Good afternoon, and thank you for joining the Fourth Quarter and Full Year 2014 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 Alan Quan, the company's Vice President, Investor Relations. I would now like to turn the call over to Alan Quan 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 risks and uncertainties, and as you know, actual results may differ materially from those discussed or anticipated. We encourage you to refer to today'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 that 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 our Chairman and CEO, Michael Johnson.

Thank you all for joining us today. Let me begin by saying we recognize that our calls have gotten a little long. So while Des will be here to answer any questions that you might have, we're going to limit our prepared remarks to John DeSimone and me. Our results in 2014 reflect our ongoing transition to a more consumer-focused organization. Our transformation, which first began in 2008 and will continue through 2015, is creating a stronger, more consumer friendly Herbalife and one that is evolving and getting better every single day. Critical to our transformation has been the focus of Herbalife and our members on daily consumption as well as our emphasis on bringing new sales leaders into a company in a more sustainable way than in the past. This more gradual path to becoming a sales leader is working. As all of the data show that these leaders are more productive and stay with Herbalife longer. 2014 saw record-breaking retention rates for our sales leaders. We achieved what we believe is an industry leading and impressive retention rate of 54.2%, that's up from 51.8% in 2013. We are continuing to grow our customer base and have more customers in 2014 than any time in our 35-year history, and we reported record net sales for the year of $5 billion. While 2014 was a record year in many respects we certainly face unique challenges. The enhancements we started making to our marketing plan at the end of quarter two last year, as part of our broader transition, had a greater short-term impact than anticipated on volumes and net sales in key markets. But we are confident that these enhancements will deliver significant value over the long term. A strong foreign exchange headwinds facing all global businesses also affected our…

Thank you, Michael. First I'll review the company's fourth quarter and full-year 2014 reported an adjusted results. Then I will discuss first quarter and full-year 2015 guidance. With respect to net sales, currency translation had a significant impact on our reported results for the fourth quarter and in fact accounted for the entire decline. Net sales in terms of local currency were essentially flat for the quarter, while reported net sales of $1.1 billion represented a decrease of 11%, compared to Q4 2013. I'll provide additional information around currency in a moment. During the quarter, approximately 60% of the countries in which we operate had increases in local currency net sales compared with Q4 2013, and about 60% had growth in volume during the quarter. However, while 60% of the countries experienced volume growth during the quarter, trends in some of the top markets noted by Michael have an outweighing impact and were a drag on the overall consolidated net sales and volume results of the company. Venezuela had the most significant impact on volume and reported net sales during the quarter. And Venezuela's volume was down 70% compared to fourth quarter of 2013 and reported net sales were down 90%. Venezuela represented less than 1% of the company's net sales in Q4 2014. Consolidated volume and net sales for the quarter were negatively impacted by Venezuela's results by 300 basis points and 700 basis points respectively. Excluding Venezuela, consolidated volumes would've been down 3%, not 6% and reported net sales would've declined 4% instead of 11%. On a positive note, the volume impact from Venezuela has now cycled through and should not be a material drag going forward in 2015. From a net sales standpoint, however, Venezuela should continue to affect consolidated results through much of the year due…

Thanks, John. Before we open it up for your questions, I want to underscore how confident we are in our future. We are confident in the strong fundamentals of our business model, confident that the changes we are implementing will deliver long-term value, and confident that we are well positioned to benefit from several important long-term macro trends, such as climbing obesity rates, aging populations and stubbornly high unemployment rates. We embarked on a journey to transform our business several years ago, because we knew it was the right thing to do for Herbalife, our members, consumers, and investors in the long-term. The short-term impact of the changes we have made and accelerated recently are a necessary part of making Herbalife a stronger, more sustainable business in the future. Our theme with our members and this anniversary year is 35 years of inspiring results. We continue to be a results driven business and are confident that all we are doing will create greater long-term value for our members, customers, employees and shareholders. Yeah, we know it will take more than words and a plan and that ultimately we must demonstrate that we have the winning recipe. Our track record over the years demonstrates that we do and we now must prove it once again. I'm confident we will do this, my team is confident we will do this, and now, we have to show you. With that, we would now be happy to take your questions. Operator, please open the lines.

And your first question comes from Scott Van Winkle of Canaccord Adams.

