Good day, ladies and gentlemen, and welcome to the Monster Beverage Corporation First Quarter 2014 Financial Results Conference Call. [operator Instructions] As a reminder, this conference call is being recorded. I would now like to introduce your host for today's conference, Mr. Rodney Sacks. Sir, you may begin.

Good afternoon, ladies and gentlemen. Thank you for attending this call. I'm Rodney Sacks. Hilton Schlosberg, our Vice President and President is -- 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 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 3, 2014, 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 this course -- 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 May 8, 2014. A copy of this information is also available on our website at monsterbevcorp.com in the Financial Information section…

[Operator Instructions] And our first question comes from John Faucher from JPMorgan. John A. Faucher - JP Morgan Chase & Co, Research Division: Want to talk a little bit about the margin expansion in the quarter and, Rodney, can you talk a little bit about, particularly on the gross margin line, with the gross margin up a lot this quarter, how are you -- how should we look at that in terms of maybe some favorability of raw material trends versus some of the more structural changes you're making in terms of moving the manufacturing more to the local markets? And then, also, if you can give us a little bit more color on the SG&A leverage, which was very strong in the quarter. Are you finally getting to that point in some of these markets, you talked about European being positive, where you're really getting solid leverage on some of the marketing investment you've been making for the past couple of years?

Well, let's just deal with the margins. I think, sales mix is clearly one of the most important factors that has influenced the margin change. This can be seen from the fact that we've had the very successful increase in sales of our Ultra margin -- Ultra line. The Ultra line cost-wise has a lower cost of goods than some of the other lines, particularly lines like the juice lines or any of the java lines or Muscle Monster lines. So when you weigh the numbers, clearly, that has helped our margins. And we also had, as we indicated earlier, some cost of goods as well. Also sales of Peace Tea, in many cases we've gone away from the $0.99 price, pre-priced cans, so our margins have improved slightly on Peace Teas. We've also been able to lower some freight expenses, we reinstated a co-packer in the Texas market, which is a pretty big market for our product, which, if you eliminated a lot of freight we were incurring in shipping product into that market from surrounding states. So when you take into account the fact that you're looking at the substantial volume we've actually been able to achieve, look at the Nielsen's on the Ultra line, and being a lower-cost item, that has primarily been the primary source of the extra margin. We also had to put of our pricing on 24-ounce and that is starting to show through on the margins as well. And that package is also starting to come back and do quite nicely. The -- with regard to the operating expenses, one of the large differences was incurred in basically the cost of premiums decreased due to the gear promo, which was very successful promotion we've done in past years, but it was costly promotion, in supplying gear and sending it out to consumers. And so we had alternative promotions this year, which we felt were good, but didn't involve us in having to contribute as much back to the consumer through benefits. So that helped us quite a bit. We also, as we indicated, we sort of basically took a closer look at International Operations. We pulled back on a number of expense items, some sampling and sales people in the markets. We also pulled back on some sponsorship opportunities and promotions internationally, with the result that we -- overall, we've just been able to, in fact, reduce our selling expenses, which has been very fortunate for us. If we just look at -- we also have the effect, as we indicated earlier, of the distributed termination costs, which is a large item, which hit our P&L last year in the comparable quarter. So clearly, we are getting to a point now with the steps we've taken to operate more leanly overseas. We are getting positive profits from Europe now and we actually -- we believe we will continue that sort of trend going forward.

And our next question comes from Mark Astrachan from Stifel. Mark S. Astrachan - Stifel, Nicolaus & Company, Incorporated, Research Division: I guess, I wanted to dive a bit deeper into the April number, the plus 7.8%. Maybe just talk a bit about what you're seeing from a trend standpoint that resulted in what seems to be a pretty good deceleration for a first quarter, and maybe, just more broadly, how you're looking at trends through the first quarter and into April, given the January number was also better than what the overall first quarter sales number came in at.

