What changed in this filing

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Item 7. Management’s Discussion and Analysis

2023-03-01 compared with 2022-02-28 · 220 added, 206 removed, 327 unchanged (57% of the section changed)

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MD&A includes the following sections:

● The COVID-19 Pandemic – a discussion of the impact of the COVID-19 pandemic on our business employees and operations;

● CANarchy Acquisition – a discussion of our acquisition of CANarchy on February 17, 2022;

● Russia-Ukraine Conflict – a discussion of the impact of the Russia-Ukraine conflict on our business and operations;

● The COVID-19 Pandemic – a discussion of the impact of the COVID-19 pandemic on our business and operations;

● Pricing Actions – a discussion of certain pricing actions implemented during 2022;

● Our Business – a general description of our business, the value drivers of our business, and opportunities and risks facing our Company, stock repurchases, acquisitions and divestitures;

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(See “Forward-Looking Statements” and “Part II, Item 7A – Qualitative and Quantitative Disclosures about Market Risks”).

CANarchy Acquisition

On February 17, 2022, we completed the CANarchy Transaction.

The CANarchy Transaction facilitates our entry into the alcohol beverage sector and brings the Cigar City TM family of brands including Jai Alai® IPA and Florida Man TM IPA, the Oskar Blues TM family of brands including Dale’s Pale Ale®, Wild Basin TM Hard Seltzers, the Deep Ellum TM family of brands including Dallas Blonde® and Deep Ellum TM IPA, the Perrin Brewing Company TM family of brands including Black Ale, the Squatters® family of brands including Hop Rising® Double IPA, and the Wasatch® family of brands including Apricot Hefeweizen to our beverage portfolio.

The CANarchy Transaction did not include CANarchy’s stand-alone restaurants.

Our organizational structure for our existing energy beverage business remains unchanged.

CANarchy is functioning independently, retaining its own organizational structure and team.

Russia-Ukraine Conflict

During the year ended December 31, 2022, the Russia-Ukraine conflict did not have a material impact on our financial position, results of operations and liquidity.

Net sales in Russia and Ukraine combined were approximately 1.1% of our total net sales for the twelve months ended December 31, 2021.

We will continue to monitor future developments relative to this conflict and its potential impacts.

The COVID – 19 Pandemic

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See “Part I, Item 1A – Risk Factors.”

We continue to address the COVID-19 pandemic with a global task force team working to mitigate the potential impacts on our people and business.

We are incredibly proud of the teamwork exhibited by our employees, co-packers and bottlers/distributors around the world who are endeavoring to maintain the integrity of our supply chain.

Despite the ongoing impact of the COVID-19 pandemic, we achieved record annual net sales in 2021.

As countries continue to combat the COVID-19 pandemic, and as governments and/or local authorities impose regulations regarding COVID-19 testing, vaccine mandates and related workplace restrictions, there remains a risk that the COVID-19 pandemic may continue to impact our business and supply chain, including our ability to recruit and/or retain our employees as well as impact our co-packers, bottlers/distributors and/or suppliers.

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

In 2021, we experienced a number of global supply chain challenges as a result of unanticipated increases in demand, in part due to the COVID-19 pandemic, which adversely impacted both cost of sales and operating costs, and in certain markets, affected the availability of our products on shelves at retailers.

In particular, we have experienced shortages in our aluminum can requirements, freight inefficiencies, shortages of shipping containers, port of entry congestion, and delays in the receipt and/or availability of certain ingredients.

In the United States, we lacked sufficient co-packing capacity to meet increased demand for certain of our products.

We have also experienced increased aluminum can costs attributable to higher aluminum commodity pricing as well as the costs of importing aluminum cans.

In addition, we experienced increased ingredient and other input costs, including shipping and freight, labor, trucking, fuel, co-packing fees, secondary packaging materials, increased outbound freight costs and production inefficiencies, which resulted in increased costs of sales and increased operating costs.

We have addressed and will continue to address the controllable challenges in our supply chain, which remains largely intact.

Additional can manufacturing capacity in the United States has been secured for 2022, although the Company will continue to import aluminum cans to supplement its domestic can supply.

Can capacity in EMEA remains challenging and the Company expects to continue to import aluminum cans into EMEA for at least 2022.

While co-packing capacity in the United States and EMEA also continues to be challenging, we have expanded our network in the United States and EMEA to substantially address supply constraints.

Our flavor facility in Athy, Ireland is operational, producing certain flavors and blends for the EMEA region, is steadily increasing production, and is investigating the feasibility of a juice plant to produce EMEA’s juice product requirements.

We continue to implement measures to mitigate our increased operating costs through pricing actions and reductions in promotions.

Pricing Actions

In 2022, we implemented measures to mitigate our increased costs through price increases and reductions in promotions (“Pricing Actions”).

We implemented a price increase effective September 1, 2022 in the United States and implemented price increases at various times in certain international markets, all of which positively impacted gross profit margins in the third and fourth quarters of 2022.

Distribution and Supply Chain

Since the beginning of the COVID-19 pandemic and the subsequent increased demand for our energy drinks, we prioritized ensuring product availability for our customers and consumers.

This strategic direction has remained in place throughout the global supply chain challenges and disruptions, despite adversely impacting our profitability.

We continue to stand by our strategy to ensure product availability and solidify the continued long-term growth of our brands.

During the year ended December 31, 2022, we experienced a significant increase in cost of sales, resulting in a material decrease in both gross profit and gross profit as a percentage of net sales, relative to the comparative year ended December 31, 2021.

The increase in cost of sales was primarily due to (i) increased ingredient and other input costs, including secondary packaging materials and increased co-packing fees, (ii) increased logistical costs, (iii) increased aluminum can costs and (iv) geographical and product sales mix.

In the third and fourth quarters of 2022 we began to see an improvement in our gross profit margins as compared to the second quarter of 2022.

This improvement was primarily attributable to (i) Pricing Actions, (ii) our decreased reliance on imported cans and (iii) improved finished product inventory levels in closer proximity to our customers, resulting in a reduction of long-distance freight costs.

Furthermore, we experienced significant increases in distribution expenses, primarily the result of increased warehousing expenses, as well as increases in other logistical expenses, which adversely impacted operating costs.

We continue to address the controllable challenges in our supply chain.

Liquidity and Capital Resources

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Java Monster®

● Muscle Monster®

● Espresso Monster®

Punch Monster®

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Monster Hydro® Super Sport

● Monster HydroSport Super Fuel®

Monster Super Fuel®

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Play® and Power Play® (stylized)

● Relentless®

● True North®

The comparative results of operations for the twelve-months ended December 31, 2020 included a non-recurring tax benefit of approximately $165.1 million due to an intra-entity transfer of intangible assets between certain of the Company’s foreign subsidiaries, which resulted in a step-up of the tax-deductible basis in the transferred assets in a foreign jurisdiction, and created a temporary difference between the tax basis and the book basis for such intangible assets (the “Non-Recurring Tax Benefit”), as well as reduced marketing, sponsorships and certain other operating expenses, largely as a consequence of the COVID-19 pandemic.

These items should be taken into consideration when evaluating comparative performance for the twelve-months ended December 31, 2021 as compared to the twelve-months ended December 31, 2020.

We also develop, market, sell and distribute craft beers, FMBs and hard seltzers under a number of brands, including Jai Alai® IPA, Florida Man TM IPA, Dale’s Pale Ale®, Wild Basin TM Hard Seltzers, Dallas Blonde®, Deep Ellum TM IPA, Perrin Brewing Company TM Black Ale, Hop Rising® Double IPA, Wasatch® Apricot Hefeweizen, The Beast Unleashed TM and a host of other brands.

We also develop, market, sell and distribute still and sparkling waters under the Monster® Tour Water TM brand name.

Our net sales of $6.31 billion for the year ended December 31, 2022 represented record annual net sales.

