Good day, ladies and gentlemen and welcome to the Second Quarter 2009 Nu Skin Earnings Conference Call. My name is Merisel (ph) and I'll be your operator for today. At this time, all participants are in a listen-only mode. We will conduct a question-and-answer session towards the end of the conference. (Operator Instructions). As a reminder, today's conference is being recorded for replay purposes. I would now to like to turn the presentation over to Mr. Scott Pond, Director of Investor Relations. Please proceed, sir.

Thanks Merisel. We appreciate you joining us today. Sitting in the room is Truman Hunt, President and Chief Executive Officer, Ritch Wood, Chief Financial Officer; Dan Chard, President of Global Sales and Operation and Joe Chang, Chief Scientific Officer. Just a reminder, during this call comments maybe made that includes some forward-looking statements. These statements involve risks 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 on these risks. Also during this call, certain financial numbers maybe discussed that differ from comparable numbers contained in our financial statement. We believe that these non-GAAP financial numbers as fixed management and investors in evaluating and comparing period-to-period results in a more meaningful and consistent manner. These refer to our investor portion in the company's website for a reconciliation of these non-GAAP numbers. And with that, I will turn the time over to Trum.

Thank you, Scott and good morning, everyone. We appreciate you joining us this morning to review our second quarter results. Last month in the month of June, we celebrated the 25th anniversary of the incorporation of Nu Skin Enterprises. And we were pleased that last month ended up being our largest volume month in our company's history. And as our press release indicates, we're also pleased to generated record results for the second quarter. We posted revenue of 322.6 million, which represents the 4% constant currency revenue improvement over the prior year quarter. Earnings per share excluding restructuring charges in Japan were $0.36, which is a 13% improvement year-over-year. We're also pleased with the 24% improvement in operating income, which is reflected in our operating margin at 11.2% excluding charges and which is the result of the business transformation after we began about three years ago. So, our strong second quarter performance leads us to increase our EPS guidance for the year. And we'll talk about that a little bit more in a moment. We continued to see really solid results in all of our geographic regions with continued strength in Europe, South Korea and United States. In particular, and as our second quarter results also reflect, we're seeing encouraging signs in Japan and China. I would attribute our positive second quarter result to three primary factors. First, our innovative anti-aging products continued to attract a loyal following. Our Nu Skin brand grew 14% over the prior year with the Star skin care product continuing to be the Galvanic Spa system. Galvanic actually grew 68% over the prior year and jumped up about 20% over the prior quarter. This Galvanic Spa is just a fantastic product for our channel. There is five proceed value in the product and ideal for…

Thank you, Trum and good morning, everyone. I'll provide the local currency revenue figures in our major markets and then some discussion here as to the financial results. In the North Asia region, second quarter revenue in Japan was ¥10.8 billion compared to ¥11.5 billion in the same quarter of 2008. And South Korea achieved another record revenue quarter with local revenue of ¥46.2 billion versus ¥41.7 billion in the prior year. In the Americas, the U.S. posted $51.3 million in revenue compared against 48.8 million in the prior year. Canada showed tremendous growth and reported C$7.0 million in the quarter compared to C$4.1 million in the prior year. And Latin America revenue was $4.9 million compared to $4.4 million in the prior year quarter. In the Greater China region, Mainland China revenue was RMB119.0 million during the quarter versus RMB112.6 million in the prior year. And quarterly revenue from Hong Kong was HK$93.6 million compared against 113.9 million in the same quarter last year, which you'll recall benefited from a successful Greater China convention held in Hong Kong during the prior year. And Taiwan revenue was NT770 million compared against NT761 million in 2008. Our gross margin for the quarter was 81.2% at the 40 basis point decline over the prior year and the decline is primarily related to foreign currency fluctuations which you'll recall impacted revenue by about 4%. And also slightly impacted by the Galvanic Spa unit sales which have a slightly lower gross margins then our other personal care products. Selling expenses for the quarter were 41.7% compared against 41.6% -- 42.6% in the second quarter of 2008. And this improvement as Truman mentioned, can be attributed to the Wealth Maximize modification to distributor compensation. That plan is now been adopted by nearly every market in…

(Operator Instructions). And your first question comes from the line of Olivia Tong from Bank of America. Please proceed.

