Nu Skin 2010 Annual Report - Direct Selling News

South Asia/Pacific. The following table sets forth revenue
for the South Asia/Pacific region and its principal markets (U.S. dollars
in millions):
2009 2010 Change
Singapore/Malaysia/
Brunei. . . . . . . . . . . . . . $ 49.2 $ 76.8 56%
Thailand . . . . . . . . . . . . . . . 38.8 56.7 46%
Australia/New Zealand 14.2 21.7 53%
Indonesia . . . . . . . . . . . . . . 10.7 15.5 45%
Philippines . . . . . . . . . . . . . 7.2 12.1 68%
South Asia/Pacific total $ 120.1 $ 182.8 52%
Foreign currency exchange rate fluctuations positively impacted
revenue in South Asia/Pacific by 13% in 2010 compared to the same
prior-year period. Revenue growth was driven largely by strong sales
and sponsoring activity in connection with the general launch of our
ageLOC Transformation skin care system. Continued interest in our
TRA weight management products and ageLOC Edition Galvanic Spa
System II also contributed to strong growth in this region. Executive
distributors in the region increased 33% while active distributors increased
18% compared to the prior year.
Europe. The following table sets forth revenue for our Europe
region (U.S. dollars in millions):
2009 2010 Change
Europe . . . . . . . . . . . . . $ 133.6 $ 150.2 12%
Foreign currency exchange rate fluctuations negatively impacted
revenue in Europe by 4% in 2010 compared to the prior year. On a local
currency basis, revenue in Europe grew by 16% in 2010 compared to
2009. Growth in Europe was driven by sustained interest in our ageLOC
anti-aging products and LifePak nutrition supplements. We also began
initial marketing activities in Ukraine during the fourth quarter of 2010. Our
active and executive distributor counts in our Europe region increased
by 14% and 11%, respectively, in 2010 compared to 2009.
GROSS PROFIT
Gross profit as a percentage of revenue in 2010 increased to
82.3% compared to 81.7% in 2009. The increase is a result of strong
sales of our higher margin ageLOC products, and foreign currency
benefits in 2010. We anticipate that our gross profit as a percentage
of revenue will remain at this level in 2011.
SELLING EXPENSES
Selling expenses remained relatively level as a percentage of
revenue at 42.1% in 2010 compared to 42.0% in 2009.
As part of our compensation plan improvements, we increased
our focus on distributor recognition. Accordingly, during 2010, the
costs of certain incentive trips and other rewards earned by distributors,
previously recorded as general and administrative expenses,
have been reclassified as selling expenses. In order to provide a
meaningful comparison, we have made this reclassification for both
the current and prior-year periods.
GENERAL AND ADMINISTRATIVE EXPENSES
General and administrative expenses decreased as a percentage
of revenue to 26.1% in 2010 from 27.8% in 2009, primarily as a result of
increased revenue and controlled expenses.
RESTRUCTURING CHARGES
During 2009, we recorded restructuring charges of $10.7 million
primarily related to transformation efforts in Japan designed to improve
operational efficiencies and align organizationally in Japan with
how we are organized globally in our other markets. There were no
similar charges in 2010.
OTHER INCOME (EXPENSE), NET
Other income (expense), net was $9.4 million of expense in 2010
compared to $6.6 million of expense in 2009. The increase in expense
is due primarily to the impact of changes in foreign currency exchange
rates. Because it is impossible to predict foreign currency fluctuations,
we cannot estimate the degree to which our other income expense will
be impacted in the future. Other income (expense), net also includes
approximately $5.8 million and $6.9 million in interest expense during
2010 and 2009, respectively.
PROVISION FOR INCOME TAXES
Provision for income taxes increased to $71.6 million in 2010 from $51.3
million in 2009. The effective tax rate decreased to 34.5% in 2010 from
36.3% of pre-tax income in 2009. The lower income tax rate was due to
an increased benefit relating to the expiration of the statute of limitations
in 2010 compared to 2009. We anticipate our tax rate will return to approximately
36.5% in 2011.
NET INCOME
As a result of the foregoing factors, net income increased to $136.1
million in 2010 from $89.8 million in 2009.
2009 COMPARED TO 2008
OVERVIEW
Revenue in 2009 increased 6% to $1.33 billion from $1.25 billion
in 2008. The introduction of our ageLOC Transformation skin care
system at our global distributor convention held in Los Angeles during
the fourth quarter of 2009 contributed to revenue growth during this
period. Foreign currency exchange fluctuations did not materially
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