Good morning and thank you for joining the fourth quarter 2012 earnings conference call for Herbalife Limited. On the call today is Michael Johnson, the company’s chairman and CEO; the company’s president, Des Walsh; John DeSimone, the company’s CFO; and Brett Chapman, the company’s general counsel. I would now like to turn the call over to Brett Chapman to read the company’s Safe Harbor language.

Before we begin, as a reminder, during this conference call comments may be made that include some forward-looking statements. These statements involve risk and uncertainty and, as you know, actual results may differ materially from those discussed or anticipated. We encourage you to refer to yesterday's earnings release and our SEC filings for a complete discussion of risks associated with these forward-looking statements and our business. In addition, during this call, certain financial performance measures may be discussed that differ from comparable measures contained in our financial statements, prepared in accordance with U.S. Generally Accepted Accounting Principles, referred to by the Securities and Exchange Commission as non-GAAP financial measures. We believe these non-GAAP financial measures assist management and investors in evaluating and comparing period-to-period results of operations in a more meaningful and consistent manner. Please refer to the Investor Relations section of our website, herbalife.com, to find our press release for this quarter, which contains a reconciliation of these measures. Additionally, when management makes reference to volume during this conference call, they are referring to volume points. I'll now turn the call over to Michael.

Thanks, Brett, and good morning everyone and welcome to our fourth quarter 2012 earnings conference call. Today, I’m going to focus our commentary on four key areas. First, our record financial performance for the fourth quarter as well as for the full year 2012. Second, our positive momentum that has continued into the first quarter, evidenced by our increased 2013 guidance. Third, our commitment to continuous improvement. At Herbalife, the goal of our 6,500 employees is to build it better every single day. And fourth, we are simplifying and better communicating our business model and metrics so that investors in the public can better appreciate what a truly great company Herbalife is. As we reported yesterday, Herbalife enjoyed broad-based strength around the world. More specifically, in 2012 we achieved the following record financial results: a record $4.1 billion in net sales, a record $4.7 billion in volume points, a record $736 million of EBITDA, a record $477 million in net income, and a record $4.05 of EPS. For the fourth quarter, we also achieved record results: a record $1.1 billion in net sales, up 20% year over year; a record $1.2 billion volume points, up 18% year over year; a record $178.8 million of EBITDA, up 18% year over year; a record $117.8 million of net income, up 12% year over year; and a record $1.05 of EPS, up 22% year over year. Our record 2012 financial results have carried into 2013, and we are experiencing strong momentum in the business. Despite what we believe to be unprecedented, untrue, and unfair attacks on this company over the last eight weeks, our business continues to perform exceptionally well. You will note from our earnings release yesterday that we have increased our 2013 revenue and earnings guidance. Over a year ago, in…

Thank you, Michael. As you’ve just heard, we had another record quarter, our sixth consecutive quarter of more than 1 billion volume points and 18% higher than last year’s fourth quarter results. We continue to be very pleased with the momentum we see in the underlying trends in our business as all six regions posted strong double digit volume point growth. And, as further testament to the success of our business, our record number of 196,732 sales leaders were retained in 2012, compared to 163,605 for prior year, representing an increase of 20%. Although the size of the group needing to requalify increased significantly in 2012, our overall retention rate remained essentially constant at 51.8% compared to 52% the prior year. The main driver of our growth continues to be the consistent execution of the daily consumption business methods that we have been discussing with you all for the past several years, which in turn leads to a natural and sustainable growth of distributors. This is augmented with the expanded use of systemized training methods throughout our six geographical regions. In 2011, we began implementing a localized focus on the business growth, with our regionalization initiative, working with distributor leadership to implement a city-by-city strategy. Over the past couple of years, we have been adding regional sales managers into key metropolitan markets throughout our six geographical regions. These regional sales managers are in the field, working with local distributor leadership. Mexico currently has eight regional managers, North America had six, EMEA has nine, Asia-Pacific has 47. The South and Central American region now as 23, and China has 14 regional managers. This strategy is achieving increases in per capita penetration in those cities that have unified distributor groups who focus on best practices, brand development, and systemized training. Out of…

