如新 (NUS) 2007 Q4 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the fourth quarter 2007 Nu Skin earnings conference call. I will be your moderator for today. At this time, all participants are in a listen-only mode. We will be facilitating a question-and-answer session towards the end of this conference. (OPERATOR INSTRUCTIONS) I would now like to turn the presentation over to your host for today's call Mr. Scott Pond, Director of Investor Relations. Please proceed, sir.

Thank you. We appreciate all of you joining us on the call this morning. With us today are Truman Hunt, President and Chief Executive Officer; Ritch Wood, Chief Financial Officer; Dan Chard, President of our Global Sales; and Joe Chang, President of Product Development.

During this call, comments may be made that include some forward-looking statements. These statements involve risk and uncertainties and 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 these risks. In addition, during this call, certain financial numbers may be discussed that differ from comparable numbers contained in our financial statements. We believe that these non-GAAP financial numbers assist management and investors in evaluating and comparing period-to-period results of operations in a more meaningful and consistent manner. Please refer to our investor portion of the Company's website at NuskinEnterprises.com for a reconciliation of these non-GAAP numbers. With that, I will turn the time over to Truman.

Thanks, Scott. And good morning, everyone. We appreciate you joining us as we report on fourth quarter results and as we look forward into 2008. We are particularly pleased with our recent results and we're confident that the trends we've seen over the past several months set us up for record results in 2008. As indicated in our press release, fourth quarter revenue is $306 million, a 6% improvement, over the prior year, while earnings per share improved 17%, to $0.26, when excluding the $0.17 of restructuring charges. Our better-than-anticipated revenue results came from steady sales growth in most of our markets.

We're especially pleased with the momentum we see building in Europe, South Korea, Southeast Asia, and the U.S. Much of this growth is being driven by our efforts to recharge our personal care business, which experienced a 16% year-over-year sales increase. The primary growth driver in our personal care business has been our Galvanic Spa products which generated $20.4 million in revenue for the fourth quarter, versus $8.5 million of revenue in the prior year. The Galvanic Spa, for those of you who have seen it is an ideal product for direct selling because it is highly demonstrable and shows an immediate impact on lines and wrinkles and skin texture. In addition the Galvanic Spa's companion products including face gels and other skin treatments are highly consumable and encourage consumer purchases.

On the nutrition side of the business we're seeing success with our weight management product offerings which resulted in product sales of $8.5 million during the quarter, which is roughly double with the prior year's results. And we're really just getting going with the My Victory product line in the U.S. So at this point most of the growth in weight management is coming from outside the U.S. Our growth is also coming from good nuts and bolts business execution, good alignment internally and with the salesforce, as well as good knowledge sharing by those markets that are growing at the healthiest rates.

Our product strategy for 2008 will continue to be focused on anti-aging solutions, and on demonstrating our difference to consumers. We will continue to support key initiatives associated with the Galvanic Spa system as well as with our weight management efforts. In addition we're very excited with the early results of our efforts to differentiate our product strategy from competitors by focusing not only on products that address the visible signs and agents of aging, but now, by being the first Company to really focus efforts on the significant contributors to the signs of aging.

The first manifestation of this strategy will be the 2008 launch of an innovative break-through that has been shown to slow the creation of an enzyme in skin called arNOX. That's arNOX. This enzyme dramatically escalates the signs of aging of our skin when we reach a certain age. Now you've heard us talk about this technology for about the past year, and we're excited to see this innovation come to market in 2008. The pre-launch of our arNOX technology will take place at distributor conventions throughout Asia in the second quarter. This should help drive the distributor recruitment and activity in advance of the actual launch of the product in the fall, when we offer it for sale in Japan, greater China, the Americas, and Europe. This anti-aging technology is not only a significant milestone for Nu Skin Enterprises but is also an important break through in the skin care category as a whole.

