Good morning and thank you for joining the third quarter 2014 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 Amy Greene, the company's Senior Vice President, Government Corporate and Investor Relations. I would now like to turn the call over to Amy Greene to read the company's Safe Harbor language.

Good morning. Before we begin, as a reminder, during this conference call comments may be made that include some forward-looking statements. These statements involve risks and uncertainties, 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 preparing 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.

Good morning, and thank you for joining our third quarter 2014 earnings call. Before we talk about the past quarter, let me provide some context. Herbalife's goal of becoming the world's leading nutrition company is grounded in the strength of our proven results. A 34-year track record of helping members and their customers achieve their nutritional goals through the use of our high quality products in a personalized support of our members. We operate in a business environment that offers huge long-term possibilities. Government and societies around the world continue to contend with the financial and human impact of climbing obesity rates, aging populations and the post-2008 economic reality. There is no doubt that Herbalife is part of that solution. We are a company that has a positive impact on public health coupled with a personal economy opportunity. In short, we are at the intersection of two of the most pressing global macro trends confronting our world today. Euromonitor and MacKenzie both estimate that the global health and wellness industry is on pace to be $1 trillion industry by 2017, and is expected to grow by about 7% a year for the next several years, as consumers become increasingly mindful about the quality of their diet and lifestyle. There is a seismic shift taking place, which is evident when you look at what is going on in certain food and beverage categories. And we are well-positioned to capitalize on this shift through our portfolio of nutrition products and our pathway to the market. Herbalife is a story of sustainable growth, a story of exciting untapped potential and of long-term opportunity. For the third quarter, we reported a 4% increase in net sales compared to the prior year on flat volume, and our adjusted EPS was up 3% to $1.45 per…

Thank you, Michael. Two-thirds of our countries posted volume point growth, while average active sales leaders with volume points increased in every region over last year's third quarter. The continued strength in average active sales leaders exemplifies the resilience and dedication of our business leaders to support their customers on their path towards their health and wellness goals. As Michael mentioned, we have been implementing changes to our business for the past several years. Each of the changes was designed to further strengthen the foundation from which we will continue to grow. Let me provide some details now, as to where we have implemented various changes and how the business in those markets has responded. Our member leadership recently voted on several updates to the marketing plan that will go into effect globally between this month and early 2015. These changes include streamlining all methods for sales leader qualification at 4,000 volume points, and ongoing rollout of our first order limit to 91 countries from 18 countries today. Our EMEA region, particularly Russia, has proven to be an optimal place to test changes to our business. For example, in late 2009, we rolled out worldwide qualification for sales leader with 5,000 volume points over a 12 month period after having tested the change in Russia for approximately a year. We implemented this globally, because the results from Russia clearly showed that members who come into the business more gradually, and who build a strong customer base as they work toward sales leader qualification are more productive and have a higher requalification rate. The evidence has only gotten stronger since 2009, with a direct correlation between the method of qualification and the likelihood of retaining the sales leader. Since implementing this change in Russia, volumes in that market have increased more…

Thank you, Des. First, I'll review the company's third quarter 2014 reported and adjusted results. Then I'll provide updated information on fourth quarter and full year 2014 guidance as well as initial full year 2015 guidance. Adjusted EPS for the quarter of $1.45 was $0.04 higher than the adjusted third quarter results of last year and $0.04 below the low end of our guidance. The comparison to last year was negatively impacted by $0.27 and is comprised of a negative $0.14 impact from currency and a negative $0.13 impact for the effective tax rate. As of September 30, 2014, the company changed the remeasuring rate for its business in Venezuela from the SICAD I rate to the SICAD II rate of VEF50 to $1. This change resulted in a pre-tax charge of $139.5 million, $122.1 million of which is recorded in SG&A, $7.6 million is recorded in costs of goods sold and $9.8 million is in other expense line below operating income. The total EPS impact of these items was $0.97 in the quarter. As of September 30, 2014, our cash balance in Venezuela at a rate of 50 to 1 is $32.6 million. Additionally, the movement to a rate of 50 to 1 had a negative $0.09 EPS impact in our fourth quarter guidance compared to our previous guidance. If the SICAD II rate of 50 to 1 was applied to the first, second and third quarter of 2014, it would have reduced adjusted EPS by $0.18 in Q1, $0.14 in Q2, and $0.13 in Q3. Our reported basis third quarter EPS of $0.13 includes the following items we consider to be outside of normal operations of the company and we believe will be useful to investors when analyzing period-to-period comparisons of our results: $0.97 previously noted related to…

(Operator Instructions) Your first question comes from the line of Scott Van Winkle with Canaccord Genuity.

A few questions. First, on the compensation plan changes, you gave examples of particularly Russia and India where we saw improvements down the road after the changes. I'm wondering is there a way to quantify the impact in maybe the first six months, 12 months whatever the cycle time is to get through the change, so we can think about what the impact might be in kind of near term volume and growth?

