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OFFON

MONSTER BEVERAGE CORPORATION

(MNST)
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MONSTER BEVERAGE : MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (form 10-Q)

11/06/2020 | 05:32pm EDT

Our Business

When this report uses the words "the Company", "we", "us", and "our", these words refer to Monster Beverage Corporation and its subsidiaries, unless the context otherwise requires. Based in Corona, California, Monster Beverage Corporation is a holding company and conducts no operating business except through its consolidated subsidiaries. The Company's subsidiaries primarily develop and market energy drinks.



The COVID - 19 Pandemic


The current COVID-19 pandemic has presented a substantial public health and
economic challenge around the world and is affecting our employees, communities
and business operations, as well as the global economy and financial markets.
The human and economic consequences of the COVID-19 pandemic as well as the
measures taken or that may be taken in the future by governments, and
consequently businesses (including the Company and its suppliers, full service
beverage bottlers/distributors ("bottlers/distributors"), co-packers and other
service providers) and the public at large to limit the COVID-19 pandemic, has
directly and indirectly impacted our business. The duration and severity of this
impact will depend on future developments that are highly uncertain and cannot
be accurately predicted, including new information that may emerge concerning
the COVID-19 pandemic, the actions taken to limit its spread and the economic
impact on local, regional, national and international markets. See the section
entitled "Risk Factors" in Item 1A of this Quarterly Report.



We have been actively addressing the COVID-19 pandemic with a global task force team working to mitigate the potential impacts to our people and business.

Health and Safety of our Employees and Business Partners

From the beginning of the COVID-19 pandemic, our top priority has been the
health, safety and well-being of our employees. Early in March 2020, we
implemented global travel restrictions and work-from-home policies for employees
who are able to work remotely. For those employees who are unable to work
remotely, safety precautions have been instituted, which were developed and
adopted in line with guidance from public health authorities and professional
consultants. Currently, certain of our offices have partially reopened in the
U.S. and in certain countries, and generally, our field sales teams are working
with our bottler/distributors and retailers subject to certain safety protocols.
We are incredibly proud of the teamwork exhibited by our employees, co-packers
and bottlers/distributors around the world who are ensuring the integrity of our
supply chain.



Customer Demand



Despite the ongoing impact of the COVID-19 pandemic, we achieved record third
quarter net sales and the highest quarterly net sales in our history. While the
performance in Europe, Middle East and Africa ("EMEA") was solid in the third
quarter, EMEA remained adversely affected by the COVID-19 pandemic.



Since mid-March 2020, we have seen a shift in consumer channel preferences and
package configurations, including an increase in at-home consumption and a
decrease in food service on-premise consumption.  Our sales in the 2020 second
quarter were initially adversely affected as a result of a decrease in foot
traffic in the convenience and gas channel (which is our largest channel) but
improved sequentially from the latter half of the 2020 second quarter and
throughout the 2020 third quarter. Our e-commerce, club store, mass merchandiser
and grocery and related business continued to increase over the 2020 second and
2020 third quarters, while our food service on-premise business, which is a
small channel for the Company, remained challenged. The duration of these trends
and the magnitude of such impacts on future periods cannot be precisely
estimated at this time, as they are affected by a number of factors (many of
which are outside our control).



We have recently seen a resurgence of the COVID-19 pandemic in the Northern Hemisphere. As a result, a number of countries, particularly in EMEA, have reinstituted lockdowns and other restrictions, which could further impact customer demand.




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A reduction in demand for our products or changes in consumer purchasing and
consumption patterns, as well as continued economic uncertainty as a result of
the COVID-19 pandemic, could adversely affect the financial conditions of
retailers and consumers, resulting in reduced or canceled orders for our
products, purchase returns and closings of retail or wholesale establishments or
other locations in which our products are sold.



Our Distribution and Supply Chain




As of the date of this filing, we do not foresee a material impact on the
ability of our co-packers to manufacture and our bottlers/distributors to
distribute our products as a result of the COVID-19 pandemic. In addition, we
are not experiencing significant raw material or finished product shortages in
our supply chain and our supply chain remains intact. We are continually
addressing our aluminum can requirements given our volume growth and the current
supply constraints in the aluminum can industry.  Depending on the duration of
any COVID-19 pandemic related issues, we may experience material disruptions in
our supply chain as the pandemic continues.



Liquidity and Capital Resources

As of the date of this filing, we expect to maintain substantial liquidity as we manage through the current environment as described in the "Liquidity and Capital Resources" section below.



Overview


We develop, market, sell and distribute energy drink beverages and concentrates for energy drink beverages, primarily under the following brand names:



?  Monster Energy®                 ?  NOS®
?  Monster Energy Ultra®           ?  Full Throttle®
?  Monster Rehab®                  ?  Burn®
?  Monster MAXX®                   ?  Mother®
?  Java Monster®                   ?  Nalu®
?  Muscle Monster®                 ?  Ultra Energy®
?  Espresso Monster®               ?  Play® and Power Play® (stylized)
?  Punch Monster®                  ?  Relentless®
?  Juice Monster®                  ?  BPM®
?  Monster Hydro®                  ?  BU®

? Monster HydroSport Super Fuel® ? Gladiator® ? Monster Dragon Tea®

             ?  Samurai®
?  Reign Total Body Fuel®          ?  Live+®
?  Reign Inferno® Thermogenic Fuel ?  Predator®
                                   ?  Fury®




We have three operating and reportable segments, (i) Monster Energy® Drinks
segment ("Monster Energy® Drinks"), which is primarily comprised of our Monster
Energy® drinks and Reign Total Body Fuel® high performance energy drinks,
(ii) Strategic Brands segment ("Strategic Brands"), which is comprised primarily
of the various energy drink brands acquired from The Coca-Cola Company ("TCCC")
in 2015 as well as our 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, to independent third-party customers
(the "AFF Third-Party Products").



During the three-months ended September 30, 2020, we continued to expand our
existing energy drink portfolio by adding additional products to our portfolio
in a number of countries and further developed our distribution markets. During
the three-months ended September 30, 2020, we sold the following new products to
our bottlers/distributors:


? Juice Monster® KhaoticTM Energy + Juice

? Juice Monster® PapillonTM Energy + Juice

? Monster Energy Ultra® Watermelon


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? Reign Total Body Fuel® Lilikoi Lychee


 ? Ultra Energy® Peach Mango




In the normal course of business, we discontinue certain products and/or product
lines. Those products or product lines discontinued in the three-months ended
September 30, 2020, either individually or in aggregate, did not have a material
adverse impact on our financial position, results of operations or liquidity.



Our net sales of $1.25 billion for the three-months ended September 30, 2020
represented record sales for our third fiscal quarter. Net changes in foreign
currency exchange rates had an unfavorable impact on net sales of approximately
$12.5 million for the three- months ended September 30, 2020.



The vast majority of our net sales are derived from our Monster Energy(R) Drinks
segment. Net sales of our Monster Energy® Drinks segment were $1.16 billion for
the three-months ended September 30, 2020. Net sales of our Strategic Brands
segment were $74.3 million for the three-months ended September 30, 2020. Our
Monster Energy® Drinks segment represented 93.3% and 93.6% of our net sales for
the three-months ended September 30, 2020 and 2019, respectively. Our Strategic
Brands segment represented 6.0% and 5.9% of our net sales for the three-months
ended September 30, 2020 and 2019, respectively. Our Other segment represented
0.7% and 0.5% of our net sales for the three-months ended September 30, 2020 and
2019, respectively.



Our growth strategy includes expanding our international business. Net sales to
customers outside the United States were $444.5 million for the three-months
ended September 30, 2020, an increase of approximately $64.7 million, or 17.0%
higher than net sales to customers outside of the United States of $379.8
million for the three-months ended September 30, 2019. Such sales were
approximately 36% and 34% of net sales for the three-months ended September
30,
2020 and 2019, respectively.