Hi. Thanks, guys. So a couple of questions. First on the change in volume assumptions, so you brought your guidance down call it $1.20 something, half of that's coming from currency, half coming from volume. I'm wondering what over the last three months or four months kind of gave you better clarity on what sales leader response would be to the new implementations?

Hey, Scott. It's John. I'll take that one and Des can jump in to add any more color. But well, time for one, we've had a history I think of modeling this business pretty well. The models didn't necessarily account for the changes that we implemented, but we're now seven months smarter and being able to adjust the models for what've we seen. So that's why we have more confidence in our current guidance. And as you can see in our release, there is really four – outside of Venezuela, there's been four countries where performance has been below our expectation, that's Mexico, U.S., Korea and Brazil.

And did that begin, I mean obviously the third quarter, you saw some weakness and you called it out when you announced the plan changes. In the fourth quarter, I think some of the first plan changes maybe like the qualification level, there were a couple of changes I believe in November. Did those change some behavior when they were implemented?

Scott, this is Des. No I don't think it's changed the behavior. I think what we have just recognized is that it represents an additional distraction of our members as they assimilated the change, and obviously that took place, the first element of the marketing plan change that took place in November, where we streamlined the sales leader qualification into 4000 volume points regardless of the period. And then, the second element of those marketing plan changes takes place this month, and hence our conservatism regarding the impact of those changes in the revised guidance.

Great. So, if I think about kind of how it flows through, and I understand volume building throughout the year, in the first quarter, all the volume that normally would have qualified under the 5K method, you're only expecting to get maybe a quarter of that volume because now it's over a 12-month period rather than say one month or two months, and then in the second quarter, you are kind of half the level rather than a quarter, and then the three quarters of the level in Q3. Is that, I mean that's simplified, but is that a way to think about the impact of going through a 12-month qualification from one to two?

Yeah. Scott, this is John, I'll take that. I think there's two impacts. One is timing, which is exactly what you are speaking to, which is somebody who may have become a sales leader under the first two pathways that existed for a long time, will now take longer to achieve that level. And that's a pipeline fill, and we have to get through that. The second is some people who may have achieved sales leader will start off slowly, and still never get there, and that's a permanent one-time adjustment that we have to cycle through, and we'll cycle through that this year too.

And the four markets you called out, is the reason that they're more impactful because it was a the higher percentage of the volume going through the 5K method in those markets, maybe more or so than markets, or is there some other reason why those four specific markets seems to have more of an impact of other than the larger?

So, I think there's two factors, Scott. One is the size of the market, because obviously in each case, it's either a region in and of itself or it's the largest individual market in a region. So that has a disproportionate impact. And then the second factor, certainly in two of those four, we had markets where historically, that is Brazil and Korea, we had historically very low retention rates, lower levels of 5K, or accumulated supervisor qualifications, and therefore the changes in those particular markets have a disproportionate impact.

And, John, gross margin impact from currency was stronger in the fourth quarter and you called out why. Can you give us a magnitude of what the impact is on gross margin from currency?

Yes. So just a little set up if I can, we've created some natural hedges and I just want to point those out, so people who do understand the impact of gross margin a little better. Most of our product from – that we sell in Europe is made in Europe and denominated in euros, so there's somewhat of a natural hedge there. About 60% of our product that's sold in Brazil, is made in Brazil, and then in China – all products sold in China, is made in China; and India, most of the products sold in India, is made in India. A lot of the remaining product is actually made in the U.S. and denominated in dollars, and that creates a transaction risk and that's got about a 100 basis points, maybe not quite on the gross margin line, that's baked into our guidance.

All right, thank you.

Your next question comes from Mike Swartz of SunTrust.

Hey, good afternoon, guys. Can you maybe just talk about the impact of pricing, it looks like you took about 3%, 4% last year excluding Venezuela and that's kind of I guess the outlook at least in your guidance for this year. And maybe talk about even geography-by-geography, how you think about pricing in terms of inflationary pressures or just currency changes and if you're seeing any kind of sensitivity to the price changes?

Yeah. Thanks. This is John. I'll take that. Overall philosophy base, you just need to start with the philosophy, price increases is driven by inflationary conditions in a marketplace. That's really our sole focus, when we're determining whether we should take a price increase or not. Now currency has an impact on inflation, but we don't take a price increase strictly from change in currency, because quite frankly there's volatility in currency and who knows what happens over the long period of time. So, provided that our products can drive the value that's necessary with the price increase and provided the price increase is along the lines of inflation. We've been successful in taking price increase.

