Good morning and thank you for joining the third quarter 2007 Earnings Conference Call for Herbalife. On the call today is Michael Johnson, the Company's Chairman and CEO; Greg Probert, the Company's President and COO; Rich Goudis, the Company's CFO and Brett Chapman, the Company's General Counsel. I would now like to turn the call over to Brett Chapman to read the Company's Safe Harbor language.

[Technical Difficulty] 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 complete discussion of risks associated with these forward-looking statements in our business. In addition, during this call certain financial performance measures maybe 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 SEC those non-GAAP financial measures. We believe these non-GAAP financial measures assist management and investor in evaluating comparing 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 third quarter press release containing a reconciliation of these measures. I will now turn the call over to Michael.

Thanks Brett. Good morning everybody. I am fired up on Liftoff this morning and I have got to lot to say. So buckle your -- fasten your seat belts as they say. It's a great morning; it's great morning to be part of Herbalife. Welcome to our third quarter earnings call. Before we update you on the third quarter, let me comment on the events that adversely affected our stock in the last few days. On Monday, an individual who claims to be a fraud investigator issued report that put in question our integrity, our marketing plan and our ethical fiber as such. This rattled your confidence; it rattled the investor confidence in our business model, our management team and our company. I am here to fix that right now. When concerning how we best respond to this report, we debated getting into the sand box and trading tit for tat or taking the high road, I have every intention of taking the high road. Herbalife is a great company, a company of which I am personally very proud. When I left Disney four and a half years ago to join Herbalife I found the company that needed improvement and it lost its founder in 2000 and had several CEOs and senior management changes in three years. The company had new owners; who were looking for new leadership. It was a company, which was very tactical which lacks strategic direction. We had a senior management team that was not united in purpose and our distributor employee confidence in the long-term future of the company was frankly in doubt. I have often told investors when I joined Herbalife I've viewed this company as a company of yesterday, today and tomorrow. Only one can change history, my focus was firmly on the…

Thank you, Michael. Before I start with my prepared remarks, I would also like to congratulate our distributors and our employees for the record they set during the third quarter and more importantly for their unity, and team work which has created tremendous excitement, and positive momentum throughout our business. Well done everyone. Now, let me provide you with an update for our key markets; the U.S., Mexico, Brazil, and China and elaborate more on infrastructure investments for 2008. The U.S., a market which we have operating in for 27 years had a strong quarter with net sales up 20% compared to third quarter 2006. These results marked the fifth consecutive quarter of 20% or better growth. The U.S. growth continue to be driven by our Latino distributors who now represent 61% of total sales growing at 37% year-over-year. Growth in this segment is driven by both our traditional business coupled with adoption of the in-home Nutrition Clubs, and the emergence of the Central Club concept. The non-Latino segment, which increased slightly over 2006 comprised 39% of the U.S. sales in the quarter. The emerging sampling DMO has been the catalyst for growth in this part of the business. Distributor trends for the market were positive with new supervisors up 15% compared to last year. More importantly, the total number of supervisors increased 15% sequentially from second quarter 2007. The U.S. had either double or triple-digit growth in all of the top ten metro areas and of the top 25 metros collectively grew at 34%. Even after 27 years, the concentration in top metros means we still have tremendous expansion and penetration opportunities across the United States. Looking towards 2008, there are several initiatives in place to support growth in the business. We will enter into our second year of…

Thanks Greg. Let me walk you quickly through the financial results that were contained in yesterday's press release and our 10-Q and then provide our financial guidance for 07 and 08. And then we'll open up the call for your questions. Net sales are $529.5 million in the third quarter were 11.1% up versus the third quarter of 2006. We experienced strong sales growth in our top ten markets which were up 11% versus 2006 led by double-digit growth in the U.S. up 20.4%, Taiwan up 23.6%, Chin a up 89.3%, Italy up 15.8% and Venezuela which is up triple-digits. As a whole, our top ten markets comprise 69% of our business, up from 68% in 2006. Reflecting the global nature of our business, changes in FX rates provided a benefit of 370 basis points in the reported growth rate. Gross profit in the third quarter was $223.7 million or 80.0% of sales, reflecting an improvement of 39 basis points compared to 79.6% in the third quarter of last year. The increase from the year-over-year was primarily the result of increase in China sales as a mix of our business, which was 20 basis points, lower transportation cost coupled with the realization of vendor cost savings 12 basis points and price increases in several of our markets, which was 7 basis points. Royalty expense for the third quarter of $186.5 million or 35.2% of sales improved 19 basis points compared to 35.4% in the third quarter of last year. Improvement over prior year was primarily due to the impact of China royalties which are partially contained in SG&A due to the employee model we used for China. Normalizing for China royalties, royalty expense was 36.8%, 55 basis points higher than the 36.2% in 2006. SG&A expense for the third quarter…

