Good morning, and thank you for joining the Fourth Quarter and Full Year 2013 Earnings Conference call for Herbalife Ltd. 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 Chief Legal Officer. 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.

Thank you, Brett. Good morning, everyone, and welcome to our fourth quarter and fiscal 2013 earnings call. As we pre-released a few weeks ago and announced yesterday, the financial strength of our business has never been stronger and was the best in our company's 34-year history. These results led to another record performance in terms of both top and bottom line. Fiscal 2013 net sales of $4.8 billion were 18% above last year's results, fourth quarter net sales of $1.3 billion were 20% above last year's fourth quarter. Our adjusted fourth quarter EPS of $1.28 increased 28% compared to the prior year period. Our adjusted full year 2013 EPS of $5.37 is an increase of 36% compared to the prior year. Our fourth quarter results reflect a 13% increase in the average active Sales Leaders and an increase of 15% in the number of new members. In 2014, we retained a record number of Sales Leaders and our overall retention rate was constant with the prior year of 51.8%. Our updated 2014 guidance reflects our expectation that we will carry this positive top line momentum from 2013 right on in to 2014. It also includes increased FX headwind as many of you had modeled along with very positive $0.39 impact on EPS from our recent financial transaction. At Herbalife, creating shareholder value is primary. It's a primary objective for our management team and our Board of Directors, and as such, we are always evaluating the proper capital structure to best maximize shareholder value, above and beyond the favorable contribution from our strong financial performance. As many of you know, when our stock was in the mid-30s last year, we began a process to recapitalize the company, take advantage of our strong cash flow to buy back stock. As luck would…

Thank you, Michael. As you've just heard, we continued our solid performance throughout the fourth quarter of 2013, marking our 17th consecutive quarter of double-digit top line growth with 13% growth over the same period in 2012. We are pleased with our business momentum throughout the year, marked by our members' tremendous engagement with our customers and their ongoing dedication to Herbalife's mission for nutrition. 5 of our 6 regions posted volume point growth and local net sales growth while Average Active Sales Leaders with volume points increased in every region over last year's fourth quarter. For the full year, all 6 regions experienced increases in volume points, net sales and Average Active Sales Leaders over the prior year. The results are complemented by the record number of 216,459 Sales Leaders retained in 2013, as compared to 196,732 in 2012, representing an increase of 10% over the previous period. With the total number of Sales Leaders needing to requalify increasing notably in 2013, our overall retention rate remained at 51.8%, consistent with prior year. Regionalization and city by city initiatives over the last few years have built a firm foundation for united leadership, systemized training and the sharing of daily consumption best business practices among members. Together, those elements prompted the successful implementation of daily consumption business methods around the world and we continue to view this focus as the key propeller of growth in our business. The results over the last several years and in 2013, which I will share with you today, prove the sustainable nature of this strategy, and thereby, the significant associated potential ahead. Our 2013 volume point per capita penetration for the company worldwide is at 1.0, a 12% increase over 2012, which included markets with significant population such as India and China. Daily consumption…

Thank you, Des. First, I'll review the company's fourth quarter and full year 2013 audited results, then I'll provide information on 2014 guidance before discussing our new convertible debt deal and our share repurchase strategy. The fourth quarter and full year results we reported yesterday were in line with the pre-release issued on February 3 in conjunction with our $1.15 billion convertible debt deal. For the fourth quarter, the company reported record net sales of $1.3 billion, representing an increase of 19.8% compared to the fourth quarter 2012. Local currency net sales for the period increased 22% with an unfavorable FX impact of 2.2% as compared to the same period last year. For the full year, we reported net sales of $4.8 billion, an increase of 18.5% over 2012. Since Des has already provided significant regional data around our volume points and net sales results, I'll now turn to margins. Our gross profit margins for the fourth quarter and full year were essentially flat compared to the respective prior year periods. Before moving to SG&A and operating margin, note that our reported fourth quarter and full year 2013 results include some unusual items that we consider to be outside the range of normal operation. We have, therefore, excluded these expenses from our adjusted fourth quarter and full year financial results. They are as follows: Onetime costs associated with our re-audit. For the quarter, these costs consisted of $10.8 million in pretax expenses or $0.08 impact on EPS. For the full year, costs were $20.4 million on a pretax basis or $0.14 impact on EPS. These costs may ultimately be recovered, but until a definitive agreement is in place, the cost will be expensed as incurred as will any recovery. Our adjusted results also exclude expenses incurred in response to attacks…

