Good day, ladies and gentlemen, and thank you for your patience. You have joined Monster Beverage Corporation's 2018 Fourth Quarter and Full-Year Financial Results Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will be given at that time.

[Operator Instructions] As a reminder, this conference may be recorded. I would now like to turn the call over to your host, Chairman and CEO, Mr. Rodney Sacks. Sir, you may begin..

Hi, good afternoon, ladies and gentlemen. Thank you for attending this call. I am Rodney Sacks. Hilton Schlosberg, our last Vice Chairman and President is with me today, as is Tom Kelly, our Senior Vice President of Finance.

Before we begin, I'd like to remind listeners that certain statements made during this call may constitute forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 as amended and Section 21E of the Securities Exchange Act of 1934 as amended, and are based on currently available information regarding the expectations of management with respect to revenues, profitability, future business, future events, financial performance and trends.

Management cautions that these statements are based on our current knowledge and expectations and are subject to certain risks and uncertainties, many of which are outside the control of the company that may cause actual results to differ materially from the forward-looking statements made during this call.

Please refer to our filings with the Securities and Exchange Commission, including our most recent Annual Report on Form 10-K filed on March 1, 2018, and our Form 10-Q filed on August 9, 2018, including the sections contained therein entitled Risk Factors and Forward-Looking Statements for discussion on specific risks and uncertainties that may affect our performance.

The company assumes no obligation to update any forward-looking statements whether as a result of new information, future events or otherwise.

An explanation of the non-GAAP measure of gross sales and certain expenditures which may be mentioned during the course of this call is provided in the notes and designated with asterisks in the condensed consolidated statements of income and other information attached to the earnings release dated February 27, 2019.

A copy of this information is also available on our Web site at monsterbevcorp.com in the Financial Information section. Consumer beverage preferences and tastes are continuing to evolve, and we are endeavoring to address them through our ongoing innovation of new products.

Net sales for the 2018 fourth quarter were negatively impacted by $8.5 million due to the adoption of Accounting Standards Codification 606.

Under ASC 606, commissions paid to The Coca-Cola Company based on our sales to certain of the company's customers, which The Coca-Cola Company accounts for under the equity method or consolidates, are now included as a reduction to net sales.

Whereas, prior to January 1, 2018, commissions based on sales to those customers, which Coca-Cola accounts for under the equity method, were included in operating expenses.

Net and gross sales for the three months ended December 31 2018, were negatively impacted by advanced purchases made by our customers in the third quarter of 2018 due to a pre-announced price increase effective November 1, 2018, on certain of our Monster Energy brand Energy Drinks in 2018 which affected our fourth quarter.

The company estimates such impact to net and gross sales was approximately $16 million and $18 million, respectively. In the fourth quarter of 2018, net sales were $924.2 million, up 14.1%, from $810.4 million in the fourth quarter of 2017. Without the adoption of ASC 606, the percentage increase in net sales would have been 15.1%.

Net sales in the fourth quarter were negatively impacted by approximately $14.4 million of foreign currency movements. The company recorded fourth quarter gross sales of $1.06 billion, up 13.7%, from $934.8 million in the fourth quarter of 2017.

Gross sales in the fourth quarter were negatively impacted by approximately $16.2 million of foreign currency movements. Gross profit, as a percentage of net sales, for the 2018 fourth quarter was 59.7%, compared with 62.1% in the 2017 fourth quarter. The gross profit percentage, as adjusted for ASC 606, would have been 60.1% for the quarter.

The decrease in gross profit, as a percentage of net sales, was primarily attributable to increases in certain import costs such as aluminum cans, freight in and other input costs, geographical sales mix as a result of our international sales increasing as a percentage of total net sales, our foreign operations generally have lower gross margins.

Domestic product sales mix and the $8.5 million of commissions accounted for as a reduction to net sales due to the adoption of ASC 606. The decrease in gross profit as a percentage of net sales was partially offset by increases in domestic sales process as well as the decrease in promotional allowances as a percentage of gross sales.

Distribution costs as a percentage of net sales were 3.7% for the 2018 fourth quarter as compared to 3.6% in the 2017 fourth quarter. Selling expenses as a percentage of net sales were 11.3% for the 2018 fourth quarter as compared to 13.6% in the same quarter in 2017.

General and administrative costs as a percentage of net sales were 11.5% for the 2018 fourth quarter as compared to 11.9% in the same quarter in 2017. In the quarter, payroll expenses as a percentage of net sales were 7.2% compared to 7.7% in the same period in 2017.