The comparative net sales for the year ended December 31, 2020 were negatively impacted by $15.2 million related to product returns from our customers as a result of a European formulation issue with a limited number of products in Europe and a labeling issue concerning one product in Japan (the “Product Returns”).

Net changes in foreign currency exchange rates had a favorable impact on net sales of approximately $61.9 million for the year ended December 31, 2021.

Net changes in foreign currency exchange rates had an unfavorable impact on net sales of approximately $239.5 million for the year ended December 31, 2022.

The vast majority of our net sales are derived from our Monster Energy® Drinks segment.

Net sales of our Monster Energy® Drinks segment were $5.22 billion for the year ended December 31, 2021.

Net sales of our Strategic Brands segment were $294.8 million for the year ended December 31, 2021.

Our Monster Energy® Drinks segment represented 92.4% and 94.2% of our net sales for the years ended December 31, 2022 and 2021, respectively.

Our Strategic Brands segment represented 5.6% and 5.3% of our net sales for the years ended December 31, 2022 and 2021, respectively.

Our Alcohol Brands segment represented 1.6% of our net sales for the year ended December 31, 2022.

Our Other segment represented 0.4% and 0.5% of our net sales for the years ended December 31, 2022 and 2021, respectively.

The comparative net sales for the Monster Energy® Drinks segment for the year ended December 31, 2020 were negatively impacted by $15.2 million related to the Product Returns.

Net changes in foreign currency exchange rates had a favorable impact on our net sales of the Monster Energy® Drinks segment of approximately $57.6 million for the year ended December 31, 2021.

Net changes in foreign currency

exchange rates had a favorable impact on net sales in the Strategic Brands segment of approximately $4.3 million for the year ended December 31, 2021.

Our growth strategy includes expanding our international business.

Net sales to customers outside the United States amounted to $2.04 billion, $1.51 billion and $1.33 billion for the years ended December 31, 2021, 2020 and 2019, respectively.

Such sales were approximately 37%, 33% and 32% of net sales for the years ended December 31, 2021, 2020 and 2019, respectively.

The comparative net sales to customers outside the United States for the year ended December 31, 2020 were negatively impacted by $15.2 million related to the Product Returns.

Our customers are primarily full service beverage bottlers/distributors, retail grocery and specialty chains, wholesalers, club stores, mass merchandisers, convenience chains, foodservice customers, value stores, e-commerce retailers and the military.

Net changes in foreign currency exchange rates had an unfavorable impact on our net sales of the Monster Energy® Drinks segment of approximately $222.3 million for the year ended December 31, 2022.

Net changes in foreign currency exchange rates had an unfavorable impact on net sales in the Strategic Brands segment of approximately $17.2 million for the year ended December 31, 2022.

Our growth strategy includes further developing our domestic markets, expanding our international business and growing our business into new sectors, such as the alcohol beverage sector.

Net sales to customers outside the United States amounted to $2.36 billion and $2.04 billion for the years ended December 31, 2022 and 2021, respectively.

Such sales were

approximately 37% of net sales for both the years ended December 31, 2022 and 2021.

Net changes in foreign currency exchange rates had an unfavorable impact on net sales to customers outside of the United States of approximately $239.5 million for the year ended December 31, 2022.

Net sales to customers outside the United States, on a foreign currency adjusted basis, increased 27.1% for the year ended December 31, 2022.

On February 17, 2022, we completed the CANarchy Transaction which facilitated our entry into the alcohol beverage sector.

Our non-alcohol customers are primarily full service beverage bottlers/distributors, retail grocery and specialty chains, wholesalers, club stores, mass merchandisers, convenience chains, foodservice customers, value stores, e-commerce retailers and the military.

Our alcohol customers are primarily beer distributors who in turn sell to retailers within the alcohol distribution system.

Percentages of our gross billings to our various customer types for the years ended December 31, 2022, 2021 and 2020 are reflected below.

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Retail grocery, direct convenience, specialty chains and wholesalers

Direct value stores and other

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 Europacific Partners, Coca-Cola Hellenic, Coca-Cola FEMSA, Coca-Cola Amatil, Swire Coca-Cola (China), COFCO Coca-Cola, Coca-Cola Beverages Africa, Coca-Cola İçecek and certain other TCCC network bottlers, Asahi Soft Drinks, Co., Ltd., Wal-Mart, Inc.

Alcohol, direct value stores and other

Our non-alcohol customers include Coca-Cola Canada Bottling Limited, Coca-Cola Consolidated, Inc., Coca-Cola Bottling Company United, Inc., Reyes Coca-Cola Bottling, 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 Europacific Partners (formerly Coca-Cola European Partners and Coca-Cola Amatil), Coca-Cola Hellenic, Coca-Cola FEMSA, Swire Coca-Cola (China), COFCO Coca-Cola, Coca-Cola Beverages Africa, Coca-Cola İçecek 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.

Our alcohol customers include J.J.

Taylor Distributing, Ben E.

Keith, Reyes Beer Division, Sheehan Family Companies, and Admiral Beverage.

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.

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Reyes Coca-Cola Bottling, LLC accounted for approximately 9%, 10% and 11% of our net sales for the years ended December 31, 2022, 2021 and 2020, respectively.

Coca-Cola Europacific Partners accounted for approximately 12%, 10% and 10% of our net sales for the years ended December 31, 2021, 2020 and 2019, respectively.

Coca-Cola Europacific Partners (formerly Coca-Cola European Partners) accounted for approximately 13%, 12% and 10% of our net sales for the years ended December 31, 2022, 2021 and 2020, respectively.

We continue to incur expenditures in connection with the development and introduction of new products and flavors.

CANarchy Acquisition

On February 17, 2022, we completed our acquisition of CANarchy Craft Brewery Collective LLC (“CANarchy”), a craft beer and hard seltzer company, for $330.0 million in cash, subject to adjustments.

The transaction allows us to enter the alcohol beverage

sector and brings the Cigar City family of brands including Jai Alai IPA and Florida Man IPA, the Oskar Blues family of brands including Dale’s Pale Ale and Wild Basin Hard Seltzers, the Deep Ellum family of brands including Dallas Blonde and Deep Ellum IPA, the Perrin Brewing family of brands including Black Ale, the Squatters family of brands including Hop Rising Double IPA and Juicy IPA and the Wasatch family of brands including Apricot Hefeweizen to our beverage portfolio.

The transaction does not include CANarchy’s stand-alone restaurants.

Our organizational structure for our existing energy beverage business will remain unchanged.

CANarchy will function independently, retaining its own organizational structure and team.

Value Drivers of our Business

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● Profitable Growth – We believe “functional” value-added beverage brands supported by marketing and innovation and targeted to a diverse consumer base, drive profitable growth.

We are focused on increasing the profit margins for both our Monster Energy® Drinks segment and our Strategic Brands segment, and believe that tailored branding, packaging, pricing and distribution channel strategies help achieve profitable growth.

We are focused on increasing the profit margins for our Monster Energy® Drinks segment, our Strategic Brands segment and our Alcohol Brands segment, and believe that tailored branding, packaging, pricing and distribution channel strategies help achieve profitable growth.

We are implementing these strategies with a view to continuing profitable growth.

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(1) improving or maintaining our product gross profit margins;

(2) providing additional leverage over time through reduced expenses as a percentage of net operating revenues;

(2) reducing our expenses as a percentage of net operating revenues;

and (3) enhancing our cost of capital.

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As of December 31, 2022, the Company had working capital of $3.76 billion compared to $3.72 billion as of December 31, 2021.

The increase in working capital was primarily the result of the $1.38 billion of net income earned during the year ended December 31, 2021.

For the year ended December 31, 2021, our net cash provided by operating activities was approximately $1.16 billion as compared to $1.36 billion for the year ended December 31, 2020.

