Body Fuel® high performance energy drinks and True North® Pure Energy Seltzers, (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, (iii) Alcohol Brands segment (“Alcohol Brands”), which is primarily comprised of the various craft beers and hard seltzers purchased as part of the CANarchy Transaction on February 17, 2022 and (iv) 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 ready-to-drink packaged energy drinks 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 Company’s Alcohol Brands segment primarily generates operating revenues by selling kegged and canned beer as well as hard seltzers primarily to distributors in the United States.
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, 2022 and December 31, 2021.
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; |
11
MONSTER BEVERAGE CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Tabular Dollars in Thousands, Except Per Share Amounts) (Unaudited)
● | 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 wholly-owned subsidiaries of TCCC (the “TCCC Subsidiaries”) and/or to TCCC bottlers/distributors 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 deferred revenue and recognized 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.
12
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, 2022 | |||||||||||||||
|
|
| Latin |
| |||||||||||
America |
| ||||||||||||||
U.S. and | and |
| |||||||||||||
Net Sales |
| Canada |
| EMEA1 |
| Asia Pacific |
| Caribbean |
| Total | |||||
Monster Energy® Drinks | $ | 982,952 | $ | 288,077 | $ | 100,288 | $ | 130,902 | $ | 1,502,219 | |||||
Strategic Brands |
| 44,025 |
| 32,565 |
| 8,805 |
| 3,407 |
| 88,802 | |||||
Alcohol Brands | 26,818 | — | — | — | 26,818 | ||||||||||
Other |
| 6,447 |
| — |
| — |
| — |
| 6,447 | |||||
Total Net Sales | $ | 1,060,242 | $ | 320,642 | $ | 109,093 | $ | 134,309 | $ | 1,624,286 |
Three-Months Ended September 30, 2021 | |||||||||||||||
|
|
| Latin |
| |||||||||||
America | |||||||||||||||
U.S. and | and | ||||||||||||||
Net Sales |
| Canada |
| EMEA1 |
| Asia Pacific |
| Caribbean |
| Total | |||||
Monster Energy® Drinks | $ | 880,012 | $ | 252,101 | $ | 120,864 | $ | 76,816 | $ | 1,329,793 | |||||
Strategic Brands | 35,417 |
| 28,450 |
| 5,603 |
| 4,979 |
| 74,449 | ||||||
Alcohol Brands | — | — | — | — | — | ||||||||||
Other | 6,315 |
| — |
| — |
| — |
| 6,315 | ||||||
Total Net Sales | $ | 921,744 | $ | 280,551 | $ | 126,467 | $ | 81,795 | $ | 1,410,557 |
1Europe, Middle East and Africa (“EMEA”)
Nine-Months Ended September 30, 2022 | |||||||||||||||
|
|
| Latin |
| |||||||||||
America | |||||||||||||||
U.S. and |
| and | |||||||||||||
Net Sales |
| Canada |
| EMEA1 |
| Asia Pacific |
| Caribbean |
| Total | |||||
Monster Energy® Drinks | $ | 2,882,306 | $ | 857,805 | $ | 327,632 | $ | 377,012 | $ | 4,444,755 | |||||
Strategic Brands |
| 135,445 |
| 91,912 |
| 22,943 |
| 10,236 |
| 260,536 | |||||
Alcohol Brands2 |
| 74,472 |
| — |
| — |
| — |
| 74,472 | |||||
Other |
| 18,356 |
| — |
| — |
| — |
| 18,356 | |||||
Total Net Sales | $ | 3,110,579 | $ | 949,717 | $ | 350,575 | $ | 387,248 | $ | 4,798,119 |
Nine-Months Ended September 30, 2021 | |||||||||||||||
|
|
|
| Latin |
| ||||||||||
America | |||||||||||||||
U.S. and |
| and | |||||||||||||
Net Sales |
| Canada |
| EMEA1 |
| Asia Pacific |
| Caribbean |
| Total | |||||
Monster Energy® Drinks | $ | 2,548,873 | $ | 741,208 | $ | 346,545 | $ | 230,536 | $ | 3,867,162 | |||||
Strategic Brands |
| 122,487 |
| 76,234 |
| 21,047 |
| 9,425 |
| 229,193 | |||||
Alcohol Brands |
| — |
| — |
| — |
| — |
| — | |||||
Other |
| 19,953 |
| — |
| — |
| — |
| 19,953 | |||||
Total Net Sales | $ | 2,691,313 | $ | 817,442 | $ | 367,592 | $ | 239,961 | $ | 4,116,308 |
1Europe, Middle East and Africa (“EMEA”)
2Effectively from February 17, 2022 to September 30, 2022
13
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, 2022, the Company had $268.9 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, 2021, the Company had $285.8 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, 2022 and 2021, $10.0 million and $10.4 million, respectively, of deferred revenue was recognized in net sales. See Note 11. During the nine-months ended September 30, 2022 and 2021, $30.0 million and $31.3 million, respectively, of deferred revenue was recognized in net sales. See Note 11.