Payroll costs increased $4.9 million, primarily due to headcount growth both domestically and internationally. Stock-based compensation and non-cash item was $14.7 million in the fourth quarter of 2018, compared to $13 million in the same quarter in 2017. Operating income was adversely affected by losses in China of $3.1 million in the quarter.

Our effective tax rates decreased from 24.8% in the 2017 fourth quarter to 23.1% in the 2018 fourth quarter. The decrease in the effective tax rate was primarily due to the reduction in the U. S.

Federal Statutory tax rate as a result of The Tax Cuts and Jobs Act with The Tax Reform Act signed into law on December 22, 2017 as well as a reduction in certain foreign income that is subject to U.S. taxation.

In addition, the comparative 2017 fourth quarter effective tax rate included a one-time provisional charge related to the revaluation of the company's deferred tax assets at December 31, 2017, and a one-time charge for the deemed mandatory repatriation of post 1986 earnings and profits as a result of The Tax Reform Act.

The decrease in the provision for income taxes was also partially offset by a decrease in the stock-based compensation tax deduction. Net income was $239.1 million in the 2018 fourth quarter, compared to net income of $201.3 million in the 2017 fourth quarter, an increase of 18.8%.

The weighted average number of diluted shares outstanding decreased from $575 million for the fourth quarter 2017 to $556.7 million for the fourth quarter of 2018, as a result of share repurchases, which I will cover later in this call.

Diluted earnings per share for the 2018 fourth quarter increased 22.7% to $0.43, from $0.35 in the fourth quarter of 2017. We continue to make good progress in the implementation of our strategic alignment with Coco-Cola bottlers globally. We're also making good progress in the U.S.

in non-traditional channels including foodservice accounts, e-commerce, and home improvement stores. In the second quarter of 2019, Monster Energy will be launched in Azerbaijan and Saudi Arabia. We are planning further international launches later this year in EMEA.

We launched Predator, our strategically-preferred affordable energy brand in South Africa in the fourth quarter, and plan to launch in certain surrounding countries in the first quarter of 2019. We're also planning launches of Predator in selected additional markets in Eastern Europe, Central Asia, the Middle East, and Africa throughout 2019.

During the fourth quarter of 2018, we launched Monster in Ecuador. We are now in track to launch Monster in Bolivia in the first quarter of 2019. We're planning to launch Monster in the Dominican Republic and Paraguay in the second quarter of 2019.

In China, we had a limited launch of Monster Ultra Light in the fourth quarter to further appeal to Monster's primary target of young affluent consumers. Ultra's innovation has facilitated expanded shelf space in the targeted top 40 cities and key accounts.

We are continuing to expand the rollout of Monster Ultra this quarter and are planning further innovation through the launch of Mango Loco in China during the second quarter of 2019. We continue the rollout of Monster across India with expansion to top 50 cities.

Monster is now selling in approximately 90% of the country with marketing initiatives now in full swing. I wanted to take a moment to address an issue previously covered on our law school, and that's our Investor Presentation in New York in January concerning our arbitration with The Coco-Cola Company.

As we reported, our various agreements with The Coco-Coal Company restrict the Coco-Cola Company from competing in the Energy Drink category with certain exceptions. Coco-Cola has developed three energy products that it believes it may market under an exception relating to the Coco-Cola brand.

We believe that the exception does not apply to those energy products. As a result, we have a disagreement with Coco-Cola over the interpretation of that exception. By mutual agreement to obtain clarification, the issue was submitted to arbitration at the end of October 2018, and that process is underway with the parties participating cooperatively.

Coco-Cola has indicated that it has suspended the proposed launch of its proposed energy products until April 2019. We cannot predict the certainty when the result of the arbitration will be published, but reasonably expect the resolution of the issue in the second quarter of 2019.

We reiterate that whatever the outcome of the arbitration, we will continue to cooperate and work together as partners.

According to the Nielsen Reports for the 13-week through January 26, 2019, all outlets combined, namely convenience, grocery, drug, mass merchandisers, sales in dollars in the Energy Drink category including Energy Shots increased by 11.3% versus the same period a year ago.

Sales of Monster grew 11.1% in the 13-week period, while sales of NOS increased 5.6%, and sales of Full Throttle increased 2.8%. Sales of Red Bull increased 9.4%. Sales of Rockstar decreased by 3.8%. Sales of 5-Hour decreased 2.1%, and sales of Amp decreased 31%.

According to Nielsen, for the four weeks ended January 26, 2019 sales in the convenience and gas channel including Energy Shots in dollars increased 13% over the same period the previous year, sales of Monster increased by 10.8% over the same period. The previous year while NOS was up 3.6%. And Full Throttle was up 4.9%.

