Greetings and welcome to the Nature's Sunshine Product's First Quarter 2016 Earnings Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow a formal presentation. [Operator Instructions]. As a reminder this conference is being recorded.

I would now like to turn the conference over to your host Richard Strulson, General Counsel and Chief Compliance Officer of Nature’s Sunshine Products. Thank you, Mr. Strulson. You may begin..

Thanks. Good afternoon, everyone. And thanks to all of you for joining our conference call to discuss our first quarter 2016 financial results. This call is available for replay in a live webcast that we posted on our Web site 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 within 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. While our overall results continue to be depressed by currency headwinds and challenges in Russia, Central and Eastern Europe. I am pleased with our first quarter results.

Net sales of $82.4 million were up 1.3% on a local currency basis which reflected the strong progress we have made towards returning Nature's Sunshine to sustainable long-term growth.

Nobel developments included, ongoing strong execution in our NSP United States and NSP Canadian businesses, which both close to their seventh consecutive quarters of year-over-year local currency sales growth.

Synergy worldwide best first quarter ever driven by successful business model and process improvements taking hold in our key Asian markets and finally positive progress in China towards obtaining our direct selling license in the third quarter of 2016 through our Joint venture with Fosun Pharma. Now turning to our segment results.

NSP America's first quarter sales of $45.2 million decreased by 0.9% year-over-year in local currencies and represented 55% of total company sales. NSP U.S. and NSP Canada both achieved their seventh consecutive quarters of year-over-year local currency sales growth of 1% and 3.1% respectively.

Our IN.FORM business model which is focused on both weight management and building a daily habit of health has been the primary driver of growth in the region. Through the end of the first quarter, we had a total of 1336 coaches certified.

The majority of which are practitioners and 413 groups up and running to help facilitate adoption of this program. In fact, both practitioners and retailers that are utilizing in form are significantly outperforming those and are not.

The incremental additions of coaches and groups also experience double digit increases during the first quarter versus last year's levels.

Sales of products related to IN.FORM line grew 13% year-over-year during the quarter In addition, we launched a new patent pending IN.FORM program at our April national convention that addresses many prominent health trends associated with core metabolic functions and has been designed to target gut health and to comprehensively addressed cardio-metabolic function at its roots.

This new IN.FORM program those clinically study at out Hughes center for research and innovation and demonstrate superior health support to other published programs on the market today. Using the medium figures, study participants who receive the IN.FORM settlement by 17 pounds of fat and 26 pounds overall.

We also saw great improvements in other key health indicators already in the healthy range such as reduced levels of triglycerides LBL cholesterol, total cholesterol and insulin levels.

When compared to the control group, we used only diet and exercise of own individuals pursuing the complete IN.FORM program experienced over 50% more body fat loss, over 50% more weight loss and between the 66% and 80% greater decrease in other key cardiovascular health indicators already within the healthy rate.

Our retail channel also need to performed well driven by strength in online sales. We continue to report this channel through our key retail account management tools as well as store marketing and branding materials and new product launches.

The 2015 re-launch of our updated and extended lines of authentic essential oils also contributed positively to the quarter with triple digit year-over-year growth in net sales. In addition, we posted strong performance in our digestive product categories lead by cleanses and probiotic.

Such as our most recent shop stable probiotic introduction Neutrobiom launched in September 2015. In Latin America, sales decreased 10.4% year-over-year in local currency. The decline was magnified by decreased net sales in Mexico due to product availability issues as a result of the regulatory environment.

We have been continuing our efforts to transition all of our Latin American markets to adopt the important programs which are classified as functional fruits and therefore not subject to stringent regulatory regulations as urban remedies.

During the quarter we continue the expansion of IN.FORM in Mexico, Columbia and Ecuador and hired a general manager in Ecuador to help facilitate adoption in light of product and other macroeconomic initiatives. We're also introducing our line of authentic essential oils in Mexico later this year.

While the changing product registration regulations create significant headwinds in this region due to the loss of several key products. We are optimistic that IN.FORM and our line of essential oils will be well received and help restore this region to growth.

Turning to Synergy worldwide, first quarter sales of $29.8 million increased by 9.2% year-over-year in local currencies and represented 36% of total company sales. This was Synergy's best first quarter ever and the second best quarter of all time. The increase was primarily driven by growth in Synergy Asia mainly Korea, Japan, Indonesia and Taiwan.

It was offset by declines in North America and Europe. Our patent pending ProAgri-9+ formula continues to be a top selling product in all major Synergy markets and was a meaningful contributor to the quarter.

