S. Mark Nicholls – Chief Financial Officer Robert A. Sinnott – Chief Executive Officer and Chief Science Officer.

Greetings and welcome to the Mannatech Incorporated Third 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 day, 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 third quarter 2014 earnings call. Today, you’ll 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, expects, 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’d like to make a few brief comments concerning our third quarter of 2014 operating results.

The third quarter of 2014 net sales was $55.6 million, a 25.2% increase from the third quarter of 2013 net sales, up $44.4 million. Net income for the third quarter of 2014 is $5.1 million or $1.89 per diluted share, as compared to a net loss of $801,000 or $0.30 per diluted share for the third quarter of 2013.

Recruiting of new associates and members increased 0.7% in the third quarter of 2014, as compared to the third quarter of 2013. The number of new independent associates and members for the third quarter of 2014 was approximately 29,000 as compared to 28,800 in 2013.

The total number of active independent associates and members based on a 12-month trailing period was approximately 234,000 as of September 30, 2014, as compared to 239,000 as of September 30, 2013.

We are very happy with the strong growth and year-over-year net sales; however, we are providing additional clarity surrounding the comparability of third quarter 2014 net sales as compared to third quarter 2013. Net sales comparability for the third quarter 2014 was impacted by two items.

The first item is the launch of the Uth skin care product, which occurred in the fourth quarter 2013 in North America with the remaining markets being launch during 2014. Our Uth skin care product has accounted for $7.2 million of net sales in the third quarter ended September 30, 2014. The second item affecting comparability is the loyalty program.

The loyalty program was launched in the third quarter 2013. Under the terms of the program, customers have one year following the vesting of their loyalty points to redeem products, otherwise the loyalty points are forfeited. We anticipate that the third quarter of 2014 would have a higher rate of redemptions and forfeitures than previous quarters.

For comparison purposes, the loyalty program increased third quarter 2014 net sales by $1.9 million as compared to the same period last year.

Excluding the effect on comparability on net sales of the Uth skin care product launch and the loyalty program, net sales would have increased $2.1 million, or 5%, for the third quarter 2014, as compared to the same period in 2013.

For the third quarter of 2014, our operations outside of North America accounted for approximately 63.4% of our consolidated net sales, whereas in the same period in 2013, our operations outside of North America accounted for approximately 53.2% of our consolidated net sales.

Asia/Pacific increased net sales by $8.3 million, or 37.7%, to $30.3 million in the third quarter of 2014, as compared to $22 million for the same period in 2013. This was due to the growth in the number of active associates and members as well as an increase in revenue per active associate and member.

In constant dollars, net sales would have been $28.9 million or an increase of 31.4% from the same period in 2013. The currency impact was primarily due to appreciation of the Korean Won.

Excluding the effects on net sales of the Uth skin care product launch and the loyalty program, net sales in Asia/Pacific would have increased by $1.5 million or an increase of 6.8% for the third quarter 2014 as compared to the same period in 2013.

Europe, Middle East, and Africa, or EMEA, net sales increased by $1.2 million or 32.4% in the third quarter of 2014 to $4.9 million as compared to $3.7 million for the same period in 2013, which was due to the growth in the number of active associates and members.

In constant dollars, net sales for the third quarter 2014 would have increased 37.8% to $5.1 million. The currency impact was primarily due to the South African Rand depreciating.

Excluding the effects on net sales of the Uth skin care product launch and the loyalty program, net sales in EMEA would have increased by $1 million, or an increase of 27%, for the third quarter 2014 as compared to the same period in 2013.

North American net sales increased by $1.7 million or 9.1%, in the third quarter of 2014 to $20.4 million as compared to $18.7 million for the same period in 2013 due to an increase in the revenue generated per active associate and member.

North America had a decline in the number of active associates in the third quarter of 2014, as compared to the same period in 2013.

Excluding the effects on net sales of the Uth skin care product launch and the loyalty program, net sales in North America would have decreased by $400,000 or a decrease of 2.1% for the third quarter 2014, as compared to the same period in 2013.

Our operating income for the third quarter of 2014 is $8.2 million, as compared to operating income of $429,000 for the third quarter of 2013. We had an unfavorable impact from changes in foreign currency as the U.S. dollar generally appreciated against the other currencies, which are used to transact business.

Foreign currency accounted for the third quarter 2014 net expense of $1.2 million as compared to a net expense of $275,000 in the same period of 2013. Our tax rate improved to 27.6% for the third quarter of 2014, as compared to 548% for the same period in 2013.

Items decreasing the effective income tax rate included favorable rate differences from foreign jurisdictions as the overall profitability improved during the third quarter 2014. As we discussed in prior quarters, our historical uneven performance in various markets previously increased our effective tax rate above the federal statutory rate.

We continue to believe the higher tax rates are transitional and we continue to engage in additional activity to accelerate top line growth and to ensure all markets contribute to overall profitability. I’ll now turn my discussion to cash flow and certain balance sheet accounts.

Our cash and cash equivalents have increased by approximately $11.8 million to a balance of $32.2 million at September 30, 2014, as compared to $20.4 million on hand at December 31, 2013. Cash flow from operating activities was $14.5 million in the nine months ending September 30, 2014, as compared to $7 million during the same period in 2013.

We invested $2.2 million in the nine months ended September 30, 2014 primarily for the acquisition of property and equipment as compared to $500,000 during the same period in 2013.

