Nu Skin 2010 Annual Report - Direct Selling News

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NU SKIN ENTERPRISES, INC. Notes to Consolidated Financial Statements The fair value of stock option awards was estimated using the Black-Scholes option-pricing model with the following assumptions and weighted-average fair values as follows: Year Ended December 31, Stock Options: 2008 2009 2010 Weighted average grant date fair value of grants . . . . . . . . . . . . . . . . . $ 4.69 $ 2.84 $ 8.61 Risk-free interest rate (1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.0% 2.3% 1.8% Dividend yield (2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.6% 3.2% 2.6% Expected volatility (3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36.1% 40.7% 37.8% Expected life in months (4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58 months 69 months 69 months (1) The risk-free interest rate is based upon the rate on a zero coupon U.S. Treasury bill, for periods within the contractual life of the option, in effect at the time of the grant. (2) The dividend yield is based on the average of historical stock prices and actual dividends paid. (3) Expected volatility is based on the historical volatility of our stock price, over a period similar to the expected life of the option. (4) The expected term of the option is based on the historical employee exercise behavior, the vesting terms of the respective option, and a contractual life of either seven or ten years. 66
NU SKIN ENTERPRISES, INC. Notes to Consolidated Financial Statements Options under the plans as of December 31, 2010 and changes during the year ended December 31, 2010 were as follows: Shares (in thousands) Weightedaverage Exercise Price Weightedaverage Remaining Contractual Term (in years) Aggregate Intrinsic Value (in thousands) Options activity — service based Outstanding at December 31, 2009 . . . . . . . . . . . . . . . . . . . . . 5,792.0 $ 14.82 Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 209.5 26.14 Exercised . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,298.8) 13.24 Forfeited/cancelled/expired . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (218.8) 14.53 Outstanding at December 31, 2010 . . . . . . . . . . . . . . . . . . . . . 4,483.9 15.82 4.31 $ 64,734 Exercisable at December 31, 2010 . . . . . . . . . . . . . . . . . . . . . . . 2,747.6 17.63 3.76 34,707 Options activity — performance based Outstanding at December 31, 2009 . . . . . . . . . . . . . . . . . . . . . 1,742.5 $ 17.03 Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,121.5 30.31 Exercised . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (242.5) 16.65 Forfeited/cancelled/expired . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (35.0) 18.03 Outstanding at December 31, 2010 . . . . . . . . . . . . . . . . . . . . . 3,586.5 24.90 5.71 $ 19,563 Exercisable at December 31, 2010 . . . . . . . . . . . . . . . . . . . . . . . 665.0 17.07 4.07 8,773 Options activity — all options Outstanding at December 31, 2009 . . . . . . . . . . . . . . . . . . . . . 7,534.5 $ 15.33 Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,331.0 29.93 Exercised . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,541.3) 13.77 Forfeited/cancelled/expired . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (253.8) 15.02 Outstanding at December 31, 2010 . . . . . . . . . . . . . . . . . . . . . 8,070.4 19.86 4.93 $ 84,298 Exercisable at December 31, 2010 . . . . . . . . . . . . . . . . . . . . . . . 3,412.6 17.52 3.83 43,480 The aggregate intrinsic value in the table above represents the total pretax intrinsic value (the difference between the Company’s closing stock price on the last trading day of the respective years and the exercise price, multiplied by the number of in-the-money options) that would have been received by the option holders had all option holders exercised their options on December 31, 2010. This amount varies based on the fair market value of the Company’s stock. The total fair value of options vested and expensed was $4.8 million, net of tax, for the year ended December 31, 2010. 67
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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
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PART I ITEM 1. BUSINESS OVERVIEW We
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The following table summarizes our
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Other. We also offer a limited numb
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introduction of additional ageLOC a
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ness model utilizing sales employee
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in a manner to attract the general
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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 and 74: NU SKIN ENTERPRISES, INC. Consolida
Page 75 and 76: NU SKIN ENTERPRISES, INC. Consolida
Page 77 and 78: NU SKIN ENTERPRISES, INC. Notes to
Page 87: 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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Nu Skin 2010 Annual Report - Direct Selling News

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