4. | LEASES |
The Company leases identified assets comprising of 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 ASC 842, “Leases”. 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 income (expense), net in the condensed consolidated statement of income.
The Company’s leases have remaining lease terms of less than one year to 12 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.14
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 | Ended | Ended | Ended | |||||||||
September 30, | September 30, | September 30, | September 30, | |||||||||
| 2022 |
| 2021 |
| 2022 |
| 2021 | |||||
Operating lease cost | $ | 2,306 | $ | 1,103 | $ | 6,238 | $ | 3,348 | ||||
Short-term lease cost |
| 1,001 |
| 1,235 |
| 2,870 |
| 3,370 | ||||
Variable lease cost |
| 189 |
| 185 |
| 567 |
| 532 | ||||
Finance leases: | ||||||||||||
Amortization of ROU assets |
| 140 |
| 138 |
| 415 |
| 394 | ||||
Interest on lease liabilities |
| 8 |
| 6 |
| 18 |
| 15 | ||||
Finance lease cost |
| 148 |
| 144 |
| 433 |
| 409 | ||||
Total lease cost | $ | 3,644 | $ | 2,667 | $ | 10,108 | $ | 7,659 |
Supplemental cash flow information for the following periods:
Nine-Months | Nine-Months | |||||
Ended September 30, | Ended September 30, | |||||
| 2022 |
| 2021 | |||
Cash paid for amounts included in the measurement of lease liabilities: | ||||||
Operating cash outflows from operating leases | $ | 5,859 | $ | 3,057 | ||
Operating cash outflows from finance leases | 18 | 15 | ||||
Financing cash outflows from finance leases | 1,678 | 1,970 | ||||
ROU assets obtained in exchange for lease obligations: | ||||||
Finance leases | 1,654 | 2,767 | ||||
Operating leases | 20,093 | 251 |
ROU assets for operating and finance leases recognized in the Company’s condensed consolidated balance sheets were comprised of the following at:
September 30, 2022 | |||||||||||
| Real Estate |
| Equipment |
| Total |
| Balance Sheet Location | ||||
$ | 36,681 | $ | 404 | $ | 37,085 | Other Assets | |||||
| — |
| 1,753 |
| 1,753 | Property and Equipment, net |
December 31, 2021 | |||||||||||
| Real Estate |
| Equipment |
| Total |
| Balance Sheet Location | ||||
$ | 22,518 | $ | 639 | $ | 23,157 | Other Assets | |||||
| — |
| 2,646 |
| 2,646 | Property and Equipment, net |
15
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 Company’s condensed consolidated balance sheets were as follows at:
September 30, 2022 | ||||||
| Operating Leases |
| Finance Leases | |||
$ | 7,028 | $ | 917 | |||
| 29,265 |
| 48 | |||
Total | $ | 36,293 | $ | 965 |
December 31, 2021 | ||||||
| Operating Leases |
| Finance Leases | |||
Accrued liabilities | $ | 3,990 | $ | 960 | ||
Other liabilities |
| 17,389 |
| 41 | ||
Total | $ | 21,379 | $ | 1,001 |
The weighted-average remaining lease terms and weighted-average discount rates for operating and finance leases at September 30, 2022 and December 31, 2021 were as follows:
| | September 30, 2022 | |||
|
| Operating Leases |
| Finance Leases |
|
Weighted-average remaining lease term (years) | 7.1 |
| 0.8 | ||
Weighted-average discount rate | 3.4 | % | 2.7 | % |
| December 31, 2021 | ||||
| Operating Leases |