Our customers are primarily bottlers/distributors, retail grocery and specialty
chains, wholesalers, club stores, mass merchandisers, convenience chains, drug
stores, foodservice customers and the military. Percentages of our gross sales
to our various customer types for the three- and nine-months ended September 30,
2020 and 2019 are reflected below. Such information includes sales made by us
directly to the customer types concerned, which include our
bottlers/distributors in the United States. Such bottlers/distributors in turn
sell certain of our products to some of the same customer types listed below. We
limit our description of our customer types to include only our sales to our
full service bottlers/distributors without reference to such
bottlers'/distributors' sales to their own customers.




                                                     Three-Months Ended      Nine-Months Ended
                                                       September 30,           September 30,
                                                      2020        2019        2020        2019
U.S. full service bottlers/distributors                   53 %        56 %        55 %        58 %
International full service bottlers/distributors          37 %        35 %        35 %        33 %
Club stores and mass merchandisers                         8 %         7 %         8 %         7 %
Retail grocery, specialty chains and wholesalers           1 %         1 % 
       1 %         1 %
Other                                                      1 %         1 %         1 %         1 %




Our customers include Coca-Cola Canada Bottling Limited, Coca-Cola Consolidated,
Inc., Coca-Cola Bottling Company United, Inc., Reyes Coca-Cola Bottling, LLC,
Great Lakes Coca-Cola Distribution, LLC, Coca-Cola Southwest Beverages LLC, The
Coca-Cola Bottling Company of Northern New England, Inc., Swire Pacific
Holdings, Inc. (USA), Liberty Coca-Cola Beverages, LLC, Coca-Cola European
Partners, Coca-Cola Hellenic, Coca-Cola FEMSA, Coca-Cola Amatil, Swire Coca-Cola
(China), COFCO Coca-Cola, Coca-Cola Beverages Africa, Coca-Cola ?çecek and
certain other TCCC network bottlers, Asahi Soft Drinks, Co., Ltd., Wal-Mart,
Inc. (including Sam's Club), Costco Wholesale Corporation and Amazon.com, Inc. A
decision by any large customer to decrease amounts purchased from us or to cease
carrying our products could have a material adverse effect on our financial
condition and consolidated results of operations.



Coca-Cola Consolidated, Inc. accounted for approximately 12% and 13% of our net
sales for the three-months ended September 30, 2020 and 2019, respectively.
Coca-Cola Consolidated, Inc. accounted for approximately 12% and 13% of our net
sales for the nine-months ended September 30, 2020 and 2019, respectively.


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Reyes Coca-Cola Bottling, LLC accounted for approximately 11% and 12% of our net
sales for the three-months ended September 30, 2020 and 2019, respectively.
Reyes Coca-Cola Bottling, LLC accounted for approximately 11% and 12% of our net
sales for the nine-months ended September 30, 2020 and 2019, respectively.



Coca-Cola European Partners accounted for approximately 11% and 10% of our net
sales for the three-months ended September 30, 2020 and 2019, respectively.
Coca-Cola European Partners accounted for approximately 10% of our net sales for
both the nine-months ended September 30, 2020 and 2019.



Results of Operations


The following table sets forth key statistics for the three- and nine-months ended September 30, 2020 and 2019.




                                  Three-Months Ended         Percentage       Nine-Months Ended        Percentage
(In thousands, except per
share amounts)                       September 30,             Change           September 30,            Change
                                   2020          2019        20 vs. 19       2020           2019       20 vs. 19
Net sales1                      $ 1,246,362   $ 1,133,577           9.9 % $ 3,402,355    $ 3,183,613          6.9 %
Cost of sales                       509,831       460,575          10.7 %   1,369,160      1,275,796          7.3 %
Gross profit*1                      736,531       673,002           9.4 %   2,033,195      1,907,817          6.6 %
Gross profit as a percentage
of net sales                           59.1 %        59.4 %                      59.8 %         59.9 %

Operating expenses2                 277,930       277,559           0.1 %     802,343        821,923        (2.4) %
Operating expenses as
a percentage of net sales              22.3 %        24.5 %                      23.6 %         25.8 %

Operating income1,2                 458,601       395,443          16.0 %   1,230,852      1,085,894         13.3 %
Operating income as a
percentage of net sales                36.8 %        34.9 %                      36.2 %         34.1 %

Interest and other (expense)
income, net                         (4,568)         3,121       (246.4) %  

(5,491) 8,835 (162.2) %


Income before provision for
income taxes1,2                     454,033       398,564          13.9 %  

1,225,361 1,094,729 11.9 %

Provision for income taxes          106,379        99,641           6.8 %  

287,503 241,848 18.9 %


Income taxes as a percentage
of income before taxes                 23.4 %        25.0 %                      23.5 %         22.1 %

Net income1,2                   $   347,654   $   298,923          16.3 % $   937,858    $   852,881         10.0 %
Net income as a percentage
of net sales                           27.9 %        26.4 %                      27.6 %         26.8 %

Net income per common share:
Basic                           $      0.66   $      0.55          20.0 % $      1.77    $      1.57         12.8 %
Diluted                         $      0.65   $      0.55          19.6 % $      1.75    $      1.56         12.7 %

Case sales (in thousands)
(in 192­ounce case
equivalents)                        139,922       121,854          14.8 %     372,481        342,734          8.7 %




1Includes $10.5 million and $10.7 million for the three-months ended September
30, 2020 and 2019, respectively, related to the recognition of deferred revenue.
Includes $31.6 million and $35.6 million for the nine- months ended September
30, 2020 and 2019, respectively, related to the recognition of deferred revenue.



2The three-months ended September 30, 2020 and 2019 includes no distributor termination costs. Includes $0.2 million and $11.0 million for the nine- months ended September 30, 2020 and 2019, respectively, of distributor termination costs.

*Gross profit may not be comparable to that of other entities since some entities include all costs associated with their distribution process in cost of sales, whereas others exclude certain costs and instead include such costs within another line item such as operating expenses. We include out-bound freight and warehouse costs in operating expenses rather than in cost of sales.



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Results of Operations for the Three-Months Ended September 30, 2020 Compared to the Three-Months Ended September 30, 2019.




Net Sales. Net sales were $1.25 billion for the three-months ended September 30,
2020, an increase of approximately $112.8 million, or 9.9% higher than net sales
of $1.13 billion for the three-months ended September 30, 2019. We do not
believe that the COVID-19 pandemic had a material adverse impact on our net
sales for the three-months ended September 30, 2020, other than in EMEA, where
an adverse impact was experienced. Net changes in foreign currency exchange
rates had an unfavorable impact on net sales of approximately $12.5 million for
the three-months ended September 30, 2020.



Net sales for the Monster Energy® Drinks segment were $1.16 billion for the
three-months ended September 30, 2020, an increase of approximately $102.0
million, or 9.6% higher than net sales of $1.06 billion for the three-months
ended September 30, 2019. Net sales for the Monster Energy® Drinks segment
increased primarily due to increased worldwide sales by volume of our Monster
Energy® brand energy drinks and increased sales by volume of our Reign Total
Body Fuel® high performance energy drinks, both as a result of increased
consumer demand. Net changes in foreign currency exchange rates had an
unfavorable impact on net sales for the Monster Energy® Drinks segment of
approximately $11.6 million for the three-months ended September 30, 2020.



Net sales for the Strategic Brands segment were $74.3 million for the
three-months ended September 30, 2020, an increase of approximately $8.0
million, or 12.0% higher than net sales of $66.3 million for the three-months
ended September 30, 2019. Net sales for the Strategic Brands segment increased
primarily due to increased worldwide sales by volume of our NOS®, Burn®,
Predator® and Mother® brand energy drinks as a result of increased consumer
demand, as well as sales of Fury® energy drinks introduced in certain countries
in the 2020 second quarter. Net changes in foreign currency exchange rates had
an unfavorable impact on net sales for the Strategic Brands segment of
approximately $0.9 million for the three-months ended September 30, 2020.



Net sales for the Other segment were $8.6 million for the three-months ended
September 30, 2020, an increase of approximately $2.8 million, or 47.1% higher
than net sales of $5.9 million for the three-months ended September 30, 2019.