Scott, this is John. I will take that. So the core of the changes that are being made is, we have three pathways to sales leaders, historically we had two. We had a one-month pathway and a two-month pathway. We introduced the three to 12 month pathway in 2009. We know that three to 12 month pathway; those people that come into that pathway are much more active and much more retained a year after they come in than anybody to the first two pathways. So as this change takes place and we transition this change, you can think of the difference between one and two month pathway and three to 12 month pathway, but if that difference is anywhere between one and 10 months, then that's the transition period. And that's kind of the transition period we've seen in some of these other markets, as we fill that pipeline.

And that applies relative to overall volume that applies to a relatively small portion of volume, is that one to two-month qualification, correct?

Yes. It's about 9% of our volume this year, about 12% last year.

And then on China, Des, when you're talking about China, you talked about the month test in August. I'm wondering what the catalyst, the reason was behind giving that test?

So a couple of things. Really what we wanted to do is put a stress test on the business that we've been telling you for several quarters about the transition to daily consumption and this is one way of verifying that and what we saw, Scott, obviously was a tremendous outcome. We eliminated new entrants into the business and we still saw our business grow about 20%. So an absolute validation of that our business in China is solidly based in consumers purchasing products every day.

And then the last one, if I could, kind of a bigger picture question. There has been several periods over the last decade where Herbalife has gone through moderated growth. I think, late '08 with the currency issues that we saw in -- there has generally been kind of an aggressive response to cut costs. Is that a strategy that's on you know on the table today, more aggressive cost cutting to you know react to a moderated growth environment in the near term?

Certainly there is an environment to control costs, while we go through this transition phase and we'll maintain that environment until we have more visibility into growth, but I do want to remind you that most of our costs, I shouldn't say most, but we certainly have a high variable cost base and a low fixed cost base, so we are in a good position for a transition of this type.

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

This is actually Mitch in for Mike. Just with regard to the first order limitation, do you believe that any market would take a relatively longer period of time to adjust to these standards?

Mitch, it's tough to say. What we have seen is that in the markets where we've introduced it and now we have it in about 18 markets around the world that it's really been a period that varies from probably three to six months on average. Now, obviously in certain markets, because we pre-announced it, this is something that's going to take on place worldwide basis in most markets first quarter of next year. We have certain markets already beginning to adjust to simulate and train. So it's possible that the impact maybe less, but probably a little bit too early to tell at this stage.

And then looking to Asia Pacific, a good quarter-over-quarter acceleration in volume, but Korea remains the laggard. Could you just provide some more color on how the initiatives are progressing in that market?

So as always the key is are the companies working the distributor leadership? We have an outstanding distributor leadership, very experienced, very unified in Korea, so we're working closely with them to address these issues. As you may know our retention rates in Korea were below the average on a worldwide basis, and so that's a key focus there. We've been working with local leadership also in relation to the transition to 5K and what we reported is that our 5K sales leaders is up 22% and so part of that transition is going to be the thing that's going to lead greater productivity, greater activity and ultimately greater retention. And that's when we can see this market returning to growth.

Could that be next year do you think?

It could be. It could be, but from our perspective these changes are the right changes, Mitch, because it's all about building a solid potential for future growth. We've seen that in other regions in the past where we've had these resets that we're seeing it now. So coupled with our very strong leadership there, we're very confident about the future for Korea.

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

I'd like to start with maybe a simplistic question. Could you talk about productivity improvement? Exactly what do you mean by that, how are you aligned with them?

So Meredith you were breaking up, but I think what you asked was what does productivity mean. How do we measure productivity? So I think there are three metrics that we measure and discuss in this call. So one is activity, one is productivity, and the other is retention. So activity, are number of people ordering in a given period and we look at sales leader activity, average active sales leaders, which means how many people on average are ordering in a given month compared to a year ago. Now, we know, in all six regions and in eight of our top 10 markets more people are ordering this third quarter than last third quarter. Productivity is how much have they ordered. And the productivity in the short term is what gets decreased with these changes. Because you're giving up the one or two month qualifiers, those first two pathways in exchange for those, that third extended pathway. So while you build, while you transition, to that change, you're going to see a decrease in productivity on average. And then, of course, retention which we measured 13 to 23 months after somebody joins to see if they're still ordering product. So those are the three metrics that we look at. Productivity when, Des, mentions productivity by individual, we know that people coming through that third pathway, the 5K method are not only significantly more active 12 months after they joined, 57% more active, they were also more productive than those that come in through the first two pathways.

And then I have a question about, I mean you said that you introduced the 5K in 2009. But it doesn't sound like it was mandatory, because you're still having an impact by emphasizing, and I think you shifted it a little to 4K, but by emphasizing this new method can you just explain that? It was rolled out but?

Yes. Well it was rolled out as an option, so that the first two pathways are not taken away, we were provided a third pathway. It's still not mandatory, but the changes we're making systematically make it more likely of people coming in to that third pathway, right, by putting a first order limitation and giving people time to do the business before they become a sales leader. That will migrate more people to the 5K method.

And then maybe just a sort of simplistic question, but you mentioned impairing an asset at the new manufacturing facility. Why would you impair an asset in a new facility?

It was delivered defective. We're in a little battle with the manufacturer. I think we recovered the cost of that asset, but it's impaired because it's not usable. And when we get the credit back from the manufacturer we will carve that out too. The facility has got over 350 employees today and it's definitely on track, other than a little blip with that equipment.