Sales of Red Bull up 11.7%, Rockstar was down 4.8%, 5-Hour down 0.12% and AMP was down 33.6%. According to Nielsen, for the four weeks ended January 26, 2019, Monster's market share the Energy Drink category in the convenience and gas channel including Energy Shots in dollars decreased by .7 share point over the same period last year to 37.1%.

NOS's share declined 0.4 share point to 3.9% and Full Throttle's share declined 0.1 share point to 0.9%. Red Bull share decreased 0.4 point to 33.7%. Rockstar share was down 1.2 points to 6.4%, 5-Hour share was lowered by 0.8 points at 6.2%, and Amp's share decreased 0.4 point to 0.6% and is 4.9% up 4.3 share points.

According to Nielsen, in the four weeks ended January 26, 2019, sales of coffee plus Energy Drinks, which now include Caffe Monster and Espresso Monster in dollars in the convenience and gas channel increased 21% over the same period previous year. Sales of our Java Monster alone was 15.5% higher than in the same period the previous year.

Sales of coffee plus energy were 29.2% higher while sales of Starbucks Doubleshot Energy were 11.7% higher. Our company share of the coffee plus energy category, which includes Java Monster, Caffe Monster, Espresso Monster, Starbucks Doubleshot and Rockstar Roasted for the four weeks ended January 26, 2019, was 58%, up 3.7 points.

Java Monster's share on its own for the four weeks ended January 26, 2019, was 50.1%, down 2.4 points, while Starbucks Doubleshot Energy share was 41.9%, down 3.5 points. According to Nielsen, in the convenience and gas channel in Canada for the 12 weeks ended February 02, 2019, the Energy Drink category increased 7% in dollars.

Monster sales increased 13% versus a year ago. Monster's market share increased 2.1 share points to 34.5%. NOS's sales increased 1%, and its market share decreased 0.1 share point to 3%. Full Throttle's sales increased 1% and its market share decreased 0.1 points to 1.5%. Red Bull's sales increased 7% and its market share increased 0.4 point to 36.2%.

Rockstar's sales decreased 6% and its market share decreased 2.6 points to 15.4%. According to Nielsen, for all outlets combined in Mexico, the Energy Drink category grew 12.9% during the month of January 2019. Monster sales increased 8.3%. Our market share in value decreased 1.3 points to 13.5% against the comparable period the previous year.

Sales of Burn were down 18.6%. Burn's market share decreased 0.5 points to 1.2%. Red Bull's sales decreased 5% and its market share decreased by 1.9 points to 9.9%.

Vive 100 sales increased 10.1% and its market share decreased for 0.8 point to 31.1%, -- sales increased 59.9% and its market share increased 4.1 share points to 14%, while Boots market share decreased 0.2 points to 11.6%.

The Nielsen statistics for Mexico cover single months, which is a short period that may often be materially influenced positively and/or negatively by sales in the OXXO Convenience chain, which dominates the market.

Sales in the OXXO Convenience chain in turn can be materially influenced by promotions that may be undertaken in that chain by one or more Energy Drinks brands during a particular month. Consequently, such activities could have significant impact on the monthly Nielsen statistics for Mexico.

I'd like to point out that Nielsen numbers in EMEA should only be used as a guide because the channels read by Nielsen in EMEA vary from country to country.

According to Nielsen, in the 13-week period ending January 2019, Monster's retail market share in value as compared to the same period the previous year grew from 11% to 12.7% in Belgium; from 24.3% to 24.8% in France; from 18.8% to 20.3% in Great Britain; from 7.1% to 7.3% in the Netherlands; from 28.9% to 13.3% in Spain.

According to Nielsen, in the 13-week period ending December 2018, Monster's retail market share in value, as compared to the same period the previous year, grew from 10.3% to 13.7% in the Czech Republic, from 15.8% to 17.5% in Germany, from 16.6% to 18.6% in Ireland, from 13.8% to 18.1% in Italy, from 15.8% to 17.3% in Norway, from 8.3% to 10.9% in Poland, from 15.6% to 15.8% in South Africa, and from 11.1% to 14.2% in Sweden.

For the 13-week period ending December, 2018 Monster's retail market share in value, decreased from 34% to 33.6% in Greece, although the value of sales increased in the same comparative period.

According to Nielsen, for the month of January 2019 in Chile, Monster's retail market share in value increased from 33.5% to 34.8% compared to the same period of previous year. According to Nielsen, in Brazil, Monster's retail market share for the month of December, 2018 increased from 15.2% to 18.9% as compared to the same period of previous year.