| Finance Leases | ||
Weighted-average remaining lease term (years) |
| 8.1 | 0.7 | | |
Weighted-average discount rate |
| 3.5 | % | 1.3 | % |
The following table reconciles the undiscounted future lease payments for operating and finance leases to the operating and finance leases recorded in the Company’s condensed consolidated balance sheet at September 30, 2022:
| Undiscounted Future Lease Payments | |||||
| Operating Leases |
| Finance Leases | |||
2022 (from October 1, 2022 to December 31, 2022) | $ | 2,038 | $ | 410 | ||
2023 |
| 7,829 |
| 525 | ||
2024 |
| 6,473 |
| 23 | ||
2025 |
| 4,808 |
| 17 | ||
2026 | 3,895 | 2 | ||||
2027 and thereafter |
| 15,974 |
| — | ||
Total lease payments |
| 41,017 |
| 977 | ||
Less imputed interest |
| (4,724) |
| (12) | ||
Total | $ | 36,293 | $ | 965 |
As of September 30, 2022, the Company did not have any significant additional operating or finance leases that have not yet commenced.
16
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, 2022 |
| Cost |
| Gains |
| Losses |
| Value |
| Months |
| Months | ||||||
Available-for-sale | ||||||||||||||||||
Short-term: | ||||||||||||||||||
Commercial paper | $ | 218,573 | $ | — | $ | 7 | $ | 218,566 | $ | 7 | $ | — | ||||||
Certificates of deposit | 20,035 | — | — | 20,035 | — | — | ||||||||||||
Municipal securities |
| 193,567 | 4 | 1,142 | 192,429 | 1,142 | ||||||||||||
U.S. government agency securities |
| 88,573 |
| — |
| 851 |
| 87,722 |
| 851 |
| — | ||||||
U.S. treasuries | 834,249 |
| — |
| 6,220 |
| 828,029 |
| 6,220 |
| — | |||||||
Long-term: | ||||||||||||||||||
U.S. treasuries | 55,684 | — | 476 | 55,208 | 476 | — | ||||||||||||
Municipal securities | 5,562 | — | 35 | 5,527 | 35 | |||||||||||||
U.S. government agency securities | 11,711 | 1 | 74 | 11,638 | 74 | — | ||||||||||||
Total | $ | 1,427,954 | $ | 5 | $ | 8,805 | $ | 1,419,154 | $ | 8,805 | $ | — |
Continuous | Continuous | |||||||||||||||||
Gross | Gross | Unrealized | Unrealized | |||||||||||||||
Unrealized | Unrealized | Loss Position | Loss Position | |||||||||||||||
Amortized | Holding | Holding | Fair | less than 12 | greater than 12 | |||||||||||||
December 31, 2021 |
| Cost |
| Gains |
| Losses |
| Value |
| Months |
| Months | ||||||
Available-for-sale | ||||||||||||||||||
Short-term: | ||||||||||||||||||
Commercial paper | $ | 334,077 | $ | — | $ | — | $ | 334,077 | $ | — | $ | — | ||||||
Certificates of deposit | 44,502 | — | — | 44,502 | — | — | ||||||||||||
Municipal securities |
| 666 |
| — |
| — |
| 666 |
| — |
| — | ||||||
U.S. government agency securities |
| 62,687 |
| — |
| 26 |
| 62,661 |
| 26 |
| — | ||||||
U.S. treasuries | 1,308,536 | 2 | 717 | 1,307,821 | 717 | — | ||||||||||||
Long-term: | ||||||||||||||||||
U.S. government agency securities | 12,500 | — | 24 | 12,476 | 24 | — | ||||||||||||
U.S. treasuries | 87,133 | — | 190 | 86,943 | 190 | — | ||||||||||||
Total | $ | 1,850,101 | $ | 2 | $ | 957 | $ | 1,849,146 | $ | 957 | $ | — |
During the three- and nine-months ended September 30, 2022 and 2021, realized gains or losses recognized on the sale of investments were not significant.
