Good day, ladies and gentlemen, and welcome to the Monster Beverage Corporation Fourth Quarter and Year-End 2013 Financial Results Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. I would like to introduce your host for today's call, Mr. Rodney Sacks, Chairman and CEO. Mr. Sacks, you may begin.

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 today; 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 1954 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 1, 2013, as well as our most recent report on Form 10-Q filed November 8, 2013, 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 February 27, 2014. A copy of this information is also available on our website at monsterbevcorp.com in…

[Operator Instructions] Our first question comes from the line of Amit Sharma with BMO Capital Markets.

Rodney, you talked about France and the reformulation of product in France. Is that likely to have any ongoing sales impact in France, or do you see a similar tax initiated in either of the markets in Europe?

We saw a similar tax initiated in Hungary and then in Mexico. And in Hungary, they put in a tax that was really high and the result was most of the energy drink companies reformulated in a different way and nobody paid the tax because it was just completely onerous and just not pragmatic. They then reformulated and they've redrawn the tax I think 3x now and they introduced tax now at a very much lower rate, which was -- which really made sense and was commercially realistic. And we reformulated and it didn't have an effect to ourselves, we have now gone back to reformulated based on the [indiscernible] tax and sales have come back. We did reformulate in Mexico and it didn't affect our sales and so, where we had the experience that we have reformulated, we've actually been able to continue. We found that the [indiscernible] labels that we were able to put in or [indiscernible] the ingredients were satisfactory. And so we believe we'll be able to reformulate and we don't believe that it will affect our sales in France. And we're just -- but obviously, we don't know exactly how it will pan out and what the government may do if they don't get the taxes they were hoping to get. So we'll see where it goes from there.

Great. And if I may ask one more. In the U.S., you had talked about the adoption, if everybody adopts new regulations to marketing. Now can you talk about what is your exposure to 14- to 18-year-old here? And if you adopt some voluntary marketing restrictions, what impact might have that on your sales here?

Well, firstly, our primary demographic, which we've said from the -- when we first launched products in the energy category 16, 17 years ago when we launched Hansen's energy, was that our primary demographic is young adults 18 to 34. And that has since expanded a little more to 40 -- up to 45-plus. People, both above and below that age will consume our products. But that isn't our primary demographic and we don't focus our marketing efforts on people outside of that demographic. So we really don't believe that the issues of adolescents would have a [indiscernible] effect on our business. But if we look at those guidelines, the guidelines that had been proposed at this point do not affect adolescents, they are focused on marketing to children, the ADA and the FDC generally define children as under 12, many people define children as 12 and under, but that's the sort of range. So it's really focused on children and not on adolescents. And as we've said right from the beginning again, our products were not -- have not been recommended for children, we don't believe that children are consuming our products and our products are fine for adolescents and, again, but we don't believe that would be addressed by these guidelines -- be affected by the guidelines.

And our next question comes from the line of Mark Astrachan with Stifel. Mark S. Astrachan - Stifel, Nicolaus & Company, Incorporated, Research Division: Wanted to quantify the gross margin impact in the quarter. So how much of the inventory damages in reserves are took down to gross margins? So what would've been on a normalized basis, that's question one. And also one while we're housekeeping, what the impact of FX was in the quarter, as well as on net international sales?

Mark, we gave the impact of FX in the statement. I'm not sure what more you're looking for on FX. Mark S. Astrachan - Stifel, Nicolaus & Company, Incorporated, Research Division: Well, I want to know what the impact was on the top line so not just what you're talking about in terms of the impact that you quantified in the release.

Well the impact to the top line is not material at all. There are some gains and there are some losses [indiscernible] . I mean, it resembles and you take individual countries that become [indiscernible] sure, it was very material in Japan but not in other countries but overall... Mark S. Astrachan - Stifel, Nicolaus & Company, Incorporated, Research Division: Overall, that's fine.

Yes. Mark S. Astrachan - Stifel, Nicolaus & Company, Incorporated, Research Division: What about the net international sales and the gross margin piece, please?

On the gross margin, the excess, I don't have the exact -- an exact figure, but it's around about the $6 million level as we think was excess of -- in damages and -- higher than we would normally see in that area. But that's an approximate. Mark S. Astrachan - Stifel, Nicolaus & Company, Incorporated, Research Division: Okay, great. And then, just sort of broadly thinking about international profitability selling expenses. How should we think about those numbers on a go-forward basis? The selling expense is down year-on-year on an absolute basis. You talked about putting some of the promotional activity on the distributor. So is this sort of a shift now as we look forward that maybe perhaps we start seeing some international profitability and the selling expense numbers are sort of the good ones to use on a run rate basis, the one we saw in the fourth quarter?