And then I'm going to ask a bigger picture question. Your competitors that is other direct selling organizations, do they make it as hard for people to do business? And do you have any concerns that the changes that you're making which should make you a bigger, better business long-term, are just going to turn people off and they're going to be attracted to other direct selling organizations?

Actually, quite the opposite. I think the changes that we're making have all been tested by the way, right. Some of them have been tested through an evolutionary process. Some have been tested in individual countries, but we know they work. We know individually that they moderate growth in the short-term and collectively they're moderating growth in the short-term, but in the long term they make us a much stronger company and we actually expect the industry will follow the lead.

Well, let me jump in. This is Michael. We're making our business much less risky. We are a risk-free. You have an opportunity with Herbalife to return product for up to a year and I think that makes it easier to do business with us. You have an opportunity to understand everything single thing going in. Our gold standard is industry leading. Our opportunity for distributors is better understood today than it ever has been. Our membership is increasing because of it. We have just tremendous package for people to join this company and as it gets better understood in the marketplace people are going to understand it's easier to do business with this company than ever before.

Your next question comes from the line Tim Ramey with Pivotal Research.

So easy to play Tuesday morning quarterback here, but the new marketing initiatives all appear to have a impact of slowing growth or sales in the near term, and yet obviously you were surprised versus your guidance number one. And it's not consistent necessarily with a holistic view of those changes that you bought back as much stock as you did earlier in the year. How do you make us more comfortable with that kind of fact pattern that we bought back stock, we gave guidance, and then we implemented these changes which are well thought out and logical, but made the previous decisions somewhat suspect?

Tim, this is John. I will take that question and Des can jump in if he wants to add any points. So let's start with, I'm going to break it into buckets, because I think that's the right way to look at this question. So let's start with the changes that were made. These changes, as you know we have a contract with our member base and changes such as the ones we're talking about are required to go to vote. So we went to vote in July on these changes and they were overwhelmingly voted in favor of these changes. Without an implementation date, I don't think that we completely understood the moderation that it would have in the short-term, right. I certainly wish that I could go back to Q2 and pull that money back that we used to buy back stock and buy it today. But at Q2 it was the right thing to do and I think in the long term it will proven that it was the right thing to do, because these changes do make us a better company. And so our confidence in the future has never as strong as it is today. It's no less than it was three or six months ago, but just circumstantially in the short term things are moderate. Let me also tell you, I also bought a lot of stock in July. So clearly this is something that -- and I think a lot of other people on this side of the phone bought stock in July. So we have a lot of confidence and this is a short-term issue that we'll manage through.

Des, could I ask or maybe it's not a question for Des, but just the greater focus on compliance clearly had an impact in markets like Brazil and probably certainly the U.S. And again, those are the right things to do, no doubt. But how do you think about that in terms of a cycling through the business. Are we a-third of the way through that? Are we half of the way through that? This is going to be a lingering effect for four quarters? How do we think about that?

Yes. So Tim, I don't know that I'd necessarily focus one specific issue because I think what we're facing here goes back to your prior question is, I think we just got an accumulation of different issues. And obviously as you know we've implemented a number of better initiatives. We happen to have build a better program for many years, but recently we've accelerated that, and partially in response to some of the outside noise. So when you've got things like the nomenclature change and then you follow that with a simplified pricing, and then you follow that with a greater level of claims training and enforcement, and then you roll in these marketing plan changes. I think it's the accumulation of efforts that's just causing a temporary reset as our members out there just get used to the new situation and just a new game plan. I know my colleagues here always get amused when I start using American football analogies, but you've got a team that's used to a certain number of plays, and they've had those plays for many years and then you bring along new plays. So it just takes time for people to assimilate those. We've bombarded our sales force, which is hugely resilient, hugely entrepreneurial, but we've bombarded them with a lot of change. And I think we're just in that transition. But again let me remind you, Tim, seven out of our top 10 markets have growth in the third quarter. So yes, we have areas of weakness, but overall I think we've got an awful lot to celebrate.

There are no further questions at this time. I would now like to turn the conference back over to Michael Johnson for any closing comments.

Well, I think want to thank you all for being on the call. And remind you it is November 4, so get out and vote today please. We are in America and this is our right and our obligation. I listen to the call, I see what we're going through as a company, I see the response in the media and what takes place in Herbalife is that people are getting healthier every day. We're building a company of distributors, of members, of customers who are taking the opportunity to improve their health, to improve their lifestyle, to improve their economic income. And we're well-positioned to take advantage of these mega-trends that are out there in the world, obesity, aging population, under-employment and rising public healthcare costs. We are a company built for today's market and built strongly for the future. We're going to remain prudent with our capital structure. We enjoy our business that's incredibly profitable and generates huge cash flow. We're extremely confident, as I said a minute ago, in our future. We will continue to work with all of our members to make and help them build a larger and more sustainable business for many years to come. It's pretty simple around here folks. We've got a great business. We're in a great marketplace and our distributors are confident and we're moving forward. So thank you very much for being on the call. We appreciate it. And we'll talk to you next quarter.