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our regional net sales discussions as an indicator of recruiting activity, which can be an
indicator of near term market momentum. |
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As requested, we confirm that we will expand our discussion on volume points in future
filings to provide the substance of the clarification included in our letter dated December
10, 2008 (the “Prior Response”) regarding our use of volume points and their relation to
sales volume. |
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We explained in the Prior Response that a change in volume points would roughly correspond
to a similar change in the total number of sales leaders, and vice-versa. You have further
inquired as to why volume points in Mexico and Central America for 2007 were down slightly
(0.8%), while according to the total sales leaders by region table on page 50 of the 2007
Form 10-K, Mexico and Central America’s total sales leaders increased by 63%. We would
like to point out that the table disclosing total sales leaders is, as noted in the table,
as of the end of February when the requalification and subsequent purge of non-qualifying
sales leaders processes have been completed. The number of sales leaders for Mexico and
Central America at the end of February 2007 was 62,683. The number of sales leaders at the
end of February of 2006 for this region was 38,356 for a year-over-year increase of 63%.
Therefore, this increase occurred mostly in calendar year 2006 when volume points in Mexico
and Central America increased by 71.4% over the prior year (please see page 60 of the 2007
Form 10-K, Under “Mexico and Central America”), roughly corresponding with the
aforementioned increase in sales leaders of 63%. The number of sales leaders for Mexico
and Central America at the end of February of 2008 was 62,418, or a decrease of 0.4% from
the prior year, roughly corresponding with the decrease in volume points of 0.8% from the
prior year. Please note that the requalification and purge processes are not formally
completed in time to include the subsequent requalification data in the Form 10-K. The
2008 requalification data is included in the subsequent first quarter Form 10-Q filing. |
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You have also requested that we supplement our overview to provide insight into material
opportunities, challenges and risks, such as those presented by known material trends and
uncertainties, on which the Company’s executives are most focused for both the short and
long term. We respectfully note that we have included discussion of certain of these
items, those that the Company’s executives are most focused, on page 48 of the 2007 Form
10-K. Specifically, the 2007 Form 10-K discusses “Industry-wide factors that affect us and
our competitors,” including “the increasing prevalence of obesity and the aging of the
worldwide population, which are driving demand for nutrition and wellness-related products
and the recruitment and retention of distributors.” Beyond those factors we believe that
many of the biggest challenges and opportunities facing our business are internal within
the Company and within our independent distributor force. Page 47 of the 2007 Form 10-K
specifically notes these “opportunities and challenges upon which we are most focused,”
including “retailing of our products, recruitment and retention of distributors, improving
distributor productivity, new markets, further penetrating existing markets including
China, globalizing successful distributor methods of operation such as Nutrition Clubs,
introducing new products, developing niche market segments and further investing in our
infrastructure.” Our independent distributors have thrived in both prosperous countries
and in poverty-stricken countries, in both economic expansions and recessions, and both in
democracies or in dictatorships, with the common denominator in each case being how
motivated and hard working our distributor force is. Therefore the Company’s management
generally focuses less on the external factors noted in Section III.A of SEC Release
33-8350, which might impact many other businesses and more on the internal factors
referenced above and noted on page 48 of the 2007 Form 10-K, which can be the enablers or
obstacles for distributor momentum, and therefore, Company success. |
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As always these factors are subject to update and change based on the current environment,
both internal and external, and as an example, the ongoing worldwide
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