The following Management's Discussion and Analysis of Financial Condition and Results of Operations ("MD&A") is provided as a supplement to - and should be read in conjunction with - our financial statements and the accompanying notes ("Notes") included in Part II, Item 8 of this Form 10-K. This discussion contains forward-looking statements that are based on management's current expectations, estimates and projections about our business and operations. Our actual results may differ materially from those currently anticipated and expressed in such forward-looking statements. See "Forward-Looking Statements" and "Part I. Item 1A - Risk Factors."

This overview provides our perspective on the individual sections of MD&A. MD&A includes the following sections:

† Our Business - a general description of our business; the value drivers of our business; and opportunities and risks facing our Company;

† Results of Operations - an analysis of our consolidated results of operations for the three years presented in our financial statements;

† Sales - details of our sales measured on a quarterly basis in both dollars and cases;

† Inflation - information about the impact that inflation may or may not have on our results;

† Liquidity and Capital Resources - an analysis of our cash flows, sources and uses of cash and contractual obligations;

† Accounting Policies and Pronouncements - a discussion of accounting policies that require critical judgments and estimates including newly issued accounting pronouncements;

† Forward-Looking Statements - cautionary information about forward-looking statements and a description of certain risks and uncertainties that could cause our actual results to differ materially from the Company's historical results or our current expectations or projections; and

† Market Risks - information about market risks and risk management. (See "Forward-Looking Statements" and "Part II, Item 7A - Qualitative and Quantitative Disclosures About Market Risks").

Our Business



Overview



We develop, market, sell and distribute "alternative" beverage category
beverages primarily under the following brand names:



†   Monster Energy®                            †   Hansen's®
†   Monster Rehab®                             †   Hansen's Natural Cane Soda®
†   Monster Energy Extra Strength Nitrous      †   Junior Juice®
Technology®
†   Java Monster®                              †   Blue Sky®
†   X-Presso Monster®                          †   Hubert's®
†   Worx Energy®                               †   Vidration®
†   Peace Tea®

Our Monster Energy® drinks, which represented 92.3%, 91.2% and 89.9% of our net sales for the years ended December 31, 2012, 2011 and 2010, respectively, include the following:

†   Monster Energy®            †   Java Monster® Kona Blend
†   Lo-Carb Monster Energy®    †   Java Monster® Loca Moca®
†   Monster Energy® Assault®   †   Java Monster® Mean Bean®

†   Monster Khaos®                             †   Java Monster® Vanilla Light
†   Monster M-80® (named Ripper® in certain    †   Java Monster® Irish Blend®
countries)
†   Monster MIXXD®                             †   Java Monster® Toffee
†   Monster Energy® Absolutely Zero            †   Monster Energy Extra Strength
†   Monster Energy® Import                     Nitrous Technology® Super Dry™
†   Monster Energy® Import Light               †   Monster Energy Extra Strength
†   Monster Energy® Dub Edition Baller's       Nitrous Technology® Anti-Gravity®
Blend
†   Monster Energy® Dub Edition Mad Dog        †   Monster Energy Extra Strength
†   Monster Rehab® Tea + Lemonade + Energy     Nitrous Technology® Black Ice™
†   Monster Rehab® Rojo Tea + Energy           †   X-Presso Monster® Hammer
†   Monster Rehab® Green Tea + Energy          †   X-Presso Monster® Midnite
†   Monster Rehab® Protean + Energy            †   Monster Cuba-Lima®
†   Monster Rehab® Tea + Orangeade + Energy    †   Monster Energy® Zero Ultra
†   M3® Monster Energy® Super Concentrate      †   Übermonster® Energy Brew

We have two reportable segments, namely Direct Store Delivery ("DSD"), whose principal products comprise energy drinks, and Warehouse ("Warehouse"), whose principal products comprise juice-based and soda beverages. The DSD segment develops, markets and sells products primarily through an exclusive distributor network, whereas the Warehouse segment develops, markets and sells products primarily direct to retailers.

During the year ended December 31, 2012, we continued to expand our existing product lines and flavors and further developed our markets. In particular, we continued to focus on developing and marketing beverages that fall within the category generally described as the "alternative" beverage category. During the year ended December 31, 2012, we introduced the following products:

† Monster Rehab® Tea + Orangeade + Energy, a non-carbonated energy drink with electrolytes (February 2012).

† Übermonster® Energy Brew, a non-alcoholic energy drink, manufactured using a brewed fermentation process (February 2012).

† Hansen's® Coconut Water, in original and tropical flavors, packaged in re-sealable Tetra Prisma boxes (March 2012).

† Peace Tea® Cranberry, Pink Lemonade and Texas-Style Sweet Tea, ready-to-drink iced teas (March 2012).

