44984_Monster_2019AnnualReport_Outside_ST 44984_Monster_2019AnnualReport_Inside_ST TO OUR STOCKHOLDERS I am pleased to report that 2019 represented our 27th consecutive record year of increased net and gross sales, with net sales surpassing the $4.0 billion threshold for the first time in our history. Net sales rose to $4.2 billion in 2019 from $3.8 billion in 2018. Gross sales rose to $4.9 billion in 2019 from $4.4 billion in 2018. We continue to innovate in the energy drink category. We successfully launched Reign Total Body Fuel™, our line of high performance energy drinks in 2019, and in addition launched a number of other new products in the United States, as well as in international markets. We anticipate future introductions of new and exciting beverages and packaging. In 2019, we completed the transition of our United States distribution of our Monster Energy® portfolio of products to the The Coca-Cola Company’s network of distributors. Our Monster Energy® drinks are now sold in approximately 148 countries and territories globally and our Strategic Brands, comprised primarily of various energy drink brands we acquired from The Coca-Cola Company in 2015, are now sold in approximately 106 countries and territories globally. One or more of our energy drinks are now distributed in approximately 161 countries and territories worldwide. Our Monster Energy® brand participates in the premium segment of the energy drink category, as do most of our Strategic Brands. Our affordable energy brand, notably Predator®, participates in the affordable segment of the energy drink category internationally. These unprecedented times are presenting particular challenges to all of us. Our deepest sympathies go out to all those who have been affected by the COVID-19 pandemic. Our top priority remains the health, safety and well–being of our employees, customers, consumers and our communities. We are continuing to monitor and reassess our business operations in accordance with guidance from public health authorities. At the time of writing, our production and distribution activities are operating and our products are available for sale at retail establishments. We have contingency plans in place to address supply chain challenges that may arise, and are continuing to work with our suppliers, co-packers and distributors to ensure our products are produced and remain available for sale to our consumers. Monster Energy Cares, our philanthropic arm, is actively engaged in a number of philanthropic efforts, including donating products to those individuals on the frontlines, such as health care workers and the National Guard. I am saddened to advise that Norman C. Epstein, a former director, who had served on our Board since 1992 and retired from the Board last year, passed away in March 2020. We extend our deepest sympathies to his wife and family. 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 executive leadership and our senior management team. We extend our personal thanks to our consumers, customers, bottlers and distribution partners as well as to our suppliers for their continued support. To our Board of Directors, executive leadership, management and employees, my sincere thanks and appreciation for all your efforts, which are evidenced by our continued success. To our stockholders, thank you for the trust you have placed in us and in our management team. We have an exciting, but challenging, 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) ☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2019 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 Trading Symbol(s) Name of each exchange on which registered Common Stock, $0.005 par value per share MNST 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 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 $31,534,998,627 computed by reference to the closing sale price for such stock on the Nasdaq Global Select Market on June 28, 2019, 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, 2020 was 536,896,142 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 2020 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, 2019. 4 MONSTER BEVERAGE CORPORATION FORM 10-K TABLE OF CONTENTS Item Number Page Number PART I 1. Business 6 1A. Risk Factors 20 1B. Unresolved Staff Comments 35 2. Properties 35 3. Legal Proceedings 36 4. Mine Safety Disclosures 36 PART II 5. Market for the Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 36 6. Selected Financial Data 38 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 39 7A. Quantitative and Qualitative Disclosures about Market Risk 62 8. Financial Statements and Supplementary Data 63 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 63 9A. Controls and Procedures 63 9B. Other Information 65 PART III 10. Directors, Executive Officers and Corporate Governance 65 11. Executive Compensation 65 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters 65 13. Certain Relationships and Related Transactions, and Director Independence 66 14. Principal Accounting Fees and Services 66 PART IV 15. Exhibits and Financial Statement Schedules 66 16. Form 10-K Summary 66 Signatures 69 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® Monster HydroSport Super Fuel® Gladiator® Monster Dragon Tea® Samurai® Caffé Monster® Live+® Reign Total Body FuelTM Predator® Reign InfernoTM Thermogenic Fuel Industry Overview The “alternative” beverage category combines non-carbonated, ready-to-drink iced teas, lemonades, juice cocktails, single-serve juices and fruit beverages, ready-to-drink dairy and coffee drinks, energy drinks, sports drinks and single-serve still waters (flavored, unflavored and enhanced) with “new age” beverages, including sodas that are considered natural, sparkling juices and flavored sparkling beverages.