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Subject: Speaker: Jean Bono, Investor Relations “Thank you, [operator]. I’d like to welcome you to the Fourth Quarter 2008 Earnings Conference call for Natural Health Trends Corp. I would like first to take care of some general administrative items. Your telephone lines have been placed on a listen-only mode until the question-and-answer segment of today’s call. This call is being recorded. If you have objections, you may disconnect at this time. Forward-looking statements in this conference call do not constitute guarantees of future performance. Such forward-looking statements are subject to risks and uncertainties that could cause the Company’s actual results to differ materially from those anticipated. For a more detailed discussion of the risks and uncertainties of the Company’s business, please refer to the Annual Report on Form 10-K for the fiscal year ended December 31, 2007 and 2008 to be filed in the next week or so, and our Quarterly Reports on Form 10-Q filed with the Securities and Exchange Commission. All forward-looking statements are made as of today based on information available to us today, and as required by law. The company assumes no obligation to update any such statements. The content of this conference call contains time-sensitive information that is accurate only as of today, March 17, 2009. At the end of our remarks there will be time for your questions. At this time I will turn the call over to Chris Sharng, President of Natural Health Trends.” Speaker: Chris Sharng, President “Thank you, Jean, and good morning everyone. Natural Health Trends enters 2009 as a company significantly different from the past, thanks to the many positive changes implemented in 2008. We are now much leaner and more focused on delivering superior health and wellness products, through a global distribution system that also provides an opportunity for satisfied product users to create their own business, selling our products. In the past year, our company faced many operational, financial and legal challenges. We invested a tremendous amount of time dealing with legacy issues and evaluating every aspect of our business. As a result, we have emerged with these past issues largely behind us and with a much stronger vision for NHT Global. A critical part of that new vision includes an aggressive change in our corporate culture. The changes and additions to our management team have also reflected the changing goals we have set for Natural Health Trends. We recently announced the appointment of Linda Lucas Padilla as Senior Vice President of Marketing. With extensive experience in our industry, Linda is driving our global product development and marketing. This new position for Natural Health Trends demonstrates our commitment to a disciplined approach to the development, launch and support of new products. With the experienced, professional management team and outstanding employees we have assembled, we intend to give our distributors expanded product offerings with which to accomplish their goals. We had a strong finish for the year 2008. The higher level of deferred revenue at the end of 2008, compared to that of September, represents more orders were received but not shipped as of December 31, versus 3 months ago. We are optimistic about the current momentum our Greater Chinese members have generated, following a prolonged Chinese New Year festival period that ended in mid February. We have been actively planning new 2009 marketing programs, including a new focus on smaller training, sales events and meetings in Greater China that have begun in the last few weeks. We are also excited about the progress of one of our newest and most promising markets—Russia. We have selected a service partner in Russia and are planning to activate an in-market customer service facility by the end of June. Taiwan successfully launched Essential Probiotics in February, an innovative product designed to improve intestinal health. We plan to introduce Essential Probiotics to our markets in Hong Kong and China soon. Our new men’s cosmetic line, Gallant, was recently introduced to our Chinese consumer business under the Skindulgence brand name. Early reception is very positive and we have planned for expanded promotions. The Chinese business is based on a network of eight branches in major cities of the country and has been cash positive since last September. In Hong Kong, we launched a new gold package that included a number of products newly registered for the Chinese market, including the exclusive NHT Triotein nutrient product. With a highly anticipated new incentive trip to Japan and a new recognition plan, the members are enthusiastic about our expanded plans for 2009. With exciting new product development plans evolving, and our global brand strategy focused on creating wellness traditions, the current trend in revenue and expenses we are witnessing after the Chinese New Year bodes well for a solid year. At the end of the fourth quarter, we implemented a price increase and a restructuring of the shipping methods in Hong Kong, Europe and North America that should further bolster our gross profit margin, starting in the first quarter. In addition, we have planned for and largely executed additional cost savings measures to further reduce expenditures in information technology, personnel, logistics and office rent in the U.S., Hong Kong and Korea. In total, that should produce cost savings of $500,000 per quarter, to be fully realized by June. As a final note, I would also like to take a moment to share personal observations with respect to the extraordinary times we live in. Every day we read and watch media coverage about the global financial meltdown and economic turmoil. I believe this macro-economic environment presents a huge opportunity for our business and distributors, as more people come to realize that they need alternative ways to achieve their goals, to utilize their skills and to simply supplement their income. NHT Global is well positioned to support those objectives. Now, Scott Davidson, our CFO, will provide you with some details on the quarterly financials.” Speaker: Scott Davidson, Chief Financial Officer “Thank you, Chris, and good morning everyone. I would like to share with you our fourth quarter 2008 financial results. Net sales in the fourth quarter were $11.1 million, roughly unchanged from the third quarter. Sales in Hong Kong increased $744 thousand, or 10%, quarter over quarter, while sales from North America and Europe increased nearly $300 thousand, or 30% over the same time frame, due to sales into Russia and its adjacent countries. These increases in revenue were reported in spite of the increase in unshipped product in both markets totaling $869 thousand in the aggregate. Also, our e-commerce business in China increased sales by $154 thousand, or 44% quarter over quarter, due to new product introductions such as TriFusion Max in August 2008. This increase in sales was largely offset by decreases in Taiwan and in South Korea. Gross profit margin was 72.0% during the fourth quarter. As we previously communicated, we anticipate continued improvement in gross margin as a result of a price increase and a restructuring of shipping methods in Hong Kong. Both of these changes were effective at the end of the fourth quarter, thus the benefits will not be reflected in our income statement until 2009. Further, we expect our margins to benefit from a reduction in importation fees in Asia, effective towards the end of the first quarter of 2009. Distributor commissions were 40.5% of net sales for the fourth quarter versus 41.5% in the third quarter of 2008. We believe that our commission rate will ultimately settle around 40% of product sales. During the fourth quarter of 2008, we de-recognized $2.2 million of commission liabilities in certain international markets for previous years as we determined that it is probable that these commission payments will not be claimed. SG&A during the fourth quarter totaled $3.9 million, including $133 thousand of non-cash stock compensation expense, compared with $4.4 million in the third quarter of 2008, which included $128 thousand of non-cash stock compensation expense. Operating loss was $815 thousand compared to operating loss of $1.3 million during the previous quarter. We generated cash from operations of $90 thousand during the fourth quarter, compared to cash used of $1.3 million in the third quarter. The improvement in both operating loss and cash flow from operations results from better alignment of commission payout with sales and our continued success in reducing operating costs. Now I would like to turn the forum back over to Chris.” Question and Answer: Mr. Sharng invited and answered questions from the listeners. Closing Speaker: Chris Sharng, President Thank you to our investors, employees and distributors for your patience throughout 2008. I look forward to reporting our progress to you again next quarter.
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