康寶萊 (HLF) 2010 Q4 法說會逐字稿

Good morning and thank you for joining the fourth-quarter and full-year 2010 earning's 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 CFO, and Brett Chapman, the Company's General Counsel. I would now like to turn the call over to Brett Chapman to read the Companies 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 risk and uncertainty, and as you know, actual results may differ materially from those discussed or anticipated. We encourage you to refer to yesterday'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 US generally accepted accounting principles referred to by the Securities and Exchange Commission as non-GAAP financial measures.

We believe these non-GAAP financial measures assist management and investors in evaluating and comparing period-to-period results of operations in a more meaningful and consistent manner. Please refer to the investor relations section of our website, www.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 will now turn the call over to Michael.

Welcome to our fourth-quarter 2010 earning's call. We feel Herbalife is uniquely positioned at the intersection of health and wealth. Providing solutions for the global obesity epidemic and opportunities for those seeking additional income. As a result, we've had another record setting year that concluded with a tremendously successful fourth quarter. Our results continue to be driven by an increasingly larger and more global independent distributor organization, who are more engaged than ever before, and who have a focus on daily consumption business methods. Congratulations to all of our Herbalife independent distributors who helped the Company set numerous records in 2010. And have once again positioned us for a strong foundation of growth in the year ahead.

Let me summarize for you a few the key performance metrics for the full year of 2010. We have record volume points of $3.2 billion, up almost 14% over 2009. Record net sales of $2.7 billion, an 18% increase. Record earnings per share of $4.67 on a reported basis, and adjusted earnings of $4.77 per share. For the first time since 1999, all six of our regions reported year-over-year increases in volume points. And, we had record sales leader retention of 48.9% compared to 43% in 2009. This is important number because we view distributor retention is a key indicator of health in our business. As you know, once a year, Herbalife sales leaders go through a requalification for process in order to maintain their sales leader status. As I just mentioned, retention of sales leaders increased to almost 49%. This is compared with 43% in 2009 and 27% in 2002. We see a direct correlation between a country or region's use of daily consumption business methods and increases in sales leader retention.

A great example of this correlation is in Mexico. The club business began 10 years ago, and its retention rate hit an all-time high in 2010 of 58%. Another indicator of the strength in our business is distributor engagement. This is measured by the average number of distributors ordering each month. We experienced double-digit growth in our average active sales leader metric in the fourth quarter and for all of 2010. The continued globalization of daily consumption business methods is enabling more distributors to be successful with Herbalife. Not only are more distributors staying in the business more, but they are continuing to move up the marketing plan. In 2010, we had upward movement in all levels of our marketing plan. In just a few minutes, Des will go deeper with both retention and engagement metrics in his discussion of the quarter and the fiscal-year 2010.

For the fourth quarter and full year, each of our six regions experienced both volume point growth and increases in average, active sales leaders. This demonstrates the broad growth we are experiencing around the world. 2010 was a pivotal year for Herbalife. We've begun to reap the benefits of several years of hard work in the areas of product, science and infrastructure. We are very pleased with the progress made in 2010 in our seed-to-feed strategy . We've made significant renovations, which have given Herbalife a state-of-the-art manufacturing facility here in California and numerous modifications to our Suzhou facility to support our increase in self manufacturing. Additionally, in October, we broke ground on a botanical extraction facility where we plan to create a competitive advantage with key, raw materials while ensuring, a high level of control over quality, purity and traceability of our ingredients.

On the product front, during the fourth quarter, we introduced two new variations of our Formula 1 shake. A pumpkin-spice seasonal flavor and a gluten-free shake. We also launched a CoQ10 product that extend our Heart Health line, which is developed in concert with Nobel Laureate, Dr. Louis Ignarro. In early 2011, we released a unique satiety and fat reduction product called, Prolessa Duo. Prolessa Duo was designed as a boost for our Formula 1 meal-replacement shake and thus far sales have been beyond our expectations, reflecting how well this product has been received.

In the area of scientific leadership we are very pleased to announce last month at Dr. Gary Small, an expert in brain health and healthy aging, joined our Herbalife Nutrition Institute and our Nutrition Advisory Board. Dr. Small has authored more than 500 scientific works as well as several, popular books in the area of brain health. He is a frequent guest on national TV programs. In 2010, we launched multiple online tools to our distributors around the world enabling online ordering of payments by of mobile devices in additional countries as well as launching Smartphone and iPad applications. We will continue to invest in technology that we believe increased distributor efficiencies and enabled them to better serve their customers.