Okay. And then maybe just touch on the CapEx reduction versus prior guidance, is that just due to shifting of investment or is it something else?

Yeah. Shifting timing of investment pushing some to 2016, some of that is the new factory that we acquired in China that won't be built out for mostly 2016, there might be a little in 2015, but not lot.

Okay, great. Thanks.

And your next question comes from Tim Ramey of Pivotal Research Group.

Hi, Tim.

Hi, there. Good afternoon. So one of the positive surprises was the retention rate, very important number I think. And I'd be interested in your thoughts on whether that was driven by say changes in EMEA that were implemented earlier or whether the more recent round of changes had an impact positively on that number. Can you speak to that?

Yeah. Hi, Tim. This is Des. So obviously Tim, we're very pleased with the improved rate of retention around the world. We see this as indication of our member's commitment to Herbalife, their confidence, and the good they do in communities, their confidence in the future. So obviously we're very pleased to see it. In terms of what's driving it? It's our focus on growth and sustainability, and that's driven significantly by this transition to a 3-month to 12-month sales leader qualification. So certainly the EMEA experience is indicative of what we expect to see in the future around the world. As you know, in EMEA we had record retention of 68% driven by accumulated supervisor qualification now in excess of 70%. So EMEA for us is a leading indicator of where we are going in all regions. They've actually completed the transition that we see happening in the U.S. and other markets. And so I think as we see that transition to the accumulated qualification take place, we're going to see continued improvements in our retention rates year by year.

And John if – correct me if I'm wrong, but this might have been the first time that I thought I saw a call out on the expenses incurred to recovery of the re-audit fees, and I think that continues to loom out there as a potential meaningful recovery for you. Any color on that or update on that?

Yeah. First, we've called that out actually every quarter, we also called the cost of the re-audit out last year when we're going through it, because we're going to call out the recovery whatever ultimately ends up being. As far as what process we're in, we're in the middle of a process. We're trying to get that (37:23). I don't have the timing update, it's a process and we're going through it. It's a legal process.

Okay. And do you have any comment on the Bostick class rejection, how should we think about that?

It wasn't rejected. I mean the court granted preliminary approval of the settlement in December, the period to file claims has now expired and the fund that was put in place is satisfactory for all the claims that have been put in place. So I think there was just normal noise that you get from a consumer product class action around some people objecting or some people opting out, but it's just commonplace.

Great. Okay, thanks.

I don't think we have any more questions. This is John, I'm going to turn it over to Michael for closing in a moment. Let me just say, I noticed a lot of people were late getting on, I think the queue was kind of backed up. We will post a recording of this call on our website shortly, so please listen if you have time. Thanks. I'll pass it back to Mike.

Well, I just want to say thank you to everybody for being on the call and just kind of remind you that our business is and always has been built on building – built on customers and we are expanding product access, we've mentioned that today. We've got bigger in more active distributor touch points. We're increasing retention by focusing on bringing business opportunity and members along at a more steady pace. We're creating programs that bring in more customers and we're creating longer term customers and more successful business opportunity members in our company than ever before. We've seen the results from these methods in Russia, EMEA, and China and we know that when adopted and adapted by our members, these methods are going to create a long-term sustainable growth. Like any business, there is an adjustment period to new methods and we will bring our business through these as quickly as possible to return Herbalife to top and bottom line growth. This is our commitment to you. We are – as I said in my prepared remarks, we're not comfortable with a company that's not growing. And we are going to get this company growing stronger than it before. We're going to emphasize more growth in Herbalife into the future. We've got an online ordering opportunity that was mentioned in our discussion today. It's something that we feel very confident will create a huge opportunity for this company deep into the future. We've got some kinks to work out of it, we're going to get it better, and we're going to return Herbalife to the place that you all expect it to be. So thank you very much for being on the call today. We appreciate it and I want to just shot out to Alan Quan today whose wife delivered a new baby and he's our new Head of Investor Relations in the company. I'll just say congratulations Alan to you and to your wife, and look forward to talking to you all very soon in May. Thank you.