We launched Monster Energy in Argentina in mid-February 2018. According to Nielsen, Monster achieved a 16.9% market share in value as of December 2018. According to IRI in Australia, Monster's market share in value for the last four weeks and in January 27, 2019 increased from 6.9% to 7.6% as compared to the same period of previous year.

Mother's market share in value decreased from 14.6% to 13.8% during the same period. According to IRI in New Zealand, Monster's market share in value for the last four weeks ending February 03, 2019, increased from 6.1% to 8.4%, as compared to the same period the previous year.

Lift Plus market share in value decreased from 10.3% to 8.7%; and Mother's market share in value decreased from 6.7% to 6.5%. . According to Nielsen in South Korea, Monster's market share in value in all outlets combined grew from 25.2% in the 2017 fourth quarter to 37.7% in the fourth quarter of 2018.

According to INTAGE, Monster's market share in value in the convenience store channel in Japan grew from 44.4% in the 2017 fourth quarter to 46.7% in the fourth quarter of 2018.

We again point out that certain market statistics that cover single months may often be materially influenced positively and/or negatively by promotions or other trading factors during those months.

Net sales for the Monster Energy Drinks segment for the fourth quarter of 2018 increased 15.9% from $736.1 million to $853.3 million from the comparable period in 2017. Net sales for the Monster Energy Drinks segment in the 2018 fourth quarter were negatively impacted by $3.2 million due to the adoption of ASC 606.

Without the adoption of ASC 606, the percentage increase in net sales for the Monster Energy Drinks segment would have been 16.4%. Net sales for the Monster Energy Drinks segment in the fourth quarter of 2018 were negatively impacted by approximately $12.4 million of foreign currency movements.

Net sales for the Strategic Brands segment were $65.8 million for the fourth quarter, as compared to $69.6 million in the same quarter in 2017. Net sales for the Strategic Brands segment for the fourth quarter of 2018 were negatively impacted by $5.3 million due to the adoption of ASC 606.

Without the adoption of ASC 606, the percentage increase in sales for the Strategic Brands segment would have been 2.3%. Net sales for the company's Strategic Brands segment in the fourth quarter of 2018 were negatively impacted by approximately $2 million of foreign currency movements in the quarter.

Net sales for the Other segment, which includes third-party sales made by AFF were $5.1 million in the fourth quarter, as compared to $4.7 million in the same quarter in 2017. Net sales to customers outside the U.S. were $274.3 million in the 2018 fourth quarter, compared to $210.4 million in the corresponding quarter in 2017.

Foreign exchange rates had the effect of decreasing net sales in U.S. dollars by approximately $14.4 million. Included in reported geographic sales are our sales to the company's military customers, which are delivered in the U.S. and trans-shipped to the military and their customers overseas.

In EMEA, we had a challenging quarter with supply chain and production issues, although less than in the 2018 third quarter, which not only affected our sales, but also resulted in a number of out-of-stocks and cancellations of orders from the retail trade in certain countries in EMEA.

As mentioned earlier, our Nielsen growth rates and market share continues to be strong in the territory. We are managing through the supply chain and production issues. Certain of our cofactors that contributed in part to these issues are back on track. Furthermore we have secured and are securing additional production capacity.

In EMEA, net sales in the fourth quarter increased 18.9% in dollars, and increased 23.2% in local currencies over the same period in 201. Without the adoption of ASC 606, the percentage increase in net sales would have been 23.8% in dollars and 28.1% in local currencies.

Gross profit in this region as a percentage of net sales for the quarter was 42.1%, compared to 47.5% in the same quarter in 2017. Without the adoption of ASC 606, gross profit as a percentage of net sales would have been 44.4% for the fourth quarter.

Gross profit in the region was also impacted by a higher percentage of Monster sales, relative to sales of concentrates for our Strategic Brands in the region. We are pleased with the rollout of additional SKUs in the Ultra range in the EMEA markets. Various SKUs in the Ultra line are now sold in 38 EMEA markets.

We are also pleased that Monster continues to perform well and gain market share in Belgium, Czech Republic, France, Germany, Great Britain, Greece, Ireland, Italy, the Netherlands, Norway, Poland, South Africa, Spain, and Sweden.

In Asia-Pacific, net sales in the fourth quarter increased 68.4% in dollars and 73.5% in local currencies over the same period in 2017. Without the adoption of ASC 606, the percentage increase in net sales would have been 70% in dollars and 75.1% in local currencies.

Gross profit in this region as a percentage of net sales was 46.1% versus 32.4% over the same period in 2017. Without the adoption of ASC 606, gross profit as a percentage of net sales would have been 46.6%. In Japan, net sales in the quarter increased 55.1% in dollars and 55.8% in local currency.