Our brand and image? Well, they just keep getting stronger. Together with our distributors we sponsor more than 180 teams, athletes, and events worldwide. Our distributors are taking an increasingly active role in their local market sponsorships and community service activities. We've been consistently educating and working with our distributor's and employees so that they ultimately understand they are the Herbalife brand. The perception of Herbalife is based not only on our sponsorships and branding, but most importantly on how well we treat people and how well we represent Herbalife in all aspects of our businesses and our daily lives. Together, we strive to make our brand both recognizable and synonymous around the world with a healthy, active life in the high integrity, successful, independent business opportunity.

We believe we have a competitive advantage in three areas; relevant products that target the global obesity epidemic; the potential for individuals to build sustainable businesses, and an increasingly strong branded image. This is why we believe the momentum in our business will continue . Now, let me turn it over to Des

Thank you Michael. The momentum we are seeing in our business is driven by two key forces, our distributors' commitment to expanding daily consumption business methods around the world, which helps create a long-term, stable customer base, and the continuing commitment of our distributors to Herbalife's mission for nutrition. As Michael mentioned in his comments, the 49% sales leader retention for 2010 was outstanding. And we believe that this is directly attributable to the globalization of the consumer-focused distributor methods of operation or DMOs. We believe that this almost 6 percentage point improvement, compared to the prior year's number, is validation that the changes in distributor business methods are helping more people be successful in Herbalife than ever before. We continue to see the expansion in daily consumption business methods as a primary driver of our distributors businesses and Herbalife's growth. We believe that the momentum behind this evolution will continue to accelerate as more distributors in more markets have success at acculturating daily consumption business methods to the markets.

Our 2010 growth in local currency net sales continued to be fairly evenly split between established and emerging markets. The established markets category, which includes several of our oldest markets, including the US and most of Western Europe, accounted for 49% of our local net sales, and increased 16% for the year. Volume in the established markets also increased 16% for the year. The emerging markets group accounted for the remaining 51% of our local currency sales and grew 19% for the year. Volume in the emerging markets increased 13% for the year compared to 2009. We remain very pleased with how balanced our growth is between the two groups and are excited about the scale of the opportunities that we see to grow both simultaneously.

Now, let me provide regional highlights and color on some key regions. The North-American region had another strong quarter, posting growth compared to the prior year period in both local currency net sales and volume points. With increases of 11% and 8% respectively. For the year, the North-American region saw local currency net sales increase 16% and volume grew 14%. New distributors increased 5% in the quarter and 14% for the year. One of the measurements that we use to gauge distributor engagement, average active sales leaders, increased 13% in the North American region, compared to last year's fourth quarter and annual results. Sales leader retention in the North-American region improved more than 5 percentage points to approximately 49% compared to the prior year. For the quarter, US net sales grew 11% and volume points grew 8% versus the same quarter last year.

The general market , or a non-Spanish-speaking market, growth has continued, largely driven by the success that they are having implementing daily consumption in markets around the US. As we discussed last quarter, the Latin market, or Spanish-speaking market, was softer in the fourth quarter than we would've liked. But this type of breather is normal in direct selling, especially after several straight years of strong growth. That said, we believe that we are beginning to see an increase in the engagement level of the Latin distributors in the US.

In January, we hosted our Latin Future Presidents Team retreat, where the energy level and engagement of the up-and-coming leaders in the market was readily apparent. And we hosted kick-off meetings for the Latin market seeing over 17,000 distributors in cities around the country, an 11% increase in the number of attendees from last year. Speaking of the Latin market, we recently announced the promotion of Ibi Fleming to Senior Vice President and Managing Director of our North-American region. Ibi Is a 13-year Herbalife veteran, and for the past five years, was responsible for the US-Latin market. During which time, that business grew from 35% of the total US market, to approximately 64% in 2010.

Moving on to Mexico. Local currency net sales for the quarter increased 34%, and volume points increased almost 27%. For the year, local currency net sales increased 19% and volume grew 14%. For the fourth-quarter and full-year comparisons, new distributors increased 3% and 6% respectively. We are pleased to see average active sales leaders increase over the course of the year. Average active sales leaders grew by 16% for the quarter and 10% for the year compared to the prior year period. This is the fifth consecutive quarter of volume growth and we are pleased to see Mexico beginning to regain the momentum that it experienced prior to 2008.