Thanks. Good morning, guys. How are you?

Hi, Olivia. Good. Thanks

Good. Want to start just maybe if we could go over a couple of the countries, since Japan declined at a much lower pace and had been in the past couple of quarters, and then also the U.S., a decline in the growth. So, just wondering if you could give a little bit more detail, between behind those two markets?

Sure, let's take Japan first. As you'll recall, Olivia, we parachuted a new management team in there, just over a year ago. And they've really have undertaken a complete start to finish reform there of how our business opportunities is presented to the field there. Had done a terrific job growing the top-line and really playing business initiatives in place that are returning the top-line around to get ahead of the right direction. And it's really just a question of doing there what we're doing everywhere else in the world that is working so well. And they're executing that very effectively. And at the same time has significantly restructured the labor force and some of our overhead there to result in a significant improvement on the bottom-line. In 2010, just saw you know, we're looking at about a $10 million improvement to the bottom-line in Japan based on the restructuring that's already happened so far this year or so, good things happening there. In the U.S., we see continued enthusiasm for the business and strength for the business. You'll recall that we grew at a very robust rate of about 20% in 2008. That growth rate has come down a little bit, as reflected in our second quarter result. But what leaves me feeling really pretty comfortable with the direction of the United States is that we just have great ambition to work with during the second quarter or in the second half. We just introduced some of the ageLOC story, a good part of the ageLOC story to our top sales force leaders about a month ago. And they're just catching a vision now, reformatting their presentations to incorporate the ageLOC story. And working towards convention in October, here in United States we fairly just have great ambition to work with.

For Japan for the minus six do you think that -- I think that you said in the past you should expect decline for the slower pace. Do you think -- in the second half that you should see less than a minus six or better than a minus six growth rate decline in Japan.

Yeah, you recall that we guided Japan to be down around 8% for the year. And we expect to deliver on this and possibly exceed our commitment. So, we're working our best to improve the decline even further. And we expect the third quarter to be probably in the same range, might be down 68% or so. And then we'll see what we can do to further improve that with the launch of ageLOC in the fourth quarter in Japan.

Got it. And then I was kind of surprise at the gross margin declined in the part of it is effects, but I thought with Japan getting a little better in relative terms, that being your highest margin region, and that would have helped a little bit offset that. Can you talk a little bit about some of the dynamics that went into the gross margin number this quarter?

Sure, Olivia. If we're just to be on a constant currency basis, our gross margin actually would have been slightly higher than the prior year. So, pretty much the full impact was related to the currency issue. We've have several initiatives in place, that continue to improve our gross margin going forward, including the launch of ageLOC products which will have very nice gross margins for us. So we'll continue to stay focused on that. We did see a little impact in the second quarter. But we expect, to really continue to see slow improvements in the future. So, there is nothing that concerns me substantially. The changes in Japan, in the U.S. really didn't impact much in the second quarter. We did have very strong sales of the Galvanic Spa which has a slightly lower gross margin than our weighted average personal care product. But that continues to balance out with sales of the Galvanic gels which have strong margins. So not concerned, I don't anticipate that it will drop going forward. So, I think we'll see it strengthened up a little bit in the future.

Okay. And then just lastly, Truman you talked a little bit about sort of counter cyclicality of direct sale and how people turn to direct sales for income opportunity in tough times. But I have a little bit trouble with that considering when I look at the distributor numbers that, relative to -- you look at Q1, Q2.

Yeah.

It seems like the active numbers which is where I would expect that to show up. Those will not -- they were worst in Q2 than they were in Q1, when you look at it. So, just, if you could talk a little bit about that that will be great?