In South Korea, net sales increased 141.6% in dollars and 142.6% in local currency, as compared to the same quarter in 2017. In Oceania, which includes Australia, New Zealand, Tahiti, French Polynesia, New Caledonia, Papua New Guinea and Guam, net sales increased 12.1% in dollars and 21.7% in local currencies as compared to the same quarter in 2017.

In Latin America, including Mexico and the Caribbean, net sales in the fourth quarter increased 43.9% in dollars and 64.7% in local currencies over the same period in 2017. Without the adoption of ASC 606, the percentage increase in net sales would have been 45.3% in dollars and 66.1% in local currencies.

Gross profit in this region as a percentage of net sales was 44.7% versus 47.1% over the same period in 2017. Without the adoption of ASC 606, gross profit as a percentage of net sales would have been 45.3%.

Net sales in Brazil in the quarter increased by 30.3% in dollars and 58.7% in local currency; net sales in Chile increased 48.6% in dollars and 60.9% in local currency in the quarter. Turning to the balance sheet, cash and cash equivalents amounted to $637.5 million at December 31, 2018, compared to $528.6 million at December 31, 2017.

Short-term investments were $320.7 million at December 31, 2018, compared to $672.9 million at December 31, 2017. Net accounts receivable increased to $484.6 million at December 31, 2018, from $449.5 million at December 31, 2017. Days outstanding for accounts receivable were 41.4 days at December 31, 2018, compared to 43.8 days at December 31, 2017.

Inventories increased to $277.7 million from $255.7 million at December 31, 2017. Average days of inventory were 67.2 days at December 31, 2018, compared to 75 days at December 31, 2017.

In the fourth quarter of 2018, we launched Java Swiss Chocolate, a line extension of our Java Monster family as an exclusive launch for certain customers, and are now in the prices of national launch of Java Swiss Chocolate. Initial results have been positive.

We are currently in the process of launching Ultra Paradox, a line extension in our Ultra family, as well as Hydro Manic Melon and Hydro Mean Green in 25.4 ounce PET bottles. In addition, we are currently launching NOS Sonic Sour, a new flavor in the NOS family, as well as rebranding NOS Rowdy Punch to NOS Power Punch.

In March, we are planning to launch our Reign Total Body Fuel in six flavors. We are also planning on launching two flavors in our Dragon Tea line in March, namely Green Tea and [indiscernible] Marty. We have repositioned our Monster Rehab White Dragon Tea to be included in the new Monster Dragon Tea line as white tea.

During January 2019, in Canada we launched two additional line extensions of Monster Hydro namely Purple Passion and Zero Sugar, as well as Monster White Dragon Tea. In March of 2019, we are planning on launching three flavors of our café Monster line in the 13.7 ounce gloss package in Canada.

In Mexico, during the fourth quarter of 2018 we launched our Lewis Hamilton Energy Drink. Initial results have been positive. We are planning on launching Monster Mango Loco this quarter. In the fourth quarter of 2108, we launched Monster Mango Loco in Belgium, Ireland, and South Africa.

Mango Loco will be widely available across Europe in the first-half of 2019. Monster Mega was launched in the Adriatics. We also launched Espresso Monster and Espresso Monster Vanilla in selected accounts in Great Britain. Espresso Monster is also just launched in Germany this month.

We are planning to launch our Espresso Monster line across Western Europe in the first-half of 2019. In the fourth quarter of 2018, we launched Burn Lemonades in Russia, VPM Orange Zero in Ireland, Power Play Mango in South Africa, and Burn Mango in the Baltics.

In the fourth quarter of 2018, we executed a limited launch of Monster Energy Pipeline Punch with a convenience and gas retailer in Australia. In January of 2019, we distributed Monster Energy Pipeline Punch nationally. In the fourth quarter of 2018 in New Zealand, we launched Pipeline Punch and Mango Loco market-wide.

We have experienced manufacturing issues relating to Mango Loco product in Australia. We anticipating that we'll be able to resolve these issues and resume product supply to both Australia and New Zealand in the second quarter and re-launch at retail in the third quarter of 2019.

As I mentioned earlier, we implemented price increase of approximately 4% on our Monster Energy portfolio to our U.S. customers effective November 1, 2018. We are pleased with the initial results of the implementation of this price increase. Promotional expenses as a percentage of gross sales decreased in the quarter.

We increased the prices of our concentrates for NOS and Full Throttle effective January 1, 2019 by approximately 1.5%. We also implemented a cost increase of approximately 3% to our Canadian customers effective February 1, 2019 for Monster Energy NOS and Full Throttle lines.