Case sales, in 192-ounce case equivalents, were 139.9 million cases for the
three-months ended September 30, 2020, an increase of approximately 18.1 million
cases or 14.8% higher than case sales of 121.9 million cases for the
three-months ended September 30, 2019. The overall average net sales per case
(excluding net sales of AFF Third-Party Products of $8.6 million and $5.9
million for the three-months ended September 30, 2020 and 2019, respectively, as
these sales do not have unit case equivalents) decreased to $8.85 for the
three-months ended September 30, 2020, which was 4.4% lower than the average net
sales per case of $9.25 for the three-months ended September 30, 2019. The
decrease in the average net sales per case was primarily the result of
geographical sales mix, the increase in net sales of the Strategic Brands
segment, which has a lower net sales price per case than the Monster Energy®
Drinks segment, and an increase in promotional allowances as a percentage of net
sales.



Gross Profit. Gross profit was $736.5 million for the three-months ended
September 30, 2020, an increase of approximately $63.5 million, or 9.4% higher
than the gross profit of $673.0 million for the three- months ended September
30, 2019. The increase in gross profit dollars was primarily the result of the
$112.8 million increase in net sales for the three-months ended September 30,
2020.



Gross profit as a percentage of net sales decreased to 59.1% for the
three-months ended September 30, 2020 from 59.4% for the three-months ended
September 30, 2019. The decrease for the three-months ended September 30, 2020
was primarily the result of geographical sales mix and higher allowances as a
percentage of gross sales, partially offset by favorable aluminum can pricing.



Operating Expenses. Total operating expenses were $277.9 million for the
three-months ended September 30, 2020, an increase of approximately $0.4
million, or 0.1% higher than total operating expenses of $277.6 million for the
three-months ended September 30, 2019. As a percentage of net sales, operating
expenses for the three-months ended September 30, 2020 were 22.3% as compared to
24.5% for the three-months ended September 30, 2019,  primarily due to decreased
expenditures of $14.1 million for sponsorship and endorsements and decreased
expenditures of $9.3 million for travel and entertainment, each largely as a
consequence of the COVID-19 pandemic. The costs for certain postponed or
rescheduled events have been, or may be, deferred to future periods. Due to the
uncertainty surrounding the COVID-19 pandemic, we are unable to estimate in
which future periods, if any, such deferred sponsorship and endorsement costs
will be recognized. The decrease in operating expenses as a percentage of net
sales was partially offset by increased payroll expenses of $14.5 million (of
which $3.5 million was related to an increase in stock-based compensation),
increased expenditures of $7.4 million for social media and digital marketing,
and increased out-bound freight and warehouse costs of $6.0 million.



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Operating Income. Operating income was $458.6 million for the three-months ended
September 30, 2020, an increase of approximately $63.2 million, or 16.0% higher
than operating income of $395.4 million for the three-months ended September 30,
2019. Operating income as a percentage of net sales increased to 36.8% for the
three-months ended September 30, 2020 from 34.9% for the three-months ended
September 30, 2019. Operating income was $96.6 million and $72.6 million for the
three-months ended September 30, 2020 and 2019, respectively, for our operations
in EMEA, Asia Pacific and South America.



Operating income for the Monster Energy® Drinks segment, exclusive of corporate
and unallocated expenses, was $502.4 million for the three-months ended
September 30, 2020, an increase of approximately $68.5 million, or 15.8% higher
than operating income of $433.8 million for the three-months ended September 30,
2019. The increase in operating income for the Monster Energy® Drinks segment
was primarily the result of the $102.0 million increase in net sales and the
$12.5 million decrease in operating expenses for the three-months ended
September 30, 2020.



Operating income for the Strategic Brands segment, exclusive of corporate and
unallocated expenses, was $43.9 million for the three-months ended September 30,
2020, an increase of approximately $8.8 million, or 25.0% higher than operating
income of $35.1 million for the three-months ended September 30, 2019. The
increase in operating income for the Strategic Brands segment was primarily the
result of the $8.0 million increase in net sales, offset by a decrease of $2.2
million in advertising costs and a $1.4 million decrease in sponsorship and
endorsement costs.



Operating income for the Other segment, exclusive of corporate and unallocated
expenses, was $2.4 million for the three-months ended September 30, 2020, an
increase of approximately $1.4 million, or 135.5% higher than operating income
of $1.0 million for the three-months ended September 30, 2019.



Interest and Other (Expense)/Income, net. Interest and other non-operating
(expense)/ income, net, was ($4.6) million for the three-months ended September
30, 2020, as compared to interest and other non- operating (expense)/ income,
net, of $3.1 million for the three-months ended September 30, 2019. Foreign
currency transaction losses were $4.8 million and $2.8 million for the
three-months ended September 30, 2020 and 2019, respectively. Interest income
was $1.5 million and $6.1 million for the three-months ended September 30,
2020
and 2019, respectively.



Provision for Income Taxes. Provision for income taxes was $106.4 million for
the three-months ended September 30, 2020, an increase of $6.7 million, or 6.8%
higher than the provision for income taxes of $99.6 million for the three-months
ended September 30, 2019. The effective combined federal, state and foreign tax
rate decreased to 23.4% from 25.0% for the three-months ended September 30, 2020
and 2019, respectively. The decrease in the effective tax rate was primary
attributable to lower income taxes in certain foreign jurisdictions as well as
an increase in the equity compensation deduction.



Net Income. Net income was $347.7 million for the three-months ended September
30, 2020, an increase of $48.7 million, or 16.3% higher than net income of
$298.9 million for the three-months ended September 30, 2019. The increase in
net income was primarily due to the $63.5 million increase in gross profit for
the three-months ended September 30, 2020.



Results of Operations for the Nine-Months Ended September 30, 2020 Compared to the Nine-Months Ended September 30, 2019.

Net Sales. Net sales were $3.40 billion for the nine-months ended September 30,
2020, an increase of approximately $218.7 million, or 6.9% higher than net sales
of $3.18 billion for the nine-months ended September 30, 2019. The COVID-19
pandemic had an adverse impact on net sales for the nine-months ended September
30, 2020. Net changes in foreign currency exchange rates had an unfavorable
impact on net sales of approximately $41.1 million for the nine-months ended
September 30, 2020.



Net sales for the Monster Energy® Drinks segment were $3.18 billion for the
nine-months ended September 30, 2020, an increase of approximately $232.7
million, or 7.9% higher than net sales of $2.95 billion for the nine-months
ended September 30, 2019. Net sales for the Monster Energy® Drinks segment
increased primarily due to increased worldwide sales by volume of our Monster
Energy® brand energy drinks and increased sales by volume for our Reign Total
Body Fuel® high performance energy drinks, both as a result of increased
consumer demand . The COVID-19 pandemic had an adverse impact on net sales of
the Monster Energy® Drinks segment for the nine-months ended September 30, 2020.
Net changes in foreign currency exchange rates had an unfavorable impact on net
sales for the Monster Energy® Drinks segment of approximately $38.3 million for
the nine-months ended September 30, 2020.



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Net sales for the Strategic Brands segment were $198.4 million for the
nine-months ended September 30, 2020, a decrease of approximately $17.3 million,
or 8.0% lower than net sales of $215.8 million for the nine-months ended
September 30, 2019. The COVID-19 pandemic had a material adverse impact on net
sales of the Strategic Brands segment for the nine-months ended September 30,
2020. The COVID-19 pandemic impact was more pronounced in the Strategic Brand
segment, particularly in EMEA, as our largest revenue generating countries for
this segment experienced extended lockdowns. Net changes in foreign currency
exchange rates had an unfavorable impact on net sales for the Strategic Brands
segment of approximately $2.8 million for the nine-months ended September 30,
2020.



Net sales for the Other segment were $20.4 million for the nine-months ended
September 30, 2020, an increase of approximately $3.4 million, or 20.0% higher
than net sales of $17.0 million for the nine-months ended September 30, 2019.



