Mark Nicholls - Chief Financial Officer Dr. Rob Sinnott - CEO and Chief Science Officer.

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Greetings, and welcome to the Mannatech Incorporated First Quarter 2014 Earnings Conference Call. At this time, all participants are in a listen only mode. As a reminder, this conference is being recorded. Now, I’d like to introduce our moderator for the call today, Mr. Mark Nicholls, Chief Financial Officer. Mr. Nicholls, you may begin..

Thank you. Good morning, everyone. This is Mark Nicholls, and welcome to Mannatech's first quarter 2014 earnings call. Today, you will hear from both me and Mannatech's CEO and Chief Science Officer, Dr. Rob Sinnott. Before we begin the call, I will first read the Safe Harbor Statement.

During this conference call, we may make forward-looking statements, which can involve future events or future financial performance.

Forward-looking statements generally can be identified by the use of phrases or terminologies such as will, continue, may, believe, intend, expect, potential, should, and plan or other similar words or the negative of such terminology.

We caution listeners that such forward-looking statements are subject to certain events, risks, uncertainties, and other factors and speak only as of today. We also refer our listeners to review our SEC submissions. At this time, I would like to make a few brief comments concerning our first quarter of 2014 operating results.

Net income for the first quarter of 2014 is 228,000 or $0.08 per diluted share as compared to net income of 644,000 or $0.24 per diluted share for the first quarter of 2013. The first quarter of 2014 net sales was $43 million a $1.3 million increase or a 3.1% increase from the first quarter of 2013 net sales of $41.7 million.

Constant dollar net sales for 2014 increased by $2.5 million or 6% as compared to the prior year.

We use constant dollar reporting to supplement our financial results presented in accordance with generally accepted accounting principals in the United States or GAAP and disclose operating results that have been adjusted to exclude the impact of changes due to the translation for foreign currencies into U.S.

dollars including net sales deferred revenue, gross profit and income from operations. We use these non-GAAP measures to provide investors with an additional perspective on trends. Recruiting of new associates and members increased 7.1% in the first quarter of 2014 as compared to the first quarter of 2013.

The number of new independent associates and members for the first quarter of 2014 was approximately 25,600 as compared to 23,900 in 2013. The total number of active independent associates and members based on a 12 month trailing period was approximately 246,000 as of March 31, 2014 as compared to 231,000 as of March 31, 2013.

For the first quarter of 2014, our operations outside of North America accounted for approximately 52.8% of our consolidated net sales, whereas in the same period in 2013 our operations outside of North America accounted for approximately 50.8% of our consolidated net sales.

Asia/Pacific net sales increased by $1.2 million or 6.7% to $19 million in the first quarter of 2014, as compared to $17.8 million for the same period in 2013, due to growth in the number of active associates and members.

In constant dollars, net sales would have increased 11.2% to $19.8 million, the currency impact was primarily due to the Yen and Australian dollar. Europe, Middle East and Africa or EMEA net sales increased by $300,000 or 8.8% in the first quarter of 2014 to $3.7 million as compared to $3.4 million for the same period in 2013.

Increases in active associates and members in South Africa was offset by decreases in active associates and members in Europe. In constant dollars, net sales would have increased 17.6% to $4 million, the currency impact primarily due to the South African rand.

During the quarter, we suspended operations in Ukraine and set charges to earnings of $500,000 consisting of 200,000 related to operations and 300,000 in inventory reserves due to the reduction and projected demand for Ukraine and European countries.

North America net sales decreased by $200,000 or 1% in the first quarter of 2014 to $20.3 million as compared to $20.5 million for the same period in 2013 due to a 12.1% decline in active associates that was partially offset by 2% increase in active members and 7.1% increase in revenue per active associate end member.

During the first quarter, associates and members applied 600,000 for loyalty purchases globally. Additionally we deferred net sales of $2.8 million during the quarter for future loyalty redemptions. At March 31, 2014, our deferred revenue balance on our balance sheet was $9.7 million, of which $7.7 million is attributable to the loyalty program.

Our operating income for the first quarter of 2014 is $1.4 million as compared to operating income of $655,000 for the first quarter of 2013. The increase in operating income was attributable to the increase in net sales and reductions operating expenses such as commissions, incentives and payroll-related costs.

These reductions were offset by an increase in the allowance for obsolete inventory related to the previously discussed Ukraine, European countries an additional $400,000 related to raw materials.

In reviewing the balance sheet at March 31, 2014, our cash and cash equivalents have decreased by approximately $200,000 to a balance of $20.2 million as compared to the $20.4 million on hand at December 31, 2013.

Cash flow from operating activities was a $93,000 dollar outflow for the first quarter 2014 as compared to $2.3 million inflow during the same period in 2013. During the first quarter 2014, we had net acquisitions of inventory of $895,000 in finished goods, whereas during the same period in 2013 we had net dispositions of $1.3 million.