† Monster Energy® Zero Ultra, a carbonated energy drink which contains zero calories and zero sugar (August 2012).

† Monster Cuba-Lima®, a carbonated lime flavored non-alcoholic energy drink (September 2012).

† Monster Energy® "Dub Edition" Baller's Blend, a carbonated punch + energy drink (October 2012).

† Monster Energy® "Dub Edition" Mad Dog, a carbonated punch + energy drink (October 2012).

In the normal course of business we discontinue certain products and/or product lines. Those products or product lines discontinued in 2012, either individually or in aggregate, did not have a material adverse impact on our financial position, results of operations or liquidity.

Our gross sales* of $2,373.5 million for the year ended December 31, 2012 represented record annual sales. The vast majority of our gross sales are derived from our Monster Energy® brand energy drinks. Gross sales of our Monster Energy® brand energy drinks were $2,205.0 million for the year ended December 31, 2012, an increase of $416.3 million, or 98.4% of our overall increase in gross sales for the year ended December 31, 2012. Any decrease in gross sales of our Monster Energy® brand energy drinks could have a significant adverse effect on our future revenues and net income. Competitive pressure in the energy drink category could also adversely affect our operating results.

Our gross sales of $1,488.5 million for the year ended December 31, 2010 were negatively impacted by advance purchases made by our customers in the 2009 fourth quarter due to our announcement of a new per case marketing contribution program for our Monster Energy® distributors commencing January 1, 2010, as well as to avoid potential interruptions in product supply due to our announcement to transition our North American operations to the SAP enterprise resource planning system commencing January 2010 (the "Advance Purchases"). We previously estimated that gross sales for the three-months ended December 31, 2009 were increased by approximately 4% to 6% as a result of the Advance Purchases. We did not limit the amount of our customers' purchases during the fourth quarter of 2009.

Our DSD segment represented 95.4%, 94.4% and 93.0% of our consolidated net sales for the years ended December 31, 2012, 2011 and 2010, respectively. Our Warehouse segment represented 4.6%, 5.6% and 7.0% of our consolidated net sales for the years ended December 31, 2012, 2011 and 2010, respectively.

Our sales and marketing strategy for all our beverages is to focus our efforts on developing brand awareness through image enhancing programs and product sampling. We use our branded vehicles and other promotional vehicles at events where we offer samples of our products to consumers. We utilize "push-pull" methods to enhance shelf and display space exposure in sales outlets (including advertising, in-store promotions and in-store placement of point-of-sale materials, racks, coolers and barrel coolers) to enhance demand from consumers for our products. We also support our brands with prize promotions, price promotions, competitions, endorsements from selected public and extreme sports figures, personality endorsements (including from television and other well known sports personalities), coupons, sampling and sponsorship of selected causes, events, athletes and teams. In-store posters, outdoor posters, print, radio and television advertising (directly and through our sponsorships and endorsements) and coupons may also be used to promote our brands.

We have historically marketed our Monster Energy®, Hansen's Energy® and Blue Energy® energy drink products as dietary supplements in accordance with the statutory definition of "dietary supplement" set forth in the Federal Food, Drug, and Cosmetic Act. However, as permitted under that Act and FDA regulations, we recently decided to transition the labeling and marketing of these energy drink products from dietary supplements to conventional foods. It is anticipated that new labels for such products as conventional foods will be introduced in 2013. Products marketed under the Worx Energy® brand, which are sold in 2-ounce bottles, will continue to be labeled as dietary supplements. We do not expect the cost of the labeling changes to be significant.

We believe that one of the keys to success in the beverage industry is differentiation, making our brands and products visually distinctive from other beverages on the shelves of retailers. We review our products and packaging on an ongoing basis and, where practical, endeavor to make them different, better and unique. The labels and graphics for many of our products are redesigned from time to time to maximize their visibility and identification, wherever they may be placed in stores, which we will continue to reevaluate from time to time.

All of our beverage products are manufactured by various third party bottlers and co-packers situated throughout the United States and abroad, under separate arrangements with each party.

Our growth strategy includes expanding our international business. Gross sales to customers outside the United States amounted to $513.9 million, $381.0 million and $240.6 million for the years ended December 31, 2012, 2011 and 2010, respectively. Such sales were approximately 22%, 20% and 16% of gross sales for the years ended December 31, 2012, 2011 and 2010, respectively.

Our customers are primarily full service beverage distributors, retail grocery and specialty chains, wholesalers, club stores, drug chains, mass merchandisers, convenience chains, health food distributors, food service customers and the military. Gross sales to our various customer types for the years ended December 31, 2012, 2011 and 2010 are reflected below. Such information includes sales made by us directly to the customer types concerned, which include our full service beverage distributors in the United States. Such full service beverage distributors in turn sell certain of our products to the same customer types listed below. We limit our description of our customer types to include only our sales to such full service distributors without reference to such distributors' sales to their own customers.