Case sales, in 192-ounce case equivalents, were 372.5 million cases for the
nine-months ended September 30, 2020, an increase of approximately 29.7 million
cases or 8.7% higher than case sales of 342.7 million cases for the nine-months
ended September 30, 2019. The overall average net sales per case (excluding net
sales of AFF Third-Party Products of $20.4 million and $17.0 million for the
nine-months ended September 30, 2020 and 2019, respectively, as these sales do
not have unit case equivalents) decreased to $9.08 for the nine-months ended
September 30, 2020, as compared to net sales per case of $9.24 for the
nine-months ended September 30, 2019.



Gross Profit. Gross profit was $2.03 billion for the nine-months ended September
30, 2020, an increase of approximately $125.4 million, or 6.6% higher than the
gross profit of $1.91 billion for the nine- months ended September 30, 2019. The
increase in gross profit dollars was primarily the result of the $232.7 million
increase in net sales of our Monster Energy® Drinks segment for the nine-months
ended September 30, 2020.


Gross profit as a percentage of net sales decreased marginally to 59.8% for the nine-months ended September 30, 2020 from 59.9% for the nine-months ended September 30, 2019.




Operating Expenses. Total operating expenses were $802.3 million for the
nine-months ended September 30, 2020, a decrease of approximately $19.6 million,
or 2.4% lower than total operating expenses of $821.9 million for the
nine-months ended September 30, 2019. The decrease in operating expenses was
primarily due to decreased expenditures of $38.3 million for sponsorship and
endorsements and decreased expenditures of $19.6 million for travel and
entertainment, each largely as a consequence of the COVID-19 pandemic, as well
as decreased expenditures of $10.7 million related to the costs associated with
distributor terminations. The costs for certain postponed or rescheduled events
have been, or may be, deferred to future periods. Due to the uncertainty
surrounding the COVID-19 pandemic, we are unable to estimate in what future
periods, if any, such deferred sponsorship and endorsement costs will be
recognized. The decrease in operating expenses was partially offset by increased
payroll expenses of $31.1 million (of which $6.1 million was related to an
increase in stock-based compensation), increased expenditures of $17.1 million
for social media and digital marketing, and increased out-bound freight and
warehouse costs of $10.2 million.



Operating Income. Operating income was $1.23 billion for the nine-months ended
September 30, 2020, an increase of approximately $145.0 million, or 13.3% higher
than operating income of $1.09 billion for the nine-months ended September 30,
2019. Operating income as a percentage of net sales increased to 36.2% for the
nine-months ended September 30, 2020 from 34.1% for the nine-months ended
September 30, 2019. Operating income was $229.4 million and $180.1 million for
the nine-months ended September 30, 2020 and 2019, respectively, for our
operations in EMEA, Asia Pacific and South America.



Operating income for the Monster Energy® Drinks segment, exclusive of corporate
and unallocated expenses, was $1.37 billion for the nine-months ended September
30, 2020, an increase of approximately $179.3 million, or 15.1% higher than
operating income of $1.19 billion for the nine-months ended September 30, 2019.
The increase in operating income for the Monster Energy® Drinks segment was
primarily the result of the $232.7 million increase in net sales of our Monster
Energy® Drinks segment for the nine-months ended September 30, 2020.



Operating income for the Strategic Brands segment, exclusive of corporate and
unallocated expenses, was $118.3 million for the nine-months ended September 30,
2020, a decrease of approximately $12.5 million, or 9.5% lower than operating
income of $130.8 million for the nine-months ended September 30, 2019. The
decrease in operating income for the nine-months ended September 30, 2020 was
primarily the result of a decrease in net sales related to the COVID-19
pandemic.



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Operating income for the Other segment, exclusive of corporate and unallocated
expenses, was $4.8 million for the nine-months ended September 30, 2020, an
increase of approximately $1.8 million, or 57.9% higher than operating income of
$3.0 million for the nine-months ended September 30, 2019.



Interest and Other (Expense)/Income, net. Interest and other non-operating
(expense)/income, net, was ($5.5) million for the nine-months ended September
30, 2020, as compared to interest and other non- operating (expense)/income,
net, of $8.8 million for the nine-months ended September 30, 2019. Foreign
currency transaction losses were $9.2 million and $3.9 million for the
nine-months ended September 30, 2020 and 2019, respectively. Interest income was
$6.9 million and $13.5 million for the nine-months ended September 30, 2020
and
2019, respectively.



Provision for Income Taxes. Provision for income taxes was $287.5 million for
the nine-months ended September 30, 2020, an increase of $45.7 million, or 18.9%
higher than the provision for income taxes of $241.8 million for the nine-months
ended September 30, 2019. The effective combined federal, state and foreign tax
rate increased to 23.5% from 22.1% for the nine-months ended September 30, 2020
and 2019, respectively. The increase in the effective tax rate was primarily
attributable to a decrease in the equity compensation deduction.



Net Income. Net income was $937.9 million for the nine-months ended September
30, 2020, an increase of $85.0 million, or 10.0% higher than net income of
$852.9 million for the nine-months ended September 30, 2019. The increase in net
income was primarily due to the $125.4 million increase in gross profit and the
$19.6 million decrease in operating expenses. The increase in net income was
partially offset by an increase in the provision for income taxes of $45.7
million.



Non-GAAP Financial Measures


Three-Months Ended September 30, 2020 Compared to the Three-Months Ended September 30, 2019.




Gross Sales**. Gross sales were $1.46 billion for the three-months ended
September 30, 2020, an increase of approximately $146.2 million, or 11.1% higher
than gross sales of $1.32 billion for the three-months ended September 30, 2019.
We do not believe that the COVID-19 pandemic had a material adverse impact on
our gross sales for the three-months ended September 30, 2020, other than in
EMEA, where an adverse impact was experienced. Net changes in foreign currency
exchange rates had an unfavorable impact on gross sales of approximately $11.9
million for the three-months ended September 30, 2020.



Gross sales for the Monster Energy® Drinks segment were $1.37 billion for the
three-months ended September 30, 2020, an increase of approximately $131.9
million, or 10.7% higher than gross sales of $1.24 billion for the three-months
ended September 30, 2019. Gross sales for the Monster Energy® Drinks segment
increased primarily due to increased worldwide sales by volume of our Monster
Energy® brand energy drinks and increased sales by volume for our Reign Total
Body Fuel® high performance energy drinks, both as a result of increased
consumer demand. Net changes in foreign currency exchange rates had an
unfavorable impact on gross sales for the Monster Energy® Drinks segment of
approximately $10.9 million for the three-months ended September 30, 2020.



Gross sales of our Strategic Brands segment were $88.2 million for the
three-months ended September 30, 2020, an increase of $11.5 million, or 15.0%
higher than gross sales of $76.7 million for the three-months ended September
30, 2019. Net changes in foreign currency exchange rates had an unfavorable
impact on gross sales in the Strategic Brands segment of approximately $1.0
million for the three-months ended September 30, 2020.



Gross sales of our Other segment were $8.6 million for the three-months ended September 30, 2020, an increase of $2.8 million, or 47.1% higher than gross sales of $5.9 million for the three-months ended September 30, 2019.

Promotional allowances, commissions and other expenses, as described in the
footnote below, were $218.1 million for the three-months ended September 30,
2020, an increase of $33.4 million, or 18.1% higher than promotional allowances,
commissions and other expenses of $184.7 million for the three-months ended
September 30, 2019. Promotional allowances, commissions and other expenses as a
percentage of gross sales increased to 14.9% from 14.0 % for the three-months
ended September 30, 2020 and 2019, respectively.



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Nine-Months Ended September 30, 2020 Compared to the Nine-Months Ended September 30, 2019.




Gross Sales**. Gross sales were $3.97 billion for the nine-months ended
September 30, 2020, an increase of approximately $279.6 million, or 7.6% higher
than gross sales of $3.70 billion for the nine-months ended September 30, 2019.
The COVID-19 pandemic had an adverse impact on gross sales for the nine- months
ended September 30, 2020. Net changes in foreign currency exchange rates had an
unfavorable impact on gross sales of approximately $44.7 million for the
nine-months ended September 30, 2020.



