10-Q 1 mnst-20210930x10q.htm FORM 10-Q
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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, 2021

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     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 529,139,115 shares of common stock, par value $0.005 per share, outstanding as of October 29, 2021.

MONSTER BEVERAGE CORPORATION AND SUBSIDIARIES

SEPTEMBER 30, 2021

INDEX

Part I.

FINANCIAL INFORMATION

Page No.

Item 1.

Condensed Consolidated Financial Statements (Unaudited)

Condensed Consolidated Balance Sheets as of September 30, 2021 and December 31, 2020

3

Condensed Consolidated Statements of Income for the Three- and Nine-Months Ended September 30, 2021 and 2020

4

Condensed Consolidated Statements of Comprehensive Income for the Three- and Nine-Months Ended September 30, 2021 and 2020

5

Condensed Consolidated Statements of Stockholders’ Equity for the Three- and Nine-Months Ended September 30, 2021 and 2020

6

Condensed Consolidated Statements of Cash Flows for the Nine-Months Ended September 30, 2021 and 2020

7

Notes to Condensed Consolidated Financial Statements

9

Item 2.

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

31

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

47

Item 4.

Controls and Procedures

47

Part II.

OTHER INFORMATION

Item 1.

Legal Proceedings

47

Item 1A.

Risk Factors

47

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

47

Item 3.

Defaults Upon Senior Securities

47

Item 4.

Mine Safety Disclosures

47

Item 5.

Other Information

47

Item 6.

Exhibits

48

Signatures

49

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, 2021 AND DECEMBER 31, 2020

(In Thousands, Except Par Value) (Unaudited)

September 30, 

December 31, 

    

2021

    

2020

ASSETS

CURRENT ASSETS:

Cash and cash equivalents

$

1,712,671

$

1,180,413

Short-term investments

 

1,224,066

 

 

881,354

Accounts receivable, net

 

849,157

 

 

666,012

Inventories

 

471,553

 

 

333,085

Prepaid expenses and other current assets

 

95,607

 

 

55,358

Prepaid income taxes

 

30,619

 

 

24,733

Total current assets

 

4,383,673

 

 

3,140,955

INVESTMENTS

 

28,255

 

 

44,291

PROPERTY AND EQUIPMENT, net

 

309,574

 

 

314,656

DEFERRED INCOME TAXES, net

 

241,297

 

 

241,650

GOODWILL

 

1,331,643

 

 

1,331,643

OTHER INTANGIBLE ASSETS, net

 

1,066,083

 

 

1,059,046

OTHER ASSETS

 

88,883

 

 

70,475

Total Assets

$

7,449,408

 

$

6,202,716

LIABILITIES AND STOCKHOLDERS’ EQUITY

CURRENT LIABILITIES:

Accounts payable

$

396,229

 

$

296,800

Accrued liabilities

 

180,719

 

 

142,653

Accrued promotional allowances

 

232,394

 

 

186,658

Deferred revenue

 

45,278

 

 

45,429

Accrued compensation

 

54,507

 

 

55,015

Income taxes payable

 

23,113

 

 

23,433

Total current liabilities

 

932,240

 

 

749,988

DEFERRED REVENUE

 

245,621

 

 

264,436

OTHER LIABILITIES

26,550

27,432

COMMITMENTS AND CONTINGENCIES (Note 12)

STOCKHOLDERS’ EQUITY:

Common stock - $0.005 par value; 1,250,000 shares authorized; 639,851 shares issued and 529,132 shares outstanding as of September 30, 2021; 638,662 shares issued and 528,097 shares outstanding as of December 31, 2020

3,199

3,193

Additional paid-in capital

 

4,626,299

 

 

4,537,982

Retained earnings

 

7,488,235

 

 

6,432,074

Accumulated other comprehensive (loss) income

 

(43,495)

 

 

3,034

Common stock in treasury, at cost; 110,719 shares and 110,565 shares as of September 30, 2021 and December 31, 2020, respectively

 

(5,829,241)

 

 

(5,815,423)

Total stockholders’ equity

 

6,244,997

 

 

5,160,860

Total Liabilities and Stockholders’ Equity

$

7,449,408

 

$

6,202,716

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, 2021 AND 2020

(In Thousands, Except Per Share Amounts) (Unaudited)

Three-Months Ended

Nine-Months Ended

September 30, 

September 30, 

    

2021

    

2020

    

2021

    

2020

NET SALES

$

1,410,557

$

1,246,362

$

4,116,308

$

3,402,355

COST OF SALES

 

621,399

 

509,831

 

1,775,375

 

1,369,160

GROSS PROFIT

 

789,158

 

736,531

 

2,340,933

 

2,033,195

OPERATING EXPENSES

 

344,694

 

277,930

 

956,346

 

802,343

OPERATING INCOME

 

444,464

 

458,601

1,384,587

 

1,230,852

INTEREST and OTHER EXPENSE, net

 

2,290

 

4,568

 

2,179

 

5,491

INCOME BEFORE PROVISION FOR INCOME TAXES

 

442,174

 

454,033

1,382,408

 