We estimate that January 2019 gross sales to be approximately 2.7% higher than January 2018. On a foreign currency adjusted basis, January 2019 gross sales would have been approximately 4.6% higher in comparable January 2018 gross sales.

In this regard, we note and as explained on our fourth quarter 2017 call that the increase in gross sales of 27.9% in January 2018 as compared to January 2017, ForEx adjusted to 25.1%, was in part due to the increase in January 2018 sales, following inventory reductions that occurred in the fourth quarter of 2017 by certain of our international distributors; (B) Initial shipments of Caffé Monster and Muscle Monster, which we launched in January 2018; and (C) Moreover innovation in 2017 had a more substantial impact on January 2018 sales than innovation in 2018 has had on our January 2019 sales.

No new innovation was launched by us in the U.S. in January 2019. This year our innovation in the U.S. namely Monster Ultra Paradox and Java Monster Swiss Chocolate is being launched nationally this week, and Reign and two additional varieties of Monster Dragon Tea will be launched in March.

The increase in January 2019 sales over January 2018 sales mentioned about should be evaluated in the context of the above factors that impacted January 2018 sales.

In this regard, we are cautioned again that sales over a short period are often disproportionately impacted by various factors such as, for example, selling days, days of the week in which holidays fall, timing of new product launches and the timing of price increases and promotions in retail stores, distributor in terms of what's shipped in the timing of production, and this is where our bottles are responsible for production, and will accurately determine their production schedules, which affects the dates on which we invoice such bottlers as well as inventory levels maintained via distribution partners, which they alter unilaterally for their own business reasons.

We reiterate that sales over a short-term such as a single month or even two months should not necessarily be imputed to or regarded as indicative of results for a full quarter or any future period.

During the 2018 fourth quarter, the company purchased approximately 9.4 million shares of common stock, at an average purchase price of 56.99 per share for a total of $536.9 million excluding broker commissions.

Between January 1, 2019 and February 26, 2019, the company purchased approximately 2.6 million shares of common stock at an average purchase price of $54.18 per share for a total of $139 million excluding broker commissions.

As of February 26, 2019, approximately 20.6 million remains available for repurchase under our previously authorized repurchase program. On February 26, 2019, the company's board of directors authorized a new repurchase program for the repurchase of up to an additional 500 million of the company's outstanding common stock.

In conclusion, I'd like to say summarize some recent positive points. Retail sales statistics for many countries around the world demonstrated that the energy category is continuing to grow and that Monster is generally growing ahead of the category in line with earlier periods.

The new additions to the Monster family continue to add to the company's sales. We are excited about the prospects for our brand and our new product launches. We are pleased with our performance in our international markets, and reiterate the growth potential for us in China and India.

We are continuing with our plans to launch Monster energy drinks with Coca-Cola bottlers in certain new markets. We're also proceeding with our plans for future launches of our affordable energy brands. I'd like to open the floor to questions about the quarter and year-end, thank you..

Thank you. [Operator Instructions] Our first question comes from the line of Caroline Levy of Macquarie. Your line is open..

Thank you very much, good afternoon..

Hi, Caroline..

Hi, Rodney. Just a quick question on -- a clarification if you could repeat the January sales, that would be helpful. I think I heard 2% and 4%, but just want to clarify. And then if you could just tell us a little bit more about how things are going in China.

You mentioned about $3 million in losses in the quarter, how does that progress over the course of last year? Are the losses about where you expected them to be, do you think we will have another lost year next year and how do you feel about the progress in China overall?.

Okay. Let's just deal with the January sales. January sales were up -- sorry, 2.7% in January and on a foreign currency adjusted basis 4.6%..

So Caroline, you got the point about January '18 sales being higher than ordinarily they should have been. So we spent a bit of time just talking about that..

Yes..

Go back to the same call we had a year ago and pick up some of those sentiments that we expressed exactly the same at that time..

Okay. Oh, got it..

And I think obviously -- and then taking that into account, we have obviously also given you the Nielsen numbers for January and you obviously February, so we do caution about this being a single month on a highly stacked January from last year. Thanks..

So Caroline, just talking very briefly about China, the loss for the quarter was very much in line with what we'd expected. We are seeing a lot of what we call green shoots in China in the major chains, our volumes per outlet are very respectable compared to what we've seen for Red Bull.

And the launch of Ultra was particularly pleasing and it's growing in strength. As regards this year, we again are adjusting for a loss in China and we absolutely committed to success in that territory.

So we know it'll be an investment and we know it'll take some time to realize profitability in China and our co-colleagues have expressed and shared with us similar sentiments, but we are committed and we would believe that we will be successful in China..

Rodney Sacks:.

e :.