Gross sales for the Monster Energy® Drinks segment were $3.72 billion for the
nine-months ended September 30, 2020, an increase of approximately $293.5
million, or 8.6% higher than gross sales of $3.43 billion for the nine-months
ended September 30, 2019. Gross sales for the Monster Energy® Drinks segment
increased primarily due to increased worldwide sales by volume of our Monster
Energy® brand energy drinks as a result of increased consumer demand as well as
enhanced distribution and increased consumer demand for our Reign Total Body
Fuel® high performance energy drinks. The COVID-19 pandemic had an adverse
impact on gross sales of the Monster Energy® Drinks segment for the nine-months
ended September 30, 2020. Net changes in foreign currency exchange rates had an
unfavorable impact on gross sales for the Monster Energy® Drinks segment of
approximately $41.8 million for the nine-months ended September 30, 2020.



Gross sales of our Strategic Brands segment were $229.4 million for the
nine-months ended September 30, 2020, a decrease of $17.2 million, or 7.0% lower
than gross sales of $246.6 million for the nine-months ended September 30, 2019.
The COVID-19 pandemic had a material adverse impact on gross sales of the
Strategic Brands segment for the nine-months ended September 30, 2020. The
COVID-19 pandemic impact was more pronounced in the Strategic Brands segment,
particularly in EMEA, as our larger revenue generating countries for this
segment experienced extended lockdowns. Net changes in foreign currency exchange
rates had an unfavorable impact on gross sales in the Strategic Brands segment
of approximately $2.9 million for the nine-months ended September 30, 2020.

Gross sales of our Other segment were $20.4 million for the nine-months ended September 30, 2020, an increase of $3.4 million, or 20.0% higher than gross sales of $17.0 million for the nine-months ended September 30, 2019.

Promotional allowances, commissions and other expenses, as described in the
footnote below, were $572.4 million for the nine-months ended September 30,
2020, an increase of $60.9 million, or 11.9% higher than promotional allowances,
commissions and other expenses of $511.5 million for the nine-months ended
September 30, 2019. Promotional allowances, commissions and other expenses as a
percentage of gross sales increased to 14.4% from 13.8% for the nine-months
ended September 30, 2020 and 2019, respectively.



**Gross Sales represents the recognition of deferred revenue and amounts
invoiced to customers net of cash discounts and returns. Gross sales are used
internally by management as an indicator of and to monitor operating
performance, including sales performance of particular products, salesperson
performance, product growth or declines and overall Company performance. The use
of gross sales allows evaluation of sales performance before the effect of any
promotional items, which can mask certain performance issues, such as the timing
of certain promotional programs. We therefore believe that the presentation of
gross sales provides a useful measure of our operating performance. The use of
gross sales is not a measure that is recognized under GAAP and should not be
considered as an alternative to net sales, which is determined in accordance
with GAAP, and should not be used alone as an indicator of operating performance
in place of net sales. Additionally, gross sales may not be comparable to
similarly titled measures used by other companies, as gross sales has been
defined by our internal reporting practices. In addition, gross sales may not be
realized in the form of cash receipts as promotional payments and allowances may
be deducted from payments received from certain customers.



The following table reconciles the non-GAAP financial measure of gross sales with the most directly comparable GAAP financial measure of net sales:




                                    Three-Months Ended       Percentage         Nine-Months Ended        Percentage
                                     September 30,             Change            September 30,             Change
(In thousands)                    2020           2019        20 vs. 19        2020           2019        20 vs. 19
Gross sales, net of
discounts and returns          $ 1,464,426    $ 1,318,267          11.1 %  $ 3,974,763    $ 3,695,128           7.6 %
Less: Promotional
allowances, commissions and
other expenses***                  218,064        184,690          18.1 %      572,408        511,515          11.9 %
Net Sales                      $ 1,246,362    $ 1,133,577           9.9 %  $ 3,402,355    $ 3,183,613           6.9 %




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***Although the expenditures described in this line item are determined in
accordance with GAAP and meet GAAP requirements, the presentation thereof does
not conform to GAAP presentation requirements. Additionally, our definition of
promotional and other allowances may not be comparable to similar items
presented by other companies. Promotional and other allowances primarily include
consideration given to our bottlers/distributors or retail customers including,
but not limited to the following: (i) discounts granted off list prices to
support price promotions to end-consumers by retailers; (ii) reimbursements
given to our 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; (iii) our agreed share of fees given to
bottlers/distributors and/or directly to retailers for advertising, in-store
marketing and promotional activities; (iv) our agreed share of slotting, shelf
space allowances and other fees given directly to retailers, club stores and/or
wholesalers; (v) incentives given to our bottlers/distributors and/or retailers
for achieving or exceeding certain predetermined sales goals; (vi) discounted or
free products; (vii) contractual fees given to our bottlers/distributors related
to sales made by us direct to certain customers that fall within the
bottlers'/distributors' sales territories; and (viii) certain commissions based
on sales to our bottlers/distributors. The presentation of promotional and other
allowances facilitates an evaluation of their impact on the determination of net
sales and the spending levels incurred or correlated with such sales.
Promotional and other allowances constitute a material portion of our marketing
activities. Our promotional allowance programs with our numerous
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,
ranging from one week to one year. The primary drivers of our promotional and
other allowance activities for the three-months ended September 30, 2020 and
2019 were (i) to increase sales volume and trial, (ii) to address market
conditions, and (iii) to secure shelf and display space at retail.



Sales



The table below discloses selected quarterly data regarding sales for the three-
and nine-months ended September 30, 2020 and 2019, respectively. Data from any
one or more quarters or periods is not necessarily indicative of annual results
or continuing trends.


Sales of beverages are expressed in unit case volume. A "unit case" means a unit
of measurement equal to 192 U.S. fluid ounces of finished beverage (24
eight-ounce servings). Unit case volume means the number of unit cases (or unit
case equivalents) of finished products or concentrates as if converted into
finished products sold by us.



Our quarterly results of operations reflect seasonal trends that are primarily
the result of increased demand in the warmer months of the year. It has been our
experience that beverage sales tend to be lower during the first and fourth
quarters of each calendar year. However, our experience with our energy drink
products suggests they may be less seasonal than the seasonality of traditional
beverages. In addition, our continued growth internationally may further reduce
the impact of seasonality on our business. Quarterly fluctuations may also be
affected by other factors including the introduction of new products, the
opening of new markets where temperature fluctuations are more pronounced, the
addition of new bottlers/distributors, changes in the sales mix of our products
and changes in advertising and promotional expenses.  The COVID-19 pandemic may
also have an impact on consumer behavior and change the seasonal fluctuation of
our business.




                                          Three-Months Ended           Nine-Months Ended
                                            September 30,               September 30,
(In thousands, except average net
sales per case)                           2020          2019          2020 

2019

Net sales                              $ 1,246,362   $ 1,133,577   $ 3,402,355   $ 3,183,613
Less: AFF third-party sales                (8,618)       (5,860)      (20,367)      (16,973)
Adjusted net sales¹                    $ 1,237,744   $ 1,127,717   $ 3,381,988   $ 3,166,640

Case sales by segment:
Monster Energy® Drinks                     117,805       103,987       317,103       286,284
Strategic Brands                            22,117        17,867        55,378        56,450
Other                                            -             -             -             -
Total case sales                           139,922       121,854       372,481       342,734
Average net sales per case             $      8.85   $      9.25   $      9.08   $      9.24



1Excludes Other segment net sales of $8.6 million and $5.9 million for the
three-months ended September 30, 2020 and 2019, respectively, comprised of net
sales of AFF Third-Party Products to independent third-party customers, as these
sales do not have unit case equivalents. Excludes Other segment net sales of
$20.4 million and $17.0 million for the nine-months ended September 30, 2020 and
2019, respectively, comprised of net sales of AFF Third-Party Products to
independent third-party customers, as these sales do not have unit case
equivalents.