Our R&D efforts in nutrition are similarly centered on attacking the sources of aging in the body. In particular, Joe Chang and his team of scientists lead the world in the development of products that address glycation in the body. Glycation is the bonding of sugar to proteins that takes place throughout our bodies as we age and can lead to many common ailments. We're developing a line of products to combat this process. Our first product to target glycation will come to market in 2009. So on both sides of the business, we will distinguish ourselves with a product strategy that will demonstrate a difference to consumers by addressing the sources of aging as opposed to just addressing the signs of aging.

It is important to note that we have significant distributor conventions scheduled in many of of our markets during the first and second quarters of 2008. We will hold conventions in Southeast Asia, and South Korea in March and then follow-up with conventions in greater China and in Japan in May. These events are always important drivers to the local markets, and we would invite any who would like to participate with us to -- in them to join us.

I also want to highlight the improved geographic diversity we're gaining as markets such as South Korea, Europe and Southeast Asia, become a much more meaningful piece of our global revenue. Each of these markets is now highly relevant to our overall results and insulates us from the effects of a single -- that a single market can have on our overall results.

As most of you recognize, a weakening dollar plays in our favor, with 86% of our revenue generated outside the United States. Generally, in times of economic slowing, our business opportunity, which provides distributors with the opportunity to supplement or replace their income, becomes more enticing. So we don't worry too much about the current economic climate. And as all of you know, baby boomers around the world are now reaching the age of retirement so anti-aging continues to be at the forefront of our aging population's needs both from an economic and a product perspective. This is why we remain very confident in our positioning.

Now, touching on a couple of our key markets, our Japan team continues to focus energy around sponsorship activity and distributor retention programs. Fourth quarter revenue was in line with our expectations, and we expect to see continued steady progress throughout 2008. You will recall that we have guided Japan to be down approximately 3% for the year, with the yen at 1.12 to the $1. In addition, we've made substantial change to our business in China. In the fourth quarter, we closed roughly two-thirds of our stores in order to focus on the key cities of Shanghai, Guangjo, and Beijing, and frankly, I was expecting to see some impact on this restructuring to our revenue in January, but we were very encouraged with the way our salesforce has responded to the changes, and our business remained remarkably stable and is even showing signs of growth, despite these significant reductions in stores and corporate employees. The receipt of our Beijing direct selling license is a positive step forward. And I know some of you are interested in the impact the storms may be having on our business there. We really haven't seen much of a negative impact so far, although the Chinese New Year, which just got started, has historically had a negative impact on revenue.

During the fourth quarter, we also made bold moves in our restructuring efforts. The reductions in G&A expenses that we discussed during our investor day in November have all been executed. We also completed the $25 million accelerated stock repurchase program that we announced, and we're now working towards our commitments to deliver revenue growth and margin improvements which will combine to improve our earnings per share 35 to 45% in 2008 net of charges. And I also want to note that we believe that the conversion of the structure of management equity incentives in 2008 to be performance-based has had a nice impact on the motivation of our management team to work aggressively and to work with a sense of urgency.

So we're confident that our plans are in place. And that we're moving forward to deliver strong results. Consequently, we want to reiterate the commitments we made in our November presentation which by the way can be found on our investor website. Our objectives and commitments for 2008 include specifically growing revenue by 4%, reversing the Japan decline, successfully restaging our China business, generating a 10.5% operating margin, and all of that leads to improving earnings 35 to 45%, or to a $1.15 to $1.22 per share. I'm confident we have the right people, the right products, and the right business opportunity to achieve our objectives. So we look forward to a record performance in 2008. And let me turn the time over to Ritch to go over the financials.

Thank you, Truman. Good morning, everyone. As you can tell from Truman's remarks, we feel great about the way the fourth quarter came in. And we really look forward to a great 2008.

Let me just first provide the local currency revenue results in our major markets, and then remind you that these can all be found on the investor section of our corporate website. For the north Asia region, fourth quarter revenue in Japan was 13.4 billion yen, compared to 14.1 billion yen in the same quarter of '06. While quarterly revenue in South Korea was 35.6 billion won versus 30.2 billion won in the prior year. In our greater China region, mainland China revenue was 119 million renminbi during the quarter, versus 132 million renminbi in the prior year. Quarterly revenue in Taiwan was 775 million NT, compared against 781 million NT last year. And Hong Kong revenue was 93.8 million Hong Kong dollars compared to 83.6 million Hong Kong dollars during the fourth quarter of '06. In the Americas, the U.S. posted $42.5 million in revenue compared to $39.3 million in the prior year. Latin America reported revenue of $2.3 million, essentially even with the prior year. And finally, in the Europe region, fourth quarter revenue was $21.6 million, versus $17.7 million in the prior period of 2006.