Our strategy for Synergy has been centered on streamlining multiple product strategies to a more cohesive sales method including a unified product offer geared towards detox, weight management and a daily habit of health, which I'll refer to as our elite health program.

We planned to rollout our elite health program later this year are Korean and European Summit. Turning to South Korea, net sales increased by 19.5% year-over-year in local currency making the second sequential growth quarter and third consecutive quarter of year-over-year growth.

Performance for the quarter is driven by our new distributor acquisition programs including the continued implementation of home health parties and expanded social media strategy and improvements in the right commencement and recognition program. Synergy Japan once again achieved strong sales with growth of 35.6% year-over-year in local currency.

This growth was supported by the implementation of a sales system adopted from our Korean distributors as well as introduction of new projects and targeted promotions to stimulate activity.

Indonesia and Taiwan continue to perform well with the year-over-year local currency sales growth of 2.8% and 48.4% respectively, primarily driven by new distributor leadership.

We recently hired a new general manager in Taiwan and has been working closely with our leaders in the region to support the pending launch of elite health system as well as organized promotions and events.

In Europe, sales decreased by 4.9% year-over-year in local currency primarily due to residual sales in the prior year period that were tied to launch of our of SLMsmart weight management program that did not recur this quarter.

That said, we are very pleased that our efforts to stand the decline in this region have succeeded with the month of March representing the first month of year-over-year growth in five quarter.

Our new VP of Europe, Carmelo D'Anzi has been busy touring our key European market to oversee the launch of new marketing and distributor recruitment and engagement initiatives specifically related to launch of our elite health system later this year.

Net sales in Synergy North America which represents 3% of company sales remained challenged with the decline of 16.9% year-over-year primarily due to reduced distributive recruiting.

We are focused on initiatives to boost the distributed recruiting, training and motivation to ensure we have proper commitment of our leaders in the region to support the pending launch of the Elite Health System. Turning to NSP Russia, Central and Eastern Europe.

Net sales of $6.4 million decreased 13.9% over the prior year and represent 8% of total company sales.

The net sales decline was primarily due to currency devaluation of the Russian ruble, the Ukrainian Hrynia which is their worse point during the first quarter and result in another sharp increase in the local cost of our products given that our pricing in the region expected the U.S. dollar.

That said, whole and it's been a bright spot for us and reported local currency net sales growth of 80.8% year-over-year which is helping offset some of the decline in this segment. We've been operating through the ongoing political unrest in Russia and Ukraine.

Now for over two years which continues to reduce the number of independent managers, distributors and customers buying and distributing our products due to reduced purchasing power.

In an effort to boost recruiting, we launched an additional product kit during the quarter that healthy lubricate to join our existing line of product kits which help generate over $0.4 million in gross sales during the quarter.

So first and for most we will continue to focus on initiatives to support and retain our managers, distributors and customers through promotional activities, discounts and training. Despite these economic challenges, our leaders have remained committed to our company.

And while we do not expect conditions to improve in the foreseeable future, we are very pleased that our local partner in the region also remains committed. We view Russia, Central and Eastern Europe as a very strategic direct selling market and believe we'll be in a good position to eventually reignite growth once the situation is steady.

Turning now to China and New market, first quarter net sales for this segment which currently only includes our wholesale business decreased to $1 million year-over-year from $1.2 million in the prior year and represented approximately 1% of total company sales.

We've continue to make good progress in China to remain on track to obtain our direct fund license in the third quarter of this year. We've spent over a year and half building a strong foundation in China with the support of our joint venture partner Fosun Pharma.

Under the leadership of Paul Noack, our President of China in New markets, we continue to make additional key hires during the quarter as well as further the general food importation process and the blue cap product registration for selected products. We look forward to keeping you updated on our progress in China over the next several quarters.

In summary, I'm very pleased with the progress we have made in the first quarter to have position us for long-term sustainable growth. Our management team and board has a lot of confidence the significant growth capabilities of Nature's Sunshine.

We will continue to allocate capital to invest in the various parts of our business who receive the most growth potential, namely in China, NSP North America and Synergy Europe and Asia-Pacific as well as return capital to our valued shareholders in the form of quarterly cash dividend.

With that I'll turn the call over to Steve to review our first quarter financials..

Thanks, Greg, and good afternoon everyone. Net sales in the quarter were $82.4 million down 1.8% from $83.9 million in the same quarter last year. However, on a local currency basis, net sales increased by 1.3% year-over-year.