Yes, I think, again, in this month, in particular, I think, you got to take into account that these are one monthly numbers. We've seen some non-matching trends when you look at things like Nielsen because we basically find that we don't work to timing a particular month. And if you take, for example -- we've seen some destocking or just managing of entire inventories from our distributors. Again, we -- in many cases, we don't have visibility to their stock, but for example, I'll give you one example. In 2013, the short lead orders, which are orders that are placed -- they're require shipment within 6 or 7 days, last year, we received from CCR a total of 42 orders, which was 1.3% of the total orders got into the we-urgently-need-inventory category. In 2014, the short orders -- short lead orders had increased to 272 orders, which was 6.7% of the total orders. We believe they are -- they have reduced inventories and are managing their inventories much more tightly, but the result is that, that means that they've run out inventories more quickly on this, and then they need these urgent orders to replace them. But again, most of our distributors and bottle partners we don't have visibility on their stock policies. Sometimes, you get some idea, we have a feeling about it but we don't always. So I think that what is important to us ultimately is the trends that you see from the Nielsens, which are really showing consumer demand at the retail level. That's showing the pull-through from month-to-month. And we think that. When you look on a longer-term basis, those are more indicative of the trends than looking at the one monthly numbers. But -- and that's why we do have that caution because really is something we need to be cautious about. Mark S. Astrachan - Stifel, Nicolaus & Company, Incorporated, Research Division: Okay. And maybe if you could just touch on sort of sequential trends through first quarter. And then just sort of a related question, how much was the FX impact on the international revenue growth line? And inclusive of that, what was the Japan impact?

I think that was about 0.5% -- it's about a 0.5% higher, yes.

. Our next question comes from Amit Sharma from Bank of Montréal.

Can you talk about -- and this is a follow-up to what John was asking in the international profitability, I mean, you mentioned that Europe is now positive and also some tax benefits from profitability in some international markets. Can you give us some idea where profitability is in some of your key markets and which of them are now profitable versus not making money?

I think we've -- we have broken it down to as much as we want to, we don't break it -- we're not going to break it down any further. Because the other markets are really new and they're choppy. They're being affected by many factors where you do promotions, where you've got -- we do have issues with foreign exchange and goods damages and shipping costs. Like for example, with Japan, we're now right in throes of changing over to local production so we think that will have a big effect. But the tale of the issues we've been facing, affect these numbers quite dramatically. And for that reason, we think that it really wasn't -- it's not appropriate to break it out into the other markets here. We have focused on the main international area at the moment, which was Europe, which we've gone positive and that's, I think, a very important turning point for the company. We believe that as the other markets starts to settle down, we start to be able to get local production, those results will also improve as we go forward.

Okay. And then the tax benefit that you had during the quarter, is that sustainable through the rest of the quarters as well, the lower tax?

We think regarding [indiscernible] it's probably pretty much up.

As long as there's profitability off season, yes.

Got it. Okay. And then...

Our next question comes from Steve Powers with UBS.

I guess, so going -- first, going back to what you're saying regarding channel inventory relative to Nielsen trends, which have been stronger, at this point, do you feel there's still essentially excess inventory to work through from your distributors or are you seeing more of a catch-up that's yet to come as the year progresses?

It's -- again, it's something which we really don't have the visibility on, but we have seen this trend. And it gets to a point where, obviously, we are seeing -- it's not going to be able to go on forever. But -- and as we believe they are likely to start getting more in line. But that -- we're just facing our sales. And unfortunately, people look at the Nielsens in advance, and then obviously you look at our sales and then you do the comparison all the time. They just really are not comparable. There's various reasons why we don't necessarily match all the time, particularly in newer markets where you're starting a new market, your customer may order too much or may order to little. And then, you have a catch-up, and then he gets pipeline, and then the next year, he's got a sales trend, and then all these factors that continue to influence the relationship between Nielsen. As you get to more stable markets, long mark to [indiscernible] they do have -- start to have a much closer correlation but even in the U.S. nets that I alluded to, we have this situation now where we do feel we have -- there has been a realignment by our larger customers to try and manage down their inventories, and that has an effect on our sales versus when you look at the market. Obviously, there are other issues in the market that also change, which is timing, but that would be the main reason we feel.