Yeah, that's a fair observation, Olivia. And I think that my comment with respect to direct selling being hedge against economic turmoil is really reflected in our overall results more than it is distributed trend specifically but you recall that we include in our active account anyone who places an order in the time period reference. And so that includes frankly a lot of people who want to act as distributors, they're just acting as consumers. And in our case with the implementation the Wealth Maximizer compensation plan we redirected some compensation incentives away from customer acquisition and more towards distributor acquisition. And we feel that the shift in our active number is really more reflected, more reflection of the Wealth Maximizer incentives than it is economic impact.

Okay. So the active is really probably not the right number to look at because it reflects consumer sort of like people who enter into the business just to get sort of a discount on the product

That's correct.

And that of course should come down.

That's right. And I think as we see consumers interact a little bit. I think we would chalk that up somewhat to economic impact. But my point is that we're more than making up for that through people who are coming to the business to supplement income.

And those are really the people who end up driving the business going forward. So, this is a very strategic shift that we've made as we rolled out the adjustments in the compensation plan, which we believe will help to drive future growth.

Got it. Thanks very much.

And our next question comes from the line of Tim Ramey from D.A. Davidson. Please proceed.

Good morning. Congratulations, guys.

Hi, Tim.

I wondered if you might discuss the price points on the four product ageLOC system and what exactly the mother of all serums might do for me or anyone else?

You won't believe what I'll do for you, Tim.

I could use your help.

The new skincare system will really be the flagship. The skincare system that we offer and will be offered in our highest price point versus other existing systems. So, the three core components, the cleanser, toner, the day cream and the night cream will be offered for a price in the $100 range with the future serum, the mother of all serums being added on top of that and approximately be the $150 range. So, this is not a cheap product but it comes with a tremendous story and the feedback we're getting from the clinical trials on this product are off the charts. So we're just very optimistic about how consumers in the field will respond to this new system.

And what's the expected usage cycle and it is a monthly cycle or...?

Yes, in fact we've really formulated it and packaged it to 30 days supply. We work on monthly cycles in our sales force likes the monthly replenishment programs. And so this product is formulated and packaged for us a month specifically.

And just questions on your strategy if cash management you've maintained fairly large cash balances. And now almost net, almost no debt I think net 39 or whatever. Can that -- I think you have shrunken a bit, but can that shrink even further?

Well, no we do operate very conservatively and have never been huge fans of debt. But I think our record also shows that we have used cash very generously with our shareholders, we've increased our dividend now for what nine years in a row. We have a very healthy track record of using cash and even incurring some debt to buy stock back. And so, we're really pleased to be in such a healthy financial condition at this moment in time. And I have enjoyed the flexibility that comes being in a position we're in. And we'll continue to use our cash to benefit shareholders.

Great. Thanks.

Yeah.

Our next question comes from the line of Mark Astrachan from Stifel Nicolaus. Please proceed.

Hey, good morning everyone.

Hello, Mark.

Hey, first question relates to, what your views are in cannibalization from the new products. And in particular, I guess as you sit here and think about these new product launches which sound pretty exciting. How do you think about, what the impact is on your other products? Plus what the potential long-term outlook is meaning, what potential impact do you see for 2010 and beyond?

Yeah, I think that's a good question. And clearly, every time we launch a new product, it is essentially in the same category as it is in products. There is going to be cannibalization. And we do take that into consideration, when we project revenue and really forecast demand for a new system. In this case, we're actually welcoming for the most part cannibalization, because, we're pricing the ageLOC system at price points that enjoys a healthier gross margin and our existing gross margins out. So there will be some cannibalization. But we've also seen to our 25 years history that people, consumers become very aware to whatever product they maybe using. And it's still frankly a little bit surprising to me that we have a very, very loyal customer base on skincare products that we launch 25 years ago. And people tend to stick with what they use and what they like. So, there is some cannibalization, but there is also high level of loyalty among consumers. The story associated with ageLOC is so different than other line and wrinkle stories that we think we're really opening up our whole new world of people, whom we can convince of the ageLOC's story and the fact that ageLOC products really are attacking the source of aging and not just the signs of aging to make them all the more compelling.