                                                   2012   2011   2010
Full service distributors                          63%    64%    64%
Club stores, drug chains & mass merchandisers       9%    10%    12%
Outside the U.S.                                   22%    20%    16%
Retail grocery, specialty chains and wholesalers    4%     4%     6%
Other                                               2%     2%     2%

On October 2, 2010, TCCC completed its acquisition of the North American business operations of CCE, through a merger with a wholly owned subsidiary of TCCC. The surviving wholly owned subsidiary was subsequently renamed CCR, and currently distributes certain of our products in those portions of the United States in which CCE previously distributed certain of our products. Concurrently with this acquisition, New CCE was formed, which currently distributes certain of our products in Great Britain, France, Belgium, the Netherlands, Luxembourg, Monaco and Sweden.

Our customers include the TCCC North American Bottlers, Wal-Mart, Inc. (including Sam's Club), the AB Distributors, New CCE, Coca-Cola Hellenic, Kalil Bottling Group, Trader Joe's, John Lenore & Company, Swire Coca-Cola, Costco, The Kroger Co. and Safeway, Inc. A decision by any large customer to decrease amounts purchased from us or to cease carrying our products could have a material negative effect on our financial condition and consolidated results of operations. CCR accounted for approximately 28% and 29% of our net sales for the years ended December 31, 2012 and 2011, respectively. CCE, which included their operations in the U.S. for the relevant periods (see distribution agreement (d) in "Item 1 - Business - Distribution Agreements"), accounted for approximately 28% our net sales for the year ended December 31, 2010.

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

Value Drivers of our Business

We believe that the key value drivers of our business include the following:

† Profitable Growth - We believe "functional" value added brands properly supported by marketing and innovation, targeted to a broad consumer base, drive profitable growth. We continue to broaden our family of brands. In particular, we are expanding our energy drinks and specialty beverages to provide more alternatives to consumers. We are focused on maintaining profit margins 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.

† International Growth - The introduction, development and sustained profitability of our Monster Energy® brand internationally remains a key value driver for our corporate growth.

† Cost Management - The principal focus of cost management will continue to be on reducing input supply and production costs on a per-case basis, including raw material costs and co-packing fees. Another key area of focus is to decrease promotional allowances, selling and general and administrative costs, including sponsorships, sampling, promotional and marketing expenses, as a percentage of net sales. The reduction of accounts receivable and inventory days on hand also remains a further key area of focus.

† Efficient Capital Structure - Our capital structure is intended to optimize our working capital to finance expansion, both domestically and internationally. We believe our strong capital position, our ability to raise funds, if necessary, at low effective cost and low overall costs of borrowings provide a competitive advantage.

We believe that, subject to increases in the costs of certain raw materials being contained, these value drivers, when properly implemented in the U.S. and internationally, will result in: (1) maintaining our product gross profit margins; (2) providing additional leverage over time through reduced expenses as a percentage of net operating revenues; and (3) optimizing our cost of capital. The ultimate measure of success is and will be reflected in our current and future results of operations.

Gross and net sales, gross profits, operating income, net income and net income per share represent key measurements of the above value drivers. These measurements will continue to be a key management focus in 2013 and beyond (See "Part II, Item 7 - Results of Operations - Results of Operations for the Year Ended December 31, 2012 Compared to the Year Ended December 31, 2011").

As of December 31, 2012, the Company had working capital of $546.5 million compared to $916.6 million as of December 31, 2011. The decrease in working capital was primarily the result of the $737.1 million repurchase of the Company's common stock during the year ended December 31, 2012. For the year ended December 31, 2012, our net cash provided by operating activities was approximately $287.7 million as compared to $333.8 million for the year ended December 31, 2011. Principal uses of cash flows in 2012 were repurchases of our common stock, purchases of investments, purchases of inventory, development of our Monster Energy® brand internationally, acquisition of property and equipment and acquisition of trademarks. 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 - Liquidity and Capital Resources").

Opportunities, Challenges and Risks

Looking forward, our management has identified certain challenges and risks for the beverage industry and our Company. Legislation has been proposed at the U.S. state 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 in beverages, 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 recently 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. In addition, uncertainty and volatility in domestic and international economic markets could negatively affect both the stability of our industry and our Company. Furthermore, our growth strategy includes expanding our international business which exposes us to risks inherent in conducting international operations. Decreased 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, juices and juice drinks, waters and energy drinks. We continuously strive to meet changing consumer needs through beverage innovation, choice and variety. (See "Part I, Item 1A - Risk Factors")

Our historical success is attributable, in part, to our introduction of different and innovative beverages. Our future success will depend, in part, upon our continued ability to develop and introduce different and innovative beverages, although there can be no assurance of our ability to do so. In order to retain and expand our market share, we must continue to develop and introduce different and innovative beverages and be competitive in the areas of quality, health, method of distribution, brand image and intellectual property protection. The beverage industry is subject to changing consumer preferences that may adversely affect us if we misjudge such preferences.

