Alan Quan - Vice-President Investor Relations Michael O. Johnson - Chairman and Chief Executive Officer John G. DeSimone - Chief Financial Officer Desmond J. Walsh - President.

Scott Van Winkle - Canaccord Genuity, Inc. Michael A. Swartz - SunTrust Robinson Humphrey Timothy S. Ramey - Pivotal Research Group.

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 results for 2014 and our guidance for 2015. John will talk about this foreign exchange landscape in more detail.

These impacts were felt most acutely in the fourth quarter, where net sales of $1.1 billion were 11% below the fourth quarter of the last year including the effect of currency. On a constant currency basis, net sales were flat and volume points for the quarter were down 6%.

For the full year, net sales were up 3% or 8% on a constant currency basis and volume points were up 2%. We're not happy with these top-line results. This is not what you or we expect from Herbalife, and we can and will, do better.

To this end, you should expect to take away from today's call, the reasons why we are so confident in what we are doing to create a strong platform for continued growth, and improve performance over the long-term.

On a regional basis, we saw strength in geographies that have already gone through this transition, and implemented the enhancements to the marketing plan. This includes EMEA, where volume points were up 17% for the fourth quarter, and 20% for year; and China, which was up 15% for the quarter, and 34% for the year.

It is our experience in these markets, it gives us confidence that we have right strategy and are executing effectively. And as we continue to rollout these changes globally, the softness we are currently experiencing in the Americas, and Asia-Pacific, will begin to turn.

On the bottom line in the fourth quarter, we more than offset the impact of lower volumes and net sales, by the actions we took to reduce expenses, as well through a favorable effective tax rate, and a reduced share count, compared to the last quarter of 2013.

This resulted in an adjusted EPS for the fourth quarter of a $1.41, up 10% compared to the fourth quarter of 2013, and above our guidance of a $1.30 to a $1.40. EPS for the full year was up 10% over 2013 to $5.93. We are focused on ensuring, we continue to drive profitability this year, and into the future.

And have an ongoing commitment to control cost without impacting our member's sales capabilities. Cash flow from operations was over a $500 million in 2014. It's important to note that throughout 2014, we maintained a healthy balance sheet, and a strong cash flow. We expect both of these to continue.

Turning to an update on the business transition, a review of core metrics shows that the direction that we are heading is the right one. In 2014, our member base was up 8%, compared to 2013, at a record 4 million, of which we know the majority are discount customers.

Our average active sales leaders were up 8% in the fourth quarter and 9% for the full year versus prior periods and sales leader retention rates were an all-time high of 54.2% for the year. This includes an impressive 68% in EMEA, which is a key indicator of what to expect from those markets that are not as far advanced in this transition.

Of all these positive metrics, what we are most excited about is our retention rates because of what it signals for the long-term health of the company. In 2003 when this management team joined Herbalife, retention rates were hovering around 27%.

Through our members' emphasis on daily consumption and enhancements made to our marketing plan, combined with the efforts of member leadership around the world, we have more than doubled retention rates to today's level, while continuing to grow our customer base significantly.

Retaining our members and their experience, passion and dedication is incredibly important. The personal relationship that develops between our members and their customers is unique and is what sets us apart from other companies. And it is this distribution network that is truly a disruptive model in the marketplace.

As Herbalife members are bringing a combination of products, services and most importantly results to people in a way that does not exist anywhere else, because of this, consumers are coming to Herbalife in greater numbers than ever before.

To put this in perspective, in 2014, we sold over 65 million canisters of our popular Formula 1 Nutritional Shake. And as the number company in the meal replacement category with 31% of the global market, we are well positioned to benefit from the projected long-term growth of the meal replacement market.

What's more, today we have tens of thousands of Herbalife clubs, offices and fit camps around the world. Places where members and customers connect to share their journey to better health and fitness. What this tells you is that Herbalife is about products, experiences and the unique mentorship and support that our members bring to their customers.

The other focus of our strategy is increasing the quality of our sales leaders, by this we mean bringing in leaders who develop their businesses over time and as a result are more productive and successful and stay with Herbalife for the long-term.

