Greetings and welcome to the Nature’s Sunshine Products Third Quarter 2015 Earnings Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] I’d now like to turn the conference over to your host Richard Strulson, General Counsel for Nature’s Sunshine Product. Thank you. You may now begin.

Thank you. Good afternoon, everyone. And thanks to all of you for joining our conference call to discuss our third quarter 2015 financial results. This call is available for replay in a live webcast that we posted on our website at www.naturessunshine.com in the Investors section. The press release which was issued this afternoon at approximately 4:00 pm Eastern Time and the information on this call contains certain forward-looking statements, which are based on a number of assumptions that are subject to change and involve known and unknown risks, uncertainties or other factors which may not be under the Company’s control. These statements are often characterized by terminologies such as believe, hope, may, anticipate, expect, will, and other similar expressions. Forward-looking statements are not guarantees of future performance and the actual results, performance or achievement of the Company may be materially different from the results, performance or other expectations implied by these forward-looking statements. These factors include, but are not limited to those factors disclosed in the Company’s Annual Report on Form 10-K, under the caption Risk Factors and other reports filed with the Securities and Exchange Commission. The press release and the information on this call speak only as of today’s date and the Company disclaims any duty to update the information provided herein and therein. I’ll now turn the call over to Greg Probert, Chairman and CEO of Nature’s Sunshine Products.

Thanks, Rich. Good afternoon everyone and thank you for your participation in today’s call. Joining me today is Steve Bunker, our Executive Vice President, CFO and Treasurer. I look forward to sharing with you details on our third quarter performance in addition to updates on our sales and profit improvement initiatives and go-to-market strategy in China. Third quarter sales of $79.6 million were down 8.8% on a local currency basis. This decrease was primarily driven by a $5.4 million sales decline in our NSP Russia, Central and Eastern Europe business. Excluding NSP Russia, Central and Eastern Europe, sales for the remaining business segment decreased by 3.5% year-over-year in local currency, primarily due to lower sales in Synergy North America and Synergy Korea. While our results were softer on the whole, we were very encouraged by continued growth in NSP United States and NSP Canada, our largest and fourth largest markets, both forcing their fifth consecutive quarters of year-over-year local currency sales growth. Further, as we discussed previously, we are on track to realize approximately $10 million of annualized operating income improvement by the end of the year through reductions of SG&A expenses, streamlining of operations and the implementation of price increases in certain markets. We remain intently focused on improving our profitability while concurrently investing in our strategic growth initiatives including our launch into China. Now turning to our segment results, NSP Americas third quarter sales of $44.5 million increased by 0.7% year-over-year in local currency and represented 6% of total Company sales. NSP U.S. and NSP Canada, both achieved their fifth consecutive quarters of year-over-year growth of 1.8% and 2.3% in local currencies respectively. Their third quarter also marked the first quarter of year-over-year growth over a prior year growth quarter. Equally important, we saw growth for both existing…

Thanks Greg, and good afternoon everyone. Net sales in the quarter were $79.6 million, down 14.8% from $93.4 million in the same quarter last year. On a local currency basis, net sales decreased 8.8% year-over-year. The decrease was primarily driven by $5.4 million decline in net sales revenues in the NSP Russia, Central and Eastern Europe segment, coupled with $5.6 million unfavorable impact from foreign currency exchange rate fluctuations. Excluding the net sales revenue declines in NSP Russia, Central and Eastern Europe, net sales for the reaming business segments decreased by 3.6% year-over-year in local currency. Cost of sales were $20.6 million, down from $22.7 million in the year ago period. Cost of sales increased as a percentage of net sales for the third quarter of 2015 by 1.6% to 25.9% as compared to the same period in the prior year. The year-over-year increase was due to the strengthening of the U.S. dollar against the local currencies in many of our foreign markets, which has made our products manufactured in the U.S. more expensive in those markets and was partially offset by a favorable change in inventory reserves. Gross margin fell 160 basis points to 74.1% compared to 75.7% in the year ago period, primarily as a result of the decline in revenue and the increased cost of sales percentage during the third quarter. Volume incentives accounted for 36% of net sales in the third quarter, a decrease from 37.4% of net sales in the same period last year. The decrease was primarily due to reduced sales in NSP Russia, Central and Eastern Europe which pay higher sales commission rates than our global average. Volume incentives are significant part of our network marketing program and are designed to incentivize higher product sales. Volume incentives vary slightly on a percentage basis…