[Operator Instructions]. Our first question comes from Simeon Gutman.

Hey for Michael and Greg. How do you insulate this business model from reputation challenges, and we spoken about it in the past. It may be from past experience you can elaborate, and then, is it something that... is it something that seeps into the distributor base?

Well, it's Michael. Simeon, good morning. It does not slip into the distributor base at all. It's... there is thousands of people getting checks right now globally. They don't care or are concerned with their sort of good nutrition, business opportunity, and building a future for themselves, and so it doesn't slip into there. Our business models are incredibly strong. It takes a moment for a corporate, because we get, we have to respond to things like this. We can't stand being dragged down in the dirt with this kind of stuff, and I said before, we won't be dragged down any more of it. We have a lot of time spent, hours spend, and some day in here everybody I am staring at has been here to 1 to 2 in the morning preparing for this call making sure that we are giving you adequate information in finding exactly how our business model operates. We are trying to be extremely professional, and rise above this. This industry unfortunately has players in it who tend to spoil the image of it. Direct selling is a wonderful model. It is a model for people to have some income at home, large, small, whatever they desire to do. We've got great products. We have a great business opportunity. We got great distributors and we are very proud of what we are doing, $100 billion industry that we are living in. And unfortunately, there is winds that are from the past that blow through every now and then. And frankly, to be forced to be responding to them kind of bothers us, but for our investor confidence, for our distributor confidence, we do it. Right after this, we will be on a phone call with our distributor leaders to go through this call,…

No problem. And I mean are there incremental conference calls that you will be pursuing aside from the most senior level of leadership down or will it just start at that point and then go for the rest?

We're just going to do it with the Chairman's Club. They will work it down. This is where their leadership comes into play and they show what they are all about and they are about strong leadership in their organizations. And, as I said before, they have been through these types of moments, and they are probably stronger at it, and better at it than we are.

Okay. And back to Mexico. Can you talk about what the response has been so far from the new Nutrition Club promotion and then related to that in the 7% to 10% top line growth assumption for '08, is it fair to think that Mexico at least at this point in time is sort of a mid to a low single-digit grower in that context?

Yes Simeon first, I think the response to promotions is too early to tell. We said it's a long-term promotion. It's actually a multiyear promotion and yes, we expect right now that given the run rates and the trends we see in Mexico, that Mexico should finish up very slight single-digits in the fourth quarter and that we hope we build continually and sequentially on that throughout 2008.

Okay and then as far as CapEx for actually looking past '08. Is this step up a temporary event for '08, and does it moderate in '09?

Yes, you actually have two stepups in '08, the majority of which is the complete roll out of Oracle over the next 18 months, and then another step up if we will is we will be actually moving to LA Live, which is kind of like the Time Square to west next year. And there is a little over, I think $10 million to $12 million in CapEx for that and so once we get through '08, we will move facilities, all our major facilities here in the U.S., which we have been in 20 years will have moved over the last '06, '07, and '08. In '09, we get down to a normal run rate, I think both in terms of information technology investment, as well as facilities.

Okay. And just lastly, I guess for you Rich. Have you guys ever thought about just more frequent updates on the business, I don't know in terms of monthly sales, but especially in the context of just more quarterly updates on the health of the business?

It's a good question. I think, we are pretty proactive with the investment community. We don't miss investor conference and we don't really miss the request to go out in market with people like yourself. I think, we do a very good job reporting on a quarterly basis and in effectively what we are doing now is really almost a mid quarter update. And I don't think you will see us changing that method.