Our gross margin for the quarter was 81.9%, slightly below the 82.2% gross margin of the prior year, but mostly even sequentially. Our selling expenses as a percent of revenue were 42.9%, also even with the prior year period. General and administrative expenses for the quarter were 89.3 million, and then in addition to that, we incurred planned restructuring charges of about $17 million. These restructuring charges were slightly higher than our initial estimate, and primarily due to higher-than-anticipated labor reductions around the world. Our management team is truly aligned and unified in our desire to improve operating margins and the successful execution of this phase of our restructuring gives us confidence in our ability to deliver our 2008 G&A targets. Excluding restructuring charges taken during the quarter, general and administrative expenses as a percent of revenue were 29.2%, compared to 30.5% for the same quarter in 2006.

We incurred $2.3 million in the other expense line item of our income statement. That's primarily related to interest expense. Our tax rate for the quarter was 44.3%. This tax rate increased due to an additional tax charge of approximately $800,000, or $0.01 per share, related to the timing of benefits associated with net operating losses in China. And the net operating loss in China was larger during the fourth quarter, due to our restructuring charges taken there. As China turns profitable, we would anticipate the benefit to be returned to the Company. Excluding the impact of this China adjustment, our tax rate for the quarter and for the year was approximately 36.6%.

So our reported earnings per share, let me just first of all touch on the item we mentioned in our release, which mentions our ongoing review of deferred tax assets and liabilities. We're finalizing our review of this issue. However, we don't anticipate the net cumulative impact over the previous five-year period to exceed $1 million, and it will likely be a benefit for that period of time. Our reported earnings per share for the quarter were $0.09. When you add back the $0.17 for restructuring charges, our earnings per share for the quarter were $0.26. So considering the additional tax charge and a bit higher interest expense than usual during the quarter, we really had a great quarter, and look forward to the reduced expenses associated with restructuring efforts beginning to kick in here January 1.

During the quarter, we paid $6.8 million in dividends. We bought back $25 million of outstanding stock. We reiterate our guidance for 2008, that is $1.18 billion to $1.2 billion in revenue, and earnings per share of $1.15 to $1.22. These estimates reflect a yen rate of approximately 1.14 to the $1 for the year. The yen is trading a bit stronger than this, which could provide some upside to this guidance. We continue to guide gross margin approximately 82.5% for the year and would anticipate that to show slight improvement throughout the year. This will come somewhat from a price increase, which is slated for the second quarter, initiatives set to reduce shipping expenses around the world, and some product cost renegotiations related to our Galvanic Spa unit and our G3 product. And we expect distributor incentives to be approximately 42.7% for the year. Again, it should show -- this number should show slight improvement as the year progresses, due primarily to lower sales expenses in China, as we roll out our new plans there.

And finally, we expect general and administrative expenses of approximately $350 million in 2008. That is approximately a $15 million net reduction in the general and administrative expenses from 2007. Which were approximately 365 million. We estimate our tax rate to be in the 37% range in the year, consistent with historical averages. For the first quarter of 2008, we're projecting revenue of 281 million to $286 million, with earnings per share of $0.23 to $0.25. These numbers assume a 1.12 yen rate to the dollar in the first quarter. So with that, we will now open the call up for questions.

(OPERATOR INSTRUCTIONS) Your first question comes from the line of Kathleen Reed from Stanford Financial. Please proceed.

Hi, good morning. Can you talk a little bit more about the improved sequential result in Japan? I know it was in line with what you had thought in November but just how some of the new initiatives put in place by your management change there have been going and what kind of positive momentum we have carrying forward in addition to the arNOX product launching at the convention in the first quarter, but just more specifics on what is going on in Japan?