I think that we are trying to conservatively manage our costs without clearly focusing on cost management, particularly with international, with a view to getting profitability across the board. There are many countries that are already profitable in some of the earlier countries or smaller countries that it's been harder to get enough scale of sales to offset the costs of trying to run small countries that they -- it is fragmented. But as that continues to improve, we do -- we are hopeful that by keeping the top [indiscernible] on cost, we will get -- be able to improve our profitability. We also did refer to some realignment on some of our -- we had spent -- we have pulled back on some of our sampling, our net activities, [indiscernible] ourselves, where we were sort of supplementing and helping our distributors in some countries and we probably were over -- we had too many heads, so we sort of realigned that going into the fourth quarter and we will start to see a lot -- more of those benefits coming through the 2014 year. So we are looking to obviously get to a profitability position internationally. We are optimistic but at this point, we need to see how the next couple of quarters pan out.

And of course, local production will help, local production in Japan, local production in India.

Yes, And then South Africa, I think that we also are planning I think later in the year. We are opening up some additional plants in southern Europe, which will help reduce some cost. So again, that is will be one of the material impacts that we think that over the course of 2014, we will probably open up quite a few additional production sites, which will be helpful.

And our next question comes from the line of Dara Mohsenian with Morgan Stanley.

So in the U.S. scanner data, we clearly saw a nice rebound in retail sales in Q4, both for your business and the energy category. You seem more bullish at the January Analyst Meeting. But since then we've seen a slowdown in the February scanner data. So I was hoping for some perspective and if you think that's primarily weather-related? Or are there other factors at play that could linger longer-term? And I guess, just taking a step back and parsing through this volatility, are you comfortable that the energy drink category is on better sustainable footing now at this point versus some of the weakness we saw last year?

That it's a lot more is a sort of we're not sure, I mean, that would be we'd be guessing, but I -- we think that weather has -- we never like referring to weather. One of the things we've never been weatherman in this company as opposed to some of the major soft drinks companies but we are all right of getting to a point where we are actually -- but I think it is correct. I think weather did have an effect. I think the weather has been exceptionally harsh in the East. And in many cases, it actually has affected our distributors' ability and some of our men in different -- to actually go on that we deliver and that hasn't -- it's something that we experienced over the last few years. This is something that is unusual. So we do think that weather has had some impact on the category as a whole. And we are hoping that once we get through the next month or 2, weather will start improving all over and particularly in the East and we will -- things will return to normal. We think the -- we feel quite good about the category, about the growth and that it has sort of returned to better levels. But again, depending on what happens on the regulatory front, it has been quiet and that might have an impact. But on the one hand, on the other hand, it's been going on now for over a year so I think a lot of consumers are basically starting to get tired of it and it's becoming old news. And we still feel very comfortable with the science and the safety of our products.

Our next line -- our next question comes from the line of Nik Modi with RBC Capital Markets.

If you could just kind of dig in deeper to Dara's question, the energy drink category certainly had a nice recovery over the last several months. And I'm just curious, maybe if you could correct in context on -- is this new consumers coming to the category? Is this kind of existing consumers getting back to normal consumption behavior? Any context you can provide around some of the consumption patterns would be helpful?

We simply don't know. We read the results, and -- but we just don't have -- and also, I can't give you good numbers [ph] , I would be guessing. So I just can't.

Our next question comes from the line of Bill Chappell with SunTrust.

Just following up on Mark's question earlier. I missed, what were the $6 million in damages, was that in Japan store or is that somewhere else? And is that expected -- anything to carry over into 2014?

We don't -- it was widespread. It was one of those interesting situations where we had widespread damages in reserves across-the-board. Some in Europe, some in the U.S., some obviously in Asia.

Yes, Asia the [indiscernible] one of the problem areas and as we continue to [indiscernible] local production, we believe that will lower our cost of goods there, improve our margins and also, reduce -- eliminate the damages of concern. But it really -- it was spread all over.

Okay. Rodney, just thought on the kind of roll out this year, just trying to understand, I mean, are we seeing most of the new, be it Red, be it Peanut Butter Cup in the market now, or will that kind of phase-in, I mean, do you expect bigger launches as we get closer to summer?

Well, Red has gone up and that's picked up quite nice distribution and that's -- in the Muscle Monster line, the actual Muscle Monster line is only about a 50% level. So we are rolling out Strawberry and that's going to pick up. We will be rolling out Peanut Butter to the general market probably in May. The new Punch line is going up as we work it through old cans and inventories, we are not sort of basically discarding any of the old inventory, so that it's starting to get onto shelves now and really by -- we expect by the end of March, early April or so, that will be pretty well distributed. There are 1 or 2 new products we are looking at. And at this point, those are sort of slated for midyear.

But we should mention that the Peanut Butter is in exclusive distribution with one particular customer group.

At this point, that is correct and then the general market will go out in about May, I think it is.

That's good.

Our next question comes from the line of Caroline Levy with CLSA. Caroline S. Levy - Credit Agricole Securities (USA) Inc., Research Division: I'm just trying to understand on -- it's taking as long as it is to get local production going, for example, in Japan. It seems to have been pushed out a little bit over time and the damages become increasingly an issue. So what are some of the challenges you face because it's hard to imagine why it's so difficult?

