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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

Part I.

FINANCIAL INFORMATION

    

Page No.

Item 1.

Condensed Consolidated Financial Statements (Unaudited)

Condensed Consolidated Balance Sheets as of September 30, 2022 and December 31, 2021

3

Condensed Consolidated Statements of Income for the Three- and Nine-Months Ended September 30, 2022 and 2021

4

Condensed Consolidated Statements of Comprehensive Income for the Three- and Nine-Months Ended September 30, 2022 and 2021

5

Condensed Consolidated Statements of Stockholders’ Equity for the Three- and Nine-Months Ended September 30, 2022 and 2021

6

Condensed Consolidated Statements of Cash Flows for the Nine-Months Ended September 30, 2022 and 2021

7

Notes to Condensed Consolidated Financial Statements

9

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

35

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

53

Item 4.

Controls and Procedures

53

Part II.

OTHER INFORMATION

Item 1.

Legal Proceedings

54

Item 1A.

Risk Factors

54

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

54

Item 3.

Defaults Upon Senior Securities

55

Item 4.

Mine Safety Disclosures

55

Item 5.

Other Information

55

Item 6.

Exhibits

55

Signatures

56

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)