And just to add that the bottlers, likewise, are excited about the opportunities that the Monster brand presents for them in China..

Thank you. Our next question comes from Mark Astrachan of Stifel. Your line is open..

Hey, hey guys..

Hello, Mark, hi..

So I guess, maybe one question broadly on gross margins. I don't want to ask you for guidance or anything like that, Hilton, but I guess, the numbers were still a little bit weaker than we or probably others would've expected.

So how much of it is aluminum? I mean, I get the freight piece, I think most of it will get the freight piece, but what we don't see is how much inventory for aluminum you bought in 2008 potentially at much higher prices.

So maybe if you could talk a bit about the cadence of that kind of cycling through and when kind of directionally some of that should lessen so without actually getting guidance, but just in terms of the inputs, puts and takes to how long before you start seeing lower price inventory kind of work through would be helpful..

Well, you know, as we look at aluminum, aluminum did start coming down to us a ladder quarter of last year. We from time to time execute hedges with our aluminum can companies and we had some hedges in place for the fourth quarter of last year ready to protect ourselves against Aluminum going significantly up as it had been for most of the year.

So that's the picture of aluminum. Aluminum coming down, re-buying it at various processing, including one of our hedges hitting in at a higher price than the market price for a portion; not for all, but for a portion of our Aluminum. So as we head into 2019, Aluminum in our books would definitely start coming down.

By how much I really can't say, and I'm not at liberty to say, but it will be coming down in 2019. .

Thank you, our next question comes from the line of Andrea Teixeira of JPMorgan. Your line is open..

Thank you. Good afternoon. Hi. I appreciated your updates on the price increase internationally, and you mentioned Canada up 3% starting on February 1st. Do you think I'm just laying your comments before that your price, respect for your price elasticity in some places.

So do you think we should be thinking of that being the last price increase so far given what Hilton just said about aluminum potentially coming down, or is that….

No, I think that there are some selected countries in EMEA where we are we have taken certain price increases, and will continue to take some price increases this year. But I just don't have a list of them with me and at this point we wouldn't like to expand further on that. So there will be some.

But obviously, we will also take that into account when we look at the Aluminum prices in what it costs us going forward. .

Thank you, our next question comes from the line of Amit Sharma of BMO Capital Markets. Your question please..

Hi, good afternoon everyone..

Hi..

A quick clarification, and then a question on -- from a EMEA -- the supply chain disruptions and production issues, how much did it cost in terms of your sales growth for that segment, right, in the quarter.

And then, as we think about the gross margin in U.S., it's clearly a little bit weaker than what we were expecting, and I hear your point on the commodity, but there's also a sales mix aspect of it.

Can you unpack that a little bit, provide us some clarity that how much of a headwind that is, and how it could continue even after you overcome the commodity headwinds?.

Okay. So regarding EMEA, it's not a precise science, and unfortunately, I just don't want to give you a number for what the impact of these supply chain issues in EMEA were in the fourth quarter. We have made some stabs at the number.

We've been reviewing it continuously since the middle of 2018, but I'd rather just stay away from giving some indication of what that number is. I don't think it would be appropriate to do so. But what I can say to you is that we believe the number was in excess of a million cases, and I'm going to stop there in the fourth quarter..

Got it. Perfect, thank you.

And then gross profit impact from sales mix in U.S?.

So there definitely is an impact on sales in the U.S., and if you what we try to do is on the call is prioritize the reasons for the decrease in gross profit and you'll notice from the call that number one was the increases in certain input costs such as aluminum cans, freight in and other input costs.

Secondly was our geographic sales mix, where our International sales are increasing as a percentage of our total sales and our foreign operations generally have lower gross margins as you heard on the call. And the third reason was the domestic product sales mix.

So, while it was definitely a factor and will continue to be a factor with the different products that the company has launched, but in the fourth quarter, it was the number, the third reason and was not the first or the second reason.

And I'd also like to stop there because when you look at our new products that will be rolled out this year particularly the new Ultra Paradise and the Reign products they will all be at the more traditional launch the margins and not at the coffee margins. So they will be higher than the coffee margins..

Thank you. Our next question comes from the line of Laurent Grandet of Guggenheim. Your line is open..

Yes, good afternoon Rodney and Hilton. I do have a question on Reign.

I noticed on the packaging doesn't carry any reference to Monster the clue or even on the back it says I mean the company manufacturing it is the Reign beverage company, so I'm curious to understand why you are not leveraging your brand name as it would be a bit more A&M intensive to launch a new brand from scratch, I'd like to understand also the first reaction from the trade on the Reign?.

Well, let me just talk about that. We the positioning of Reign is different to the positioning of Monster and we've made the strategic decision to not in fact make Reign a line extension of Monster.