1,225,361

PROVISION FOR INCOME TAXES

104,969

106,379

326,247

287,503

NET INCOME

$

337,205

$

347,654

$

1,056,161

$

937,858

NET INCOME PER COMMON SHARE:

Basic

$

0.64

$

0.66

$

2.00

$

1.77

Diluted

$

0.63

$

0.65

$

1.97

$

1.75

WEIGHTED AVERAGE NUMBER OF SHARES OF COMMON STOCK AND COMMON STOCK EQUIVALENTS:

Basic

 

528,997

 

527,637

 

528,618

 

530,194

Diluted

 

535,915

 

533,263

 

535,554

 

535,011

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, 2021 AND 2020

(In Thousands) (Unaudited)

Three-Months Ended

    

Nine-Months Ended

September 30, 

September 30, 

    

2021

    

2020

    

2021

2020

Net income, as reported

$

337,205

$

347,654

$

1,056,161

$

937,858

Other comprehensive income (loss):

Change in foreign currency translation adjustment

 

(26,716)

 

21,217

 

(46,412)

 

(338)

Available-for-sale investments:

Change in net unrealized (losses) gains

 

43

 

(308)

 

(117)

 

196

Reclassification adjustment for net gains included in net income

 

 

 

 

Net change in available-for-sale investments

 

43

 

(308)

 

(117)

 

196

Other comprehensive income (loss)

 

(26,673)

 

20,909

 

(46,529)

 

(142)

Comprehensive income

$

310,532

$

368,563

$

1,009,632

$

937,716

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, 2021 AND 2020

(In Thousands) (Unaudited)

Accumulated

Other

Total

Common stock

Additional

Retained

Comprehensive

Treasury stock

Stockholders’

    

Shares

    

Amount

    

Paid-in Capital

    

Earnings

    

(Loss) 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

Accumulated

Other

Total

Common stock

Additional

Retained

Comprehensive

Treasury stock

Stockholders’

    

Shares

    

Amount

    

Paid-in Capital

    

Earnings

    

(Loss) Income

    

Shares

    

Amount

    

Equity

Balance, December 31, 2019

636,460

$

3,182

$

4,397,511

$

5,022,480

$

(32,387)

(99,762)

$

(5,219,505)

$

4,171,281

Stock-based compensation

 

17,098

17,098

Exercise of stock options

 

644

4

13,971

13,975

Unrealized gain, net on available-for-sale securities

 

 

 

 

 

304

 

 

 

304

Repurchase of common stock

 

(10,503)

(579,948)

(579,948)

Foreign currency translation

 

(30,599)

(30,599)

Net income

 

278,835

278,835

Balance, March 31, 2020

 

637,104

 

$

3,186

 

$

4,428,580

 

$

5,301,315

 

$

(62,682)

(110,265)

 

$

(5,799,453)

 

$

3,870,946

Stock-based compensation

 

15,936

15,936

Exercise of stock options

 

820

4

29,863

29,867

Unrealized gain, net on available-for-sale securities

 

 

 

 

 

200

 

 

 

200

Repurchase of common stock

 

(298)

(15,822)

(15,822)

Foreign currency translation

 

9,044

9,044

Net income

311,369

311,369

Balance, June 30, 2020

637,924

$

3,190

$

4,474,379

$

5,612,684

$

(53,438)

(110,563)

$

(5,815,275)

$

4,221,540

Stock-based compensation

17,668

17,668

Exercise of stock options

534

2

21,696

21,698

Unrealized loss, net on available-for-sale securities

(308)

(308)

Repurchase of common stock

(2)

(148)

(148)

Foreign currency translation

21,217

21,217

Net income

 

347,654

347,654

Balance, September 30, 2020

 

638,458

$

3,192

$

4,513,743

$

5,960,338

$

(32,529)

(110,565)

$

(5,815,423)

$

4,629,321

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, 2021 AND 2020

(In Thousands) (Unaudited)

Nine-Months Ended

September 30, 

    

2021

    

2020

CASH FLOWS FROM OPERATING ACTIVITIES:

Net income

$

1,056,161

$

937,858

Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation and amortization

40,716

45,879

Gain on disposal of property and equipment

(984)

(210)

Impairment of intangibles

7,000

Stock-based compensation

52,391

53,042

Deferred income taxes

353

Effect on cash of changes in operating assets and liabilities:

Accounts receivable

(199,709)

(201,677)

Distributor receivables

228

341

Inventories

(149,414)

39,490

Prepaid expenses and other assets

(41,162)

(20,446)

Prepaid income taxes

(7,365)

11,460

Accounts payable

106,570

(9,724)

Accrued liabilities

34,085

53,501

Accrued promotional allowances

51,022

31,915

Accrued distributor terminations

5,302

(150)

Accrued compensation

(2,888)

(1,214)

Income taxes payable

(114)

17,969

Other liabilities

574

(562)

Deferred revenue

(17,784)

(15,236)

Net cash provided by operating activities

927,982

949,236

CASH FLOWS FROM INVESTING ACTIVITIES:

Sales of available-for-sale investments

1,016,556

795,858

Purchases of available-for-sale investments

(1,343,351)

(849,276)

Purchases of property and equipment

(28,131)

(42,062)

Proceeds from sale of property and equipment

1,246

880

Additions to intangibles