[Operator Instructions] Your first question comes from the line of Rommel Dionisio with Wedbush Securities.

I wonder if you can just update us on some of the direct access initiatives outside of Mexico? You guys referenced Waldo's arrangement, it's done very well. But also, just maybe just give us an update of how Russia, Indian, perhaps some other markets are going with some of those initiatives?

Rommel, this is Des. So we have a number of different programs going in different markets. We're obviously looking to replicate the Waldo's situation. We're also testing automated sales centers in EMEA. If you think of a large capacity vending machine but behind locked doors with access only to it by members. And frankly, we see this is very promising. We're also looking at a FedEx relationship in the Philippines and other market that would provide similar access to local product pick ups. So we certainly have seen the impact of this in Mexico, Rommel, and we look forward to reporting results in other markets in quarters ahead. It's certainly a priority for us and you're going to hear a lot more about this in the future.

Okay. Is it possible to quantify at this point to see how much the business is expanding outside of the traditional urban centers or are we a little early for that?

The focuses of the initiative is really to do 2 things. One is within urban centers, it's to provide 24/7 access because, obviously, in a highly populated urban centers, what we see is it's challenging sometimes for distributors to make their way across cities. So it's not just a rural initiative, it's also for urban centers. Difficult to quantify exactly, but it's something that we're looking at closely. And I think, when we provide further information, Rommel, we'll try and do that for you also.

Your next question comes from the line of Sandy Balkin with Visium Asset Management.

I had a little trouble hearing some of the call because I'm down in Cali [ph], but can you just clarify, what is the currency headwind for the full year?

It's $0.65 for the full year. It's $0.20 in the first, these are approximate numbers, around $0.20 in the first quarter and $0.65 for the full year 2014 versus what the rates were on average for 2013.

And how much of that is Venezuela?

Around half of that is Venezuela, and then it's Brazil, Indonesia, Mexico, India, Argentina are all contributing.

So absent this FX impact, guidance would have been $0.65 higher or not necessarily?

Well, absent FX, it would have been $0.65 higher. I think, I just cautioned you on the Venezuela one because 6.5, which is what Venezuela was accounted for last year is certainly likely to change and probably not reflective of the economics in that market last year.

And once you implement that self-manufacturing facility in Venezuela the next couple of years, will that mitigate some of the impact from FX from Venezuela at least?

Well, just to be clear, we're looking to produce locally in Venezuela, not necessarily self-manufacture. And the reason is companies that are manufacturing in Venezuela have had greater ability to access dollars for the ingredients they need to come in to keep the factory running. So we think it's an effective way to pay for supply, so it's a process because our products have to get licensed, and that's time consuming in Venezuela even though it's a local manufacturer. But we think it's a way to lower the, I wouldn't say FX risk, more the currency control risk associated with importing product in Venezuela.

Okay. That's fair. And my second question is kind of disparate currency. Can you guys give an update on Senator Markey letters and just inform us as to what's going on?

Sure, this is John. I'll take that question. We have been in frequent communication with Senator Markey's office. On January 31, I, along with other members of our executive team, met with Senator Markey's staff in person, and we appreciated the opportunity to do so. I thought the meeting went well and I thought we were completely responsive to their questions, and subsequent to that meeting, we have sent a letter to his office.

The letter, responding to his increase or just as a summary of your meeting?

Yes, both.