And maybe just one other comment that this new line of products works perfectly with the Galvanic Spa. So it continues to compliment and harmonize with the Galvanic Spa story.

Great, and then in terms of just thinking about would be the potential impact would be on longer-term hotline trends. It seems like then it would stand to be a bit incremental there, especially given the price point?

Yeah we really haven't given any guidance yet for 2010 or beyond. And we probably won't do that until our Investor Day meeting in November. But we view as I indicated in my opening remarks we view ageLOC as the most significant product platform the company has ever launched. And we're just delighted with the competitor proposition and the really differentiated story that we have to go to market with. And we're confident that as we tell that story effectively we will see incremental improvement on top-line.

Great. And then just to more housekeeping oriented question, the savings you talked about from Japan. I am assuming most of that will fall to the bottom-line versus being reinvested in the business?

Yeah, that's true. We'll get about half of the savings, $5 million this year. That's not including the restructuring charges that we're taking the full $10 million next year anticipate most of that falling to the bottom-line. We have upped our promotional activity particularly our advance spending consistent with what we're doing in other market. There are little bit. But generally it's going to be savings that'll improve profitability.

Right, in the 5 million for this year in the guidance I'm assuming.

That is right, yeah.

Great. And then just on the tax rate, 34.4, does that's going to be a good number using going forward?

Yeah, I think probably right around 35% for this year. It should drop down to around 30% in the third quarter and then be back up in the 37 to 38% for the fourth quarter.

Great. Thank you.

Yeah.

And our next question comes from line of Doug Lane from Jefferies. Please proceed. Douglas Lane - Jefferies & Company: Yes, thank you. Good morning, everybody.

Hi Doug. Douglas Lane - Jefferies & Company: Back on the new product the ageLOC system; mentioned $100 price point is that for each of the four components or three components.

No that's for the set. Douglas Lane - Jefferies & Company: So a month supply of the set is a $100 and then if you want future that's another 150 amongst supply?

That's correct. Douglas Lane - Jefferies & Company: How does it -- can you help me put this is perspective with some of your existing products like Tru Face Essence which is also a very premium price skincare product. Is there a rebranding that's going to go on the Tru Face Essence, is it going to operate in parallel with it, I mean, how does that fit into the new system, if you will?

Yeah, that's a good question Doug, we love the Tru Face Essence product. And that's become very significant to our top-line and to our bottom-line. And frankly, if there is a single product, where the new system, where they might be overlapped with the new system to some degree, it's with the Tru Face Essence product. Ideally, in the perfect world, we probably would have infused ageLOC into Tru Face but unfortunately, the formulations were just not compatible. And so, Tru Face Essence also you'll recall Doug is really all about firming. And we will not be making firming claims with the new future serum product. So, a consumer really can use continue to use Tru Face Essence also for firming specifically or they'll have to decide just based on which serum they prefer, which product they prefer to use. They are compatible to be used together, just a question of whether a consumer is really a skincare or really wants to go around and buy both the new system and continue to use Tru Face Essence also or not. Douglas Lane - Jefferies & Company: Now, you haven't incorporated the Tru Face Essence product line with the Galvanic Spa, right?

Well, with the Galvanic Spa, a consumer can use whatever skin treatments skincare system they want. And so most of the people who use Tru Face Essence Ultra, I would venture to guess they're also using the Galvanic Spa. And that will continue to be the case. Douglas Lane - Jefferies & Company: I just want to insure. Okay.

Tru Face Essence Ultra is not applied with the Galvanic Spa. Douglas Lane - Jefferies & Company: That's what I am asking. Okay.

Right. Douglas Lane - Jefferies & Company: Shifting to back on a recruiting front, on the executive distributors, it seems to be sequentially moving in the right direction. The two areas that stand out are Greater China or Europe but I mean still double digits 20% they can't really I mean that's just continuous to grow strongly, but maybe China, Greater China where both executives went from declining 2.7 to declining 4.9. And also your active distributors there have been declining pretty sharply in the past couple of quarters. Seems to be backing the trend, can you give us some color on that?