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See Item 2, "Management's Discussion and Analysis of Financial Condition and
Results of Operations - Our Business" for additional information related to
the
increase in sales.


Liquidity and Capital Resources

Cash and cash equivalents, short-term and long-term investments. We believe that
cash available from operations, including our cash resources and access to
credit, will be sufficient for our working capital needs, including purchase
commitments for raw materials and inventory, increases in accounts receivable,
payments of tax liabilities, expansion and development needs, purchases of
capital assets, purchases of equipment, purchases of real property and purchases
of shares of our common stock, through at least the next 12 months. Our sources
and uses of cash were not materially impacted by the COVID-19 pandemic in the
nine-months ended September 30, 2020 and, to date, we have not identified any
material liquidity deficiencies as a result of the COVID-19 pandemic. Based on
the information currently available to us, we do not expect the impact of the
COVID-19 pandemic to have a material impact on our liquidity. We will continue
to monitor and assess the impact the COVID-19 pandemic may have on our business,
financial condition and/or operating results.



At September 30, 2020, we had $1.07 billion in cash and cash equivalents, $599.3
million in short-term investments and $20.6 million in long-term investments. We
have historically invested these amounts in U.S. treasuries, U.S. government
agency securities, municipal securities, commercial paper, certificates of
deposit, variable rate demand notes and money market funds meeting certain
criteria. At this time, we no longer invest these amounts in municipal
securities. We maintain our investments for cash management purposes and not for
purposes of speculation. Our risk management policies emphasize credit quality
(primarily based on short-term ratings by nationally recognized statistical
organizations) in selecting and maintaining our investments. We regularly assess
market risk of our investments and believe our current policies and investment
practices adequately limit those risks. However, certain of these investments
are subject to general credit, liquidity, market and interest rate risks. These
market risks associated with our investment portfolio may have an adverse effect
on our future results of operations, liquidity and financial condition.



Based on our current plans, at this time we estimate that capital expenditures
(exclusive of common stock repurchases) are likely to be less than $200.0
million through September 30, 2021. However, future business opportunities may
cause a change in this estimate.



Cash flows provided by operating activities. Cash provided by operating
activities was $949.2 million for the nine-months ended September 30, 2020, as
compared with cash provided by operating activities of $821.1 million for the
nine-months ended September 30, 2019.



For the nine-months ended September 30, 2020, cash provided by operating
activities was primarily attributable to net income earned of $937.9 million and
adjustments for certain non-cash expenses, consisting of $53.0 million of
stock-based compensation, $45.9 million of depreciation and amortization and
$7.0 million of intangible asset impairment. For the nine-months ended September
30, 2020, cash provided by operating activities also increased due to a $53.5
million increase in accrued liabilities, a $39.5 million decrease in
inventories, a $31.9 million increase in accrued promotional allowances, an
$18.0 million increase in income taxes payable and an $11.5 million decrease in
prepaid income taxes. For the nine-months ended September 30, 2020, cash used in
operating activities was primarily attributable to a $201.7 million increase in
accounts receivable, a $20.4 million increase in prepaid expenses and other
assets, a $15.2 million decrease in deferred revenue, a $9.7 million decrease in
accounts payable and a $1.2 million decrease in accrued compensation.



For the nine-months ended September 30, 2019, cash provided by operating
activities was primarily attributable to net income earned of $852.9 million and
adjustments for certain non-cash expenses, consisting of $47.8 million of
depreciation and amortization and $46.9 million of stock-based compensation. For
the nine-months ended September 30, 2019, cash provided by operating activities
also increased due to a $69.5 million increase in accounts payable, a $55.8
million increase in accrued promotional allowances, a $10.3 million increase in
income taxes payable, a $6.2 million decrease in prepaid income taxes and a $5.8
million decrease in distributor receivables. For the nine-months ended September
30, 2019, cash used in operating activities was primarily attributable to a
$179.8 million increase in accounts receivable, a $44.9 million increase in
inventories, a $19.6 million decrease in deferred revenue, a $16.1 million
increase in prepaid expenses and other assets, a $9.6 million decrease in
accrued liabilities and a $3.9 million decrease in accrued compensation.



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Cash flows used in investing activities. Cash used in investing activities was
$140.5 million for the nine-months ended September 30, 2020 as compared to cash
used in investing activities of $328.2 million for the nine-months ended
September 30, 2019.



For both the nine-months ended September 30, 2020 and 2019, cash provided by
investing activities was primarily attributable to sales of available-for-sale
investments. For both the nine-months ended September 30, 2020 and 2019, cash
used in investing activities was primarily attributable to purchases of
available-for-sale investments. For both the nine-months ended September 30,
2020 and 2019, cash used in investing activities also included the acquisitions
of fixed assets consisting of vans and promotional vehicles, coolers and other
equipment to support our marketing and promotional activities, production
equipment, furniture and fixtures, office and computer equipment, computer
software, equipment used for sales and administrative activities, certain
leasehold improvements, as well as acquisitions of and/or improvements to real
property. We expect to continue to use a portion of our cash in excess of our
requirements for operations for purchasing short-term and long-term investments,
leasehold improvements, the acquisition of capital equipment (specifically,
vans, trucks and promotional vehicles, coolers, other promotional equipment,
merchandise displays, warehousing racks as well as items of production equipment
required to produce certain of our existing and/or new products) to develop our
brand in international markets and for other corporate purposes. From time to
time, we may also use cash to purchase additional real property related to our
beverage business and/or acquire compatible businesses.



Cash flows used in financing activities. Cash used in financing activities was
$532.9 million for the nine-months ended September 30, 2020 as compared to cash
used in financing activities of $405.3 million for the three-months ended
September 30, 2019. The cash used in financing activities for both the
nine-months ended September 30, 2020 and 2019 was primarily the result of the
repurchases of our common stock. The cash provided by financing activities for
both the nine-months ended September 30, 2020, and 2019 was primarily
attributable to the issuance of our common stock under our stock-based
compensation plans.



Purchases of inventories, increases in accounts receivable and other assets,
acquisition of property and equipment (including real property, personal
property and coolers), leasehold improvements, advances for or the purchase of
equipment for our bottlers, acquisition and maintenance of trademarks, payments
of accounts payable, income taxes payable and purchases of our common stock are
expected to remain our principal recurring use of cash.



Of our $1.07 billion of cash and cash equivalents held at September 30, 2020,
$595.0 million was held by our foreign subsidiaries. No short-term or long-term
investments were held by our foreign subsidiaries at September 30, 2020.



The following represents a summary of the Company's contractual commitments and related scheduled maturities as of September 30, 2020:




                                        Payments due by period (in thousands)
                                         Less than       1­3        3­5        More than
      Obligations             Total        1 year       years       years       5 years

Contractual Obligations¹    $ 142,165    $  108,430    $ 32,819    $   916    $         -
Finance Leases                  1,221         1,221           -          -              -
Operating Leases               24,545         3,561       5,429      3,592         11,963
Purchase Commitments²          62,211        62,211           -          -              -
                            $ 230,142    $  175,423    $ 38,248    $ 4,508    $    11,963



1Contractual obligations include our obligations related to sponsorships and other commitments.

2Purchase commitments include obligations made by us and our subsidiaries to various suppliers for raw materials used in the production of our products. These obligations vary in terms, but are generally satisfied within one year.




In addition, approximately $3.0 million of unrecognized tax benefits have been
recorded as liabilities as of September 30, 2020. It is expected that the amount
of unrecognized tax benefits will not significantly change within the next 12
months. As of September 30, 2020, we had $0.5 million of accrued interest and
penalties related to unrecognized tax benefits.



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Critical Accounting Policies



There have been no material changes to our critical accounting policies from the
information provided in Item 7, "Management's Discussion and Analysis of
Financial Condition and Results of Operations", included in our Annual Report on
Form 10-K for the fiscal year ended December 31, 2019 ("Form 10-K").



