2018 Annual Report
Total Page:16
File Type:pdf, Size:1020Kb
TO OUR STOCKHOLDERS I am pleased to report that 2018 represented our 26th consecutive record year of increased gross sales. Net sales rose to $3.8 billion in 2018 from $3.4 billion in 2017. Gross sales rose to $4.4 billion in 2018 from $3.9 billion in 2017. We continue to innovate in the energy drink category and following successful launches earlier this year, we anticipate future introductions of new and exciting beverages and packaging. In particular, in March 2019, we successfully launched Reign Total Body Fuel™, our new line of performance energy drinks. In 2018 and 2019, we continued to transition a number of domestic and international geographies to the system bottlers of The Coca-Cola Company. Our Monster Energy® drinks are now sold in approximately 142 countries and territories globally and our Strategic Brands, comprised of various energy drink brands we acquired from The Coca-Cola Company in 2015, are now sold in approximately 96 countries and territories globally. One or more of our energy drinks are now distributed in approximately 155 countries and territories worldwide. Our Monster Energy® brand participates in the premium segment of the energy drink category in numerous countries as do our Strategic Brands. Our affordable energy brand, notably Predator®, participates in the affordable segment of the energy drink category internationally. Norman C. Epstein, Harold C. Taber, Jr. and Kathy N. Waller are retiring from the Board of Directors effective as of the 2019 Annual Meeting and are not standing for re-election. Mr. Epstein and Mr. Taber have both served on the Board of Directors since 1992, and Ms. Waller has served on the Board of Directors since 2015. We thank them for their dedicated service and valuable contributions to the company. In addition to the seven directors standing for re-election, the Board of Directors has nominated three accomplished individuals: Kathleen E. Ciaramello, Jeanne P. Jackson and Steven G. Pizula, refreshing our Board of Directors with new perspectives and ideas. I would like to express my gratitude for the support and leadership shown by Mr. Hilton Schlosberg, our President, Chief Operating Officer and Chief Financial Officer, and would also like to express my gratitude for the direction and guidance provided by our senior management team. My personal thanks to our consumers, customers, bottlers and distribution partners as well as our suppliers for their continued support. To our management and employees, my sincere thanks and appreciation for all of your efforts, which are evidenced by our continued success. To our stockholders, thank you for the trust you have placed in our management team. We have an exciting road ahead of us and look forward to enhancing our future performance. Sincerely, Rodney C. Sacks Chairman and Chief Executive Officer 1 2 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Form 10-K (Mark One) [ X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2018 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _____ to _____ Commission File Number 001-18761 MONSTER BEVERAGE CORPORATION (Exact name of registrant as specified in its charter) Delaware 47-1809393 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 1 Monster Way Corona, California 92879 (Address of principal executive offices) (Zip Code) Registrant’s telephone number, including area code: (951) 739 - 6200 Securities registered pursuant to Section 12(b) of the Act: Title of Each Class Name of each exchange on which registered Common Stock, $0.005 par value per share Nasdaq Global Select Market Securities registered pursuant to Section 12(g) of the Act: None Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes No Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act. Yes No Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes No Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes No 3 Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405 of this chapter) is not contained herein, and will not be contained, to the best of the registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act: Large accelerated filer Accelerated filer Non-accelerated filer Smaller reporting company Emerging growth company If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. Indicate by check mark whether the registrant is a shell company (as defined by Rule 12b-2 of the Exchange Act.). Yes No The aggregate market value of the voting and non-voting common equity held by non-affiliates of the registrant was $28,771,940,302 computed by reference to the closing sale price for such stock on the NASDAQ Global Select Market on June 30, 2018, the last business day of the registrant’s most recently completed second fiscal quarter. The number of shares of the registrant’s common stock, $0.005 par value per share (being the only class of common stock of the registrant), outstanding on February 20, 2019 was 543,148,169 shares. DOCUMENTS INCORPORATED BY REFERENCE: Portions of the registrant’s Definitive Proxy Statement to be filed subsequent to the date hereof with the Commission pursuant to Regulation 14A in connection with the registrant’s 2019 Annual Meeting of Stockholders are incorporated by reference into Part III of this Report. Such Definitive Proxy Statement will be filed with the Securities and Exchange Commission no later than 120 days after the conclusion of the registrant’s fiscal year ended December 31, 2018. 4 MONSTER BEVERAGE CORPORATION FORM 10-K TABLE OF CONTENTS Item Number Page Number PART I 1. Business 6 1A. Risk Factors 21 1B. Unresolved Staff Comments 33 2. Properties 33 3. Legal Proceedings 34 4. Mine Safety Disclosures 34 PART II 5. Market for the Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 34 6. Selected Financial Data 36 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 37 7A. Quantitative and Qualitative Disclosures about Market Risk 61 8. Financial Statements and Supplementary Data 62 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 62 9A. Controls and Procedures 62 9B. Other Information 64 PART III 10. Directors, Executive Officers and Corporate Governance 64 11. Executive Compensation 64 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters 64 13. Certain Relationships and Related Transactions, and Director Independence 65 14. Principal Accounting Fees and Services 65 PART IV 15. Exhibits and Financial Statement Schedules 65 16. Form 10-K Summary 66 Signatures 68 5 PART I ITEM 1. BUSINESS When this report uses the words “the Company”, “we”, “us” and “our”, these words refer to Monster Beverage Corporation and its subsidiaries, unless the context otherwise requires. Based in Corona, California, Monster Beverage Corporation is a holding company and conducts no operating business, except through its consolidated subsidiaries. The Company’s subsidiaries primarily develop and market energy drinks. Overview We develop, market, sell and distribute energy drink beverages and concentrates for energy drink beverages, primarily under the following brand names: Monster Energy® NOS® Monster Energy Ultra® Full Throttle® Monster Rehab® Burn® Monster MAXX® Mother® Java Monster® Nalu® Muscle Monster® Ultra Energy® Espresso Monster® Play® and Power Play(stylized)® Punch Monster® Relentless® Juice Monster® BPM® Monster Hydro® BU® Caffé Monster® Gladiator® Predator® Samurai® Live+ Mutant® Our Monster Energy® brand energy drinks, which represented 91.7%, 90.1% and 90.1% of our net sales for the years ended December 31, 2018, 2017 and 2016, respectively, primarily include the following energy drinks1: Monster Energy® Java Monster® Kona Blend Lo-Carb Monster Energy® Java Monster® Loca Moca® Monster Assault® Java Monster® Mean Bean® Monster Energy Absolutely Zero® Java Monster® Vanilla Light Juice Monster® Khaos®