Yeah that's an issue of essentially reformatting the business model in China. And we've been asked that now for a couple of years in light of the new regulations. And so, I would encourage you to look more at just overall top-line results and how that active number looks for the time being, because I think that the dust is still yet to settle on the transition of the business model. We might continue to see some contraction in the actives. But what we're really delighted with is the commencement of business building activity, there that is reflected on the top-line.

And then, just one other comment on the active numbers there. Because of the convention in the prior year, sometimes we get a push for people to qualify and be recognized. So, executive number in the prior year would have been a little higher likely in the second quarter, which impacted the comparison a little bit. Douglas Lane - Jefferies & Company: Got it. Okay, thanks.

And our next question comes from the line of Scott Van Winkle from Canaccord Adams. Please proceed.

Hi guys. Congrats and Doug took all my questions. So I try to make a couple here. First, the products being launched the convention in a limited availability and then a full launch in January in U.S., Europe and Japan I think you said. Is that the way you wanted it or was there a push back or I just wonder there's about two month a black out window hurts.

Scott, let me have Dan Chard, he's our President of Global Sales to hit that question.

Scott, one of the reasons we did it the way that we are -- what was found is the critical period between convention and launch which is essentially used to train our entire executive force, so convention is going to be launched to the general public. And then we have in the various markets of U.S. and Japan, a series of potentially growth shows training and sales meetings will go on throughout the various countries to start driving both the interest each side. And we're really putting together amount of sales tools and components to make the January launch as successful as possible. This is a system that's been protected largely in South Korea, where we've consistently had almost successful launch than we're spreading that out and using the same tactics in our other markets. So, that's the primary reason for doing it that way.

And have all necessary approvals particularly in Japan that attend (ph)?

Well, I'm not exactly sure Scott, where we are in registration of each of the new ageLOC products. But the skincare products are typically much, much easier to qualify for sell everywhere in the world in the nutrition products side. And we don't anticipate a registration issue with this new skincare system.

Okay. And is there -- the MOAS, I like that name better actually. Is there any ingestible that's going to be involved there or just a skincare product at this point?

Yeah, eventually, we will infused ageLOC technology and ageLOC components into the Pharmanex line as well. And we are working to do that so, we are prepared to do that in the fall of 2010, whether or not, we actually pull the trigger on that launch will probably depend on how sales are trending generally. And Scott, we're just not anxious to disrupt good momentum in the business. And frankly if things are going well and things are on-track, we'd probably will save a Pharmanex launch for a later point in time that would be prepared with an ageLOC Pharmanex offering in the fall of 2010.

Okay. And there were several questions about the price points and suite of products. If you took a guess on all the products that might be cannibalized, what would be average monthly cost of the products that could cannibalize there?

The 180 system is probably the most comparable system. And its price points for the whole system as more in the $150 range. And so, we're really moving the average price point up significantly with a higher gross margin on the new offering.

So, cannibalization certainly won't be bad?

No.

And I had a kind of a different take on the China distributors. It looks like active distributors were up sequentially for the first time around three years or so, am I reading that right and that's a Greater China number, is that all main driven?

Yeah the Greater China numbers really reflective of Honk Kong and Taiwan as well. But I think you are reading the sequential increase correctly. We're seeing a similar impact; anticipate that we'll wrap around as business model change probably in the next couple of quarters. So the year-over-year comparison will begin to look more realistic probably somewhere fourth quarter or first quarter or next year. And we'd keep our eye very closely on the sequential change as well.

Okay. And Ritch that 6 to 7 million spend for the convention, can you remind us what last year's spend was or the last event spend was, pardon?

Yeah we spent, it would have been a year and a half ago and we spent about 5.5 to $6 million, that was in I believe the first quarter of ''08 -- first quarter of '07 maybe. So, it's been a while since we've had the global convention. This one will be a little bit more expensive as we celebrate the 25th anniversary and really put a lot of energy behind the ageLOC launch. We think that will be a good investment that will comeback to us as we start to rollout these products.