The strength of the daily consumption model is best illustrated in the fact that 2010 sales leader retention in Mexico improved more than seven percentage points to almost 58%. For the past couple of years, we've been telling investors that Mexico was in a transitional period, as we developed a better infrastructure in the country to support the business, including better product access. Also, we've regionalized our support staff and reexamine how we structure our promotional activities so that they are all working towards the common goal of driving daily consumption and consistent steady volume growth. Mexico has been a fabulous learning experience for the company, and we are now taking these lessons learned around the world.

The Asia Pacific region continues to be a key growth driver for the company. This region is intent on giving the North-America region a run for the honor of being Herbalife's first 1 billion volume point market. During the fourth quarter, local currency net sales increased 21% and volume points grew 24% compared to the prior year period. For the year, local currency net sales and volume increased 27%. For the fourth quarter and full year, new distributors increased 19% and 33% respectively. We believe that the growth within the region continues to be driven by the expansion of daily consumption business methods and a high degree of distributor engagement. Average active sales leaders increased 23% in the quarter, and 26% for the year. Sales leader retention in the Asia-Pacific region was flat with 2009, at approximately 38%.

For the past several quarters, we have been discussing our excitement about the growth we are beginning to see in India. Well, India was again a highlight in the fourth quarter. Posting volume point growth of more than 140% compared to the prior year. The business is now taking root in multiple states throughout India and we are working diligently to ensure that our infrastructure is capable of supporting this level of growth.

Local currency net sales in the South and Central-American region increased 22%, and volume points in the region were up 13% in the quarter. For the year, local currency net sales and volume points increased 19% and 4% respectively. Average active sales leaders in the region increased 6% over last year's fourth quarter and 3% for the year. New distributors decreased less than 1% for the quarter, and were flat for the year compared to the prior year periods. Regionally, we believe that the distributor leadership has begun to see the benefits that increased daily consumption business models bring to their markets, and we are pleased to see several markets within the region expand their use of daily consumption business methods. As an indication, South American sales leader retention improved 13 percentage points to 47% in 2010.

Within the South and Central-American region, we need to mention the strength that we are seeing in Brazil. Brazil experienced volume point growth of more than 16% in the fourth quarter, as nutrition clubs and our traditional business methods both saw growth in the quarter. In Brazil, we have worked to regionalize our sales support team, so they can provide better support to distributors in their markets around the country. We are taking the business down to more localized level utilizing a city-by-city approach. We are very excited about the opportunity that we believe exists in Brazil, and our distributors in that market are just beginning to scratch the surface of the market. We believe that the success the distributors are having in Brazil is well illustrated by the fact that sales leader retention in Brazil with almost 47% this year compared to 25% in 2002.

Turning to EMEA. This is a region we are now seeing the growth of daily consumption business models focused on the creation of long-term customers. During the fourth quarter, local currency net sales increased 13% and volume points in the region grew almost 9% compared to the prior year. For the year, local currency net sales increased 7% and volume increased 4%. We are pleased to see the UK continue to gain traction with the weight loss challenge concept and the Nordic Countries are seeing growth with distributor offices called Lifestyle Centers. New distributors for the fourth quarter and full year increased 9% and 12% respectively. Average active sales leaders in the region improved over the course of the year and were up 5% in the quarter and 3% for the year. Sales leader retention in EMEA improved almost 7 percentage points to approximately 59%.

Within EMEA, we are particularly pleased with the progress we're seeing in Russia. As we have told you previously, Russia was the market where we initially tested the marketing plan changes that we eventually rolled out, globally, last October. As the market that has had the 12-month sales leader qualification in place the longest, we continue to be very pleased with the changes we are seeing in the business. We saw very solid double-digit volume point growth in Russia during the fourth quarter and for the year, compared to the prior year period.

The Russian sales leaders that qualified under the longer, 12-month process, are over 50% more active following their qualification than those that qualified under the traditional one or two month plan. The success that Russia is experiencing is evident in both their volume growth and sales leader retention. This market has begun to gain traction with volume growth of 30% for the year. And 2010 sales leader retention of almost 70%, which is the highest among our larger markets. We continue to believe that Russia has the potential to be a very significant market for us. The longer qualification process has been a game changer in Russia, and we believe that the success being seen in this market could be a leading indicator to what we could experience in other markets as the 12-month qualification takes root in markets around the world.