Principal uses of cash flows in 2021, were purchases of investments, development of our Monster Energy® brand internationally and

acquisitions of real property, property and equipment.

The increase in working capital was primarily the result of the increase in accounts receivable and inventories, related to the increase in net sales for the year ended December 31, 2022.

For the year ended December 31, 2022, our net cash provided by operating activities was approximately $887.7 million as compared to $1.16 billion for the year ended December 31, 2021.

Principal uses of cash flows in 2022 were purchases of investments, purchases of treasury stock, the acquisition of CANarchy, development of our brands internationally and acquisitions of real property, property and equipment.

These principal uses of cash flows are expected to be and remain our principal recurring use of cash and working capital funds in the future (See “Part II, Item 7 – Management’s Discussion and Analysis of Financial Condition and Results of Operations – Liquidity and Capital Resources”).

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Looking forward, our management has identified certain challenges and risks for the beverage industry and the Company, including our significant commercial relationship with TCCC and TCCC’s status as a significant stockholder of the Company, in each case as described above under “Part I, Item 1A – Risk Factors.”

In addition, legislation has been proposed and/or adopted at the U.S., state, county and/or municipal level and proposed and/or adopted in certain foreign jurisdictions to 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, require certain product labeling disclosures and/or warnings, impose taxes, limit product sizes or impose age restrictions for the sale of energy drinks.

In addition, articles critical of the caffeine content in energy drinks and their perceived benefits and articles indicating certain health risks of energy drinks have been published.

In addition, legislation has been proposed and/or adopted at the U.S., state, county and/or municipal level and proposed and/or adopted in certain foreign jurisdictions to restrict the sale of energy and alcohol drinks (including prohibiting the sale of energy and/or alcohol drinks at certain establishments or pursuant to certain governmental programs), limit caffeine and/or alcohol content, require certain product labeling disclosures and/or warnings, impose taxes, limit product sizes or impose age restrictions for the sale of energy and/or alcohol drinks.

In addition, articles critical of the caffeine content in energy drinks and their perceived benefits, or alcohol drinks and their misuse or abuse, as well as articles indicating certain health risks of energy or alcohol drinks have been published.

The proposal and/or adoption of such legislation and the publication of such articles, or the future proposal and/or adoption of similar legislation or publication of similar articles, may adversely affect our Company.

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Consumer discretionary spending also represents a challenge to the successful marketing and sale of our products.

Increases in consumer and regulatory awareness of the health problems arising from obesity and inactive lifestyles continue to represent a challenge.

We recognize that obesity is a complex and serious public health problem.

Our commitment to consumers begins with our broad product line and a wide selection of diet, light and low calorie beverages within our energy drink product lines.

Increases in consumer and regulatory awareness of the health problems arising from obesity and inactive lifestyles as well as alcohol consumption continue to represent a challenge.

We recognize that obesity and alcohol abuse and misuse are complex and serious public health problems.

Our commitment to consumers begins with our broad product line and a wide selection of diet, light and low calorie beverages within our product lines.

We continuously strive to meet changing consumer needs through beverage innovation, choice and variety.

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In addition, other key challenges and risks that could impact our Company’s future financial results include, but are not limited to:

● the continuation or worsening of the COVID-19 pandemic;

● the risks associated with the realization of benefits from our relationship with TCCC;

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● maintenance of our brand image, product quality and corporate reputation;

● increasing concern over various environmental, human rights and health matters, including obesity, caffeine consumption and energy drinks generally, and changes in regulation and consumer preferences in response to those concerns;

● increasing concern over various environmental, human rights and health matters, including obesity, caffeine and/or alcohol consumption and energy and/or alcohol drinks generally, and changes in regulation and consumer preferences in response to those concerns;

● profitable expansion and growth of our family of brands in the competitive market place (See “Part I, Item 1 – Business – Competition” and “Part I, Item 1 – Business – Sales and Marketing”);

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● restrictions on imports and sources of supply, duties or tariffs, changes in related government regulations and disruptions in the timely import or export of our products and/or ingredients including flavors, flavor ingredients and supplement ingredients, due to port strikes and/or port congestion, delays due to the COVID-19 pandemic, related labor issues or other importation impediments;

● protection of our existing intellectual property portfolio of trademarks and copyrights and the continuous pursuit to develop and protect new and innovative trademarks and copyrights for our expanding product lines;

● limitations on available quantities of aluminum cans;

● the increased costs resulting from importing aluminum cans and other raw materials and ingredients;

● limitations on co-packing availability;

● protection of our existing intellectual property portfolio of trademarks and copyrights and our continuous pursuit to develop and protect new and innovative trademarks and copyrights for our expanding product lines;

● limitations on available quantities of aluminum cans, other packaging materials and ingredients;

● limitations on co-packing availability and in particular, consolidation in the co-packing industry;

● increases in ocean and domestic freight rates;

● shortages of shipping containers and port congestion;

● the long-term impact of Brexit on our business in Europe and the United Kingdom;

● the imposition of additional regulation, including regulation restricting the sale of energy drinks, limiting caffeine content in beverages, requiring product labeling and/or warnings, imposing excise taxes and/or sales taxes, and/or limiting product size and/or age restrictions.

● the imposition of additional regulation, including regulation restricting the sale of energy or alcohol drinks, limiting caffeine or alcohol content in beverages, requiring product labeling and/or warnings, imposing excise taxes and/or sales taxes, and/or limiting product size and/or age restrictions;

● the continuation or worsening of the COVID-19 pandemic.

See “Part I, Item 1A – Risk Factors” for additional information about risks and uncertainties facing our Company.

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● domestic and international growth potential of our products;

● growth potential of the energy drink category, both domestically and internationally;

● growth potential of the energy drink and alcohol beverage categories, both domestically and internationally;

● growth potential of the affordable energy drink category;

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● continued focus on reducing our cost base;

● our entry into the alcohol category and development of our alcoholic portfolio.

● our entry into the alcohol category and development of our alcohol portfolio.

Results of Operations

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Operating income as a percentage of net sales

Other income (expense), net

Other (expense) income, net

Income before provision for income taxes 1

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Net income per common share:

Case sales (in thousands) (in 192‑ounce case equivalents)

Energy Drink case sales (in thousands) (in 192‑ounce case equivalents) 2

1 Includes $40.0 million, $41.5 million and $42.1 million for the years ended December 31, 2022, 2021 and 2020, respectively, related to the recognition of deferred revenue.

2 Excludes case sales of the Alcohol Brands and Other segments.

*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.

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Net sales were $6.31 billion for the year ended December 31, 2022, an increase of approximately $769.7 million, or 13.9% higher than net sales of $5.54 billion for the year ended December 31, 2021.

Net sales increased primarily due to increased worldwide sales by volume of our Monster Energy® brand energy drinks as a result of increased consumer demand.

Net changes in foreign currency exchange rates had a favorable impact on net sales of approximately $61.9 million for the year ended December 31, 2021.

The comparative net sales for the year ended December 31, 2020 were negatively impacted by $15.2 million related to the Product Returns.

Net sales 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 due to pricing actions and reductions in promotions in certain markets.

Net changes in foreign currency exchange rates had an unfavorable impact on net sales of approximately $239.5 million for the year ended December 31, 2022.

Net sales on a foreign currency adjusted basis increased 18.2% for the year ended December 31, 2022.

Net sales were $2.20 billion and $1.90 billion for the years ended December 31, 2022 and 2021, respectively, in EMEA, Asia Pacific, Latin America and the Caribbean.

Net sales for the Monster Energy® Drinks segment were $5.83 billion for the year ended December 31, 2022, an increase of approximately $612.5 million, or 11.7% higher than net sales of $5.22 billion for the year ended December 31, 2021.

Net 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.

Net changes in foreign currency exchange rates had a favorable impact on net sales for the Monster Energy® Drinks segment of approximately $57.6 million for the year ended December 31, 2021.