Our working capital, defined as total current assets plus total current liabilities increased by $200,000 to $13.8 million as compared to $13.6 million at December 31, 2013. Our net inventory balance decreased by approximately $33,000 to $13.95 million at March 31, 2014 as compared to $13.99 million at December 31, 2013.

Total liabilities increased $400,000 to $33 million at March 31, 2014 as compared to $32.6 million at December 31, 2013. As in prior quarters we have essentially have no long-term debt. Finally, during the first quarter of 2014, we did not pay dividends and we did not repurchase shares on the open market.

At this time, I'll turn the call over to Mannatech's CEO and Chief Science Officer, Dr. Rob Sinnott..

Thank you, Mark. Good morning to Mannatech's investors, customers, associates and employees. You just heard a detailed analysis of the financial results from our CFO, Mr. Mark Nicholls. Now I'll give you a little color commentary and what we see at some of the big things influencing Mannatech at this particular point in time.

We are continuing with our plan to keep improving operational efficiency and accelerate our global sales growth. Specifically, we are facilitating the spread of proven sales and business development practices globally.

For example in Korea Mannatech is having success with compact, efficient training centers located in close proximity to the homes of top associate leaders. It gives these teams a convenient and attractive place to gather and hold regular daily meetings and it has proven successful.

In late April, we expanded this program by opening two new training centers in the growing population centers of (inaudible) and Busan as well as completing an expansion of our sole training center to accommodate strong demand there.

We believe that this model of bringing multiple, small cost effective training centers strategically located to feed pockets of active associate meeting activity will work well particularly in Asia. We are looking at this model to accelerate our pace of growth in Hong Kong and to help rekindle consistent growth in Japan and Taiwan.

We are also learning from the dramatic and continuing growth that we are seeing in South Africa. In that particular case, a strong culture of leadership development and a pattern of very strong quarterly regional events has supported this organic growth.

We have seen that the underlying principles of this South African model have transplanted well in places like Canada, where we have seen adoption of these skills by certain associate leadership teams. We have projects and personnel now in place to infuse our U.S., Australasian and European leaders with the strong leadership disciplines.

Specifically, we have recently expanded the very successful training of the month business based leadership education program to Europe and the United States. Compelling systematic events and strong personnel development training have been the foundations of the direct selling industry for decades.

This program which has been hone for Mannatech and is now being readily adopted by many of our leaders globally, I think that Mannatech has now finally discovered and polished unique forms of these arts that are tailored to our unique culture.

As proof of this just this past weekend we hosted a very successful 20th anniversary sales and training convention in Texas. At this event, we brought together hundreds of our top leaders and their teams to the Frisco Convention Center Dr. Pepper Arena and Dr. Pepper Ballpark.

Frisco which is the fastest growing city in the United States with its hugely vibrant and business friendly culture was proven out to be the perfect host city for Manifest 2014. The weather was picture perfect particularly for all of our outdoor stadium activities.

The event was packed with recognition, training and information from our fastest growing leaders globally. We think it will help immeasurably to jump start the crosspollination of successful ideas amongst our most active leaders who will grow and prosper by applying the best practices that are most effective for Mannatech in 2014.

On the product side of the business, we continued to launch our youth skin care cream into all of our major global markets during 2014. Mannatech currently has several new products in our development pipeline that build on the company’s strength in nutritional glycobiology and the broader field of human nutrition.

Mannatech has recently hired a highly experienced Chief Marketing Officer Mr. Joe (inaudible) who joined our team last week. We see what that this new addition will accelerate the pace of positive change at Mannatech.

I feel that we have a very strong management team and now with this additional strength leading our marketing area, we will impart process and discipline that will improve our global coordination for product launches and follow-up marketing activity to ensure that we are getting maximum return from our technology investments.

Mannatech has much to gain from our existing portfolio of products and technology and from cleverly positioned new product launches. We have a 20 year history of innovation and a solid product development pipeline, but I feel consume our growth for decade into the future.

On the operation side of the business we continue to seek our best practices to improve our operational efficiencies. In particular, we are undertaking a thorough review of our supply chain from forecasting to manufacturing and distributions.

The current metrics in historical financial trend show us clearly that there are gains to be had by sharpening our forecasting and purchase planning discipline and repairing efficient manufacturing and distribution alliances.

We will never compromise quality to improve margin or lower prices, but we also know that in this current environment there is not room for any inefficiency in a product driven company supply chain.

We have come a long way in the last few years, but rather than feeling [faceted] or satisfied, it has stimulated our imagination to explore the boundaries of how great we can potentially be. I know that our team of employees and independent associates is fired up and ready for the opportunities ahead of us.

So, in conclusion, I thank our shareholders, our customers, our associates and our employees for their support and diligence in making our collective vision a reality..

Thank you for listening to Mannatech first quarter 2014 earnings call. As a reminder, company information and filings can be found at the company's website Investor Relations website ir.mannatech.com or by reviewing SEC submission. This concludes today's call..