Nu Skin 2010 Annual Report - Direct Selling News

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NU SKIN ENTERPRISES, INC. Consolidated Statements of Income (U.S. dollars in thousands, except per share amounts) Year Ended December 31, 2008 2009 2010 Revenue $ 1,247,646 $ 1,331,058 $ 1,537,259 Cost of sales 228,597 243,648 272,431 Gross profit 1,019,049 1,087,410 1,264,828 Operating expenses: Selling expenses 533,151 559,605 646,348 General and administrative expenses 360,470 369,368 401,418 Restructuring charges — 10,724 — Total operating expenses 893,621 939,697 1,047,766 Operating income 125,428 147,713 217,062 Other income (expense), net (Note 22) (24,775) (6,589) (9,449) Income before provision for income taxes 100,653 141,124 207,613 Provision for income taxes 35,306 51,279 71,562 Net income $ 65,347 $ 89,845 $ 136,051 Net income per share: Basic $ 1.03 $ 1.42 $ 2.18 Diluted $ 1.02 $ 1.40 $ 2.11 Weighted-average common shares outstanding (000s): Basic 63,510 63,333 62,370 Diluted 64,132 64,296 64,547 The accompanying notes are an integral part of these consolidated financial statements. 52
NU SKIN ENTERPRISES, INC. Consolidated Statements of Stockholders’ Equity and Comprehensive Income (U.S. dollars in thousands) Class A Common Stock Additional Paid-in Capital Treasury Stock Accumulated Other Comprehensive Loss Retained Earnings Balance at January 1, 2008 $ 91 $ 209,821 $ (413,976) $ (67,759) $ 546,832 $ 275,009 Comprehensive income: Net income — — — — 65,347 65,347 Foreign currency translation adjustment — — — (2,302) — (2,302) Total comprehensive income 63,045 Repurchase of Class A common stock (Note 10) — — (6,093) — — (6,093) Exercise of employee stock options (401,000 shares) — 772 3,052 — — 3,824 Excess tax benefit from equity awards — 1,062 — — — 1,062 Stock-based compensation — 7,273 — — — 7,273 Cash dividends — — — — (27,940) (27,940) Balance at December 31, 2008 91 218,928 (417,017) (70,061) 584,239 316,180 Comprehensive income: Net income — — — — 89,845 89,845 Foreign currency translation adjustment — — — 1,830 — 1,830 Net unrealized gains on foreign currency cash fl owh e d g e s — — — 97 — 97 Total comprehensive income 91,772 Repurchase of Class A common stock (Note 10) — — (21,144) — — (21,144) Exercise of employee stock options (614,000 shares)/ vesting of stock awards — 1,633 4,594 — — 6,227 Excess tax benefit from equity awards — 1,669 — — — 1,669 Stock-based compensation — 9,989 — — — 9,989 Cash dividends — — — — (29,006) (29,006) Balance at December 31, 2009 91 232,219 (433,567) (68,134) 645,078 375,687 Comprehensive income: Net income — — — — 136,051 136,051 Foreign currency translation adjustment — — — 9,661 — 9,661 Net unrealized gains on foreign currency cash fl owh e d g e s — — — 60 — 60 Less: reclassification adjustment for realized gains in current earnings — — — (126) — (126) Total comprehensive income 145,646 Repurchase of Class A common stock (Note 10) — — (58,516) — — (58,516) Reclassification of treasury shares held by subsidiary 3,122 (3,122) — — — Exercise of employee stock options (1.5 million shares)/ vesting of stock awards — 2,724 18,457 — — 21,181 Excess tax benefit from equity awards — 7,605 — — — 7,605 Stock-based compensation — 10,835 — — — 10,835 Cash dividends — — — — (31,189) (31,189) Balance at December 31, 2010 $ 91 $ 256,505 $ (476,748) $ (58,539) $ 749,940 $ 471,249 Total The accompanying notes are an integral part of these consolidated financial statements. 53
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NU SKIN ANNUAL REPORT 2010 ELEVATE
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35,676 32,939 30,588 30,002 2007 20
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BUILDING FOR THE FUTURE In 2011, we
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$163M AGELOC GALVANIC SPA AND GELS
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8 8
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5 INCREASING OPERATIONAL EFFICIENCI
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* GAAP RECONCILATION TABLE 2007 200
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Can we sustain growth? Yes we can.
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UNITED STATES SECURITIES AND EXCHAN
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TABLE OF CONTENTS PART I 1 ITEM 1 B
Page 23 and 24: PART I ITEM 1. BUSINESS OVERVIEW We
Page 25 and 26: The following table summarizes our
Page 27 and 28: Other. We also offer a limited numb
Page 29 and 30: introduction of additional ageLOC a
Page 31 and 32: ness model utilizing sales employee
Page 33 and 34: in a manner to attract the general
Page 35 and 36: take longer than we anticipated. Pl
Page 37 and 38: chases, management services and con
Page 39 and 40: These declines could continue or in
Page 41 and 42: ous markets, including Japan, South
Page 43 and 44: creased scrutiny by the government.
Page 45 and 46: pact the cost associated with manuf
Page 47 and 48: on a sustained basis. Factors that
Page 49 and 50: negotiated contracts with shipping
Page 51 and 52: System failures could harm our busi
Page 53 and 54: consumption taxes based on an audit
Page 55 and 56: STOCK PERFORMANCE GRAPH Set forth b
Page 57 and 58: ITEM 7. MANAGEMENT’S DISCUSSION A
Page 59 and 60: estrictions on the importation of f
Page 61 and 62: RESULTS OF OPERATIONS The following
Page 63 and 64: South Asia/Pacific. The following t
Page 65 and 66: employees in Mainland China who had
Page 67 and 68: We currently have debt pursuant to
Page 69 and 70: the legal form of the transaction.
Page 71 and 72: closures related to vendor’s mult
Page 73: NU SKIN ENTERPRISES, INC. Consolida
Page 77 and 78: NU SKIN ENTERPRISES, INC. Notes to
Page 99 and 100: Report of Independent Registered Pu
Page 101 and 102: PART III The information required b
Page 103 and 104: corporated by reference to Exhibit
Page 105 and 106: *10.56 Form of 2010 Plan Director S
Page 107 and 108: BOARD OF DIRECTORS Blake M. Roney E
Page 109: 18 NU SKIN ENTERPRISES, INC. 75 WES
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