Now, let's turn to China where local currency net sales increased 22%, and volume points increased 29% in the fourth quarter compared to the prior year period. For the year, local currency net sales increased 20% and volume increased 25%. It was almost two years ago when we began to introduce the club concept into this unique market because of the strong success the clubs were demonstrating in neighboring countries. As we have seen in other markets, the acculturation process typically takes up to 24 months before we begin to see what we believe to be strong, sustainable growth. We believe that our sales leaders in China are making progress acculturating the concept of daily consumption. And we are now seeing clubs open in locations that are more like those which have been successful and duplicable in other markets.

As we have been discussing with you for the past several quarters, we believe that there is an ongoing transformation within our business. The daily consumption model has taken hold in some of our largest markets, and it continues to expand into more of our existing markets every day. A fascinating aspect of the growth in daily consumption is various forms that are taking on around the world. Nutrition clubs are now just one iteration of daily consumption business methods being successfully leveraged by Herbalife distributors around the world. While we talk about the localization of daily consumption across the globe, it is important to understand that we believe we are in the early stages of their growth in most of our markets.

In closing, let me congratulate our distributor leadership for the success that they have achieved in the fourth quarter through increased focus on creating long-term customers with sustainable business methods, and increased meeting activity to welcome , train, and activate new distributors around the world. Now, let me pass the call over to John,

Thank you, Des. As Michael stated earlier our growth was very broad based with all six regions reporting gains for the quarter versus the prior year period. Reflective of this broad strength, yesterday, we reported net sales of $738.4 million, an increase of 17% compared to the fourth quarter of 2009. Local currency net sales increased by 18.9% reflecting a 190 basis point negative foreign currency impact. For the full-year 2010, net sales of $2.7 billion grew 17.6% and 17.4% on a reported and local currency basis respectively.

Since Des has already walked through the details of our volume growth, I will go on to gross margin. For the quarter, on a reported basis, gross margin was approximately 150 basis points higher than the same period a year ago. Approximately 70 basis points of this increase resulted from the Venezuela related items. The remaining 80 basis points increase in gross margin was due to changes in foreign currency rates, the impact of price increases, and from cost savings driven by our seed-to-feed initiative. We began to see a small gross margin benefit from the ramp-up of our Lake Forest manufacturing facility, which began a few months ago. The movement of US production into this facility is currently ongoing and we expect it to continue until about the middle of this year. At which point, we will begin manufacturing certain foreign production based on licensing lead times.

Moving on to SG&A. As a percentage of sales, SG&A improved by 20 basis points compared to a year ago. However, the comparison is burdened by 45 basis points from the timing of the largest distributor event, which occurred in Q3 last year or Q4 this year. As an additional note, this quarter currency had very little impact on SG&A as a percentage of sales compared to last year's fourth quarter.

Turning to operating margins. On a reported basis, operating margin improved by approximately 100 basis points. This improvement was primarily a result of the previously discussed changes in gross profit and SG&A. Partially offsetting these benefits was approximately 40 basis points negative impact to operating margin from the translation of results as on a weighted average basis. The dollar was stronger this quarter than the fourth quarter of 2009.

I would now like to make some comments regarding our effective tax rate, which showed a significant improvement compared with the year-ago quarter and compared to our previous guidance. As you know, the fourth quarter tax rate always includes a true up to the full year rate for the results of the prior three quarters. Accordingly, I will discuss the tax rate improvement in the context of the full-year. For 2010, the effective tax rate improved by approximately 650 points on a reported basis and 520 points on an adjusted basis compared to 2009. Much of this improvement was expected and included in our previous guidance. However, our actual 2010 effective tax rate of 26.5%, was 200 basis points better than the midpoint of our guidance range. Approximately half of this benefit or 100 basis points was generated from the implementation of tax strategies that we expect to be ongoing, and as such has been reflected in our new guidance for 2011. The other half was related to one-time items, which we do not expect to continue.

Now turning to our Q4 earnings relative to the guidance we provided for the quarter. Earnings per share of $1.31 was $0.20 better than the high end of our guidance range provided in November. About half or $0.10 of the upside was a result of sales growth as volume points exceeded the high end of the guidance range by approximately $20 million. The other half of the upside was a result of the previously mentioned lower than effective tax rate. Compared to the prior year, EPS for the quarter of $1.31 was 49% higher than the reported number and a 34% improvement from the adjusted fourth-quarter 2009 EPS of $0.98. This $0.33 improvement over the adjusted Q4 results, was driven by volume which benefited EPS by $0.22. And also from a $0.19 benefit from the lower tax rate. These two items were partially offset by a $0.05 negative impact due to currency, and a $0.03 negative impact from the timing of the distributor meeting noted earlier.