Cathy, you will recall in our November presentation, we presented some segmentation information that showed how we basically segment our salesforce and highlighted the fact that we believe that part of our problem in Japan, if not a majority of our problem in Japan, has been the fact that over the past several years, our management team has focused primarily on product-related incentives to try to drive the business forward and to grow the business. In our evaluation of the market, and what we really need to do to rekindle growth in that market, we have concluded that we need to rebalance the scales of our promotional efforts between business promotions, which provide incentives for recruiting and sponsorship, leadership creation, which are really -- is really the most potent component of the fuel that propels our business, along with continued product promotions to some extent.

The initial efforts to do that have shown good results, and we have parachuted in ex pat from Provo into Tokyo who is a very big contributor in that process and is really helping our management team there focus on business drivers as well as product drivers to the business. With our May convention that is coming up, we will continue that effort, but we will also be introducing into the market not only the arNOX product that we mentioned but we're also launching Lifepak Nano at our May convention which is a very healthy selling product here in the United States and we think that will also have a good impact on growth in 2008. Do you want to add anything to that, Dan?

I would just maybe make one other comment, Cathy, if you look at the year, and as it goes forward, we had a convention in the first quarter of last year in Japan which probably pushed a little bit of additional sales into the quarter, so I think as a comparable, we would expect our trend to be consistent sequentially, on a year-over-year basis, and then begin to improve as we roll out the convention in the second quarter and then continue to improve throughout the year.

So I'm sorry, just to understand what you just said, so you think sales could be down a little bit more in the first quarter for Japan from -- from the down 5 in the fourth quarter just because you have a tougher comparison?

Yes, it is fairly consistent, actually, down somewhere in the 5%, but then we've guided to down 3% for the year, which we continue to feel good about.

Okay. And in China, sales, at least from your press release, were down 10%, in your fourth quarter, in China, and that seems to be a bit of a reversal from the positive trend in the third quarter. Is that largely due to all the restructuring and kind of the disruption with the store closures, et cetera? And can you just comment a little bit more about what you're seeing in January and when you relaunch your whole new hybrid model in China?

Yes, Cathy, the -- we're actually really pleased with the results we've seen over the last couple of months, with all of the other restructuring that has gone on there, including closing two-thirds of our stores and shedding about 550 people in headcount. I actually thought we would see more impact to the business than we have. And what was particularly encouraging was that January was a very strong month in China, and as I indicated in my remarks, we're seeing healthy signs of growth there. So we're really pleased with key indicators in China right now.

And when do you relaunch your model, the hybrid model?

Well, in the fourth quarter, we made a couple of changes, including the one we referenced at the investor meeting in November, which was to change the way we -- to change our early employment from traditional Chinese employment, with an employment contract to a service contract. So that portion of it is now in place, and then we're also making a couple of changes, one significant change, in the first quarter, which will really allow our early -- our early sales representatives to be more effective in recruiting new sales representatives in terms of the way they qualify to advance in our -- in the sales representative ranks. Other than that, we have some other things that we will be evolving, to but we are going to hold that point until we feel like we start seeing the impact of those first two changes I mentioned. So other changes will be pending, the positive results that we anticipate coming.

Okay. And Ritch, can you -- sorry, last question, can you just break out interest expense from other expense, and why the interest expense was up so much year-over-year?

Yes, our FX gain was essentially 0 for the quarter, and so it was primarily all interest expense. We had a couple of short-term loans that we took out in Korea particularly as we moved into a new building had to put up some key money and things which caused interest expense a little bit higher than normal, probably about $500,000 higher for the quarter than we would anticipate in a normal quarter.

Okay. Thank you.

Your next question comes from the line of Olivia Tong with Merrill Lynch. Please proceed.

Hi, good morning. Can you first tell us what the debt levels were for December '07?

Our debt at the end of the year was right about $200 million.

And then restructuring came in a little bit higher, was it that you had more reductions or was it more that the reductions cost more than you had anticipated?