As a reminder, there were historically two ways to become a sales leader, a one-month path and a two-month path. In 2008, we began testing a third method in Russia that allowed people to take up to 12 months to qualify. Based on the results of that test, we began offering this third method globally in 2009.

Different markets have adopted this third, more sustainable method at different times over the last several years, and all of our data has consistently shown that those who joined Herbalife over a period of 3 months to 12 months and who take the time to understand our products, while building a loyal customer base see greater success.

These individuals also demonstrate much higher ordering and activity levels one year after they join, and retention is subsequently higher. For example, the first time requalification rate for leaders who initially took 3 months to 12 months to qualify a 62% higher than those who came in as one-month or two-month later, they are also 60% more active.

Last summer, we accelerated formal implementation of a number of enhancements to promote global adoption of the more sustainable approach to qualification including standardizing the sales leader qualification at 4,000 volume points over a 12-month period expanding the first-order program from 18 markets to all markets and eliminating field sales for qualification.

We did this because we could clearly see that the more gradual qualification drives tangible results over time, and we are seeing more and more people entering the business through the 3-month to 12-month method as they too recognize the benefits of doing so. This now accounts for 48% of all sales leader qualifications globally.

Turning to some of our key regions, we have seen significant impact from our transition in four of our largest markets U.S., Korea, Mexico and Brazil. We are working closely with our member leadership to ensure that the changes are embraced quickly that we are implementing business growth initiatives designed to expand product awareness and usage.

One of those exciting initiatives will enable new customers, who visit herbalife.com to buy products direct from a member online. This ability to go through herbalife.com will significantly streamline the customer acquisition process for our members and should improve the conversion rate of those who show interest in our products.

This new capability follows on the heels of a period of transitioning members to our GoHerbalife.com online platform. We have worked with our members to ensure this new platform has all the functionality they need and expect, and the rollout of GoHerbalife.com has been hugely successful.

In Mexico, we continued to expand our product access initiatives, which gives members who are geographically dispersed and without access to transportation, the ability to pick up and pay for products through existing distribution partners.

We now have nearly 1,000 of these distribution points across Mexico, more than doubling the amount from last year. In Korea and Brazil, a number of targeted promotions as well as more effective training and communication in the field have seen our members embrace more fully the 3-month to 12-month qualification method.

Member leadership engagement is gaining momentum and we are already seeing an improvement in key metrics with 3-month to 12-month qualification from January 2014 to January 2015 in Korea, up from 39% to 70%, and Brazil doubling to 60%. I now want to highlight two regions that are performing incredibly well, EMEA and China.

EMEA is the leading indicator for a number of the enhancements that are being adopted in other markets. The enthusiastic adoption of the 3-month to 12-month qualification method a number of years ago is generating results, with over 75% now coming into the business in this way, which in turn is driving the growth in the retention levels we see today.

We are also seeing markets that were previously flat, such as Germany and France, returning to growth. China is equally encouraging, showing double-digit growth again this quarter, and for the full year.

As of the fourth quarter last year, online ordering and home delivery are available in all provinces and municipal cities in which we are licensed to do business.

By the end of 2014, virtually all member orders were being placed online for home delivery or onsite pickup, as we continue to invest in automating our distribution processes to increase efficiency and deliver the best customer experience.

We're also excited about the traction that our customer loyalty program is gaining in China, and the impact it is having on order volumes and conversion to service provider.

We added 370,000 customers to our loyalty program in 2014, an increase of 132% over 2013, and more than 55,000 of those loyal customers were converted to sales representatives in 2014, a 28% increase over 2013.

We are also seeing a positive trend in order volumes, with monthly volume points from customers in the loyalty program, up from just over 1 million in the month of January 2014, to an average of 10 million per month in the second half of the year.

This represents an increase from 4% of the total volume, going through those in the customer loyalty program in January 2014, to nearly 20% per month at the end of the year. Finally, in China, we are excited to announce that we have reached an agreement to lease an approximately 400,000 square foot manufacturing facility in the Nanjing province.

This will be our third and biggest facility in China, and reflects our confidence in the continued growth of this important market. This agreement is in line with our previously stated global commitment to our seed to feed strategy, that will see us manufacture, 65% of our products in-house by the end of 2015.

