Nu Skin 2010 Annual Report - Direct Selling News

NU SKIN ENTERPRISES, INC.
Notes to Consolidated Financial Statements
10. CAPITAL STOCK
The Company’s authorized capital stock consists of 25 million shares of preferred stock, par value $.001 per share, 500 million shares of
Class A common stock, par value $.001 per share, and 100 million shares of Class B common stock, par value $.001 per share. The shares of
Class A common stock and Class B common stock are identical in all respects, except for voting rights and certain conversion rights and
transfer restrictions, as follows: (1) each share of Class A common stock entitles the holder to one vote on matters submitted to a vote of the
Company’s stockholders and each share of Class B common stock entitles the holder to ten votes on each such matter; (2) stock dividends of
Class A common stock may be paid only to holders of Class A common stock and stock dividends of Class B common stock may be paid
only to holders of Class B common stock; (3) if a holder of Class B common stock transfers such shares to a person other than a permitted
transferee, as defined in the Company’s Certificate of Incorporation, such shares will be converted automatically into shares of Class A common
stock; and (4) Class A common stock has no conversion rights; however, each share of Class B common stock is convertible into one share of
Class A common stock, in whole or in part, at any time at the option of the holder. All outstanding Class B shares have been converted to
Class A shares. As of December 31, 2010 and 2009, there were no preferred or Class B common shares outstanding.
WEIGHTED-AVERAGE COMMON SHARES OUTSTANDING
The following is a reconciliation of the weighted-average common shares outstanding for purposes of computing basic and diluted net
income per share (in thousands):
Year Ended December 31,
2008 2009 2010
Basic weighted-average common shares outstanding . . . . . . . . . . . . 63,510 63,333 62,370
Effect of dilutive securities:
Stock awards and options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 622 963 2,177
Diluted weighted-average common shares outstanding . . . . . . . . . 64,132 64,296 64,547
For the years ended December 31, 2008, 2009 and 2010, other
stock options totaling 5.0 million, 4.8 million and 0.4 million, respectively,
were excluded from the calculation of diluted earnings per
share because they were anti-dilutive.
REPURCHASES OF COMMON STOCK
The board of directors has approved a stock repurchase program
authorizing the Company to repurchase the Company’s outstanding
shares of Class A common stock on the open market or in private transactions.
The repurchases are used primarily to offset dilution from the
Company’s equity incentive plans and for strategic initiatives. During the
years ended December 31, 2008, 2009 and 2010, the Company repurchased
approximately 0.4 million, 1.2 million and 2.2 million shares of Class
A common stock for an aggregate price of approximately $6.1 million,
$21.1 million and $58.5 million, respectively. Between August 1998 and
December 31, 2010, the Company repurchased a total of approximately
21.8 million shares of Class A common stock under this program for
an aggregate price of approximately $332.3 million. In June 2010, the
Company’s board of directors authorized an increase of $150.0 million
in the amount available under the Company’s ongoing stock repurchase
program. At December 31, 2010, $153.6 million was available for repurchases
under the stock repurchase program.
11. STOCK–BASED COMPENSATION
At December 31, 2010, the Company had the following stockbased
employee compensation plans:
EQUITY INCENTIVE PLANS
During the year ended December 31, 1996, the Company’s board
of directors adopted the Nu Skin Enterprises, Inc., 1996 Stock Incentive
Plan (the “1996 Stock Incentive Plan”). In April 2006, the Company’s
Board of Directors approved the Nu Skin Enterprises, Inc. 2006 Stock
Incentive Plan (the “2006 Stock Incentive Plan”). The 2006 Stock Incentive
Plan was approved by the Company’s stockholders at the
Company’s 2006 Annual Meeting of Stockholders held in May of
2006. The 1996 Stock Incentive Plan and the 2006 Stock Incentive
Plan provide for granting of stock awards and options to purchase
common stock to executives, other employees, independent consultants
and directors of the Company and its Subsidiaries. Stock options
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