We have an Investor Day coming at the end of this month.

Okay great, thanks guys.

Our next question comes from Rommel Dionisio.

Yes, good morning from Wedbush Morgan. With regards to the U.S. business, first of all, great performance in the quarter. The Latino business has obviously been, excuse me Latino distributor force has obviously been the key driver and I think Nutrition Clubs have been a big part of that. Can you talk about the non-Latino force? I know you talked about sampling helping that business. But is there a thought to really certain begin to push Nutrition Clubs to that segment of the U.S. distributor force going forward?

Right. This is Greg.

Hi Greg.

There are a couple of answers to that question. There is a lot of focus on the Anglo business, as well as Latino. As you said, it's about 39%, 40% of our business, and a couple of things and couple of initiatives in there. One is the weight loss challenge. So, lot of our distributors are doing something we are basically think of the biggest loser on TV. It's really where they are challenging and coming together in groups, and mentoring and coaching, and encouraging each other to lose weight and coming together again in a soulful environment, so it's a little, it's different in execution from the Nutrition Clubs, it has all the same benefits. We have a sense of community, you have mentoring, you have encouragement, you have product results, and so that's one of the things we are seeing. As I said in my prepared comments that we were looking at penetrating the College segment and really trying to recruit, and bring new younger customers, and younger distributors into the business. We have launched a generation age initiative a few years back in the U.S where we had brought in distributors under 30 and now we are going down and a little bit lower actually on the colleges. And we think it is a great product opportunity in college. We think it's also a great part time business opportunity to earn some money while you are in college and we thought if we can get people on to the product in college, they can become Herbalife for life product users. We have clubs emerging in the Anglo segment, the Central Clubs as well as in-home Nutrition Clubs, and so we have Kansas City we have, one of our distributor leaders is very, very successful at building Anglo clubs. And, so I think if we look at it a lot of the things that are working in the Latino business are moving over into the Anglo business and we expect those are starting to take root. It will take a little bit of time, so they will take a couple of quarters to see that. And again as I said the sampling DMO is very vibrant, and again getting more and more people on to the products and make sure that we have customer retention.

Thank you, Greg and congratulation on the quarter by the way. Good performance again.

Thank you.

Our next question comes from Karen Howland.

Good morning, thanks for taking my call. Looking at the volumes that have in the European region, Middle East and Africa, I have noticed on a two year basis they have continued to decline, just wondering, what sort of initiatives you have in place there to reverse that trend?

I think there is a couple of things and relatively EMEA is a big, big market and we are trying to break it down into what's happening at a market level. And I feel there are some very strong successes in EMEA if you look at the Italy and now Russia is actually showing some pretty good growth, it is up 17%. We believe in Eastern Europe that we have a chance, Eastern Central Europe as well as Russia we have a chance to grow, that's one of our markets while I think we have under penetrated and frankly underperformed in the past and we just as we now to take a couple of weeks ago we just brought on a new executive to run our Central and Eastern Europe business which includes Poland and Czech and Slovak Republics and few other markets. I think that's happening. You see some of the DMOs going into Europe that have worked in other parts, typically the sampling DMO, our biggest check in Spain, our biggest check in France are actually using that DMO now. So again, we are seeing that DMO moving toward through Europe obviously the Nutrition Clubs, the Central Clubs are moving and with the Wellness Evaluation and Wellness Coaching which actually started in France is now moving through out Europe. So I think Europe has a few markets that are down, a lot of markets that are very strong and so we think that EMEA will start to turn... has turned the quarter and will start to increase again I think a couple of quarters, but I think we are very, you are talking and partially optimistic about EMEA.

And the initiatives that you are talking about the Nutrition Club Reserve, Wellness Coaching that have been going throughout, does this assuming that has been gain traction of course the last quarter or recently we have seen?