With respect to cash flow, for the full-year 2010, the company generated cash flow from operations of $380.4 million, an increase of 33.4% compared to 2009. We paid $53.7 million in dividends, invested $68.1 million in capital expenditures repurchased $150.1 million in common shares, of which $50 million was repurchased in the fourth quarter. The Company has reduced its net debt by $111.9 million from the December 2009 levels. With total debt at less than 0.4 times trailing twelve months EBITDA.

Now let me discuss our guidance for 2011, both for Q1 and the full year. For the first quarter, we expect volume growth of 14% to 16% and net sales to increase by 18% to 20%. EPS is expected to be between $1.17 and $1.21. For the full year, in terms of EPS, we are raising our guidance range by $0.15 to both the low and high end of the range previously provided. Resulting in a new 2011 guidance range of $5.15 to $5.40 per share. The increase is mostly a result of changes in foreign currency rates and a lower effective tax rate. Additionally, while our expectations for growth and volume points for 2011 remains unchanged, from previous guidance, at 8% to 10% above 2010, the absolute value increased as 2010 finished higher than previously projected. The 2011 volume points guidance reflects our belief in the strength and the momentum of the business as we build on the 16.5% volume point increase experienced since the beginning of the second quarter of 2010.

Before ending the prepared remarks, I will comment briefly on the pending stock split. As announced yesterday, the Board of Directors approved a 2-for-1 stock split, subject to shareholder approval. This decision demonstrates our confidence in the Company's future. It also improves the liquidity of the stock and makes the stock more accessible for distributors and consumers. We will now open the call for your questions.

(Operator Instructions)

Tim Ramey with D.A. Davidson & Co.

Congratulations, what an amazing quarter. I guess, my question really revolves around the development of the daily consumption model going further. You seem to be hitting really high-teens growth rates. Are we likely to see this get into a groove and be in the high single-digit range going forward? Or you still think the acceleration of the adoption of the model is the driving factor?

Yes, hello Tim, this is Des. So, Tim, we obviously are just very excited with the adoption of all daily consumption metrics around the world. We see strong growth and we continue to see that happening. Both in new markets and in markets where, frankly, the model is already established. So, we see that continuing, and you see that expectation included in our guidance.

Sounds great. Thank you.

John San Marco with Janney Montgomery Scott.

Yes, thanks and congratulations on the quarter. The strength in Mexico really jumps out at me, both for the year and for the quarter. I'd like to hear your take on what you think the biggest driver is there? And whether there are things you are doing differently there that you can replicate in Latin America to accelerate that segment?

As always there's never one thing that contributes to growth in the market. So firstly as always, it's distributor leadership and engagement. And, that has being hugely strong in Mexico. In addition to that, I think we've improved product access by improving our own infrastructure. And then through our relationship with the third party, we've now made it easier for our distributors to access products on a daily basis. Another element is training both for, frankly, our Company employees and also distributors have significantly improved their training programs for new distributors coming into the business. Then, I think, the last thing is that one of the things that we have done in Mexico, and that we're now doing in other markets, is that we've taken a regionalized sales approach. So, we now have salespeople on our staff closer to distributors in the region working with them day-by-day, and we think that is also a factor. So again a number of different factors.

And the answer to your second part of your question is, yes, we are taking our learnings from Mexico and we're applying them now in other markets. And I think we are going to see the impact of that. We are seeing it already in Brazil. I think we're going to see in Russia and India, in the US and in other countries as we continue to expand that regional sales concept.

Yes, that's helpful color. Thank you. And just sticking on the subject of access. Is there any update you can provide on what your plans are or where you are in the planning process with respect to India?

We are adopting a similar approach, so two aspects to that. One is expanding the creation of our own sales centers on a regional basis. Then secondly, we are actually looking at partnering with another retailer to create a similar situation which we have in Mexico. The one difference in India is, unlike in Mexico, there is no one national retailer. So, what we are instead focusing on, is finding regional retail partners. And just to emphasize, in those locations our product is not available in the retail part of the stores. It's available in the warehouse, and again functioning effectively as a pickup center for our distributors to be able to pick up product locally.

I'm sorry and those partnerships are already in place? Or?

They are actually in discussion as we speak. One key player, and in an evaluation process with some others. We anticipate a test of that beginning very shortly in India.

Okay. A 140% volume growth is a nice problem to have, but I'm wondering if it surprised you a little bit and there's a lot more urgency to get this done now? Or is there any risk that the level of distribution you do have is insufficient this year, and will see India decelerate?