Thank you. At this time we’ll be conducting a question-and-answer session. [Operator Instructions] Our first question comes from Gregg Hillman from First Wilshire Securities Management.

First of all, that loss from the discontinued operations, that 800,000, what was that; was that Peru or what was that?

The loss from continuing -- from discontinued operations was related to our exit of Brazil about five years ago. We had some favorable reserves that we’re able to release.

And on -- Greg, in terms of momentum for IN.FORM, comparing it to -- I don’t know like [Indiscernible] or how long it seems like you are gaining some momentum there. Do you think you are at inflection point there, you will grow very rapidly or what’s your take on that?

Yes, Greg. I think we are getting to an inflection point. We have been very successful at converting a lot of our existing practitioner base to doing IN.FORM in addition to their traditional methodology. It’s still fairly low when we penetrate it. So, I think what we see is an opportunity through Q4 this year and going to next year to actually convert a lot more people into IN.FORM. We’re seeing the people that are converting are growing substantially double-digits over the traditional business. I think we’re getting those testimonials, we’re getting the success stories. And I think it’s starting to sort of permeate our distributor base and create a positive buzz. And I expect to see an acceleration of the number of distributors that convert to IN.FORM, as well as I think we’ll start to see the -- a new generation of distributors attract to the Company. So, I think the combination of the conversion of existing distributor base in addition to attracting new distributors will accelerate IN.FORM growth next year.

And Greg, I think you said that you brought IN.FORM out of Mexico, is that a recent phenomena and is there something else like IN.FORM in Mexico right now that’s down there or you’re more unique in terms -- in the Mexico for IN.FORM?

I think there’s obviously weight loss companies down in Mexico, both in direct selling space and in the retail space. I think the difference with IN.FORM is that it’s not just the weight loss, it’s weight loss but also creating a daily habit of health around various bio -- improving various biomarkers. So, I think it has the weight loss components of a lot of our competitors but I think it’s a much more comprehensive and long lasting program in terms of teaching nutrition, teaching daily health, total supplementation, not just protein or weight loss. So, I consider it the most comprehensive program on the market.

Is this just [indiscernible] still online just in terms of getting into China say as a drug seller, you mentioned you are going to deemphasize retail at this point and concentrate on just the retail channel -- the wholesale and the drugs channel. Is that correct.

That’s correct.

And is there any impediment -- how many drug seller licenses are there in China right now for foreign companies?

I don’t know the figure off the top of my head.

And is there any impediments; what are the final hurdles that you have to get over to get that license?

I would say that we’re moving on schedule with respect to the direct selling license. We’re following all the procedures that need to be followed. We’re running our submission and checking all of our boxes. I wouldn’t say that there are any impediments. We’re running on schedule.

Okay. And then -- but you are selling into China right now on a wholesale basis, is that correct or is there any China sales currently being made?

We have set up our ecommerce site and business.

Is that going forward with sales or is that just still in the pilot phase?

It’s early days, I think our ecommerce brand is very much linked to our direct selling strategy as I think we’ve explained in prior quarters that as we bring on -- as we launch the direct selling and bring on our leaders, the ecommerce gives them an opportunity to use ecommerce as a back office, as a fulfillment device, as it plays for customers who purchase products. And so we don’t expect significant revenue out of that channel until we launch our direct selling business in Q3 of next year.

Thank you. [Operator Instructions] Our next question comes from Nelson Obus from Wynnefield Capital.

Steve, just a question, in just EBITDA, is the loss of China added back or not?

No. The loss in China is -- it’s not added back.