Got it. And is there a next step that we need to be aware of or?

Not that I am aware of.

Okay. So do you feel like it's been resolved [indiscernible] on Senator Markey, you guys have addressed all the questions he had?

So I think we were completely responsive in the meeting and I think we did a good summary in the letter. And beyond that, I think, it's in the hands of the staff of Senator Markey's office and they're reviewing the letter.

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

This is Mitch in for Mike. First, with regards to Korea, and I'm sorry if I missed this earlier, but how are the training initiatives and the clubs you recently spoke to progressing?

So I think, they're progressing well, Mitch. Obviously, our business in Korea is exceptionally strong. We've got one of the highest volume point penetrations of any major market in the world there. We've got a very mature leadership. But obviously, we're focused on improving some of our methods there and working with our leadership to accomplish that and this training in the clubs is a key part of that. So we believe it's progressing well. You may be aware, we've received a number of consumer awards and media awards in Korea in the past 12 months, which certainly is reflective of our business model there and our acceptance as a nutrition company. And we see good things ahead for Korea based partially on the training and other initiatives.

Okay. And then, second, looking to the Asia Pac region as a whole it, and just given where the business in Korea stands now, is it possible for the region's retention rate to converge to a level around the company average over time?

Absolutely, Mitch. In fact, we see this as one of our great opportunities in the Asia Pacific region. As you know, we had a tremendous period of growth there, and this normally follows in our business. We then prepared a consolidation where we focus on improving the metrics, improve training, providing better support to those who have joined the business. So that process is all taking place. Obviously, we've got a huge population in Asia Pacific. We're increasing the addressable audience with daily consumption with enhanced product access and with more products. So huge opportunity ahead and improvements in the metrics is a key part of that.

[Operator Instructions] Your next question comes from the line of Mark Sigal with Canaccord Genuity.

It's Mark on for Scott. The growth in China was once again very strong, and I was wondering if you can just provide a little more color perhaps on club growth versus club productivity and overall productivity there?

Yes. So Mark, we're very pleased by what we see in China. What we see obviously is continued adoption of the club model, continued acculturation of that. We're also excited, frankly, by this preferred customer program. So as we announced, we've got about 150,000 members of this preferred customer program. Under this program, a customer will pay an amount of about RMB 15, about $2 or $3. And in return for that, they receive -- they have the option of buying directly from the company, in which case, we track loyalty points. And then, at the club level, those preferred customers would be able to redeem those points for little items, what we call promotion items and so on. So this has been hugely successful, it's helping us build a stronger, stabler business. It's giving direct visibility to our customer orders. So for a lot of reasons, we see good things in China. As always, we're cautious because it is China, but certainly, we're planning additional investments to support our future growth there.

Okay. Great. And then, Des, earlier in the year, you talked about some significant weather disruption in Mexico. It seems like those issues have abated. Can you talk about how things have trended coming out of those major storms you faced?

Yes. So those were the hurricanes that we referred to towards the end of last year, and it certainly did have an impact, but as you can see from the full quarter results, volume points up 5%, we're back on a stable growth curve again. So very pleased to see that.

Okay. And then, lastly, with the new manufacturing facility expected to come online in the not-too-distant future, can you guys talk a little bit about some margin capture opportunities there and just how you're thinking about that as the plant ramps?

Yes. So let me start by saying that the ramp-up of the plant, the construction side is on time and on budget. We expect to start beginning production and it's the early ramp up in June, July timeframe. I think, the ramp up is going to be about a 15-month ramp up phase, and I think that in 2014, it's actually slightly dilutive as the costs get run through the P&L with not a lot of production, about $0.03 dilutive this year. Then we'll start to see accretion by the end of 2015. When we get closer to that point, we'll give you some more specifics for modeling purposes.

Your next question comes from the line of Meredith Adler with Barclays.