The reported decrease was primarily driven by a $2.5 million unfavorable impact from foreign currency exchange rate fluctuations as well as a $1.1 million reduction in net sales in the NSP Russia, Central and Eastern Europe segment. Cost to sales were $22.0 million up slightly from $21.9 million in the year ago period.

Cost to sales increased modestly as a percentage of net sales in the first quarter by 0.6% to 26.7% as compared to the prior year quarter. The strengthening of the U.S.

dollar against the local currency and many of our form markets increased cost to sales by approximately 0.8% in the first quarter of 2016 which made our products manufactured in the U.S. more expensive in those markets.

As a result, gross margin sales of 73.3% from 73.9% in the year ago period, primarily as a result of the increased cost of sales percentage during the first quarter. Volume incentives accounted for 36.3% of net sales in the first quarter a slight increase from 36.2% of net sales in the same period last year.

Volume incentives vary slightly on a percentage basis byproduct, due to pricing policies and commission plans in place and by the sales mix in our various markets. Volume incentives are a significant part of our network marketing program and are designed to incentivize higher product sales.

Selling general and administrative expenses were $28.4 million up $2.1 million or 7.8% compared to $26.3 million in the same period a year ago. Our investment in China totaled $1.4 million for the quarter as compared to $0.8 million in the year ago period.

As a percentage of net sales selling general and administrative expenses were 34.4% in the first quarter up from 31.4% in the prior year quarter.

The increase in SG&A as a percentage of net sales was primarily due to the reduced capitalization of $1.0 million of internal labor cost related to our ERP implementation project as well as $0.6 million of increased investment in China.

Operating income decreased to $2.1 million or 2.6% of net sales from $5.3 million or 6.4% of net sales in the prior year period. The decrease was primarily due to higher SG&A expenses on both an absolute dollar basis and as a percentage of net sales compared to the prior year period as well as the increased cost of sales percentage.

Adjusted EBITDA as defined in our earnings press release is net income from continuing operations before taxes, depreciation, amortization, other income adjusted to exclude share based compensation expense decreased to $4.2 million in the first quarter as compared to $7.7 million in the first quarter of 2015 primarily due to the lower operating income coupled with foreign exchange gains.

The effective income tax rate for the first quarter of 2016 was 51.4% as compared to 16.1% in the first quarter of 2015. The current quarter’s effective tax rate was significantly higher than the U.S.

federal statutory tax rate of 35% primarily due to the impact of current year, foreign losses related to China which currently do not provide a future tax benefit. Net income from continuing operations for the quarter was $1.8 million or $0.11 per diluted share as compared to 4.2 million or $0.23 per diluted share in the year ago period.

The quarter's diluted earnings per share were negatively impacted by several factors, including; a $0.07 per share from our current investment in China, which excludes tax benefits expected to be realized in future quarters; and $0.02 per share from unfavorable changes in the effective tax rate.

Turning to the balance sheet, cash and cash equivalents at March 31, 2016 were $46.4 million up from $41.4 million at December 31, 2015.

This higher cash balance was primarily due to cash from operations of $2.9 million and borrowings of $0.8 million on the raw and credit facility partially offset by $1.9 million used to pay dividends and $1.3 million of capital expenditures which included $1.2 million of investments to support our Oracle ERP implementation which remains on track to go live in January 2017.

Inventory at March 31st was up 8% from December 31, 2015 as we’re building inventory in advance of our channel launch and for new products released on our April U.S. National Convention. We have approximately $109.9 million in current assets.

Today, our Board of Directors also approved a regular quarterly cash dividend of $0.10 per share that will be paid on June 06, 2016 to shareholders of record as of the close of business on March 25, 2016.

During the first quarter we did not repurchase any shares of common stock in our $20 million share repurchase program at March 31, 2016 remaining balance available for repurchases under the program was $13.4 million.

In summary I will echo Greg's comments and that we will continue to stay to course and execute on our strategic priorities that drive future top line growth.

Our strong cash position affords us the liquidity in capital resources necessary to execute on our strategy including our entry into China while simultaneously returning value to our shareholders. With that I will turn the call over to the operator for questions.

Operator?.

Thanks again for your support and for participating in today's call. In late May we will be presenting at the B. Riley & Company 17th Annual Investor Conference in Los Angeles. We hope to see many of you there. Have a great day..

Ladies and gentlemen this does conclude today's teleconference. Thank you for your participation. You may disconnect your lines at this time. And have a wonderful day..