Nu Skin 2010 Annual Report - Direct Selling News

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.
OTHER INCOME (EXPENSE), NET
Other income (expense), net was $6.6 million of expense in
2009 compared to $24.8 million of expense in 2008. Of this 2008
amount, approximately $18.4 million relates to foreign currency transaction
losses related to our yen-denominated debt as the Japanese
yen strengthened from 111.45 at December 31, 2007 to 90.73 at December
31, 2008. Other income (expense), net also includes approximately
$6.9 million and $7.8 million in interest expense during 2009
and 2008, respectively.
PROVISION FOR INCOME TAXES
Provision for income taxes increased to $51.3 million in 2009
from $35.3 million in 2008. The effective tax rate increased to 36.3%
in 2009 from 35.1% of pre-tax income in 2008. The higher income tax
rate was due to a reduced benefit relating to the expiration of the
statute of limitations in 2009 compared to 2008.
NET INCOME
As a result of the foregoing factors, net income increased to
$89.8 million in 2009 from $65.3 million in 2008.
LIQUIDITY AND CAPITAL RESOURCES
Historically, our principal uses of cash have included operating
expenses, particularly selling expenses, and working capital (principally
inventory purchases), as well as capital expenditures, stock repurchases,
dividends, debt repayment, and the development of operations
in new markets. We have generally relied on cash flow from
operations to fund operating activities, and we have at times
incurred long-term debt in order to fund strategic transactions and
stock repurchases.
We typically generate positive cash flow from operations due to
favorable margins. We generated $187.9 million in cash from operations
in 2010 compared to $133.9 million in 2009. This increase in cash
generated from operations is primarily due to the increase in revenue
in 2010 as well as increased profitability from our restructuring efforts.
As of December 31, 2010, working capital was $206.1 million
compared to $152.7 million as of December 31, 2009. Our working
capital increased primarily due to an increase in cash and cash equivalents.
Cash and cash equivalents at December 31, 2010 were $230.3
million compared to $158.0 million at December 31, 2009. The increase
in cash was primarily the result of the increase in our cash generated
from operations in 2010.
Capital expenditures in 2010 totaled $53.8 million, and we anticipate
capital expenditures of approximately $65 million for 2011.
These capital expenditures in 2011 are primarily related to:
• purchases of computer systems and software, including equipment
and development costs;
• the build-out and upgrade of leasehold improvements in our
various markets, including retail stores in China
• real estate acquisitions and initial development work related
to the building of a new innovation center on our Provo, Utah
campus; and
• acquisition of our previously leased corporate headquarters buildings
and distribution center in Provo, Utah.
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