I have actually 2 questions I want to go back to China for a moment. And just can you -- is there anything for you to say about increased government involvement or scrutiny on your business or whether the scrutiny they have on other MLM businesses is having impact on you or you think it will?

Yes, Meredith, I'll take that question, this is John. I'll start by saying I'm certainly not an authority on Nu Skin's model there, although I think we are fundamentally different on how we go to market there. But there's some good news, I think. The indications, I'm not authority on this either but the indications are that Nu Skin will navigate through this series and there may be, from some stories we've heard, same ones you have, that there may be some more clarity coming on how the regulations work in China, and that's good for the industry. China is an ever-changing, evolving marketplace. I think, we're comfortable that we're in compliance with today's regulations and we're also comfortable that if the regulations mature, that we can be in compliance with wherever they go and the thing to remember is our business is based on people taking our product everyday and that model will work and we can certainly adjust it accordingly as needed in the marketplace.

And your growth doesn't scare you? I mean, it seems like one of Nu Skin's problem was that they grew very, very quickly. You feel like you're in control despite the rapid growth?

Okay. So again, I'll preface by saying -- my comments by saying I'm not an expert on Nu Skin's model, I don't know that growth is the problem. I think, it's the foundation of the growth. As long as it's coming from people taking the product everyday, backed by genuine demand, there's not going to be an issue.

And then, a totally different subject, most of the buyback that you're going to be doing this year will come from the convert offering. But you generate quite a bit of cash every year sitting on a lot of cash, obviously some of it is in Venezuela. But can you just talk a little bit about any thoughts on what to do with that cash? I think, you've got revolver borrowings, is it time to pay those down. Can you just give us some color on it?

Yes, great question. I will start by saying we did the $1.15 billion convertible debt deal, the net proceeds of that will all be used to buy back stock, a lot of that has happened already, the rest will happen over the next few months. And then, what we've included in guidance is $50 million a quarter, starting in Q2, 3 and 4, in addition to this debt deal, which is very consistent with how we've guided in the past. And the purpose of that guidance is to indicate to our investors that we intend to continue to buy back stock, and that will be, at least as we expect today, that will be our continued use of cash, which would be to buy back stock. We're not M&A-oriented. We don't have a lot of capital needs, so with the cash we generate, there are really 2 options, you can pay down debt or you can return the money to shareholders, our choice would be to return money to shareholders as long as we have a conservative capital structure and we think the current structure we have is still conservative and no need to pay down.

But you're generating a lot more than even $200 million of free cash flow every year, which will be if you did 5 -- 4 quarters of $50 million, that's what you would used. It just seems like maybe you're just going to start building your cash balances again. Have you thought at all, maybe longer term about how you address that?

So we have. And I think, again, consistent with our historical approach is we forecast $50 million of buyback per quarter and keep the rest in reserve to buy back opportunistically, and that is our attention at this point in time. So our intention is still to use it as a buyback. It's just there's a portion of it not -- a large portion of it not included in guidance.

So the 3.25% drop in the stock might be buying opportunity? That's today's drop.

It might be.

There are no further questions at this time.

This is Michael. So let me just take a minute to close here real quick. And guys, this company, we've got a great team. We had another record-setting quarter and a full year that was driven by fantastic business metrics. And I think, it's really important for us to focus on who we really are. We're a solid company, we're always looking to improve and we're uniquely positioned to help in the fight of global obesity and age and help improve community health. We've had a wonderful run of products, our products are better today than ever before. They're sold through an innovative daily consumption sales method of clubs, fit camps, weight loss challenges and really, most importantly, we have a growing sales leader group who are highly engaged and active, spending time to educate and inspire their customers on the benefits of good health and nutrition and healthy, active lifestyle. And as John pointed out, and our guidance suggests, we continue to expect strong growth for our company in 2014. We really look forward to bringing you our first quarter results later this year in April. So thank you for your continued support. Have a wonderful day, and let's go, Herbalife. Thanks.

This concludes today's conference. You may now disconnect.