Just last month, we officially opened our 800,000 square foot manufacturing facility in Winston-Salem, North Carolina which by the end of this year will have created more than 500 new jobs and will be producing more than 150 million units of product per year.

Looking ahead, we expect 2015 to improve sequentially throughout the year as we continue on our journey to the ideal combination of growth and sustainability. John will walk you through our updated guidance, but let me share a couple of high-level thoughts. Obviously currency will continue to be a headwind for us.

As it will be for many others, and our updated guidance takes this into account.

We've also adjusted our guidance to reflect the volume impact we're seeing as a result of the global roll out of our marketing plan enhancements, given the implementation dates of the 'first order' program and the elimination of field sales this month, we expect volumes to be hit hardest in the first quarter, but begin to pick up momentum through the course of the year as the 12-month qualifiers come through their anniversary in the field sales phase out.

None of the changes we have implemented should have a material effect on the growth beyond the 12-month period post implementation. And we have no additional marketing plan changes planned for the future. In the mean time we will continue to prudently manage our costs and expect our cash flow to remain robust.

We remain confident in our business model and our transition, and we know we will be an even stronger company in the years ahead. 35 years ago this month, Herbalife began changing people's lives, with a mission for nutrition and an opportunity for additional income.

As we celebrate this milestone with our members and the millions of people who have benefited from Herbalife in communities around the world, it is clear that Herbalife has undergone changes and is a different business today than it was at the beginning or even just a few years ago.

We know the transition, we have embarked upon is the right one and took steps to accelerate it globally because we feel so strongly about the early results and the long-term benefits. We are a company that is first and foremost about results.

Results had come from great nutrition products and from the support and guidance of our hard-working and passionate members. That is at the heart of what we do and will remain the key driver of our business in the future.

We have a global team of dedicated employees supporting the continued evolution of our business and a group of members whose enthusiasm, passion and commitment to Herbalife has never been greater. I will now turn the call over to John for a more detailed look at the numbers..

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 to exchange rate differentials. In addition to Venezuela, our consolidated results were also negatively affected by the impact of declines in four markets, the U.S., Mexico, Brazil and Korea.

For perspective, excluding these four markets and Venezuela the rest of the world combined had volume point growth of 5% and local currency revenue growth of 9%, each of these four markets is being impacted slightly differently by the marketing plan changes discussed by Michael. And importantly we anticipate these changes will cycle through in 2015.

And as a result, we expect to return to consolidated volume and local currency net sales growth later in the year. I'll provide a bit more information on this later in my comments when I discuss guidance. For the fourth quarter, adjusted EPS was $1.41, up 10% compared to the fourth quarter 2013, and above our guidance range of $1.30 to a $1.40.

Adjusted results finished above our guidance range due to lower expenses including bonus expense. A decrease in the effective tax rate partially offset by lower than expected top line. Like many companies significant currency headwinds had a meaningful impact on our results in the fourth quarter, and we expect this to continue in 2015.

Currency negatively impacted Q4 adjusted EPS by $0.31 compared to Q4 2013. On a reported basis, Q4 EPS increased 5% to $1.21 per diluted share in the quarter compared to $1.15 per diluted share in the fourth quarter of 2013. Our Q4 reported EPS includes additional items we consider to be outside of normal operations of the company.

And we believe will be useful to investors when analyzing period-to-period comparisons of our results, $0.13 from non-cash interest costs associated with our outstanding convertible debt offering, $0.04 and $0.03 respectively for expenses incurred in response to attacks on our company and expenses incurred related to the FTC inquiry.

Lastly, our adjusted results exclude a $0.02 impact from non-recurring expenses associated with member payments related to Venezuela. Moving on to gross margins, our reported gross margin for the fourth quarter was approximately 80.6%, about 50 basis points higher than the fourth quarter of 2013.

The increase was driven primarily by the impact of price increases and country mix, partially offset by the unfavorable impact of currency.

Moving on to our effective tax rate, our fourth quarter adjusted tax rate was approximately 410 basis points lower than our effective tax rate of Q4 2013 and approximately 140 basis points lower than the low end of our guidance range. In both cases, the decrease was due primarily to changes in our country mix.