I asked what was a pretty dumb question on the last call about how much China cost us. And I was reminded Steve that you’ve put money into the joint venture that there is sort of an accrual or whatever you want to say, a reserve or however we want to put it. So now that we are actually pulling the loss, [ph] what happens, am I seeing a change here or not just in terms…

Nelson, good question. What we did is -- we own 80% of the joint venture; our partner Fosun owns 20%.Last August we funded RP to the joint venture which was $16 million; they funded their 20% which was $4 million. So, at that point, it was an investment in the joint venture and cash on the balance sheet, no accruals or no expenses. And so now on a quarterly order, each month as we incur expenses in hiring people, in office space, in professional fees and preparing through the product registration, the submission of the direct selling license, we incur expenses that get expensed. And so in the third quarter, we spent $1.8 million that was expensed.

Frankly you are taking the $16 million and flowing it through the P&L if there is a loss or will it increase the gain [ph] is that fair?

Yes it’s an SG&A expense and capital.

So would you like capitalizing your capital expenditure? So it really -- it shouldn’t affect our cash flow statement right?

Well, it does impact the cash flow statement in that at the loss -- at this point it’s a cost to get into China, cost to get into the market but once we have our direct selling license, we would be able to start to realize the revenues which will exceed the expenses.

You haven’t sent them -- you didn’t send them $16 million which is…

The cash is on our balance sheet until we spend it.

I got it, okay. Just one bigger question here and I’m -- it has to do with Synergy. So, there’s been a really interesting up and down preposition; it was a number of years ago was very steady and it had a debt that went way up. And now it seems to be for us the little bit of [indiscernible] some of this has to with the peculiarities of success in individual countries but is there any underlying theme here in terms of I guess I was a little surprised as to how fast it came down but I know we’re trying to get it where altitude. Is this a country-by-country thing or is it some of the universal themes that account for this up and down picture, a lot more volatility than the other parts of the business, particularly North America?

I think it’s a combination of both of those factors. MLM obviously goes up and down on a country-by-country, region-by-region basis, which is not unusual in this industry. I think in particular in the Synergy case, in Asia, we have work of distributors that developing I think a fairly unified business system and product portfolio. And as I said in my comments that system was developed in Korea, moved to Japan, moved to Indonesia, and moved throughout several other countries in Asia. Our go forward plan is to take that methodology, that daily method of operation and roll that through the rest of Asia and roll it through Europe, starting basically Q1 of next year. So, I think as we come up with a more homogenous business system and product portfolio across our region that you will see want to return to grow across all the regions and more importantly probably -- and more stability in the individual country of performance.

And good metrics in terms of distributor account in North America. Are you trying to reconstruct what the variables that allow us to stabilize, grow in terms of distribution network?

Yes, in terms of the U.S., NSP U.S., there is a couple of factors that work, one is in our traditional practitioner business we’ve been able to through tools and new product releases such as our silver launch a year ago or essential oil launch a quarter ago, we made to reinvigorate that installed based. Our retail base, which as we’ve stated before is about 40% of our U.S. sales. We’re using very traditional retail methods there such as key account management, point-of-purchase displays, planogramming, and because of that I think that sector is growing. And then probably the largest impact is the lunch of IN.FORM and the adoption of IN.FORM. And as I sad that segment is growing by double digits which is the question of getting further penetration of the existing base with IN.FORM and attracting the next generation of distributors in the IN.FORM business model.

Is there any -- when you look at the demographics of the IN.FORM based distribution, is there any different there that -- is it bringing a different kind of person, I am just curious?

I think it’s different in terms of demographics and also psychographics. We’re attracting a younger group of distributors which is one of the reasons, we came up with IN.FORM and launch it. So, we think that’s the way of bringing the next generation of distributors which we haven’t been able to do in the U.S. business for a while. And you saw for the first time in several years, we actually enlarged our member base in Q3, both in terms of existing members and new members signing up, so those are customers. So that’s I think a very good metric and indication that it is working. And I think you have to -- from a psychographic, I think we’re bringing in people that are less oriented towards the practitioner business and over time will be I think more I’d call health enthusiast. And that allows us I think to cast a wider net and bring more people in to a system that is very well-defined, is easy to learn and easy to do duplicate.