Yes I think the wellness is probably a little further long, I think Nutrition Clubs and really emerging. Again like any Nutrition Club, it has to be acculturated and has to be adjusted for the particular market. So you saw a bit typical in the Central Clubs in South America and U.S. it is both in-home clubs and Central Clubs and now Commercial Clubs are... that's starting to gain some traction but I think, its still several years away. If you remember the Nutrition Clubs took many, many years to get traction in Mexico. I think one another concept that's emerging in Russia under our leadership there is it's early the Breakfast Club and that's again a iteration of the Nutrition Club concept from Mexico that's being acculturated and adapted for that market and we think that's one of the reasons that our Russian market is up 17%.

Thanks for that color. And then, I think just probably is a obvious question but, that stock with the current level that it is out there, are you guys are the pacifiers of the, for your share buyback?

Yes, we've precluded for being in the market for at least another couple of days, and after that we'll just continue to monitor the performance and we would agree with you.

Thanks so much.

Our next question comes from Chris Ferrara.

Hey guys. I just want to follow up on that buyback question I mean, can I guess, can you talk about what the tax consequences if any, there are associated with really, I mean really pushing the authorization and the buyback given what's happened to the shares and if there are any, I mean is that part of the consideration and are you guys meeting with the Board to discuss these things any time soon?

Well Chris we have little over $250 million in additional authority or capacity if you will on our buyback. So I don't think we have anything that governs us in the near term and we'll monitor the situation closely and this is business that generates a tremendous amount of free cash. We don't believe that the buyback over the next year would have any adverse impact that we are aware on of effective tax rate and again we are looking at the stock right now. We are disappointed at where it is and we think on a value basis, the stock should be significantly higher and it provides a great opportunity for us and others to take advantage of where the stock is.

Got it. And then I just want to ask, I think, I guess one of the big tiers in the marketplace today like no big surprise sort of the SEC related voluntary document request. Obviously as you guys said that it's untraditional I know, your concerns and I guess investors worst fears to that there is some systemic issue in your model, right with distributors making initial buying, never use the products, put them in their garage and then recruit team of downline to basically do the same thing only to just generate commissions on the initial buying. So can you just address the concern that there are garages around the world filled with unused Herbalife product like understanding of course you don't have complete clarity. But even anecdotes that help people get pass that would be, would be great.

So Chris, let me just start with this first, there was another one of our peer group, peer companies had a similar issue back in the first and second quarter and it was the same routine, the same investigator and followed by an SEC inquiry. So I think that seems like to be just what happened. Listen, these models have stood the test of times by the review by attorney generals. We here, I think you've been here; you've actually walked through some of our analytical business practice group and our distributor relations group. We have, we believe are the leading controls in place that ensure that we operate at the highest level of whether it's a law or regulation and we have a very strong oversight group that ensure that distributors comply with that.

Yes, let me jump bit on that, as far as product in garages, our fastest growing DMO is Nutrition Clubs. There is daily consumption of retail of this product. We see it fired Mexico for three years. It's now starting to fire other marketplaces, that is not... there is no garages in that. The garage is Nutrition Club in throughout the world. So you have that. If we have places or if there are you know excess inventory moments we have the ability to buy that product back. The distributor has the ability to return that product. So there is no need for a garage to fill up any way. Somebody has come into this business and decided that this is not for them or they have been out of meeting and got excited by the moment and then all of a sudden they get home and there is whatever disagreement on business direction in the household, they have the opportunity for buybacks. Our buybacks are 1% in this company. The way the inventory flows and moves throughout the world, we are pretty confident that this is not a plan that takes place as the one that you expressed. We are just recruiting on top of recruiting. We constantly and constantly go after any type of situation with that could incur, we don't see many of them but we also foster through the sampling program, smaller packages of sampling. Try the product first, see if its something you are comfortable with before you make a larger investment and see it if this is a business opportunity that you are comfortable with that you can do. Get on to products; get your own personal success story. These are all things that you become a successful Herbalife distributor because your own personal testimonial. Frankly, our best and most... strongest advocate for this company are people who have lost weight on a product or who reached a healthier, more active life style and become testimonials for the product themselves. So, this is again, are there problems? You bet. Are there strong opportunities in this company? They are much bigger than any problems that we have.

Thanks a lot guys.

Our next question comes from Scott VanWinkle.