The comparative net sales for the Monster Energy® Drinks segment for the year ended December 31, 2020 were negatively impacted by $15.2 million related to the Product Returns.

Net changes in foreign currency exchange rates had an unfavorable impact on net sales for the Monster Energy® Drinks segment of approximately $222.3 million for the year ended December 31, 2022.

Net sales for the Monster Energy® Drinks segment on a foreign currency adjusted basis increased 16.0% for the year ended December 31, 2022.

Net sales for the Strategic Brands segment were $353.5 million for the year ended December 31, 2022, an increase of approximately $58.7 million, or 19.9% higher than net sales of $294.8 million for the year ended December 31, 2021.

Net sales for the Strategic Brands segment increased primarily due to increased worldwide sales by volume of our Predator®, Burn® and Mother® brand energy drinks as a result of increased consumer demand.

Shortages of certain NOS® concentrates negatively impacted net sales for the year ended December 31, 2021.

Net changes in foreign currency exchange rates had a favorable impact on net sales of approximately $4.3 million for the Strategic Brands segment for the year ended December 31, 2021.

Net sales for the Strategic Brands segment increased primarily due to increased worldwide sales by volume of our Predator® and NOS® brand energy drinks as a result of increased consumer demand.

Net changes in foreign currency exchange rates had an unfavorable impact on net sales of approximately $17.2 million for the Strategic Brands segment for the year ended December 31, 2022.

Net sales for the Strategic Brands segment on a foreign currency adjusted basis increased 25.8% for the year ended December 31, 2022.

Net sales for the Alcohol Brands segment were $101.4 million for the year ended December 31, 2022 (effectively from February 17, 2022 to December 31, 2022).

There were no comparative 2021 net sales for the Alcohol Brands segment as the Company completed its acquisition of CANarchy on February 17, 2022.

Net sales for the Other segment were $22.9 million for the year ended December 31, 2022, a decrease of approximately $3.0 million, or 11.5% lower than net sales of $25.9 million for the year ended December 31, 2021.

Case sales, in 192-ounce case equivalents, were 613.4 million cases for the year ended December 31, 2021, an increase of approximately 108.6 million cases or 21.5% higher than case sales of 504.8 million cases for the year ended December 31, 2020.

The overall average net sales per case (excluding net sales of AFF Third-Party Products of $25.9 million and $27.0 million for the year ended December 31, 2021 and 2020, respectively, as these sales do not have unit case equivalents) decreased to $8.99 for the year ended December 31, 2021, which was 0.7% lower than the average net sales per case of $9.06 for the year ended December 31, 2020.

The decrease in the average net sales per case was primarily the result of geographical sales mix.

Case sales for our energy drink products, in 192-ounce case equivalents, were 701.7 million cases for the year ended December 31, 2022, an increase of approximately 88.2 million cases or 14.4% higher than case sales of 613.4 million cases for the year ended December 31, 2021.

The overall average net sales per case for our energy drink products (excluding net sales of Alcohol Brands and Other segments) decreased to $8.82 for the year ended December 31, 2022, which was 1.9% lower than the average net sales per case of $8.99 for the year ended December 31, 2021.

The decrease in the average net sales per case was primarily the result of geographical and product sales mix.

Barrel sales for our craft beers and hard seltzers, in 31 US gallon equivalents, were 0.3 million barrels for the year ended December 31, 2022 (effectively from February 17, 2022 to December 31, 2022).

Gross profit was $3.17 billion for the year ended December 31, 2022, an increase of approximately $66.1 million, or 2.1% higher than the gross profit of $3.11 billion for the year ended December 31, 2021.

The increase in gross profit dollars was primarily the result of the $942.7 million increase in net sales for the year ended December 31, 2021.

Gross profit as a percentage of net sales decreased to 50.3% for the year ended December 31, 2022 from 56.1% for the year ended December 31, 2021.

The decrease for the year ended December 31, 2021 was primarily the result of increased aluminum can costs attributable to higher aluminum commodity pricing, increased costs of certain other raw materials and ingredients, increased freight-in costs and geographical sales mix.

The decrease for the year ended December 31, 2022 was primarily the result of increased freight rates and fuel costs, including costs relating to the importation of aluminum cans, increased ingredient and other input costs, including secondary packaging materials, increased aluminum can costs attributable to higher aluminum commodity pricing, increased co-packing fees, production inefficiencies and geographical sales mix.

Operating Expenses

Total operating expenses were $1.59 billion for the year ended December 31, 2022, an increase of approximately $278.8 million, or 21.3% higher than total operating expenses of $1.31 billion for the year ended December 31, 2021.

As a percentage of net sales, operating expenses were 23.7% for both the years ended December 31, 2021 and 2020.

The increase in operating expenses was primarily due to increased out-bound freight and warehouse costs of $86.1 million, increased payroll expenses of $42.5 million, increased expenditures of $38.1 million for sponsorships and endorsements, increased expenditures of $15.7 million for social media and digital marketing, and increased expenditures of $10.4 million for professional service expenses, including accounting and legal costs.

The increase in operating expenses for the year ended December 31, 2021, was partially offset by $16.9 million due to the reversal of amounts previously accrued in connection with an intellectual property claim.

During the comparative 2020 period, the Company decreased expenditures for sponsorship and endorsements and decreased expenditures for travel and entertainment, each largely as a consequence of the COVID-19 pandemic.

The impact of the COVID-19 pandemic was less pronounced on our sales and marketing programs during the year ended December 31, 2021.

The comparative operating expenses for the year ended December 31, 2021 included a $16.9 million reversal of amounts previously accrued in connection with an intellectual property claim.

The increase in operating expenses was primarily due to increased general and administrative expenses of $92.9 million, including travel and entertainment, professional service fees (including legal and accounting) and depreciation and amortization, increased out-bound fuel, freight and warehouse costs of $74.3 million, increased selling and marketing expenses of $59.9 million, including sponsorships and endorsements, point of sale, premiums and allocated trade development, and increased payroll expenses of $57.0 million (of which $23.1 million was related to CANarchy).

In addition, CANarchy related depreciation and amortization was $8.7 million for year ended December 31, 2022.

The increase in operating expenses was partially offset by a decrease in distributor termination expenses of $5.3 million for the year ended December 31, 2022.

Operating expenses as a percentage of net sales for the years ended December 31, 2022 and 2021 were 25.2% and 23.7%, respectively.

Operating expenses for the year ended December 31, 2019 (pre COVID-19) were $1.12 billion, or 26.6% of net sales.

Operating Income

Operating income was $1.80 billion for the year ended December 31, 2021, an increase of approximately $164.3 million, or 10.1% higher than operating income of $1.63 billion for the year ended December 31, 2020.

Operating income was $1.58 billion for the year ended December 31, 2022, a decrease of approximately $212.7 million, or 11.8% lower than operating income of $1.80 billion for the year ended December 31, 2021.

Operating income as a percentage of net sales decreased to 25.1% for the year ended December 31, 2022 from 32.4% for the year ended December 31, 2021.

Operating income was $402.8 million and $279.7 million for the year ended December 31, 2021 and 2020, respectively, for our operations in EMEA, Asia Pacific, Latin America and the Caribbean.

Operating income for the year ended December 31,2019 (pre COVID-19) was $1.4 billion, or 33.4% of net sales.

Operating income for the Monster Energy® Drinks segment, exclusive of corporate and unallocated expenses, was $1.99 billion for the year ended December 31, 2021, an increase of approximately $170.4 million, or 9.4% higher than operating income of $1.82 billion for the year ended December 31, 2020.

The increase in operating income for the Monster Energy® Drinks segment was primarily the result of the $915.4 million increase in net sales for the year ended December 31, 2021.

Operating income for the year ended December 31, 2022 decreased primarily as a result of the increase in operating expenses as well as the decrease in the gross profit as a percentage of net sales.