Thank you. Our next question is a follow-up from Gregg Hillman.

Greg, could you just talk about couple of products in particular, I guess AnxiousLess and then also the [indiscernible] patent that you did the press release on. Why was that important or what was that about and how much better are you [indiscernible] out there right now?

So AnxiousLess continues to be a top seller for us. It’s obviously a very differentiated product, as you know. We have a patent pending on that as well and we’re able to show that. This is really the future of research in this Company and the reason why we invested in the Hughes Center for Research and Innovation was to take sort of standardized product [indiscernible] in the case of AnxiousLess, look for unique combinations and in that case we’re able to make a proprietary blend of products and do a clinical show that it made our product 56% more bioavailable. I think the same holds true with the ProArgi-9 that it’s not the L-arginine in it which you could buy almost every store but it’s a combination of the L-arginine with the other ingredients that we are able to show in our clinical one increased NO output more immediately than L-arginine and also inhibited the mechanism that creates oxidized LDL which is one of the key biomarkers in cardiovascular disease. So, we feel very comfortable. And because of that and we created a new use that we’re able to file a patent pending on that product. And I think it differentiates us in the market. No one I am aware of can show that they have a blend of a L-arginine and other ingredients that increases NO as fast as ours, nor locks the mechanism that create oxidized LDL which is one of the key biomarkers as I said for cardiovascular disease. So we think this is obviously our biggest seller in Synergy and we believe this represents a significant differentiation in the market against our competitors.

I think then the other people research doing a great job and coming up with new products sort of [indiscernible] realize on the revenue line, but it sounds like you’re putting kind of a franchise in cardio. But also I believe it is you are trying to expand the product offering to go after metabolic disease rather than just weight loss, you’re going after a wider swap if you will with IN.FORM?

Yes.

Is that branded or is it different product or is it that just part of the original IN.FORM?

We were actually working on launching the next generation of that which we’ll do next year and that will have additional products and will have some additional science as well as we’ll do some new branding on that as well. So, we think -- we’ve launched it and we’ve got good penetration. And I think next year we’re looking to take it to a whole new level in the U.S. and then roll it out throughout and the Americas.

And then I just wanted to ask you about technology and Facebook marking, I know there is two other companies, one is educational development course that sells [indiscernible] both through at multi-level but we Facebook [indiscernible] and the things exploding and also Tupperware is doing people kind of review the parties remotely which is helping to increase sales. So, I was wondering is there any course tool that you could do like social media tools that you could do to enhance sales or where do you think…

Great question, Gregg. I think we’re looking at that in all aspects of the business. So, when we launch in China, I think we will have the most sophisticated mobile app a very -- everybody in that market including not only internet on desktops but on all mobile devices. And I think that -- as you know that’s a very tech savvy country. And we think that’s again a differentiator for our launch in China that we will have a very robust ecommerce and mobile technology. We’re doing the same thing in synergy, both from a distributor standpoint in recruiting customers and distributors, but also using technology to give them tools to better manage their down lines and their customers and be more proactive. So, it’s both; it’s the customer and distributor acquisition tool as well as a business tools to manage your existing portfolio of business. So that’s going to be rolled out end of next year in synergy that will be part of our, China launch in Q3 and then we’ll have some mobile apps in the IN.FORM 1.1 launch that we’re going to do next year in the U.S.

Thank you. At this time, there is no further question. I’ll turn the call back over to Greg Probert for closing comments.

Thanks again for your support and for participating in today’s call. I want to thank our distributors and employees worldwide for everything they do, everyday to make Nature’s Sunshine such a great company. Have a great day. Thank you.

Thank you. This does conclude today’s teleconference. You may disconnect your lines at this time. Thank you for your participation.