Recent Accounting Pronouncements




The information required by this Item is incorporated herein by reference to the
Notes to Condensed Consolidated Financial Statements - Note 2. Recent Accounting
Pronouncements, in Part I, Item 1, of this Quarterly Report on Form 10-Q.



Inflation


We believe inflation did not have a significant impact on our results of operations for the periods presented.



Forward-Looking Statements



Certain statements made in this report may constitute forward-looking statements
(within the meaning of Section 27A of the Securities Act of 1933, as amended,
and Section 21E of the Securities Exchange Act of 1934, as amended) (the
"Exchange Act") regarding the expectations of management with respect to
revenues, profitability, adequacy of funds from operations and our existing
credit facility, among other things. All statements containing a projection of
revenues, income (loss), earnings (loss) per share, capital expenditures,
dividends, capital structure or other financial items, a statement of
management's plans and objectives for future operations, or a statement of
future economic performance contained in management's discussion and analysis of
financial condition and results of operations, including statements related to
new products, volume growth and statements encompassing general optimism about
future operating results and non-historical information, are forward-looking
statements within the meaning of the Exchange Act. Without limiting the
foregoing, the words "believes," "thinks," "anticipates," "plans," "expects,"
and similar expressions are intended to identify forward-looking statements.



Management cautions that these statements are qualified by their terms and/or
important factors, many of which are outside our control, and involve a number
of risks, uncertainties and other factors, that could cause actual results and
events to differ materially from the statements made including, but not limited
to, the following:


The human and economic consequences of the COVID-19 pandemic, as well as the

measures taken or that may be taken in the future by governments, and

? consequently, businesses (including the Company and its suppliers, bottlers/

distributors, co-packers and other service providers) and the public at large

to limit the COVID-19 pandemic;

The impact on consumer demand of the resurgence of the COVID-19 pandemic in the

? Northern Hemisphere, resulting in a number of countries, particularly in EMEA,

   reinstituting lockdowns and other restrictions as well as the impact of
   possible resurgences in other countries;

The slowing of growth and/or decline in sales of the domestic and international

energy drink categories generally, including the convenience and gas channel

? (which is our largest channel) and food-service on-premise, and the impact on

demand for our products resulting from deteriorating economic conditions and

financial uncertainties due to the COVID-19 pandemic;

The impact of temporary plant closures, production slowdowns and disruptions in

? operations experienced by our suppliers, bottlers/distributors and/or

co-packers as a result of the COVID-19 pandemic, including any material

disruptions on the production and distribution of our products;

The impact of the reduction in our sponsorship and endorsement activities as

? well as our sampling activities as a result of COVID-19 on our future sales and

market share;

We have extensive commercial arrangements with TCCC and, as a result, our

? future performance is substantially dependent on the success of our

relationship with TCCC;

The impact of TCCC's bottlers/distributors distributing Coca-Cola brand energy

? drinks and possible reductions in the number of our SKUs carried by such

bottlers/distributors and/or such bottlers/distributors imposing limitations on

distributing new product SKUs;

? Closures of, and continued restrictions on, on-premise retailers and other

establishments which sell our products as the result of the COVID-19 pandemic;

? The limitation or reduction by our suppliers, bottlers/distributors and/or

co-packers of their activities and/or operations during the COVID-19 pandemic;



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? The impact of the COVID-19 pandemic on our product sampling programs;

? The effect of TCCC being one of our significant shareholders and the potential

divergence of TCCC's interests from those of our other shareholders;

? Our ability to maintain relationships with TCCC system bottlers/distributors

and manage their ongoing commitment to focus on our products;

Disruption in distribution channels and/or decline in sales due to the

? termination and/or insolvency of existing and/or new domestic and/or

international bottlers/distributors;

? Lack of anticipated demand for our products in domestic and/or international

markets;

? Fluctuations in the inventory levels of our bottlers/distributors, planned or

otherwise, and the resultant impact on our revenues;

Unfavorable regulations, including taxation requirements, age restrictions

? imposed on the sale, purchase, or consumption of our products, marketing

restrictions, product registration requirements, tariffs, trade restrictions,

container size limitations and/or ingredient restrictions;

The effect of inquiries from, and/or actions by, state attorneys general, the

Federal Trade Commission (the "FTC"), the Food and Drug Administration (the

"FDA"), municipalities, city attorneys, other government agencies,

quasi-government agencies, government officials (including members of U.S.

? Congress) and/or analogous central and local agencies and other authorities in

the foreign countries in which our products are manufactured and/or

distributed, into the advertising, marketing, promotion, ingredients, sale

and/or consumption of our energy drink products, including voluntary and/or

required changes to our business practices;

Our ability to comply with laws, regulations and evolving industry standards

? regarding consumer privacy and data use and security, including with respect to

the General Data Protection Regulation and the California Privacy Act of 2018;

? Our ability to achieve profitability from certain of our operations outside the

United States;

Our ability to manage legal and regulatory requirements in foreign

? jurisdictions, potential difficulties in staffing and managing foreign

operations and potentially higher incidence of fraud or corruption and credit

risk of foreign customers and/or bottlers/distributors;

? Our ability to produce our products in international markets in which they are

sold, thereby reducing freight costs and/or product damages;

? Our ability to absorb, reduce or pass on to our bottlers/distributors increases

in freight costs;

? Our ability to effectively manage our inventories and/or our accounts

receivables;

Our foreign currency exchange rate risk with respect to our sales, expenses,

? profits, assets and liabilities denominated in currencies other than the U.S.

dollar, which will continue to increase as foreign sales increase;

? Uncertainties surrounding the United Kingdom's departure from the European

Union (or "Brexit");

? Changes in accounting standards may affect our reported profitability;

? Implications of the Organization for Economic Cooperation and Development's

base erosion and profit shifting project;

Any proceedings which may be brought against us by the Securities and Exchange

? Commission (the "SEC"), the FDA, the FTC or other governmental agencies or

bodies;

The outcome and/or possibility of future shareholder derivative actions or

? shareholder securities litigation that may be filed against us and/or against

certain of our officers and directors, and the possibility of other private

shareholder litigation;

The outcome of product liability or consumer fraud litigation and/or class

action litigation (or its analog in foreign jurisdictions) regarding the safety

? of our products and/or the ingredients in and/or claims made in connection with

our products and/or alleging false advertising, marketing and/or promotion, and

the possibility of future product liability and/or class action lawsuits;

? Exposure to significant liabilities due to litigation, legal or regulatory

proceedings;

? Intellectual property injunctions;

? Unfavorable resolution of tax matters;

? Uncertainty and volatility in the domestic and global economies, including risk

of counterparty default or failure;

? Our ability to address any significant deficiencies or material weakness in our

internal controls over financial reporting;

? Our ability to continue to generate sufficient cash flows to support our

expansion plans and general operating activities;

Decreased demand for our products resulting from changes in consumer

preferences, including changes in demand for different packages, sizes and

? configurations, obesity and other perceived health concerns, including concerns

relating to certain ingredients in our products or packaging, product safety

   concerns and/or from decreased consumer discretionary spending power;

Adverse publicity surrounding obesity and health concerns related to our

? products, water usage, environmental impact, human rights and labor and

   workplace laws;


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  Table of Contents

Changes in demand that are weather related and/or for other reasons, including

changes in product category and/or package consumption and changes in cost and

? availability of certain key ingredients including aluminum cans, as well as

disruptions to the supply chain, as a result of climate change and extreme

weather conditions;

The impact of unstable political conditions, civil unrest, large scale

? terrorist acts, the outbreak or escalation of armed hostilities, major natural

disasters and extreme weather conditions, or widespread outbreaks of infectious

diseases;

The impact on our business of competitive products and pricing pressures and

our ability to gain or maintain our share of sales in the marketplace as a

? result of actions by competitors, including unsubstantiated and/or misleading

   claims, false advertising claims and tortious interference, as well as
   competitors selling misbranded products;


   The impact on our business of trademark and trade dress infringement

proceedings brought against us relating to our brands, including our Reign

? Total Body Fuel® high performance energy drinks, which could result in an

injunction barring us from selling certain of our products and/or require

changes to be made to our current trade dress;