We actually had more reductions. In Japan, we had more, in Taiwan we had a little bit more, we were able to go a little further than we had initially anticipated in China and then also here in the U.S., I think when we gave the initial guidance, it was prior to us having the management incentive in place, and I think the fact that our management is really motivated to push forward, allowed them or kind of facilitated them pushing a little harder to get a little further than what they had initially guided us to.

Got it. And then on the U.S., obviously you had a convention last quarter, which is going to drive up the results, but even ex-convention you were up 17, and then this quarter, were you up 8, and I would have assumed that with the introduction of the new weight management products and other things that we wouldn't have seen as significant a deceleration when apples-to-apples excluding the convention. Are you surprised by how much the results decelerated on what looks to be an easier comp? Or is there anything else that you can provide color on that?

It is true we had a very strong third quarter, Olivia. I would attribute it -- the fourth, to a couple of things. Number one is we see a lot of transition, frankly, going on right now, as distributors who have led their business, using the Galvanic Spa, are capturing more and more recruits. And so we tend to see a little bit of shift in Pharmanex focus to Galvanic Spa focus which probably accounts for a little bit of that deceleration, but to tell you the truth, again, looking at key indicators including sponsoring, even after the fourth quarter, we're seeing very healthy trends in the United States, so I wouldn't signal the deceleration, the revenue growth rate is really a deceleration of the U.S. business quite yet, because the sponsoring is still very strong.

Yes, I might just add one other comment, Olivia, in the fourth quarter of 2006, we actually held a fairly good event to throw some energy, so you'll notice as you go back to '06 there is quite an increase from the Q3 to the Q4. So I think there is a little bit more difficult comparison. Secondly, we've guided the Americas to be up somewhere around 10% this year, our strategy grid without our taking out convention, which fluctuates a little bit, our strategy grid has us at about 11% for the America, we feel very good about that number, so as we go forward, we feel like we're on track to be at least 11% or slightly ahead as we go throughout the year.

Great. And then just lastly, I want to talk a little bit about supervisor growth. Do you consider, we always go back and forth on this, but do you consider the growth in active and executive distributors to be a leading or a lagging indicator as far as sales growth?

That is a good question. We watch it carefully, as we go from market to market. Generally, it takes a few months for an executive to actually become an executive. They go through a process that breaks. So the number that ties most closely with our revenue -- our growth rates in revenue and so forth, is our executive number. Active sometimes can be a little bit more possibly of a leading indicator as we see sponsorship rates sometimes accelerate prior to those folks becoming executives. So I think it differs a little bit situation by situation, but generally, I think our executives tie most closely to revenue and actives could potentially be a little bit of a leading indicator.

Got it. Thanks very much.

Your next question comes from the line of [Diedrich Bosch] with Canaccord Adams. Please proceed.

Hi, good morning, guys.

Good morning.

I just have -- trying to get a little more color on the U.S. market. I was wondering if you can give me some more details on the product mix between the personal care and nutrition segments? I guess I would like to know what products are selling well, and have you seen any change with the softer consumer?

Yes, in the -- just to give a little bit of detail on the product mix, we were approximately 70/30 split between personal care and nutrition has shifted a little bit over the past year, as Galvanic Spa and other Nu Skin initiatives have kind of taken off. We actually had a growth rate of approximately 50% in the Nu Skin business in the fourth quarter, while the Pharmanex growth was just very -- slightly ahead of the prior year, so we're seeing a bit of a shift from I would say Pharmanex over to personal care although Pharmanex with the launch of weight management which really kind of kicked off the beginning of this year, we would expect to continue to hold strong. In terms of the consumer, we haven't noticed at this point in time an impact based on consumption, and generally, as Truman mentioned in his script, the opportunity side of our business seems to kick in when there is some economic distress, and people are a little bit more motivated to supplement or replace their income through a business opportunity, so we continue to feel good about the business opportunity, and have not seen negative impact on the consumer side in the U.S. at this point.

Okay. And there has been a lot of publicity about anti-oxidant juices, and I just wondering if you could talk a bit about the trends with your G3 product.