Operating income was $316.3 million and $402.8 million for the years ended December 31, 2022 and 2021, respectively, for our operations in EMEA, Asia Pacific, Latin America and the Caribbean.

Operating income for the Monster Energy® Drinks segment, exclusive of corporate and unallocated expenses, was $1.85 billion for the year ended December 31, 2022, a decrease of approximately $140.7 million, or 7.1% lower than operating income of $1.99 billion for the year ended December 31, 2021.

The decrease in operating income for the Monster Energy® Drinks segment was primarily the result of an increase in operating expenses as well as a decrease in gross profit as a percentage of net sales.

Operating income for the Strategic Brands segment, exclusive of corporate and unallocated expenses, was $197.7 million for the year ended December 31, 2022, an increase of approximately $24.0 million, or 13.8% higher than operating income of $173.7 million for the year ended December 31, 2021.

The increase in operating income for the Strategic Brands segment was primarily the result of the $28.4 million increase in net sales.

Operating income for the Other segment, exclusive of corporate and unallocated expenses, was $6.9 million for the year ended December 31, 2021, an increase of approximately $1.0 million, or 16.9% higher than operating income of $5.9 million for the year ended December 31, 2020.

Other Income (Expense), net

Other income (expense), net, was $4.0 million for the year ended December 31, 2021, as compared to other income (expense), net, of ($7.0) million for the year ended December 31, 2020.

Foreign currency transaction gains (losses) were $0.3 million and ($11.2) million for the year ended December 31, 2021 and 2020, respectively.

Interest income was $4.2 million and $8.1 million for the year ended December 31, 2021 and 2020, respectively.

The increase in operating income for the Strategic Brands segment was primarily the result of a $30.6 million increase in gross profit.

Operating loss for the Alcohol Brands segment, exclusive of corporate and unallocated expenses, was $31.5 million for the year ended December 31, 2022 (effectively from February 17, 2022 to December 31, 2022).

The operating loss for the year ended December 31, 2022 was due in part to (i) excess depreciation and amortization as well as the fair value treatment of purchased inventory, all relating to the CANarchy Transaction, (ii) increased input costs and an underutilization

of fixed overhead and (iii) sales volume declines primarily of Wild Basin TM due in part to overall sales declines in the hard seltzer category.

The inventory acquired, which was subsequently sold, was recognized through cost of goods sold at fair value (purchased cost), resulting in no recognized profits on the associated sales.

Operating income for the Other segment, exclusive of corporate and unallocated expenses, was $3.0 million for the year ended December 31, 2022, a decrease of approximately $3.9 million, or 56.2% lower than operating income of $6.9 million for the year ended December 31, 2021.

Other (Expense) Income, net

Other (expense) income, net, was ($12.8) million for the year ended December 31, 2022, as compared to other (expense) income, net, of $4.0 million for the year ended December 31, 2021.

Foreign currency transaction gains (losses) were ($37.9) million and $0.3 million for the years ended December 31, 2022 and 2021, respectively.

Interest income was $29.7 million and $4.2 million for the years ended December 31, 2022 and 2021, respectively.

Provision for Income Taxes

Provision for income taxes was $423.9 million for the year ended December 31, 2021, an increase of $207.4 million, or 95.8% higher than the provision for income taxes of $216.6 million for the year ended December 31, 2020.

The effective combined federal, state and foreign tax rate was 23.5% and 13.3% for the year ended December 31, 2021 and 2020, respectively.

The comparative provision for income taxes for the year ended December 31, 2020 included the Non-Recurring Tax Benefit of approximately $165.1 million.

Provision for income taxes was $380.3 million for the year ended December 31, 2022, a decrease of $43.6 million, or 10.3% lower than the provision for income taxes of $423.9 million for the year ended December 31, 2021.

The effective combined federal, state and foreign tax rate was 24.2% and 23.5% for the years ended December 31, 2022 and 2021, respectively.

The increase in the effective tax rate was primarily attributable to the decrease in income in certain foreign jurisdictions with lower tax rates compared to the United States.

Net income was $1.19 billion for the year ended December 31, 2022, a decrease of $185.9 million, or 13.5% lower than net income of $1.38 billion for the year ended December 31, 2021.

The decrease in net income for the year ended December 31, 2021 was primarily due to the $207.4 million increase in the provision for income taxes and the $220.3 million increase in operating expenses, partially offset by the $393.1 million increase in gross profit.

The decrease in net income for the year ended December 31, 2022 was primarily due to the decrease in the gross profit percentage of net sales as well as the increase in operating expenses.

Key Business Metrics

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Gross Billings**

Gross billings were $6.42 billion for the year ended December 31, 2021, an increase of approximately $1.10 billion, or 20.6% higher than gross billings of $5.33 billion for the year ended December 31, 2020.

Net changes in foreign currency exchange rates had a favorable impact on gross billings of approximately $83.1 million for the year ended December 31, 2021.

The comparative gross billings for the year ended December 31, 2020 were negatively impacted by $15.2 million related to the Product Returns.

Gross billings for the Monster Energy® Drinks segment were $6.06 billion for the year ended December 31, 2021, an increase of approximately $1.06 billion, or 21.3% higher than gross billings of $5.00 billion for the year ended December 31, 2020.

Gross billings 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.

Net changes in foreign currency exchange rates had a favorable impact on gross billings for the Monster Energy® Drinks segment of approximately $78.7 million for the year ended December 31, 2021.

The comparative gross billings for the Monster Energy® Drinks segment for the year ended December 31, 2020 were negatively impacted by $15.2 million related to the Product Returns.

Gross billings were $7.26 billion for the year ended December 31, 2022, an increase of approximately $837.0 million, or 13.0% higher than gross billings of $6.42 billion for the year ended December 31, 2021.

Net changes in foreign currency exchange rates had an unfavorable impact on gross billings of approximately $285.9 million for the year ended December 31, 2022.

Gross billings for the Monster Energy® Drinks segment were $6.74 billion for the year ended December 31, 2022, an increase of approximately $678.4 million, or 11.2% higher than gross billings of $6.06 billion for the year ended December 31, 2021.

Net changes in foreign currency exchange rates had an unfavorable impact on

gross billings for the Monster Energy® Drinks segment of approximately $268.7 million for the year ended December 31, 2022.

Gross billings for the Strategic Brands segment were $398.7 million for the year ended December 31, 2022, an increase of $58.6 million, or 17.2% higher than gross billings of $340.2 million for the year ended December 31, 2021.

Shortages of NOS® concentrate negatively impacted gross billings for the year ended December 31, 2021.

Net changes in foreign currency exchange rates had a favorable impact on gross billings in the Strategic Brands segment of approximately $4.4 million for the year ended December 31, 2021.

Net changes in foreign currency exchange rates had an unfavorable impact on gross billings in the Strategic Brands segment of approximately $17.2 million for the year ended December 31, 2022.

Gross billings for the Alcohol Brands segment were $103.0 million for the year ended December 31, 2022 (effectively from February 17, 2022 to December 31, 2022).

There were no comparative 2021 gross billings for the Alcohol Brands segment as the Company completed its acquisition of CANarchy on February 17, 2022.

Gross billings for the Other segment were $22.9 million for the year ended December 31, 2022, a decrease of $3.0 million, or 11.5% lower than gross billings of $25.9 million for the year ended December 31, 2021.

Promotional allowances, commissions and other expenses, as described in the footnote below, were $924.7 million for the year ended December 31, 2021, an increase of $152.6 million, or 19.8% higher than promotional allowances,

commissions and other expenses of $772.2 million for the year ended December 31, 2020.

Promotional allowances as a percentage of gross billings decreased to 12.8% from 13.1% for the year ended December 31, 2021 and 2020, respectively.