Hi gentlemen, a couple of questions. First on Michael's comments about segmenting those 1.3 million distributors; that was from your analysis based on volumes to the distributors. What happens when you ask the leadership or you do survey work. Do you find the same type of segmentation of who you... how you would classify distributors?

Yes Scott. This is Greg. Yes, we do. Directionally, we hear the same thing, so anecdotally, it supports what we have sort of quantified internally and it makes really common sense. If you are coming into the business as a customer and you join up with the distributor, that entry price point is roughly $50 to come in and you get a 25... at least a 25% discount and you are buying a couple of hundred dollars a month to get on the ShapeWorks program for example. The payback of that entry fee is on your product discount is a couple of months. It's actually one month, so under that model this makes a lot more sense to sign up as what we call it discount buyer and that's probably 1 million of that 1.7 million distributors are actually discount buyers. The good news is by becoming a distributor they also have the ability to buy directly from the company, in addition to getting that discount, so that's new information that we have broken out for you before, but we think it's important to understand that they are not in this for the business opportunity. They are in for the product and their entry cost is minimal.

Okay. Is there a difference between those three segments and turnover rates? The discount buyer may stay on a little longer where may be a future supervisor decides he is not going to make it and jumps off the program faster?

Yes Scott, we don't track that. And one of the things that we hope to do in the future when we get our systems Oracle rolled out in some of our BizWorks 2.0 is to be able to really penetrate that database and data mine that do some CRM on those. But right now, we don't track that. We only track retention for the supervisors as we said in Michael's prepared comments about 419,000 supervisors of the 1.7 million, and our retention rate is 43%. So those people, once they get to supervisor, stay in the business, and have pretty good average earnings. And again that's one of the things, we look at the turnover rate to that one million customers is they tend to come in, and out of the business. They come, and get their product results, go out, and come back in, and in future we hope to do a better job of data mining that segment.

And the second question was around the Nutrition Clubs. Are there any different rules in place for a Commercial Club versus a traditional Nutritional Club given the fact that there is probably higher volumes, and higher infrastructure investment on the part of the distributor?

Yes, we have fairly extensive rules and manuals on all the club types, so as they evolve, we adapted, and for instance one of the things with in-home clubs is we call it good neighbor policy, is that if you are doing this in your home, you don't have too bigger club. If you are opening a larger club, do it more as a Central Club, or Commercial Club, and we want make sure that all of our distributors are compliant with local laws and regulations, so we spend a lot of time doing that, and a lot of time with the leadership making sure that they are training those rules and regulations to their downline, and we really are very proactive to make sure that we don't have that issue in Mexico where we grow so fast that those rules and regulations, and it is good business practices will not pass down fast and we want to make sure that proactively address that in other markets. As we said earlier, in Mexico, we do well and perform audits of the Nutrition Clubs, and, really with the goal of making sure that the training is taking place so the leadership are responsible for training. If your remember, one of the things was they go out and train and so far all their clubs, and the certificate to us, and we go out and on a random basis, we make sure that they are actually doing that, and again its less about finding someone doing something wrong and it is about training them to be compliant.

Thank you

[Operator Instructions]. There are no further questions at this time.

Okay. Well, first of all, we would like to thank everybody for participating today, kind of an interesting summary we've looked at, which was it took 16 years for this company to get to $1 billion in retail sales, and that's retail sales, we are not talking about net sales. Eight years to get to $2 billion and 2 years to get to $3 billion. The distributors, the employees who really, they make up team Herbalife. Greg and I are really excited about the future of our company. You heard it today on the call. You heard about these DMOs, their successful operations globally, things that are growing, and people responding frankly to this global weight loss dilemma. The growth potential and the returns to shareholders will continue to grow in this company. They will get bigger and better. I hope to see many of you on November 28 at our Investor Day. We will take you through our Nutrition Club, you will have a chance to visit it, as well as a new Central Club here in LA. We are excited, because we can give you a tour of our new Torrance facility including a science lab and a distributor call center. You'll get to hear more insight shared by many of our executives on the company. We will highlight more on our key initiatives for 2008. Then we will have our research and development team give you more insight into our products. I hope you all have a blessed and wonderful Thanksgiving. Thank you for participating on our call today.