This is Joe Chang here. Yes, obviously there's quite a few start-ups even in our area here on opportunities, focusing on the juice. Our G3 is holding up fairly well because with the help of the BioPhotonic scanner, this juice is the only one in the market where we can actually demonstrate the benefits of the G3 with our BioPhotonic scanner, so the scanner itself is playing a very vital role in helping us differentiate our G3 from the rest of the herd. We, in product development, we are also focusing on the next generation juice, but right now, G3 is holding up very well. Not just in the United States, but in all of the other foreign markets as well. And we are switching over to a larger volume bottle, if you will, which will also result in some cost savings, and we're going to globalize and make a universal bottle for all of our foreign markets as well. So with that launch coming over the next six months, we feel that our G3 will get some of our margins back, if you will, on that particular product.

Thanks. And I'm not sure you -- but what was the auto fulfillment rate fourth quarter?

It is approximately 50% of sales.

Thank you.

(OPERATOR INSTRUCTIONS) Your next question comes from the line of Amy Greene with Avondale partners. Please proceed.

Hi, guys. Just wondered if you could give us some idea if you were to look at the operating margin improvement that you've guided to, how much of it would you estimate is actually contractual versus kind of a benefit from sales leverage?

I didn't quite catch that, Amy. Sorry, you are breaking up. What I did think I caught was a question about operating margin and the impact of FX. Was that right?

No, I'm trying to figure out if you can quantify how much of it is contractual from the manufacturing contracts and freight contracts, how much of that improvement is something that is easily locked in versus something that is a sales leverage gain?

In our -- primarily are you talking about our gross margin?

Primarily gross, yes.

Okay. Well, let me just actually walk through the income statement a little bit. On our gross margin, there are really two or three key initiatives that we have in place to improve our margin there. One is some savings in freight. We're targeting about $3 million savings in freight, about $2 million of that was some contract changes, and differences in the way we ship our products in the U.S. That contract was signed and actually initiated in December, so that should be in place. We're also targeting a reduction in our air freight expenses from around $3.3 million in 2007, to about $2 million in 2008. So another $1 million of savings there. We anticipate a global price increase which we think will add somewhere between 15 and 20 basis points to our margin. That should be implemented in the second quarter of this year.

Jumping down to our operating costs, our general and administrative costs, last year, they were about $365 million. So our restructuring efforts should bring that $365 million down to $350 million, so $15 million net savings or approximately $0.15 for the year per share. And then in addition to that, we would anticipate with our guidance revenue improvement of somewhere around 40 million to $50 million, and on the same -- on actually a reduced overhead expense level, you can kind of compute the impact. We have about a 40% contribution margin. After distributor incentives, and cost of sales, so 40% on that additional $40 million of revenue, let's say, would be another $16 million of essentially profit, or another $0.16. So you can see that those numbers add up to what we've guided to, which gets back to the 35 to 45% increase in earnings per share in 2008.

Great. Thanks, guys.

Your next question comes from the line of Olivia Tong with Merrill Lynch. Please proceed.

Hi, just two follow-ups. First, what are you taking pricing on?

What are we taking pricing on?

What products?

Oh, it will be -- it depends a little bit by market. It is a global price increase. Again, the average price increase will be right around 2%. But it will be mostly across the board. Targeted to some of our key products, primarily, that have room. Those that we feel have a little bit more room, obviously would get a little bit higher price increase but generally, it is pretty much across the board.

Got it. And then your gross margin being down year-over-year, in Q4, what were the drivers in that?

There are two primary drivers, one happens to do with some increased freight expense. The other, which we've kind of had throughout the year, in 2007, the other just kind of relates to some product shift, we've had Japan, which is our highest gross margin country, is down a little bit, the U.S. does not have quite as high of a gross margins, and sales there have grown a little bit. Also, a little bit of a shift between product categories, the Galvanic Spa has typically had a little bit lower margins than our overall personal care line, and it is actually been one of the key growth drivers, so we've renegotiated that contract to pull some costs out of the unit, with increased volumes here. And so that should also help to push a little bit of improvement in our gross margin as it relates to the Galvanic Spa.

Got it. And then just one other question. Can you remind me, what is the tax rate for Q4 when you exclude the charges?