Thank you very much, Des. I’ll first review the company’s fourth quarter and full year 2012 results, then provide an update on our share buyback program before moving on to Q1 and 2013 guidance. For the fourth quarter, we reported net sales of just under $1.1 billion, an increase of 19.8% compared to the fourth quarter of 2011. For the period, foreign currency had a small headwind of 60 basis points. All six regions had double digit volume point increases, and five of six regions also had double digit net sales increases. For the full year, we reported net sales of just over $4 billion, an increase of 17.9%. Currency was a net headwind during the year, negatively impacting year over year net sales by 470 basis points. Similar to the fourth quarter results, all six regions experienced a double digit volume point growth with five of six regions also experiencing double digit net sales increases for the year. Des has already walked you through the design of our volume and net sales results by region, so I’ll move on to gross margin. During the fourth quarter, gross margin of 80.1% declined slightly sequentially compared to Q3, about 10 basis points, but was slightly higher than our expectations. Compared to the prior year, Q4 gross profit percentage decreased by approximately 60 basis points, drive mostly from foreign currency and country mix, partially offset by the benefits from net sourcing savings and lower inventory writedowns. On a full year basis, gross margin declined by approximately 20 basis points. Similar to the quarterly variance, this full year change was caused by an unfavorable impact from foreign currency, country mix, and other costs, partially offset by the benefit of net sourcing savings and lower inventory writedowns. Now like to turn operating margin. Fourth…

Your first question comes from the line of Tim Ramey with D.A. Davidson.

John, still trying to kind of better understand the Venezuelan cash situation. I think I read in the K where it had jumped up to 4% of sales. So it’s more meaningful, if I’m right about that. But I know you’ve been trying to repatriate cash for a while, and there’s still a pretty good balance down there. Can you talk about why you weren’t more effective in getting cash out?

Yeah, it’s not a very accessible exchange market right now. Prior to the devaluation there were two government-controlled rates. There was the CADIVI rate, which is the official rate, which is 4.3, which was completely inaccessible. And then there was a secondary government rate called [sitni] that was 5.3, and that was limited to just a couple hundred thousand dollars per month. And then any other exchanges had to take place outside the borders of Venezuela, and it’s not a very liquid market, and I think the current devaluation will hopefully increase the liquidity in the market and we’ll be able to exchange some of the cash. But right now we can’t get the cash out. Hopefully that changes during the year. In all likelihood, it will be worse than the 6.3 official rate, but we don’t know that for sure. We don’t know how accessible the government makes that rate. When they had their last deval in 2010, when they went from 2.15 to 4.3, they made that 4.3 rate very accessible for a short period of time, and we were able to take out a lot of money. That may be the case now. We just don’t know. It’s developing as we speak.

And if I could follow up with Des. I know at the analyst day, last March, you emphasized how well organized Russia was and how it was somewhat of a model for other markets. And you’re continuing to see incredible growth there, but with relatively low numbers of nutrition clubs and so on. What have you learned from the Russian model for maybe the rest of EMEA or the rest of the world? Are there other kind of learnings about what’s going right there?

Obviously we continue to monitor Russia, because the performance there is tremendous, 55% up in the fourth quarter. I guess there are three elements that are driving the Russian business. First of all, it’s the same thing that’s driving our business around the world. It’s focused around daily consumption. You combine that, then, with the 5K supervisor qualification program, for people who achieve supervisor over a period of 12 months. That has been a huge contributor to the performance of the business and the incredible retention rates, in excess of 70%. And then the last element is our regionalization and city by city initiatives, where, in Russia, we have a very high percentage of the major cities in Russia have formed distributor leadership groups. And those leadership groups work with our local management, take responsibility for their city. That drives best practices, it drives brand awareness and improvement, and it drives focused, systemized training. So those three factors are factors that are common throughout Russia, and obviously we’re very engaged in expanding those best practices around the world.

Your next question comes from the line of Mike Swartz with SunTrust.