The Company’s investments at September 30, 2022 and December 31, 2021 carried investment grade credit ratings.
17
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, 2022 | December 31, 2021 | |||||||||||
| Amortized Cost |
| Fair Value |
| Amortized Cost |
| Fair Value | |||||
Less than 1 year: | ||||||||||||
Commercial paper | $ | 218,573 | $ | 218,566 |
| $ | 334,077 | $ | 334,077 | |||
Municipal securities |
| 193,567 |
| 192,429 |
|
| 666 |
| 666 | |||
U.S. government agency securities |
| 88,573 |
| 87,722 |
|
| 62,687 |
| 62,661 | |||
Certificates of deposit |
| 20,035 |
| 20,035 |
|
| 44,502 |
| 44,502 | |||
U.S. treasuries | 834,249 | 828,029 | 1,308,536 | 1,307,821 | ||||||||
Due 1 -10 years: | ||||||||||||
Municipal securities |
| 5,562 |
| 5,527 |
|
| — |
| — | |||
U.S. treasuries | 55,684 | 55,208 | 87,133 | 86,943 | ||||||||
U.S. government agency securities |
| 11,711 |
| 11,638 |
|
| 12,500 |
| 12,476 | |||
Total | $ | 1,427,954 | $ | 1,419,154 |
| $ | 1,850,101 | $ | 1,849,146 |
6. | FAIR VALUE OF CERTAIN FINANCIAL ASSETS AND LIABILITIES |
ASC 820, “Fair Value Measurement”, 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.
18
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, 2022 |
| Level 1 |
| Level 2 |
| Level 3 |
| Total | ||||
Cash | $ | 1,113,207 | $ | — | $ | — | $ | 1,113,207 | ||||
Money market funds |
| 116,952 |
| — |
| — |
| 116,952 | ||||
Certificates of deposit | — | 20,035 | — | 20,035 | ||||||||
Commercial paper |
| — |
| 234,310 |
| — |
| 234,310 | ||||
Municipal securities |
| — |
| 203,159 |
| — |
| 203,159 | ||||
U.S. government agency securities |
| — |
| 99,361 |
| — |
| 99,361 | ||||
U.S. treasuries | — | 935,178 | — | 935,178 | ||||||||
Foreign currency derivatives |
| — |
| (204) |
| — |
| (204) | ||||
Total | $ | 1,230,159 | $ | 1,491,839 | $ | — | $ | 2,721,998 | ||||
Amounts included in: | ||||||||||||
Cash and cash equivalents | $ | 1,230,159 | $ | 72,889 | $ | — | $ | 1,303,048 | ||||
Short-term investments |
| — |
| 1,346,781 |
| — |
| 1,346,781 | ||||
Accounts receivable, net |
| — |
| 694 |
| — |
| 694 | ||||
Investments |
| — |
| 72,373 |
| — |
| 72,373 | ||||
Accrued liabilities |
| — |
| (898) |
| — |
| (898) | ||||
Total | $ | 1,230,159 | $ | 1,491,839 | $ | — | $ | 2,721,998 |
December 31, 2021 |
| Level 1 |
| Level 2 |
| Level 3 |
| Total | ||||
Cash | $ | 749,089 | $ | — | $ | — | $ | 749,089 | ||||
Money market funds |
| 440,826 |
| — |
| — |
| 440,826 | ||||
Certificates of deposit | — | 44,502 | — | 44,502 | ||||||||
Commercial paper |
| — |
| 335,477 |
| — |
| 335,477 | ||||
Municipal securities |
| — |
| 2,428 |