I'll tell you why. In Japan, we launched Monster in a slim can, the 11-ounce [indiscernible] slim can. That can was not a can manufacturer available in Japan. So we actually had to contract with a can company to have molds made and to actually have the can specifically made for us. Once we had the can made, we had to then get changed parts made on a line at which we're doing and we are testing and we're dealing with seaming issues now and production issues for really a new can that is not being run and -- on Japanese line with particular manufacturer. So this is why that has been an unusually long process. Normally, the process to get a packer up and running, you will need lesser amount of change parts maybe a share mixer or the RO water, which we require, those are 2 things that we find generally we do need to usually have our packers purchase and install. And those are usually shorter timelines, not as much complications in getting it up and running and getting quality right. So that is the reason that we've had with Japan. Then you normally have the issues of flavors and waters, the Monster Flavor, particularly the Green is very sensitive to different types of water, even though you use RO, RO has different meanings and there are different levels of minerals that are left in it. And they generally -- you'll -- you can come -- working with 1 factory works the first time and other factors, we've had a real problem with the factory in Spain where all our flavors are fine except the green. We simply can't get green with the right taste. So it's been nearly 9 months of trials and retrials in Spain to get green done. But the guys up and running with the other ones in the [indiscernible]. So we just had some production issues, the flavor is very delicate, particularly the green flavor, and that is the reason -- once we get going and we get the right authorizations in, for example, in India, that will be a shorter production issue. The issue with South Africa is similar, they don't have cans, they don't make the 500-milligram cans, it's not available. We actually are contracting to try and get cans shipped to South Africa in the short-term, and then, they will be in local production on 500, they are introducing that size towards the end of the year. So we are hoping, we actually can get production towards the second -- early in the second half of the year with the imported cans which will be slightly more expensive but then we'll go through local production. So those are the challenges we're having in addition to the normal production challenges we have. As I said, with water and mixing equipment, et cetera.

I think it's also important, Caroline, to understand that we go with the package that we feel has got the best success in our market. That's why in Japan, we went for a particular can, because we felt that would have the best success. And I think that performance to-date has proven that, that was a good move. But the can is not commercially available yet, but it will be shortly.

I think one of the reasons that maybe distinguishes us from many beverage companies is that in the case of -- a usual beverage company, they will simply use the package that is easier to produce and that is locally available. And it doesn't -- they don't focus on being different and being unique and I think that is -- we do, we really do, we've done it all our lives here. And we would rather take the time and effort to get into a package that is different and that is unique than rather just follow the herd and just take a normal -- we could use a normal 12-ounce package like a soda can and do it, but we think that is the reason why we've been able to make Monster different and that was one of the reasons. And it is important to stay true to that, so it has taken more time. We understand that. But it will come together, it's just it has taken more time than we would have liked them.

And our final question comes from the line of John Faucher with JPMorgan. John A. Faucher - JP Morgan Chase & Co, Research Division: Wanted just follow up on one of the things you mentioned in the call, which was severance payments in Europe, related to your restructuring. Is that related to some of the changes in the contracts you're trying to work out with the distributors?

No, that is completely separate. This was just in anticipation of possibly, sort of maybe being more optimistic about where the category was going in sales. I think, we ramped up with there and just found that we had our MET teams and TDMs were probably too large. We looked at our margins and the available margins and this really had to trim down and get that down to a more manageable level and to grow a little slower. So we looked -- that was the restructuring and that was pretty much and by and large in Western Europe. This is during the last -- the fourth quarter. John A. Faucher - JP Morgan Chase & Co, Research Division: Okay, great. And then one other sort of quick follow-up on India. At the Analyst Meeting, you talked about moving into India maybe a little bit sooner than you had planned because the right distributor came up. I guess, how should we think about the run rate there, is this a market where you think it -- we should -- we need to be patient and it's going to take a long time to develop?

We think you need to be patient. We think ultimately, the market is a very big market but as the moment, the Ultra Premium energy drink market is a small niche market from an affordability point of view. But we think that will continue to grow just as the country starts to expand and grow. So we see the energy category being a much bigger market down the line. I mean, it's obviously you know that population is up. But in the short term, it will be a smaller niche market and we are hoping to grow as we did in Japan was to hope to actually grow the market as opposed to simply trying to get a share of the existing market, but a lot of logistical issues in Japan in getting product from -- through the different cities where we sort of primarily focused our launch on a couple of key cities, the 2 main cities, obviously of Delhi and Mumbai, and a couple of the other major ones sort of -- as well. But those -- that's been the focus and as we continue to grow, we will be able to roll it out more.

And as we have mentioned and spoken to our analysts in the past, we'll continue to lose money in India until we are able to achieve local production.

In some ways it's good enough to sell too much because -- well there's more per can. But we are going to get there and we hopefully will get to local production or so reasonably, reasonably soon, going forward.

I'm showing no further questions at this time and I would now like to turn the call back to Mr. Rodney Sacks for any further remarks.

Thank you very much. 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 reiterating, and I can do it enough in times, that our products are safe, are properly labeled and the caffeine content of a Monster at approximately 10 milligrams per ounce is less than 0.5 milligrams per ounce of the caffeine levels contained in Starbucks and other coffee house, brewed coffee. Thank you very much for your attendance.