**Gross billings represent amounts invoiced to customers net of cash discounts and returns.

Promotional allowances, commissions and other expenses, as described in the footnote below, were $990.6 million for the year ended December 31, 2022, an increase of $65.8 million, or 7.1% higher than promotional allowances, commissions and other expenses of $924.7 million for the year ended December 31, 2021.

Promotional allowances as a percentage of gross billings were 13.6% and 14.4% for the years ended December 31, 2022 and 2021, respectively.

**Gross billings represent amounts invoiced to customers net of cash discounts, returns and excise taxes.

Gross billings 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 is useful to investors in evaluating overall Company performance.

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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:

Promotional and other allowances for our energy drink products primarily include consideration given to our non-alcohol 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;

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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.

Promotional and other allowances for our energy drink products constitute a material portion of our marketing activities.

Our promotional allowance programs for our energy drink products 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 years ended December 31, 2021 and 2020 were (i) to increase sales volume and trial, (ii) to address market conditions, and (iii) to secure shelf and display space at retail.

The primary drivers of our promotional and other allowance activities for our energy drink products for the years ended December 31, 2022 and 2021 were (i) to increase sales volume and trial, (ii) to address market conditions, and (iii) to secure shelf and display space at retail.

Promotional and other allowances for our Alcohol Brands segment primarily include price promotions where permitted.

The table set forth below discloses selected quarterly data regarding sales for the past three years.

Data from any one or more quarters is not necessarily indicative of annual results or continuing trends.

Sales of beverages are expressed in unit case volume.

Sales of our energy drinks are expressed in unit case volume.

A “unit case” means a unit of measurement equal to 192 U.S.

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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.

In addition, our experience with our energy drink products suggests they are less seasonal than the seasonality expected from traditional beverages.

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 and customers, changes in the sales mix of our products and changes in and/or increased advertising and promotional expenses.

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 are less seasonal than the seasonality expected from 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 and/or increased advertising and promotional expenses.

COVID-19 pandemic, including new variants, may also have an impact on consumer behavior and change the seasonal fluctuation of our business.

(See “Part I, Item 1 – Business – Seasonality”).

Net Sales (in Thousands)

AFF third party net sales (in Thousands)

Alcohol Brands and Other segment net sales (in Thousands)

Adjusted Net Sales (in Thousands)¹

Case Volume / Sales (in Thousands)

Adjusted Average Net Sales Per Case

1 Excludes Other segment net sales of $25.9 million, $27.0 million and $21.9 million for the years ended December 31, 2021, 2020 and 2019, respectively, comprised of sales of our AFF Third-Party Products to independent third parties as these sales do not have unit case equivalents.

The following represents case sales by segment for the years ended December 31:

Energy Drink Case Volume / Sales (in Thousands)

Energy Drink Adjusted Average Net Sales Per Case

1 Excludes Alcohol Brands and Other segment net sales.

The following represents energy drink case sales by segment for the years ended December 31:

(In thousands, except average net sales per case)

AFF third-party sales

Alcohol Brands segment sales

Other segment sales

Adjusted net sales 1

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Total case sales

Average net sales per case

Inflation had a negative impact on our results of operations, leading to increased cost of sales and operating expenses for the year ended December 31, 2021.

Inflation did not have a significant impact on our results of operations for the years ended December 31, 2020 or 2019.

Average net sales per case - Energy Drinks

1 Excludes Alcohol Brands segment (effectively from February 17, 2022 to December 31, 2022) and Other segment net sales.

Net changes in foreign currency exchange rates had an unfavorable impact on both net sales and the overall average net sales per case for the year ended December 31, 2022.

Unit Sales of our alcohol products are expressed in barrel equivalents (“Barrel”).

A Barrel is a unit of measurement equal to 31 U.S.

Barrel sales were 0.3 million for the year ended December 31, 2022 (effectively from February 17, 2022 to December 31, 2022).

Inflation had a negative impact on our results of operations, leading to increased cost of sales and operating expenses for the years ended December 31, 2022 and 2021.

To mitigate the impact of inflation, we implemented a price increase effective September 1, 2022 in the United States and continue to implement price increases in certain international markets where feasible.

Liquidity and Capital Resources

Cash and cash equivalents, short-term and long-term investments – As of December 31, 2021, we had $1.33 billion in cash and cash equivalents, $1.75 billion in short-term investments and $99.4 million in long-term investments, including certificates of deposit, commercial paper, U.S.

government agency securities, U.S.

treasuries, and to a lesser extent, municipal securities.

Cash and cash equivalents, short-term and long-term investments – As of December 31, 2022, we had $1.31 billion in cash and cash equivalents, $1.36 billion in short-term investments and $61.4 million in long-term investments.

We maintain our investments for cash management purposes and not for purposes of speculation.

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However, certain of these investments are subject to general credit, liquidity, market and interest rate risks.

These risks associated with our investment portfolio may have an adverse effect on our future results of operations, liquidity and financial condition.

These market risks associated with our investment portfolio may have an adverse effect on our future results of operations, liquidity and financial condition.

Of our $1.31 billion of cash and cash equivalents held at December 31, 2022, $668.9 million was held by our foreign subsidiaries.

No short-term or long-term investments were held by our foreign subsidiaries at December 31, 2022.

We believe that cash available from operations, including our cash resources and our revolving line of 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 shares of our common stock, as well as purchases of capital assets, equipment and properties, through at least the next 12 months.

Based on our current plans, capital expenditures (exclusive of common stock repurchases) are currently estimated to be approximately $150.0 million through December 31, 2022.

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.

Based on our current plans, capital expenditures (exclusive of common stock repurchases) are likely to be less than $300.0 million through December 31, 2023.

However, future business opportunities may cause a change in this estimate.

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Cash flows provided by operating activities.

Cash provided by operating activities was $1.16 billion for the year ended December 31, 2021, as compared with cash provided by operating activities of $1.36 billion for the year ended December 31, 2020.

Cash provided by operating activities was $887.7 million for the year ended December 31, 2022, as compared with cash provided by operating activities of $1.16 billion for the year ended December 31, 2021.

For the year ended December 31, 2022, cash provided by operating activities was primarily attributable to net income earned of $1.19 billion and adjustments for certain non-cash expenses, consisting of $64.1 million of stock-based compensation, $61.2 million of depreciation and amortization, $7.3 million of non-cash lease expense and $2.2 million loss on impairment of intangibles.

For the year ended December 31, 2022, cash provided by operating activities also increased due to a $49.8 million increase in accounts payable, a $48.2 million decrease in deferred income taxes, a $50.8 million increase in accrued promotional allowances and a $3.7 million increase in accrued compensation.

For the year ended December 31, 2022, cash used in operating activities was primarily attributable to a $347.7 million increase in inventories, a $129.0 million increase in accounts receivable, a $38.3 million increase in prepaid expenses and other assets, a $30.4 million decrease in accrued liabilities, a $19.9 million decrease in deferred revenue, a $16.9 million decrease in income taxes payable, a $4.5 million decrease in other liabilities and $4.4 million decrease in prepaid income taxes.

For the year ended December 31, 2021, cash provided by operating activities was primarily attributable to net income earned of $1.38 billion and adjustments for certain non-cash expenses, consisting of $50.2 million of depreciation and amortization, and $70.5 million of stock-based compensation.

For the year ended December 31, 2021, cash provided by operating activities also increased due to a $114.3 million increase in accounts payable, a $71.6 million increase in accrued liabilities, a $31.5 million increase in accrued promotional allowances, a $16.4 million increase in deferred income taxes, an $8.0 million increase in accrued compensation and a $7.2 million increase in income taxes payable.

For the year ended December 31, 2021, cash used in operating activities was primarily attributable a $277.8 million increase in inventories, a $254.2 million increase in accounts receivable, a $29.3 million increase in prepaid expenses and other assets, a $22.7 million decrease in deferred revenue and a $10.9 million increase in prepaid income taxes.