36.6%. There was an $800,000 charge, tax charge associated just with the fourth quarter so both the year and the quarter come in at approximately 36.6% excluding that one charge.

Got it. Thanks a bunch.

You bet.

We have a follow-up question from the line of Kathleen Reed with Stanford Financial. Please proceed.

Hi. Can you talk a little bit about your further expansion plans for China and just to make sure, it doesn't sound like nothing is being put on hold with China, so you haven't -- your rollout of your hybrid model is still on track, if I understand that right. And just if you can update on other cities or provinces that you're targeting for expansion, and what your revenue estimate for China is for '08.

This is Dan Chard. Our expansion plans have not changed per se. I think as we mentioned earlier, we'll change our strategy slightly, we recognize our ability to focus and expand without necessarily using stores of the anchor for our business expansion. We're now licensed to be in the direct selling activities in Beijing and around Shanghai. Our next focus is on Guangjo province. So those three together make up the majority of our volume. But we will continue to grow our business and to develop our business in the areas where we previously had stores despite having a reduced number of stores. I will let Ritch give you the projections for China.

I think we guided to a flat year just because China is really -- it is really difficult to project out what has happened. So we've tried to be conservative, guided that we would expect 2008 to be flat with 2007, but certainly, that is not the target of our management team, and the focus of what we think China has in terms of potential.

Okay. And can you just give us an update in terms of the manufacturing facilities that I think are now up and running in China? Or one is up and running and there's another one is expected to come online.

We continue to do all of our manufacturing for our China operations. We have two primary manufacturing facilities, a nutrition manufacturing facility and a personal care, we continue to look at opportunities to potentially reduce costs by manufacturing there for export to some other markets, but that process is moving fairly slow right now, with a lot of issues related out there to China manufacturing, and so forth. So we've continued to explore opportunities, but wouldn't plan on anything in the near future in terms of benefit or savings associated with low -- with China production.

Okay. And then can you just talk about when the My Victory rolls out to other markets internationally?

This is Joe here. As we have reported to you, that in the foreign markets, particularly in Asia, Southeast Asia, Taiwan and Hong Kong, they already have a weight management system called the TRA, the right approach to weight management, and they're doing fairly well and becoming successful with sponsoring, consumption, and so on, with that particular weight management system. What we are trying to do strategically is then to see whether we can insert some of the components of My Victory, excuse me, some of the components of My Victory into that TRA system, because since it is working so well for us in Southeast Asia, and other Asian markets, we don't want to force the My Victory onto them prematurely. Because that will disrupt the sponsoring activity, as you heard from Truman and Ritch that we have successfully been holding with TRA. So some of the features of my Victory will be rolled out over the next 12 months but not all of the features.

Okay. And then just last question, if you can comment on how much you have of share repurchase and what your priorities are for uses of cash.

Yes, when we did the increase back I guess it was last summer, we increased -- or I guess about October, we increased to $114 million, we then used $25 million in our accelerated stock repurchase program that we did in November, so that leaves us $90 million remaining. We would anticipate that free cash flow during 2008, after paying back debt in dividends, would be employed to repurchase stock. And based on the numbers we've kind of guided to, that is somewhere in the range of 25 million to $40 million. And so we would anticipate that probably coming in a little bit more later in the year, since we just kind of went through $25 million right-off. So I would imagine we'd more active in the market later on in 2008 as compared to early on.

Okay. Great. And sorry, one really quick housekeeping. That nice detailed spread sheet, when will that post to your website?

It may be posted now.

Yes, it posted this morning. If it is not up right now, it will be very soon, and Scott will be sending that out to you as well, Cathy.

Okay. Great. Thank you.

You bet.

With no more further questions in the queue, I would like to turn the presentation over to Mr. Truman Hunt for closing remarks.

Well, we just thank you all again today for joining us. We're off to a great start in 2008 and look forward to making this a record year for Nu Skin Enterprises. Please give us a call if you have any other questions.

Thank you are to your participation in today's conference. This concludes your presentation. You may now disconnect. And have a good day.