We are actually trying to learn from our experience in Mexico because obviously a number of years ago the growth ahead of us. Obviously, what we are now doing is that we are very focused in India; we have a very strong team there. We've got a key strategic initiative to increase access to our products, and so we are very fully engaged against that.

Great. Glad to hear that, and thanks for taking my questions.

Thank you.

[Pierre Ostlund] with Jefferies & Co.

I will add my congratulations to everyone else's. Want to look at more of a product-specific question. Targeted nutrition, in particular, looked very strong this year. It was up I think 27% to 28%. How much of that growth would you attribute to new products, be it Aloe Extensions or the CoQ10 product you talked about? And how much of that growth is just the distributor base maybe, perhaps especially in daily consumption, just being more effective up sellers of those products?

Hello, Pierre, this is John; I will take this question. New products haven't driven growth, and they tend to only drive growth in the long-term with us. In our models, is not traditional food/drug/mass-type consumer products where you get this big bang with a new product launch, but it does drive engagement. We've had some line extensions, that also has helped with targeted nutrition. But primarily it's clubs; it's clubs selling more product in addition to just the weight management product that we've been selling in the past.

Excellent. Along that line, actually in 2010, about how much of your sales do you think are going through daily consumption models be it the clubs or otherwise?

So, you know, it's an estimate. And our estimate this point is about a third of the business, which is where it was about three months ago.

Okay that's fair. And then just one quick one on forecasting 2011. So, if we're looking at a top-line growth rate of 13% to 15%, and I think that $5.15 to $5.40 versus $4.77. It's little bit less than that. I know the tax rate is a little bit of a headwind to you, but is there any reason, with that kind of sales growth, that we shouldn't look for at least a flattish operating margin in 2011, if not a little bit of expansion?

There is no contraction of margins assumed in our guidance, which is I think answers your question.

Is certainly helps, yes.

As much as we are willing to answer your question, I should say. I'm not trying to be cryptic, but--

No, if we can use 2010 as at least a baseline that's helpful. I appreciate that; thank you.

(Operator Instructions)

Bret Jordan with Avondale partners.

A little follow-up to last question on percentage of sales in daily consumption. Do you have a feeling for how many points of sale you have and the growth rate of daily consumption door fronts? Is the volume increase in existing doors? Or, are the number of doors increasing faster?

On a worldwide basis we estimate it's about 64,000 to 65,000 locations. We don't really have visibility to average sales per location, other than to say that when we look at the overall picture we see, obviously, continued strong growth. Even in those markets where the number of locations is stable. I guess the other thing, of course, we want to emphasize is that our traditional business is just as strong as ever, even in those markets that have actually adopted the clubs as a common DMO. And for us that's very significant because obviously one of the strengths of Herbalife is not only the strength of, in terms of the number of markets that we are in, but also in terms of the strength in terms of the number of ways in which our distributors do the business.

So, although we continue to, obviously, be very much focused on growth and the clubs, both of those markets where they are strong and those markets where they are currently being adopted. We are also, obviously, very focused on our traditional business. And, what we're seeing of course, is our stronger brand is helping open doors in both traditional and nutrition club business around the world.

Okay, so we won't go to comp store sales numbers next quarter?

No, no we can't.

I have a question on Venezuela. It looks like after the quarter you got some capital out of it Venezuela, or are in the process of extracting. Is the balance of exposure in Venezuela going to stay there just to run the business on a working capital basis? Or do you think you can take more out?

Well, we are not in control of what we can take out, so I can't answer that question. I can tell you we were-- it's not so much taking out as much as converting to dollars. So in Venezuela just into dollars we were able to convert $16 million of the $25 million that we had on our books into US dollars. Our ability to get access to dollars in the future is still unknown. This wasn't a structured conversion, this was a special bond offering, and we were allocated our fair share of that, but the allocations are not in our control. So, what remains in country is needed for working capital. That doesn't mean that, that number will grow over the next few months.

Okay. So you have no visibility on converting the Bolivar exposure you've got to dollars?

None beyond what's already been accomplished in Q1.

Okay, great. Thank you.

At this time there are no further questions. Gentlemen are there any closing remarks?

I would just like to, on behalf of our distributors and our employees worldwide say thank you for your continued support. And congratulate all of them on a year well done. We are looking forward to talking to you again in a quarter. We've got a great momentum in our company right now and we are very, very, very excited about the future. So thanks for your participation, and thanks for your support.

This concludes today's program, you may now disconnect.