For the year ended December 31, 2020, cash provided by operating activities was primarily attributable to net income earned of $1.41 billion and adjustments for certain non-cash expenses, consisting of $57.0 million of depreciation and amortization, $70.3 million of stock-based compensation and $8.7 million of intangible impairments.

For the year ended December 31, 2020, cash provided by operating activities also increased due to a $30.3 million decrease in inventories, a $26.4 million increase in accrued liabilities, an $18.7 million increase in accounts payable, a $13.8 million increase in accrued promotional allowances, a $10.4 million increase in income taxes payable, a $7.5 million increase in accrued compensation, a $5.5 million decrease in prepaid income taxes and a $1.0 million decrease in prepaid expenses and other assets.

For the year ended December 31, 2020, cash used in operating activities was primarily attributable to a $156.9 million increase in deferred income taxes, a $120.1 million increase in accounts receivable and a $21.5 million decrease in deferred revenue.

For the year ended December 31, 2021, cash used in operating activities was primarily attributable to a $277.8 million increase in inventories, a $254.2 million increase in accounts receivable, a $29.3 million increase in prepaid expenses and other assets, a $22.7 million decrease in deferred revenue and a $10.9 million increase in prepaid income taxes.

Cash flows used in investing activities.

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For both the years ended December 31, 2022 and 2021, cash used in investing activities was primarily attributable to purchases of available-for-sale investments.

For both the years ended December 31, 2021 and 2020, cash used in investing activities also included the acquisition 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, real property, computer software, equipment used for sales and administrative activities, certain leasehold improvements, improvements to real property as well as the acquisition, defense and maintenance of trademarks.

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 and to develop our brand in international markets) and for other corporate purposes.

For the year ended December 31, 2022, cash used in investing activities included $329.5 million (net of cash acquired), related to the CANarchy Transaction.

To a lesser extent, for both the years ended December 31, 2022 and 2021, cash used in investing activities also included the acquisition of real property, 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, improvements to real property as well as the acquisition, defense and maintenance of trademarks.

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 and 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 provided by (used in) financing activities.

Cash provided by financing activities was $34.8 million for the year ended December 31, 2021 as compared to cash used in financing activities of ($526.1) million for the year ended December 31, 2020.

Cash flows (used in) provided by financing activities.

Cash used in financing activities was $706.9 million for the year ended December 31, 2022 as compared to cash provided by financing activities of $34.8 million for the year ended December 31, 2021.

The cash flows used in financing activities for the year ended December 31, 2022 was primarily the result of the repurchases of our common stock.

The cash flows provided by financing activities for both the years ended December 31, 2022, and 2021 was primarily attributable to the issuance of our common stock related to stock-based compensation.

The cash flows used in financing activities for both the years ended December 31, 2021 and 2020 was primarily the result of the repurchases of our common stock related to stock-based compensation.

The following represents a summary of the Company’s contractual commitments and related scheduled maturities as of December 31, 2022:

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Purchase Commitments 2

¹ Contractual obligations include our obligations related to sponsorships, other marketing activities and AFF new production facility construction costs.

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

2 Purchase 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, no unrecognized tax benefits have been recorded as liabilities as of December 31, 2021.

In addition, approximately $3.0 million of unrecognized tax benefits have been recorded as liabilities as of December 31, 2022.

It is expected that the amount of unrecognized tax benefits will not significantly change within the next 12 months.

As of December 31, 2022, we had $0.4 million of accrued interest and penalties related to unrecognized tax benefits.

Accounting Policies and Pronouncements

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The Company will recognize an impairment for the amount by which the carrying amount exceeds a reporting unit’s fair value.

For the years ended December 31, 2021, 2020 and 2019, there were no impairments recorded and there are no accumulated impairment balances.

For the years ended December 31, 2022, 2021 and 2020, there were no goodwill impairments recorded and there are no accumulated impairment balances.

Other Intangibles – In accordance with FASB ASC 350, intangible assets with indefinite lives are not amortized but instead are measured for impairment at least annually, or when events indicate that an impairment exists.

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The Company amortizes its trademarks with finite useful lives over their respective useful lives.

For the years ended December 31, 2021 and 2019 no impairments were recorded.

For the year ended December 31, 2022, an impairment charge of $2.2 million was recorded to intangibles.

Revenue Recognition – Promotional and other allowances (variable consideration) recorded as a reduction to net sales, primarily include consideration given to the Company’s bottlers/distributors or retail customers including, but not limited to the following:

For the year ended December 31, 2021 no impairment charges were recorded to intangibles.

For the year ended December 31, 2020, an impairment charge of $8.7 million was recorded to intangibles.

Revenue Recognition – Promotional and other allowances (variable consideration) recorded as a reduction to net sales for our energy drink products primarily include consideration given to the Company’s non-alcohol bottlers/distributors or retail customers including, but not limited to the following:

● discounts granted off list prices to support price promotions to end-consumers by retailers;

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● commissions paid to TCCC based on our sales to certain wholly-owned subsidiaries of TCCC and/or to certain companies accounted for under the equity method by TCCC.

The Company’s promotional allowance programs with its bottlers/distributors and/or retailers are executed through separate agreements in the ordinary course of business.

The Company’s promotional allowance programs for its energy drink products with its bottlers/distributors and/or retailers are executed through separate agreements in the ordinary course of business.

These agreements generally provide for one or more of the arrangements described above and are of varying durations, ranging from one week to one year.

The Company’s promotional and other allowances are calculated based on various programs with bottlers/distributors and retail customers, and accruals are established during the year for its anticipated liabilities.

The Company’s promotional and other allowances for its energy drink products are calculated based on various programs with bottlers/distributors and retail customers, and accruals are established during the year for its anticipated liabilities.

These accruals are based on agreed upon terms as well as the Company’s historical experience with similar programs and require management’s judgment with respect to estimating consumer participation and/or distributor and retail customer performance levels.

Differences between such estimated expenses and actual expenses for promotional and other allowance costs have historically been insignificant and are recognized in earnings in the period such differences are determined.

Promotional and other allowances for the Alcohol Brands segment primarily include price promotions where permitted.

Recent Accounting Pronouncements

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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:

● Our ability to absorb, mitigate or pass on to our bottlers/distributors and/or consumers increases in commodity, freight and other costs;

● The human and economic consequences of the COVID-19 pandemic, including new variants, 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;

● Fluctuations in growth and/or growth rates and/or decline in sales of the domestic and international energy drink categories generally, including in the convenience and gas channel (which is our largest channel) and the impact on demand for our products resulting from deteriorating economic conditions and/or 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 2020 or future reductions of our sponsorship and endorsement activities as well as our sampling activities as a result of COVID-19 or other pandemics on our future sales and market share;

● The impact of countries being in lockdown due to the COVID-19 pandemic at various times;

● Delays in the availability and/or administration and/or acceptance of vaccines may prolong the COVID-19 pandemic;

● The impact of vaccine mandates on our business and supply chain, including our ability to recruit and/or retain employees, and disruptions in the business of our co-packers, bottlers/distributors and/or suppliers.