Is the higher spending associated with higher attendance or just a lot more excitement?

Primarily associated with a different venue, we're holding our 25th anniversary in Los Angles this time versus our historical conventions which have been Salt Lake city.

Okay, great. Thank you very much.

Okay.

(Operator Instructions). And next question come from the line Mimi Noel from Sidoti & Company. Please proceed. Mimi Noel - Sidoti & Company: Good morning Trum and good morning Ritch.

Hello. Mimi Noel - Sidoti & Company: Just a few questions, first, as you make your ways through the over all in Japan, in China, do you look beyond that. I mean are there any other markets that could benefit for some right-sizing or at that point is you going to be uniform across all markets and there are no best practices to implement et cetera.

Well, Mimi Japan is really the final stopping place for our transformation efforts. And we've been through a similar transformation over the course of the last year and a half or so in China as well. But frankly, Japan is the last place where we anticipate dealing significant restructuring in. And we're really happy with the works, that's been done there. But let me just touch on the last point of your question which is best practices and I tell you the truth, one of the things that Dan Chard is doing so well is really implementing, taking best practices from all over the world and insuring them globally. You just refer to the fact that South Korea is really been the all star market in terms of product launches. And we're learning a lot from them and implementing globally what we're learning there so. Best practice wise. The focus really at this point now and going forward is best practice on the top-line. Mimi Noel - Sidoti & Company: Okay. And also wanted to ask, Truman you mentioned average order volumes, I don't know if it was exactly as I heard it but it sounds like they're increasing, is that correct or would elaborate on the comment you made in your prepared remarks?

Yes, that is correct. And we as part of the Wealth Maximize implementation we put an incentive in place to improve productivity. And that incentive that is offered has proven to be very valuable to our 2009 because we simply have carried out there that people are chasing after and its increasing our average order volumes almost everywhere in the world. Mimi Noel - Sidoti & Company: Okay. And then the last question LA for the global convention it is little bit more expensive. Why the convention there is this year is that just a place to do the Silver Anniversary or there is something else that work?

Yeah, we wanted to do just something different for our 25th anniversary. And it's going to be a spectacular event. I am really excited about it but more than the location it's really all about exciting for the ageLOC launch I mean that's really what was going to make a great event. Mimi Noel - Sidoti & Company: Okay. And do you have any reason to think that because its in Los Angeles over Salt Lake City that are actually to draw more entities.

Well actually the office the event will be held in the Nokia theatre in L.A., which only seats 7000 people. Mimi Noel - Sidoti & Company: Okay.

And we will have an overflow area, but the fact that we can only put 7000 in room we'll put a little bit of a cap on attendance. So, what we did this year was also an incentive in place where people have to qualify in order to get in the room. And so, it's been a nice dynamics on overall business results to essentially require our sales force to reach certain levels in order to attend. Mimi Noel - Sidoti & Company: Okay. So, the exclusivity of this is creating some competition too?

Right. Mimi Noel - Sidoti & Company: Okay, all right. That's all I have. Thank you very much.

Thanks Mimi.

And there is no further questions in the queue at this time. I'd like to turn the presentation over to Mr. Truman Hunt for any closing remarks.

Thanks for joining us again this morning everyone. Ritch and I are going to be in Boston and New York in the upcoming few weeks and look forward to visiting to you. We also want you to know that we would welcome your participation and intended at our convention in October. Let us know through Scott Pond or Ritch is actually attending. Also scheduling our traditional Investor Day in the month of November which will be a great opportunity for us to really talk to the street more about the sign behind ageLOC which you're going to find very interesting and very compelling. And let me just conclude by saying that we're very optimistic about the remainder of 2009 and going into 2010. We're confident that '09 is going to be another record year that will set us up well to continue to reach our objective as becoming the world's leading direct selling company in the upcoming few years. Thanks very much.

Thank you for your participation in today's conference. This concludes today's presentation. You may now disconnect and have a great day.