Maybe you could just touch on the retention rates in North America. I think you said they were up over 300 basis points year over year. And maybe you could flush out what’s behind that. It’s a pretty big increase. So any color would be helpful.

Obviously 54% [unintelligible] retention in North America, and basically it’s indication of the strength of our business, the focus on daily consumption. And again, the same things as we’ve spoken of in the past. It’s daily consumption, it’s systemized training, it’s providing better support structure. And frankly, our distributor leaders. Highly engaged, highly focused. And mentorship rate of growth, in relation to new distributors coming into the business. And then of course lastly it’s a testament to the power of our products, and the results that our customers have on those products every single day.

And then just kind of viewing that through the lens of where your retention rates are in Russia, around 70%, is that something that you think you can get to over time, in not only North America but some of your other markets?

There’s no reason why that shouldn’t be possible, because the elements that are present in Russia we are now vigorously engaged in working on with our distributor leadership. As you know, we have our major worldwide event coming up in a few weeks, our President’s Summit in Paris. And our key focus there is on our regionalization, our city by city initiative, because what we want is we want distributor leaders around the world coming together, taking responsibility for their cities, introducing more and more customer focused initiatives to expand our customer base to drive deeper into communities, and then to have systemized training in place in individual cities. So again, those elements that are present in Russia that we see impacting our business in the U.S. and elsewhere, we want to accelerate the adoption of those practices because that’s the key to improving our retention rates from the 50s into the 70s on a worldwide basis.

And then just one follow up for John. Maybe you could touch on why the bump in the tax rate versus your prior expectations. Is there anything baked in there for repatriation of cash that’s held overseas?

No, we assume that our cash overseas will always be repatriated. And we accrue for the tax implications of that through APB 23 every year. So there is no incremental tax incurred when we actually repatriate the cash. There’s a cash impact, but the P&L has already been accounted for. The only change in expectations in tax rate is the country mix, and a little bit of the incremental interest expense with higher debt as we buy back stock.

Your next question comes from the line of Scott Van Winkle with Canaccord Genuity.

Can you talk a little bit more about the comments about simplifying the business model? Is there any kind of sneak peek you can give us as to what’s coming?

I would say it falls into a number of areas. I think the first was our revised income disclosure statement, that we previously had an industry-leading standard in this respect, but now we think we’ve set the bar even higher with the new [unintelligible] to understand the disclosure statement. The next area that we’re focused on is our nomenclature. There is a misperception in the market that frankly people have thought to capitalize on. Because when a person hears the term distributor, then they naturally assume that that is somebody that is distributing Herbalife products. What we, of course, know from our research is that a very significant percentage of people who become distributors do so in order to receive a wholesale price on Herbalife products because they are avid Herbalife users. So what we want to do is that we want to simplify matters by breaking out that group and identifying them separately so that it’s clear that this is a group that are not distributing product, but rather are engaged as wholesale customers. I think there’s other elements that we’re going to be looking at in relation to some of our charges in various areas, so it’s part of an ongoing program. And the other thing I’d mention is, we began what we refer to as the build it better program in January 2012. So this simplification process is something that’s been happening since then, and what you’re seeing today is simply part of those ongoing methods that have been in place now for 14-15 months.

And then you called out some expected one-time expenses this year for the recent activities. Can you talk a little bit about one of the things you said at the analysts day in January, that you engaged a marketing firm to help communicate with distributors and respond to negative publicity? What’s been done in that regard?

What we spoke of there is that we’ve engaged a search firm to bring on board a vice president level head of research. We believe that having better understanding regarding the motivation behind purchases, the issue of who is our customer, understanding our customers better, we think this will actually help us in terms of expanding our business and also help some of the misperceptions that exist out there. So that’s what we referenced, and in fact that search is currently taking place, and we hope to fill that position within a couple of months.

Let me add, first, that the research executive will build a global research department to do similar research to what Lieberman did, but on a more coordinated, global basis. It provides good insight into the business, and good validation of statistics that we have internally. But those costs are in guidance. That’s not part of the one-time costs that we’ve excluded.