● 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;

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

● Our ability to introduce new products and the impact of the COVID-19 pandemic on our innovation activities;

● Our ability to successfully adapt to the changing landscape of advertising, marketing, promotional, sponsorship and endorsement opportunities created by the COVID-19 pandemic;

● Other effects of the COVID-19 pandemic on our employees, such as mental health challenges that employees may face;

● The impact of any reductions in productivity and disruptions to our business routines while most office-based employees of the Company are working remotely;

● The impact of logistical issues, including shortages of shipping containers, port of entry congestion and increased freight costs;

● Our ability to absorb, mitigate or pass on cost increases to our bottlers/distributors and/or customers;

● The impact of rising costs, interest rates, and inflation on the discretionary income of our consumers, particularly the rising cost of energy;

● Uncertainties associated with an economic slowdown or recession that could negatively impact the financial condition of our customers and could result in a reduced demand for our products;

● The impact of the military conflict in Ukraine, including supply chain disruptions, volatility in commodity prices, increased economic uncertainty and escalating geopolitical tensions;

● The impact of temporary or permanent facility closures, production slowdowns and disruptions in operations experienced by our suppliers, bottlers/distributors,/or co-packers, and/or breweries, including any material disruptions on the production and distribution of our products;

● The consolidation of co-packers leading us to increasingly rely on fewer co-packing groups, certain of which account for a large percentage of our co-packing capacity for our Monster Energy® drinks;

● The impact of logistical issues and delays, including shortages of shipping containers and port of entry congestion;

● 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;

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● The effect of TCCC being one of our significant stockholders and the potential divergence of TCCC’s interests from those of our other stockholders;

● Our ability to maintain relationships with TCCC system bottlers/distributors and manage their ongoing commitment to focus on our products;

● Our ability to maintain relationships with TCCC system bottlers/distributors and manage their ongoing commitment to focus on our non-alcohol 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;

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● 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 Consumer Privacy Act of 2018;

● Unfavorable regulations, including taxation, 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”), the Bureau of Alcohol, Tobacco, Firearms and Explosives (the “ATF”), 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 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, but not limited to, with respect to the General Data Protection Regulation and the California Consumer Privacy Act of 2018;

● Our ability to achieve profitability and/or repatriate cash from certain of our operations outside the United States;

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● Changes in U.S.

tax laws as a result of any legislation proposed by the new U.S.

tax laws as a result of any legislation proposed by the U.S.

Presidential Administration or U.S.

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● 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;

● Any proceedings which may be brought against us by the Securities and Exchange Commission (the “SEC”), the FDA, the FTC, the ATF 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;

● Exposure to significant liabilities due to litigation, legal or regulatory proceedings, including litigation directed at the energy and alcohol beverage industries generally or at the Company in particular;

● Intellectual property injunctions;

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● 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, product safety and quality, water usage, environmental impact and sustainability, human rights, our culture, workforce and labor and workplace laws;

● 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 (such as the COVID-19 pandemic);

● Decreased demand for our products resulting from changes in consumer preferences, including, but not limited to:

changes in demand for different packages, sizes and configurations;

changes due to perceived health concerns such as obesity, ingredients in our products or packaging, and alcohol abuse;

changes due to product safety concerns;

and/or changes due to decreased consumer discretionary spending power;

● Adverse publicity surrounding obesity, alcohol consumption, and other health concerns related to our products, product safety and quality, water usage, environmental impact and sustainability, human rights, our culture, workforce and labor and workplace laws;

● Our ability to meet or comply with sustainability-related expectations, standards, and regulations, including forthcoming rules set forth by the SEC and European Commission;

● Changes in demand that are weather or season 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 poor or 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, widespread outbreaks of infectious diseases (such as the COVID-19 pandemic), or unforeseen economic and political changes and local or international catastrophic events;

● The impact of changes to our sponsorship and endorsement activities, our sampling activities, and/or our innovation activities as a result of COVID-19 or other pandemics on our future sales and market share;

● The impact of countries being in lockdown due to the COVID-19 pandemic at various times;

● 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;

● The impact on our business of trademark and trade dress infringement proceedings brought against us relating to our brands, 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 implement and/or maintain price increases, including through reductions in promotional allowances;

● 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;

● Our ability to implement our growth strategy, including expanding our business in existing and new sectors, such as the alcoholic beverage sector;

● 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 and Alcohol Brands;

● Our ability to implement our growth strategy, including expanding our business in existing and new sectors, such as the alcohol beverage sector;

● Our ability to successfully integrate CANarchy and other acquired businesses or assets;

● 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;

● The inherent operational risks presented by the alcohol beverage industry that may not be adequately covered by insurance or lead to litigation relating to alcohol marketing, advertising, or distribution practices, alcohol abuse problems and other health consequences arising from excessive consumption of or other misuse of alcohol, including death;

● The impact of criticism of our products and/or the energy drink and/or alcohol beverage markets generally and/or legislation enacted (whether as a result of such criticism or otherwise) that restricts the marketing or sale of energy drinks and/or alcohol beverages (including prohibiting the sale of energy and/or alcohol drinks at certain establishments or pursuant to certain governmental programs), limits caffeine or alcohol 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 and/or alcohol drinks;

● Our ability to comply with and/or resulting lower consumer demand and/or lower profit margins for energy drinks and/or alcohol beverages 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 and/or alcohol drinks (including prohibiting the sale of energy and/or alcohol drinks at certain establishments or pursuant to certain governmental programs), limit caffeine or alcohol 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 and/or alcohol drinks, as well as laws and regulations or rules made or enforced by the ATF and Explosives and/or the FTC or their foreign counterparts;

● Disruptions in the timely import or export of our products and/or ingredients including flavors, flavor ingredients and supplement ingredients due to port congestion, strikes and related labor issues or otherwise;

● 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 we are a member, and/or any international beverage associations and the impact of our failure to satisfy such guidelines may have on our business;

● Our ability to satisfy all criteria set forth in any model energy and/or alcohol drink guidelines, including, without limitation, those adopted by the American Beverage Association, of which we are a member, and/or any international beverage associations and the impact of our failure to satisfy such guidelines may have on our business;

● 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, including flavors and flavor ingredients, 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, flavors, flavor ingredients, supplement ingredients, aluminum cans generally, PET containers used for our Monster Hydro® energy drinks, 24-ounce aluminum cap cans and 550ml BRE aluminum cans with resealable ends;

● Limitations in securing the supply of sufficient quantities of aluminum cans may cause us to focus on producing higher volume products.

As a result, certain of our lower volume products may be temporarily discontinued by our bottlers/distributors and/or their retail customers, and we may not be able to reinstate all, or any, of such lower volume products in the future;

● Changes in the cost, quality and availability of containers, packaging materials, aluminum cans or kegs, the Midwest and other premiums, raw materials, including flavors and flavor ingredients, 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, water, flavors, flavor ingredients, supplement ingredients, aluminum cans generally, PET containers used for our Monster Hydro® energy drinks, 24-ounce aluminum cap cans and 550ml BRE aluminum cans with resealable ends;

● Limitations in procuring sufficient quantities of aluminum cans;

● In order to secure sufficient quantities of aluminum cans and sufficient co-packing availability in the future, we may be required to commit to minimum purchase volumes and/or minimum co-packing volumes.

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● 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, e-commerce retailers, e-commerce websites, 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, impose restrictions or limitations on the sale of our products and/or devote less resources to the sale of our products;

● The impact of certain activities by competitors and others to persuade regulators and/or retailers and/or customers in certain countries to reduce the permitted or maximum container sizes for our products from those currently being sold and marketed by us;

● 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 retailer consolidation on our business and our ability to successfully adapt to the rapidly changing retail landscape, including, but not limited to, substantial competition in the alcohol beverage market from new entrants, consolidations by competitors and retailers, and other competitive activities;

● Our ability to adapt to the changing retail landscape with the rapid growth in e-commerce retailers;

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● The success of our sports marketing, social media and other general marketing endeavors both domestically and internationally;

● Unforeseen economic and political changes and local or international catastrophic events;

● Possible product recalls and/or reformulations of certain of our products and/or market withdrawals of certain of our products due to defective and/or non-compliant formulas or production in one or more jurisdictions;

● The failure of our bottlers and/or co-packers to manufacture our products on a timely basis or at all;

● 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;

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● 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;

● 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;

● 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 Securities and Exchange Commission is not exhaustive.

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 “Part I, Item 1A – Risk Factors” 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.

forward-looking statements.

Other unknown or unpredictable factors also could harm our results.

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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.

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.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis