Good day, ladies and gentlemen, and welcome to the Monster Beverage Corporation Third Quarter 2015 Financial Results Call. At this time all participants are in a listen-only mode. Later we will conduct a question-and-answer session and instructions will follow at that time. [Operator Instructions] As a reminder, today's conference call is being recorded. I would now like to turn the conference over to Rodney Sacks, Chairman and CEO for Monster Beverage Corporation. Please go ahead.

Good afternoon, ladies and gentlemen. Thank you for attending this call. I'm Rodney Sacks. Hilton Schlosberg, our Vice Chairman and President is with me as is Tom Kelly, our Senior Vice President of Finance. Before we begin, I would 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 which 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 March 2, 2015, as well as our most recent report on Form 10-Q filed August 10, 2105, including the sections contained therein entitled Risk Factors and Forward-Looking Statements for a 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 designated with asterisks in the condensed consolidated statements of income and other information attached to the earnings release dated, November 5, 2015. A copy of this information is also available on our website at monsterbevcorp.com in the…

0.06.

0.06 million shares at an average purchase price of $134.12 per share. The company has approximately $250 million available under its current board authorize repurchase program. Turning to the balance sheet, cash and cash equivalents amounted to $1.2 billion compared to $370.3 million at December 31, 2014. Short-term investments were $1.5 billion compared to $781.1 million at December 31, 2014. Long-term investments decreased to $34.4 million from $42.9 million at December 31, 2014. Including short and long-term investments our auction rate security is $1.5 million, which are now being redeemed in full. Days outstanding for accounts receivables were 43 days at September 30, 2015 and 36.4 days at December 31, 2014 compared to 38.5 days at September 30, 2014. Inventory decreased to $159.7 million from $174.6 million at December 31, 2014. Average days of inventory was 49.4 days at September 30, 2015 which was lower than the 57.4 days of inventory at December 31, 2014 and lower than the 62.9 days at September 30, 2014. In November we will be launching Pipeline Punch as well as Ultra Black nationally. Our reposition of Monster Energy Rehab, Juice Monster and Punch Monster lines all continue to make good progress. We are planning to launch additional new products early in 2016. Gross sales in October 2015 in dollars adjusted for the advance purchases I referred to earlier were approximately 6.8% higher than October 2014. In local currencies gross sales in October adjusted for the advanced purchases I referred to earlier were approximately 10.6% higher than in October 2014. October 2014 included the old warehouse division and Peach Tea. October 2014 comes to a high. October also had one less selling days in October 2014 and was also negatively impacted by the production issues experienced in Great Britain. We caution again that sales in…

Ladies and gentlemen on the phone lines [Operator Instructions] And our first question comes from Kevin Grundy of Jefferies. Your line is now open.

Hey, thanks. Good evening, guys.

Good evening.

So first a broader question and then just a couple brief modeling questions. First, can you talk about the investment that you think is going to be necessary specifically in Russia and China with your big opportunities, but relatively going to be new markets for you? Talk about what sort of lift you're expecting there, how you're defining success and then if you could touch on the investment piece? And then a modeling question for you, Hilton. Just margins were particularly strong in the quarter. What we should expect there for the balance of the year going forward? And then some guidance on the long-term tax rate. Thank you very much.

I think that much of what you're asking is really forward-looking, which we have historically not given and we're not going to give. So the large part of your question will remain unanswered. We don't believe there is - at this point, our intention in launching in Russia is not going to be different to the way we have historically launched. And there may be some changes in China but it's too premature for us to even make that decision. We've not made it. We are at the moment evaluating the market and how we're going to go to market in Russia. Again, we do not believe that those would be extraordinarily high or different in any way to how we've gone in the past but it really is premature for us to give you any real indication on that. With regards to the tax rate, Hilton will give you some response on that going forward and I'll hand over to him.

Okay. Kevin, there were two questions you asked. One was about margins and, as you know, we do not give guidance. However, what I can tell you is that we took a price increase on certain of our Monster 16-ounce line effective August 31. So we had one month of sales with increased prices and there were buy-ins in that period as well, which we referred to, and there were some buy-ins in September. So you can factor that into your analysis. The second thing is we have looked at the tax rate and we believe here and obviously we stand corrected but we think our tax rate should be more normalized at about 37.5%.

Very good. Thank you, guys.

Thank you. And our next question comes from Mark Astrachan of Stifel. Your line is now open.

Yeah, hey. Good afternoon, guys.

Hi, Mark.

Just a couple of logistics modeling type questions. Could you give the split of your legacy business sales in the U.S. and international so we can get a sense of the comparisons there? And then separately, just curious how you think the price increase has impacted your market share and volumes just broadly? And then sort of market dynamics, I know there's been a lot made of a strange weeks' worth of data in the scanner services. So curious if you could comment on that. And obviously in the context of the weaker results in October, sort of hearing what you're saying, how much of that is the pieces that you were talking about, the moving parts versus underlying weakening and in demand for you or just the category broadly?

Yeah, just to start with the Nielsen in October, the months particularly of October was sort of a choppy month. And we just think that it's the timing of promotions, the timing of launches. Things are sort of - with all these other factors, we think they did have some influence over it. We don't believe that it will be ongoing but we believe that the rest of the quarter will improve. But we still see strength in the category. We have a number of new products launches planned for the beginning, early next year and running through a number of quarters next year. So we believe that you just should not have that high regard or influence on the single month's numbers. With regard to the split between the legacy, we've given you that split throughout the company. We haven't divided it into the U.S. versus the rest of the world. And I don't have that debt number about what we've done it. We look at it in country by country and regions. So I don't have that really but I'm not sure that we should be providing that information at this point we know because then that starts creating other issues and segments. And so at this point we'd like to just leave it at the Finished Products and Concentrates segments as a group going forward.

Okay. Thank you.

Thanks.

Thank you. And our next question comes from Caroline Levy of CLSA. Your line is now open.

Could you just clarify, when you said October's up 7%, was that including international? That was a worldwide number?

Yes.

Okay. And 10 if you exclude the advanced purchases?

Forex.

Oh, that was forex?

Yeah.

Okay. Sorry, sorry. Would you be able to give us the breakup - I mean your case sales seem to include Concentrate, which then distorts what your Finished Product, we can't get at what Finished Product grew or what net revenue per Finished Product case looks like. Would you be willing to share that?

So you're looking for a break out again of the Finished Product cases and we, again, this is...

We haven't - you'll see the statement information. You'll see Finished Goods and you'll see Concentrates in the Q, which we're hoping to release tomorrow or Monday. So you'll have that then. And we're looking forward as whether it will make sense to give case numbers.

Because I think it's very hard to model something if we don't have an idea of what volume pricing - and you give us contact I think by division, but we need that volume in pricing by division, if at all possible. So anyway just lastly, could you talk - getting back to share loss, which is what we're seeing in the measured data and we actually haven't seen that for several years. And then a few months ago Red Bull started growing significantly faster than you guys. And I thought maybe with the price increase you would catch up but it doesn't appear to be happening. So are there any other dynamics over the past couple of months that would have affected that other than launch timing?

Well, again it depends on how you, you've got to look at the two-year step numbers and where we were. So those have quite a big impact on share, or if you take share loss. Red Bull's numbers are basically been a percent or two above ours generally. And but again, they had - they took a price increase in January at a slightly higher level which seems to have stuck. We are really just starting to try and get the - our price level solidified. But if you look at cases and units, then our market share in fact increased and ahead of Red Bull's.

Thank you. And our next question...

So and that's what I'm a little confused about, Caroline, because we mentioned on the call today that in convenience, which is a major sector, our share's actually higher than Red Bull's. So what you're looking at is year-on-year historical 2014 versus 2015. But if you look at the actual share, our share in convenience according to Nielsen is bigger than that of Red Bull.

And it's been trending that way for the last three months. We've been increasing share. So these figures are sometimes - you've got to read, depends how you read them.

Thank you. And our next question comes from Pablo Zuanic of SIG. Your line is now open.

Hi. This is - good afternoon. This is actually Atisha on behalf of Pablo. I have more of a strategic level question. For the markets where you're planning to keep your distributors, what kind of emphasis will be played on the energy drink brands acquired? And can we expect any kind of attrition cannibalization of those brands? And on the flip side, where you will be moving to the new Coke system in the countries, should we expect some attrition for those brands? And if not, how will those brands be segmented in those countries.

I think that we don't believe there will be any attrition in our business. The whole strategy is that in those countries that we stay with our existing distributors like Japan, then they will stay with whatever portfolio they have and if we have portfolio that we've acquired, in Japan there just isn't one but in other countries where there is one then that will be managed through the Coke bottler. We've taken assignment of the Coke distribution arrangement or contract and that will simply be managed. In the cases where we are going to transition Monster, we are going to transition them and the outputs are managed separately. You've got Monster going into that bottler and we obviously have bought and paid for the strategic brand and we are going to manage those brands. It is our job basically to try which is different to how Coke obviously looks at their competitors, but now that we have both brands in our country, we're going to look to try and segment them and position them differently. But they both are important brands they both are, in each country good contributors to our bottom line and to our growth as a company and to giving us a stronger position, overall in the energy category in that country if you aggregate the two brands, in many countries it gives us a very strong and leading position, which I think also helps us. And obviously from a management point of view, where we can use the same stop we will try to rationalize it. But in some cases we feel you do need additional stops to take in focus on their own brand in a country. So I don't' think there will be attrition. The attrition will come from if the brand is not strong enough in a particular country to sustain its distribution or shelf space then there will be attrition but obviously we're going to try and put focus on this and try to avoid that. So at the moment, obviously we are going through a learning curve with some of then we brands. We are repositioning the new brands, we are looking to redesign them and reevaluate their size, containers, and whether we need a different size or a single size. Some of them there are too many size containers and different flavors in different countries for the same brand. We are trying to rationalize some of these and improve some of the flavors. We have plans to introduce some innovation and some new flavors for these brands, these strategic brands in 2016. So we are positive about them and that they will be managed differently and they will be managed separately, but we obviously are looking to put support behind and to do our best with all of the brands that we have in our portfolio with the energy focus. That remains our focus in that category.

Thank you and our next question comes from Judy Hong of Goldman Sachs. Your line is now open.

Thank you. Hi, everyone.

Hi, Judy.

I have two questions. One is, Rodney, just a little bit more color on China as you think about 2016. One, just in terms of the clarification on where you are on the approval process. I think you said you're still expecting to launch in the first half. Any risk that it gets delayed into the back half? And then just in terms of distribution opportunity, just given the strengths of the Coca-Cola system in that country, do you expect to see distribution ramp up pretty quickly in China versus some of the other countries that you've entered? And then the second question is really on return of capital that you, in prior calls, you have commented on the Board actively looking at ways to return more cash to shareholders. Obviously, you still have a pretty sizeable cash balance on your balance sheet. But any sort of update in terms of the Board's willingness to actually take on some leverage and return even more cash to shareholders?

I'll let Hilton answer the second one. I'll address the first one, which divides the questions up. On distribution in China, we are looking at going into China not very differently to how we've addressed most of the markets where we believe we have the best prospect of success. And again, without having taken a final decision, it is unlikely that we're going to have some sort of massive national launch with big TV campaigns behind it. We like to go into a country, we'll take a number of areas or types of chains or class of business and focus on that and roll it out. And it may mean that it takes some time. It doesn't - it may not go through all of the provinces. China is very, very big. It's like saying in America, how would we launch? Well we launched in America in one county, in San Diego. And we launched in one county in Northern California. And then you sit down and grow from there and develop it. We think that that type of launch, and not necessarily one county, I mean one city, but that type of launch is far better. If it's a smaller country, it's a lot easier to get your distribution up. But China is a massive country, it's like a continent. And we're still working through the strategy as to how do we launch, where do we launch, what cities do we launch in, do we launch a little slower in two different or three different types of cities, more modern or a little more traditional, get the responses and see how we position the brand. We're going into a new market with new culture and new consumers. And it is very, very, we believe, a great opportunity for the…

Judy, the Board is still reviewing options with regard to return of capital to shareholders and we will update shareholders once this decision has been finalized. At this time, no final decision has been taken how best to accommodate a buyback. You also asked a question about leverage and I think my answer is the same answer I've given in the past. Some of us may have a - personally have an aversion to that but it's a Board decision and the Board will determine what's in the best interests of shareholders and the company. So just watch this space. That's all I can say.

Great. Thank you.

Thank you. And that concludes our Q&A session for today. I'd like to turn the conference back over to Mr. Sacks for closing remarks.

On behalf of Monster, I'd like to thank everyone for their continued interest in the company. We continue to believe in the company and our growth strategy, and remain committed to continuing to develop and differentiate our brands and to expand the company both at home and abroad. We are particularly excited by the new opportunities that we have going forward with a robust portfolio of energy drink products throughout the world comprised of our Monster Energy brand together with our newly-acquired strategic brands. We believe that our agreements with the Coca-Cola Company will enable us to focus on our core energy business while leveraging the strength of The Coca-Cola Company's powerful distribution and bottling system on a worldwide scale. Thank you very much for your attendance.