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

† changes in consumer preferences and demand for our products;

† economic uncertainty in the United States, Europe and other countries in which we operate;

† the risks associated with foreign currency exchange rate fluctuations;

† maintenance of our brand image and product quality;

† increasing concern over obesity and changes in regulation and consumer preferences in response to those concerns;

† increasing concern over caffeine consumption and related regulation of our products containing caffeine;

† 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
- Sales and Marketing");

† costs of establishing and promoting our brands internationally;

† restrictions on imports and sources of supply; duties or tariffs; and changes in government regulations;

† 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 certain package containers such as the 24-ounce cap-can, the 18.6-ounce BRE can, and co-packing availability; and

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

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

We believe that the following opportunities exist for us:

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

† growth potential of other segments of the "alternative" beverage category including sparkling beverages, carbonated soft drinks, ready-to-drink iced teas, juice drinks and enhanced waters;

† planned and future new product and product line introductions with the objective of contributing to higher profitability;

† the introduction of premium packages designed to generate strong revenue growth;

† significant package, pricing and channel opportunities to increase profitable growth;

† effective strategic positioning to capitalize on industry growth;

† broadening distribution/expansion opportunities in both domestic and international markets;

† launching our products into new geographic markets; and

† continued focus on reducing our cost base.

Results of Operations

(in thousands, except per share information)

                                                                                  Percentage Change
                                   2012            2011            2010        12 vs. 11    11 vs. 10
Gross sales, net of
discounts & returns*           $   2,373,499   $   1,950,490   $   1,488,516       21.7%        31.0%
Less: Promotional and other
allowances**                         312,797         247,260         184,574       26.5%        34.0%
Net sales                          2,060,702       1,703,230       1,303,942       21.0%        30.6%
Cost of sales                        995,046         808,921         623,702       23.0%        29.7%
Gross profit***                    1,065,656         894,309         680,240       19.2%        31.5%
Gross profit margin as a
percentage of net sales                51.7%           52.5%           52.2%

Operating expenses                   515,033         437,886         332,426       17.6%        31.7%

Operating expenses as a
percentage of net sales                25.0%           25.7%           25.5%

Operating income                     550,623         456,423         347,814       20.6%        31.2%
Operating income as a
percentage of net sales                26.7%           26.8%           26.7%

Other (expense) income:
Interest and other (expense)
income, net                          (2,256)           1,619           2,246    (239.3%)       (27.9% )

Gain (loss) on investments
and put option, net                      787           (772)           (758)    (201.9%)         1.8%
Total other (expense) income         (1,469)             847           1,488

Income before provision for
income taxes                         549,154         457,270         349,302       20.1%        30.9%

Provision for income taxes           209,134         171,051         137,273       22.3%        24.6%

Net income                      $    340,020    $    286,219    $    212,029       18.8%        35.0%
Net income as a percentage
of net sales                           16.5%           16.8%           16.3%

Net income per common share:

Basic                                  $1.96           $1.62           $1.20       20.5%        35.6%
Diluted                                $1.86           $1.53           $1.14       21.1%        34.5%

Case sales (in thousands)
(in 192-ounce case
equivalents)                         202,918         164,661         129,031       23.2%        27.6%

*Gross sales is used internally by management as an indicator of and to monitor operating performance, including sales performance of particular products, salesperson performance, product growth or declines and overall Company performance. The use of gross sales allows evaluation of sales performance before the effect of any promotional items, which can mask certain performance issues. We therefore believe that the presentation of gross sales provides a useful measure of our operating performance. Gross sales is not a measure that is recognized under GAAP and should not be considered as an alternative to net sales, which is determined in accordance with GAAP, and should not be used alone as an indicator of operating performance in place of net sales. Additionally,

gross sales may not be comparable to similarly titled measures used by other companies, as gross sales has been defined by our internal reporting practices. In addition, gross sales may not be realized in the form of cash receipts as promotional payments and allowances may be deducted from payments received from certain customers. (See "Part II, Item 6 - Selected Financial Data").

** Although the expenditures described in this line item are determined in accordance with GAAP and meet GAAP requirements, the disclosure thereof does not conform with GAAP presentation requirements. Additionally, our definition of . . .