? Our ability to introduce new products and the impact of the COVID-19 pandemic

on our innovation activities;

? Our ability to implement and/or maintain price increases;

? An inability to achieve volume growth through product and packaging

initiatives;

Our ability to sustain the current level of sales and/or achieve growth for our

? Monster Energy® brand energy drinks and/or our other products, including our

Strategic Brands;

The impact of criticism of our energy drink products and/or the energy drink

market generally and/or legislation enacted (whether as a result of such

criticism or otherwise) that restricts the marketing or sale of energy drinks

? (including prohibiting the sale of energy drinks at certain establishments or

pursuant to certain governmental programs), limits caffeine content in

beverages, requires certain product labeling disclosures and/or warnings,

imposes excise and/or sales taxes, limits product sizes and/or imposes age

restrictions for the sale of energy drinks;

Our ability to comply with and/or resulting lower consumer demand and/or lower

profit margins for energy drinks due to proposed and/or future U.S. federal,

state and local laws and regulations and/or proposed or existing laws and

regulations in certain foreign jurisdictions and/or any changes therein,

including changes in taxation requirements (including tax rate changes, new tax

laws, new and/or increased excise, sales and/or other taxes on our products and

revised tax law interpretations) and environmental laws, as well as the Federal

Food, Drug, and Cosmetic Act and regulations or rules made thereunder or in

? connection therewith by the FDA, as well as changes in any other food, drug or

similar laws in the United States and internationally, especially those changes

that may restrict the sale of energy drinks (including prohibiting the sale of

energy drinks at certain establishments or pursuant to certain governmental

programs), limit caffeine content in beverages, require certain product

labeling disclosures and/or warnings, impose excise taxes, impose sugar taxes,

limit product sizes, or impose age restrictions for the sale of energy drinks,

as well as laws and regulations or rules made or enforced by the Bureau of

Alcohol, Tobacco, Firearms and Explosives and/or the FTC or their foreign

counterparts;

Our ability to satisfy all criteria set forth in any model energy drink

guidelines, including, without limitation, those adopted by the American

? Beverage Association, of which the Company is a member, and/or any

international beverage association and the impact on the Company of such

guidelines;

? Disruptions in the timely import or export of our products and/or ingredients

due to port strikes and related labor issues;

? The effect of unfavorable or adverse public relations, press, articles,

comments and/or media attention;

Changes in the cost, quality and availability of containers, packaging

materials, aluminum cans, the Midwest and other premiums, raw materials and

? other ingredients and juice concentrates, and our ability to obtain and/or

maintain favorable supply arrangements and relationships and procure timely

and/or sufficient production of all or any of our products to meet customer

demand;

Any shortages that may be experienced in the procurement of containers and/or

? other raw materials including, without limitation, aluminum cans generally, PET

containers used for our Monster Hydro® energy drinks and 24-ounce aluminum cap

cans;

? The impact on our cost of sales of corporate activity among the limited number

of suppliers from whom we purchase certain raw materials;

Our ability to pass on to our customers all or a portion of any increases in

? the costs of raw materials, ingredients, commodities and/or other cost inputs

affecting our business;

Our ability to achieve both internal domestic and international forecasts,

which may be based on projected volumes and sales of many product types and/or

? new products, certain of which are more profitable than others; there can be no

assurance that we will achieve projected levels of sales as well as forecasted

product and/or geographic mixes;

Our ability to penetrate new domestic and/or international markets and/or gain

? approval or mitigate the delay in securing approval for the sale of our

products in various countries;


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  Table of Contents

The effectiveness of sales and/or marketing efforts by us and/or by the

? bottlers/distributors of our products, most of whom distribute products that

may be regarded as competitive with our products;

Unilateral decisions by bottlers/distributors, buying groups, convenience

chains, grocery chains, mass merchandisers, specialty chain stores, club stores

? and other customers to discontinue carrying all or any of our products that

they are carrying at any time, restrict the range of our products they carry

and/or devote less resources to the sale of our products;

The impact of possible trading disputes between our bottler/distributors and

? their customers and/or one or more buying groups which may result in the

delisting of certain of the Company products, temporarily or otherwise;

? The effects of retailer consolidation on our business and our ability to

successfully adapt to the rapidly changing retail landscape.

? The effects of bottler/distributor consolidation on our business;

? The costs and/or effectiveness, now or in the future, of our advertising,

marketing and promotional strategies;

? The success of our sports marketing, social media and other general marketing

endeavors both domestically and internationally;

Our ability to successfully adapt to the changing landscape of advertising,

? marketing, promotional, sponsorship and endorsement opportunities created by

the COVID-19 pandemic;

? Unforeseen economic and political changes and local or international

catastrophic events;

? Possible recalls of our products and/or defective production;

Our ability to make suitable arrangements and/or procure sufficient capacity

? for the co-packing of any of our products both domestically and

internationally, the timely replacement of discontinued co-packing arrangements

and/or limitations on co-packing availability, including for retort production;

? Our ability to make suitable arrangements for the timely procurement of

non-defective raw materials;

Our inability to protect and/or the loss of our intellectual property rights

? and/or our inability to use our trademarks, trade names or designs and/or trade

dress in certain countries;

Volatility of stock prices which may restrict stock sales, stock purchases or

? other opportunities as well as negatively impact the motivation of equity award

grantees;

Provisions in our organizational documents and/or control by insiders which may

? prevent changes in control even if such changes would be beneficial to other

stockholders;

? The failure of our bottlers and/or co-packers to manufacture our products on a

timely basis or at all;

? The impact of any reductions in productivity and disruptions to our business

routines while most office-based employees of the Company work remotely;

Any disruption in and/or lack of effectiveness of our information technology

? systems, including a breach of cyber security, that disrupts our business or

negatively impacts customer relationships, as well as cybersecurity incidents

involving data shared with third parties; and

? Recruitment and retention of senior management, other key employees and our

   employee base in general.



The foregoing list of important factors and other risks detailed from time to
time in our reports filed with the SEC is not exhaustive. See the section
entitled "Risk Factors" in our Form 10-K and in Item 1A of this Quarterly Report
for a more complete discussion of these risks and uncertainties and for other
risks and uncertainties. Those factors and the other risk factors described
therein are not necessarily all of the important factors that could cause actual
results or developments to differ materially from those expressed in any of our
forward-looking statements. Other unknown or unpredictable factors also could
harm our results. Consequently, our actual results could be materially different
from the results described or anticipated by our forward-looking statements, due
to the inherent uncertainty of estimates, forecasts and projections and may be
better or worse than anticipated. Given these uncertainties, you should not rely
on forward-looking statements. Forward-looking statements represent our
estimates and assumptions only as of the date that they were made. We expressly
disclaim any duty to provide updates to forward-looking statements, and the
estimates and assumptions associated with them, after the date of this report,
in order to reflect changes in circumstances or expectations or the occurrence
of unanticipated events except to the extent required by applicable securities
laws.

© Edgar Online, source Glimpses

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Financials (USD)
Sales 2021 5 363 M - -
Net income 2021 1 384 M - -
Net cash 2021 1 894 M - -
P/E ratio 2021 34,4x
Yield 2021 -
Capitalization 47 644 M 47 644 M -
EV / Sales 2021 8,53x
EV / Sales 2022 7,66x
Nbr of Employees 3 340
Free-Float 58,9%
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Technical analysis trends MONSTER BEVERAGE CORPORATION
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Income Statement Evolution
Consensus
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Mean consensus OUTPERFORM
Number of Analysts 22
Last Close Price 90,14 $
Average target price 102,71 $
Spread / Average Target 13,9%
EPS Revisions
Managers and Directors
NameTitle
Rodney Cyril Sacks Chairman & Co-Chief Executive Officer
Hilton Hiller Schlosberg Vice Chairman & Co-Chief Executive Officer
Thomas J. Kelly CFO & Principal Accounting Officer
Gary P. Fayard Independent Director
Benjamin M. Polk Independent Director
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