It needs to we think it should be positioned have its own positioning, its own marketing, create its own personality and that we believe will give its best chance of success. We already have an extensive range of products in Monster that appeal to consumers. They have their own personality and identity.

So we just felt that this was the appropriate thing for us to do. This doesn't mean that in the future depending on this performance category, its longevity and the size that it grows to what we believe it will expand the energy category. What it does, we will look to what we want to do in the Monster range.

There is no limitation on us in having line extensions or maybe a subfamily of products in this performance energy range with BCAAs or whatever else we want to do with a sort of a slightly different energy formula formulation. And that's something that we're looking at and open to doing, so that doesn't preclude us.

We just feel that and in fact it's better. And it does enable us to position the brands differently and get more shelf space.

We think that would have been more pressure on our existing shelf space had we simply launched line extensions and we do have a number of additional line extensions which we are planning for months that we've already described a number of them to you that are being launched.

We actually have additional launches and sub launches planned for Monster later in the year. So we've got quite a full plate for Monster and you can't do everything under one brand and that's the reason that we've positioned it as we have..

And I think it's also important to note that we're continuing with rollouts of Friends under the strategic brands and new flavors. So we're not neglecting the strategic brand segment either..

Just as regard to retailers again, where it's being rolled out in March. So it's premature but the acceptance from retailers and to the brand to the positioning to the taste profile that we've done in the packaging has been very positive. We're actually very happy with it and we are going to have a focused and concerted rollout in March..

Thank you. Our next question comes from the line of Kevin Grundy of Jefferies.

Your question please?.

Thanks. Good afternoon..

Hi, good afternoon Kevin..

Quick cleanup question I hope, I know your inclination and the pension historically has not been to guide but Hilton can you just confirm for us that given the moving parts and you understand the comments are in input cost and mix and but you have full-year pricing going in, do you expect gross margins to be higher and you could just confirm that that would be helpful.

And then Rodney on pricing, can you talk about Red Bulls pricing posture. So from a U.S. perspective, they clearly haven't followed yet. Is that concerning? Is there a point at which you consider rolling back pricing or promoting it back through trade and then maybe internationally, what are you seeing from them.

Do you think will be further opportunity to price beyond what you've outlined on this call? Thank you for that..

Kevin, I'll just take the last question first. Red Bull obviously has made a strategic decision once we had announced our increase to be aggressive in some of the promotions, more so that in previous years and to try and pick up some volume in share. Would that be losing for some time. We've seen that, it doesn't affect us.

We've I think been successful at what we strategically intended to achieve and we're not intending to roll back any pricing at this time. We're satisfied with where we've got with pricing and we think the pricing is fine. And so we don't believe that Red Bull will continue because it's going to hurt their margins and they won't continue indefinitely.

But that's -- we can't speculate as to what's in their heads but whether they do so or not. We don't believe that would be a factor for us or any materiality quite frankly and so we're moving forward with our plans..

So just to add a little bit to that, the price increase that was planned was really carefully planned in relation to Red Bulls pricing where there were significant gaps between our price on shelf and where Red Bull was at that time. And what we were able to do with our price increase was move us closer to the Red Bull pricing.

So if you look at the -- at the pricing in the 4% that we implemented, the objective was to get pretty close to where Red Bull had their products priced in the market. And obviously we're only talking about the U.S.

And then on your other point on gross margin, you know Kevin, I didn't have to give you guidance because we don't give guidance, but you've got all the facts, you know that aluminum is coming down. We've said that freight costs are continuing to increase.

You know our geographical sales mix because we've spoken about that there and we've also spoken about our new products and that the new products are largely going to be focused on better margin products. So you can come to your own conclusion.

I think you know where I'm heading, and how can I give any guidance or any discussion on margin, but I think that's enough for you to able to work it out..

Thank you. This concludes our Q&A session. At this time, I would like to turn the call back over to Mr. Sacks for any closing remarks..

Thank you. On behalf of Monster, I would like to thank everyone for their continued interest in the past. We continue to believe in this company, and our growth strategy remains committed to continuing to innovate, develop, and differentiate our brands and to expand the company both at home and abroad.

And in particular, expand distribution of our products through the Coca-Cola bottler system internationally.

We are also particularly excited about new opportunities that we have going forward with the portfolio of Energy Drink products throughout the world comprised of our Monster Energy Brand together with our Strategic Brands as well as Hydro, Mutant, and in particular Predator and Reign. Thank you very much for your attention and your attendance..

Ladies and gentlemen, this concludes today's conference. Thank you for your participation. You may disconnect your lines at this time..