Nu Skin 2010 Annual Report - Direct Selling News

impact revenue in 2009 compared to 2008. Revenue in 2009 was
positively impacted by growth in all of our regions, driven largely by
strong sales of our personal care products, including the Galvanic Spa
System II with ageLOC Galvanic Spa Gels and our new ageLOC
Transformation skin care system, as well as successful promotions of
other key products. Despite improving trends in Japan, we continued
to see declines in our local currency revenue in that market.
Earnings per share in 2009 increased to $1.40 compared to $1.02
in 2008 on a diluted basis. The increase in earnings was largely the
result of increased revenue, as discussed above, and transformation
initiatives we executed over the previous several years to transform
and align our business and operate more efficiently. Earnings per share
in 2009 and 2008 were also impacted by:
• foreign currency transaction losses in 2008 of approximately
$11.9 million (net of taxes of $6.5 million), or $.19 per share, as
foreign currencies shifted dramatically during the year;
• restructuring charges in 2009 totaling $6.8 million (net of taxes
of $3.9 million), or $.11 per share, relating to further transformation
initiatives to reduce overhead, primarily in Japan
REVENUE
North Asia. The following table sets forth revenue for the North Asia
region and its principal markets (U.S. dollars in millions):
2008 2009 Change
Japan . . . . . . . . . . . . . . $ 443.7 $ 461.9 4%
South Korea . . . . . . . 150.8 144.2 (4%)
North Asia total . . . $ 594.5 $ 606.1 2%
Foreign currency fluctuations positively impacted revenue by
3% in this region compared to the prior-year period. Currency fluctuations
positively impacted revenue in Japan by 10% and negatively
impacted revenue in South Korea by 16% in 2009. Our active and
executive distributor counts decreased 10% and 5%, respectively, in
Japan in 2009 compared to 2008. In South Korea, our active and
executive distributor counts increased 18% and 20%, respectively,
comparing 2009 to 2008.
Local currency revenue in Japan declined 6% in 2009 compared
to 2008. The revenue decline was largely due to the difficult industry
and regulatory conditions in this market as previously discussed,
which contributed to our decline in active and executive distributors.
We believe that most direct selling companies also saw their businesses
contract in this market in 2009. As a result of industry and
regulatory challenges in this market, we focused on distributor compliance
and were also more cautious in both our corporate and our
distributor’s marketing activities. Local currency revenue in Japan
decreased 1% year-over-year in the fourth quarter of 2009.
In response to this regulatory environment and, as a result of increases
in the number of complaints to consumer centers regarding
the activities of some of our distributors, we increased our focus on
distributor compliance and training. Some of the actions we took to
address activities of distributor groups that were having higher levels
of complaints contributed to the declines in our revenue. We also
engaged in less aggressive product promotions in 2008 than we had
in 2007.
South Korea posted strong year-over-year local currency revenue
growth of 12%. This growth was fueled by strong distributor
alignment behind our product and distributor initiatives, maintaining
a vibrant sponsoring environment for our distributors and spurring
significant growth in our active and executive distributors. This revenue
growth was more than offset by a weakening of the South Korean
won during 2009.
Greater China. The following table sets forth revenue for
the Greater China region and its principal markets (U.S. dollars
in millions):
2008 2009 Change
Taiwan . . . . . . . . . . . . . $ 92.3 $ 91.7 1%
China . . . . . . . . . . . . . . 65.3 71.1 9%
Hong Kong . . . . . . . . 52.4 47.6 (9%)
Greater China total $ 210.0 $ 210.4 —
Foreign currency exchange rate fluctuations positively impacted
revenue in the Greater China region by 1% in 2009. Local currency
revenue in Taiwan was up 4% in 2009 compared to 2008. The executive
distributor count in Taiwan was up 9% compared to the prior-year
period, while the number of active distributors was up 12% when compared
to the prior-year period. In Taiwan, due to regulatory restrictions,
we were unable to market the Galvanic Spa System II, which had been
a primary growth initiative in our other markets.
On a local currency basis, revenue in Mainland China increased
7% in 2009 compared to 2008. Mainland China reported a 27% decline
in our preferred customers compared to the prior-year period and a
9% increase in the number of sales representatives. The year-over-year
increase in revenue in Mainland China was the result of strong sales
of the Galvanic Spa System II, which we fully launched in the first quarter
of 2009, successful sales initiatives and the adoption of our revised
business model.
Hong Kong local currency revenue was down 9% in 2009 compared
to 2008 primarily as a result of a reduction in sales of products to sales
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