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 balances decreased by approximately $1.5 million to $12.5 million at September 30, 2014, as compared to $14 million at December 31, 2013.

This decrease is from a $2 million reduction in raw materials and an increase of $500,000 in the finished goods held for sales to our customers. Total liabilities increased $14 million to $46.6 million at September 30, 2014, as compared to $32.6 million at December 31, 2013.

Liabilities with the largest increases in balances at September 30, 2014, as compared to December 31st are deferred revenue, which increased $6.4 million primarily due to our loyalty program and taxes payable, which increased $5.4 million primarily due to an increase in profitability.

At September 30, 2014, the loyalty program had a deferred revenue balance of $9.8 million and a deferred commission balance of $5.1 million. At December 31, 2013, the loyalty program had a deferred revenue balance of $5.5 million and deferred commission balance of $2.7 million.

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

Thank you very much, Mark. Good morning to Mannatech’s investors, customers, associates, and employees. Our CFO, Mark Nicholls, and his team have done a very good job laying out the full details of Mannatech’s financial results in the company’s 10-Q filing, and Mark has given you some highlights on this call.

Mannatech has had a very good quarter financially. As the CEO and also a shareholder, I’m very pleased by the increased revenue, increased profitability, increased operational efficiency, increase in cash and cash equivalents, and increased working capital. These financial metrics all show improving health of the business.

Through diligent management of the operation, we have began to turn the company around financially. We now have options available to us. We’re strategically growing the business that were not present to us just a couple of years ago.

Currently, we have profitable growth strategies that are working well in several countries in all three major regions of our global network. Our effort to expand these strategies to more countries does appear to be gaining traction.

Expanding these profitable growth strategies and improving operational efficiency will remain our top goal for 2015 through 2017. We are very excited by how the three point plan, leadership and development, and training system which was honed in South Africa has began catching on in the European Union.

Successful associate leaders from South Africa have been training European Associate leaders using this systematic approach. As a result, we are seeing early signs of growth in the EU that are very encouraging.

We also believe that the three point plan can be successfully transplanted to places like North America and Australia to help the leaders there achieve sustainable growth of their businesses. We are enthusiastic about our continuing growth prospects in Asia. In early October, Mannatech held its second Asia MannaFest at Olympic Park in Seoul, Korea.

This was the large and enthusiastic gathering of associate leaders, primarily from Korea, Taiwan, Hong Kong, Japan, and Singapore. The events were centered around leadership development, training, and recognition. This has quickly become Mannatech’s largest global event by attendance. There is great momentum developing in Asia.

Asian entrepreneurs appreciate Mannatech’s network marketing business model and our reputation for highest quality health products. Together these factors synch the deal in the minds of consumers. We see strong growth prospects in Asia for Mannatech. Asia is alive with entrepreneurial potential.

There is strong appreciation for premium quality products produced in the United States, and there is also the strong appreciation of an integrative natural approach to preserving wellness. We are learning how to appeal successfully to the Asian consumers.

We are then applying this knowledge and momentum to other Asian countries in which Mannatech operates. On the operations front, Mannatech is driving for continual improvement.

We have come to realize that we can become more profitable by actively managing our forecasting, our contract manufacturing relationships, our warehousing and transport logistics to much tighter standards. We are already making some progress in these areas.

Over the next two years, we will continue to tighten up these operational areas with better processes and new tools to make us more efficient. Our goal is to increase profitability by more tightly controlling the cost of good sold and the cost associated with selling products.

We recognize that this is money that has been leaking through our fingers and we intend to recapture for ourselves. There is significant turbulence and headwinds affecting global business today, political and stability and terrorism are real threats that can affect our business by affecting people’s willingness to travel or conduct meetings.

To mitigate these risks, we are implementing tools and training to make remote meetings for example by Skype and integral part of our business.

We also seeing increasing regulatory activity and other real or threaten protection statics in some countries including Mexico and South Africa that have some potential to adversely affect our business and leased on a temporary basis. Mannatech will need to address these business issues on an ongoing basis.

We have a very competent and active regulatory and legal team that help us to navigate these issues when they arise. I believe that the management and the Board are asking the right questions about risk mitigation. And we are not at all hesitant to take proactive steps to address risk issues when they occur.

As part of our strategy, we remain very active in the industry organizations, such as the direct selling association to stay aggressive dynamic situations that may impact our business. Running a profitable efficient business that spans almost two dozen countries on five continents is not an easy task.

But we have a very competent and experienced team, who can manage the existing operations, while planning prudent growth strategies for the future. So in summary, Mannatech is the company that has a lot going in its favor. We have very strong products and intellectual property that make us valuable and help to protect us from competition.

We have a 20-year track record of success that has helped our management team to build a wealth of experience. We have survived many tests and challenges that probably would have sunk other companies. Several of our competitors are now facing some of the same complaints and legal challenges that we have survived and have made it stronger.

Now with growth momentum building and spreading, I feel that our prospects for 2015 through 2017 are very bright. In many ways, Mannatech has built the last because of the way that we responded to our challenges and use them to make it stronger and better. With every quarter that passes, we strive to become a better and better company.

Our management and Board of Directors are united in this goal. I thank our team of global employees, our 234,000 independent associates, and our shareholders for their continuing support to make Mannatech, the best company that it can possibly to be. Thank you..

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