And our next question comes from Judy Hong from Goldman Sachs.

I guess, Rodney, I guess, I just wanted to circle back on the April number I don't want to really get this into too much -- just understanding it's just one month. But what I'm hearing from you is that from a consumer kind of takeaway, all the trends that you're seeing, both at Europe from your brands and in the category levels seem to be relatively healthy. The full down [ph] really appears to be driven by the inventory movement at your wholesalers, primarily in the U.S. market. Are there any other markets that you're seeing this inventory kind of disconnect continuing? I think, in the second quarter, or sorry, the first quarter, you said Japan was up year-over-year. I think Asahi had numbers up by 40% so I'm just trying to reconcile what's happening in the U.S. from underlying versus inventory, and then also some of the international markets.

Yes. If you take the -- basically, South America and Asia Pacific markets, in the month, those were down. But if you take, which is the point I made and our sales were down because of timing, or mistiming whatever the case -- whatever you want to put it, of purchases, when we went to new distributor last year, and it was very choppy. So you end up with one month where there was a high level of purchases coming out of Brazil, and then this month, you end up with a much lower level. But if you go through the numbers, and you look at the sales out of that distributor in Brazil, and that is one particular distributor where we do have some visibility on their sales numbers. Their sales numbers have continued to grow and are substantially higher than last year. But our sales into them, in April, specifically, are negative. And if you take the Asia Pacific, it's not only -- it's largely Japan but then there are a lot of other markets in that one month while we were up in the quarter, we were negative in that month. And that was part of that transition month where we changed over from supplying goods made in the U.S. to local production. So again, we believe that will change as we go forward during the quarter. But those had -- those 2 markets had quite an effect on the April number. The April number would have been quite a few percentage points higher if you take -- if you just take into account sales in, basically, North America and Europe, or EMEA, as we put it. So we're quite comfortable with the numbers going forward. We think the categories showing pretty resilient and healthy signs. And as you can pick up from the Nielsen, that really is the best indicator of ultimate consumer demand for the brand and for the category.

. And our next question comes from Caroline Levy from CLSA.

This is Brian Doyle, filling in for Caroline. I was just wondering -- just on international profitability, again, you said EMEA is now profitable. I was wondering if you could just update us on how big that is as a percentage of your total international revenue. And then, secondly, just on the international gross margin, I was kind of surprised that it was down in the quarter. My first thought that, that would largely be currency-related, but it sounds like currency was only like 0.5 point hit to the top line, so just a little clarity on when the sort of international margins are going to improve.

It's -- at the moment, it's -- the actual net margins are small in relation to the sales. It's just basically at the beginning of turning the corner. And we -- as we go forward, we believe we will continue to improve there, but we do have thinner margins overseas. We did indicate, I think earlier, that our gross margins overseas were slightly less than its comparable periods last year. And we're looking to, again, trying to deal with -- address that. Again, we think some of that will be addressed as we look for -- go forward. One of the things we will be looking to do is to introduce new products where we believe we will have better margins internationally as we expand the product range overseas. So we, obviously, are looking to try and improve those margins, but at this point a lot of that will depend on our ability to get our cost down.

. Ladies and gentlemen, that does conclude our question-and-answer session for today. I would now like to turn the call back over to your host, Rodney Sacks, for any further 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 continue to develop and differentiate our brands and to expand the company, both at home and abroad. We reiterate our products are safe, our frothy labels and the caffeine contents of a Monster at approximately 10 milligrams per ounce is less than 1/2 the milligrams per ounce of the caffeine levels contained in Starbucks and other coffeehouse brewed coffee. Thank you very much for your attendance.