And then John, do you have an update on an estimate of volume going through nutrition clubs? Are we still in that 33-41% range?

I have no further update at this point.

Your next question comes from the line of Rommel Dionisio with Wedbush Securities.

I wondered if you guys could just update us on some of the product access initiatives in India and Russia? You guys had talked about the last several months. To what extent are those initiatives having an impact? And to what extend might you think about expanding similar initiatives in other countries?

Having seen our presentation multiple times, you’re obviously aware of the importance of creating access to our products for distributors, especially in developing markets, where there’s not a sophisticated shipping infrastructure. India and Russia are two test cases that we’re working on new concepts. Actually, Russia is an entirely new concept, which are the automated pickup centers, where a distributor, and only a distributor, can go into a fixed location and pick up their product from a machine, and then we can replenish the machine at night, when there’s limited traffic. And it’s actually a pretty effective replenishment mechanism in a country that has significant traffic and access problems. There’s a couple of machines running right now in Russia. They’re hitting our expectations, but it’s early, so I don’t want to get out ahead of it. And then in India, we are trying to find a model in India that mirrors what we’ve done in Mexico, which is to partner with a retailer who already has a fixed infrastructure and we can leverage that to make our products accessible to our distributors and create a cross benefit to that retailer by driving foot traffic to their stores. So we are in some stores right now in India. It’s still in the test phase. And we should have an update on both initiatives over the next three to six months.

Your next question comes from the line of Bill Leach with TIAA-CREF.

I was wondering, can you just verify your statement in the 10-K about the SEC. Did you contact them? Or did they contact you? Or both?

Sure. As we disclosed as part of our filing yesterday, and we confirmed at our investor day on January 10, following the events in the marketplace in December, and a subsequent meeting that we, Herbalife, requested with the staff of the SEC, staff requested some information regarding our business and our operations. And consistent with its policies, the company is, and will, cooperate with these inquiries. Other than that, there’s nothing to disclose.

Do you have any thoughts about your new big shareholder? He’s proposed, perhaps, having the company use its balance sheet more aggressively, even going private. Have you had any discussions with him that you could share with us?

We don’t, and you wouldn’t expect us to, I believe, comment on specific investors. But we will continue to believe obviously that the stock represents a compelling investment opportunity, and so all the results we put forward today we put that together with anyone who’s legitimate, we welcome them, that are interested in learning anything and more about our company. And yes, we’ve had short discussions with Mr. [Ackman], but beyond that, nothing concrete to report.

We’ll take one more question.

Your next question comes from the line of Olivia Tong with Bank of America.

When you talked about share purchase, you mentioned that was in the outlook for Q2 to Q4. You’ve got about $50 million built in, but there’s the potential to significantly exceed that. So other than obviously the price of the shares in the market, what else could impact your decision to exceed that $50 million versus “significantly” exceed that, given the size of your repurchase authorization?

What I’d point to is first, we have a history of a commitment to share repurchase. Since 2007, we’ve repurchased over $1.7 billion. In the last 12 months, we’ve repurchased over $700 million, and in the last four weeks, we’ve repurchased $162 million. And we have a longstanding commitment of returning our excess cash to investors through a sustained share repurchase approach. And to that extent, there are opportunities to repurchase stock at the current levels, in the future, and we anticipate that we’ll continue to repurchase stock in excess of the $50 million that’s included in the guidance. And the specifics around how and when we’ll execute that is not something we’re prepared to disclose at this time.

I just want to say thank you, everybody, for being on the call. This was a great fourth quarter that we had, a great year. It’s great momentum in our business, and our guidance reflects our confidence in the effort to improve public health and create business opportunity for our distributor entrepreneurs who are motivated to work hard, build businesses, through really positive customer experiences, personalized service, and through the daily consumption of Herbalife products that we’re getting out into the market and building a better infrastructure for that every single day. So I want to say thank you for joining us today. We look forward to sharing our fabulous next quarter expectations with you in April. Thank you everyone.