Moving to the full-year results, we reported record volume points of $5.4 billion, an increase of 2% over 2013 and reported record net sales of $5 billion, an increase of 3% over 2013. On a constant currency basis, net sales were $5.2 billion, an increase of 8% over 2013. Full-year adjusted EPS for 2014 was up 10.4% over 2013 to $5.93.

For the full year, currency headwinds negatively impacted adjusted EPS by $0.72 compared to full-year 2013, of which $0.44 was due to Venezuela.

The full-year 2014 adjusted effective tax rate of 28.2% was approximately 210 basis points higher than the adjusted effective rate in 2013 primarily due to the decrease in net benefits from discrete events and the inability of realized tax benefit on interest expense partially offset by favorable changes in geographic mix of our net income.

Moving on to cash flow, for the full year 2014, our cash flow continued to be robust, we generated cash flow from operations that exceeded $500 million for the year. We paid dividends of $30.4 million and invested $156.7 million in capital expenditures, including our new facility in Winston-Salem.

We also repurchased approximately $1.3 billion in common shares outstanding under our share repurchase program. During the fourth quarter, we had a one-time increase in inventory of approximately $40 million in local currency, which we will work off during 2015.

The build was the result of planned increases from the ramp up of our new manufacturing facility, plus a temporary build form the impact of lower than expected sales.

Moving on to our guidance for 2015, for all currency assumptions except Venezuela, we have used the average closing exchange rate during the first three weeks of January, consistent with our historical practice.

Overall, the currency rates assumed in our current guidance, have a negative impact on 2015, full year EPS of $0.61 compared to the previous guidance provided in early November and approximately $1.19 negative headwind in 2015 compared to 2014.

Approximately two-thirds of the impact from currency since our last guidance came from four markets, Mexico, Russia, Brazil, and Colombia. With Mexico having the biggest impact of approximately $0.20.

With respect to Venezuela, our guidance assumes a rate of 50 bolivars to $1 for the year, and excludes the potential impact of any devaluation of the bolivar in any future repatriation of existing cash balances in the country. Recently the SICAD II rate of 50 to 1 was terminated. And a new Simadi rate was introduced in Venezuela.

Based on what we know today, if we move to the Simadi rate, which opened at approximately 170 to 1, we would incur an initial charge of approximately $35 million. We are still assessing whether this Simadi exchange mechanism is a viable mechanism for Herbalife to use.

With respect to volume, we expect sequential improvement throughout 2015, as we believe the impact of our marketing plan changes will cycle through during the year. Accordingly, we expect the greatest impact to be felt in Q1, and that the impact will diminish throughout the year.

We are not planning to make any additional changes to our marketing plan and we expect to return to growth during Q3 and Q4. Net sales in our guidance reflect the volume forecast in the impact from currency. Currency headwinds will have a negative impact of approximately 800 basis points on net sales growth rates in both Q1 and full-year 2015.

Our adjusted EPS guidance for the first quarter of 2015 is in the range of $1.0 to a $1.10, which includes currency headwinds of approximately $0.28 of which about $0.10 is from Venezuela. For the full-year 2015, we now expect adjusted EPS to be in the range of $4.10 to $4.50.

This full year guidance includes a currency headwind of approximately $1.19 of which about $0.45 is from Venezuela. Compared to the prior full year of 2015 EPS guidance, as I stated earlier, currency had an unfavorable impact of approximately $0.61. The balance of the reduction in guidance is due to lower volume, partially offset by expense control.

Moving on to cash flow, we expect to generate free cash for 2015 of $430 million to $460 million, which includes an improvement in inventory, which I noted earlier. Our priorities for our use of cash as always, on pay down of debt and invest in our business.

However, we continually evaluate our capital structure options to ensure maximum flexibility and maximum value for our shareholders. So as Michael said, we are disappointed that our 2014 top line results were below our expectations, but we are confident in our strategy and we look forward to demonstrating positive momentum throughout 2015.

I will now turn the call back over to Michael..

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..

That concludes today's conference call, and thank you for joining. You may now disconnect..