Table of Contents Letter to Stockholders.... 1 Form 10-K.... 3 Report of Independent Registered Public Accounting Firm.... 71 Consolidated Financial Statements.... 72 Corporate Directory.... 113 Annual Meeting The annual meeting of stockholders will be held at 2:00 pm on Thursday, June 7, 2018 at Monster Beverage Corporation, 1 Monster Way, Corona, CA 92879 TO OUR STOCKHOLDERS I am pleased to report that 2017 represented our 25th consecutive record year of increased gross sales. Net sales rose to $3.4 billion in 2017 from $3.0 billion in 2016. Gross sales rose to $3.9 billion in 2017 from $3.5 billion in 2016. We are continuing to innovate and anticipate introducing new and exciting beverages and packaging in the coming months. In 2017, 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 134 countries and territories around the world. Our Strategic Brands, comprised of various energy drink brands we acquired from The Coca-Cola Company in 2015, are now sold in approximately 92 countries and territories around the world. Given that in some countries we may only sell one of our brands, we believe we have the opportunity to introduce additional brands into certain of these geographies in the future. Our Monster Energy® brand participates in the premium energy category in numerous countries. However, we believe there is also an opportunity for us to participate in the affordable energy category in certain countries. We are currently developing brands such as Predator™ specifically for the affordable energy category in certain select countries. 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, 2017 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, $.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 and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post such files). Yes No 3 Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K 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, or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one): Large accelerated filer Accelerated filer Non-accelerated filer Smaller reporting company (Do not check if a 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 $25,779,806,546 computed by reference to the closing sale price for such stock on the NASDAQ Global Select Market on June 30, 2017, 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 12, 2018 was 566,402,748 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 2018 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 32 2. Properties 32 3. Legal Proceedings 33 4. Mine Safety Disclosures 33 PART II 5. Market for the Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 33 6. Selected Financial Data 36 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 36 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 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 67 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 as well as Mutant® Super Soda drinks. Reportable Segments We have three operating and reportable segments, (i) Monster Energy® Drinks segment (“Monster Energy® Drinks”), which is comprised of our Monster Energy® drinks, Monster Hydro® energy drinks and Mutant® Super Soda drinks, (ii) Strategic Brands segment (“Strategic Brands”), which is comprised of the various energy drink brands acquired from The Coca-Cola Company (“TCCC”) in 2015 (the “TCCC Transaction”) (see Note 2 “Acquisitions and Divestitures” in the notes to the consolidated financial statements) and (iii) Other segment (“Other”), the principal products of which include the non-energy brands disposed of as a result of the TCCC Transaction (effectively from January 1, 2015 to June 12, 2015), as well as certain products, acquired as part of our American Fruits & Flavors (“AFF”) asset acquisition in 2016 (the “AFF Transaction”) (see Note 2 “Acquisitions and Divestitures” in the notes to the consolidated financial statements), that are sold by AFF to independent third- party customers (the “AFF Third-Party Products”) (effectively from April 1, 2016). Corporate and unallocated amounts that do not specifically relate to a reportable segment have been allocated to “Corporate and Unallocated.” Our Monster Energy® Drinks segment represented 90.5%, 90.5% and 92.5% of our consolidated net sales for the years ended December 31, 2017, 2016 and 2015, respectively. Our Strategic Brands segment represented 8.9%, 8.9%, 5.3% of our consolidated net sales for the years ended December 31, 2017, 2016 and 2015 (effectively from June 13, 2015).