Nu Skin 2010 Annual Report - Direct Selling News

NU SKIN ENTERPRISES, INC.
Notes to Consolidated Financial Statements
sion plan. The Company recorded pension expense of $0.9 million, $0.6 million and $1.1 million for the years ended December 31, 2008, 2009
and 2010, respectively.
14. EXECUTIVE DEFERRED COMPENSATION PLAN
The Company has an executive deferred compensation plan for select management personnel. Under this plan, the Company may
make a contribution of up to 10% of a participant’s salary. In addition, each participant has the option to defer a portion of their compensation
up to a maximum of 80% of their compensation. Participant contributions are immediately vested. Company contributions vest on the earlier
of: (a) attaining 60 years of age; (b) 50% after ten years of service and 5% each year of service thereafter; and (c) death or disability. The Company
recorded compensation expense of $0.8 million, $1.1 million and $3.4 million for the years ended December 31, 2008, 2009 and 2010,
respectively, related to its contributions to the plan. The Company had accrued $10.0 million and $15 million as of December 31, 2009 and
2010, respectively, related to the Executive Deferred Compensation Plan.
15. DERIVATIVE FINANCIAL INSTRUMENTS
At December 31, 2009, the Company held forward contracts designated as foreign currency cash flow hedges with notional amounts
totaling approximately $3.0 million to hedge forecasted foreign-currency-denominated intercompany transactions and $0.1 million net unrealized
gain, net of related taxes, was recorded in accumulated other comprehensive loss. At December 31, 2010, the Company held $22.2 million
in forward contracts designated as foreign currency cash flow hedges to hedge forecasted foreign-currency-denominated intercompany
transactions.
The contracts held at December 31, 2010, have maturities through June 2011, and accordingly, all unrealized gains and losses on foreign
currency cash flow hedges included in accumulated other comprehensive loss will be recognized in current earnings over the next 5 months.
There were no pre-tax net (losses)/gains on foreign currency cash flow hedges recorded in current earnings for the years ended December 31,
2008 and 2009. There were $0.1 million of pre-tax net gains on foreign currency cash flow hedges recorded in current earnings for year ended
December 31, 2010.
16. SUPPLEMENTAL CASH FLOW INFORMATION
Cash paid for interest totaled $7.9 million, $7.0 million and $6.2 million for the years ended December 31, 2008, 2009 and 2010, respectively. Cash
paid for income taxes totaled $27.2 million, $36.8 million and $61.2 million for the years ended December 31, 2008, 2009 and 2010, respectively. There
was a non-cash item for the year ended December 31, 2010, as described in Note 3 to the consolidated financial statements pertaining to the related
party purchase of corporate office and warehouse space.
17. SEGMENT INFORMATION
The Company operates in a single operating segment by selling products to a global network of independent distributors that operates
in a seamless manner from market to market, except for its operations in Mainland China. In Mainland China, the Company utilizes an employed
sales force, contractual sales promoters and direct sellers to sell its products through fixed retail locations. Selling expenses are the Company’s
largest expense comprised of the commissions paid to its worldwide independent distributors as well as remuneration to its Mainland China
sales employees, promoters and direct sellers paid on product sales. The Company manages its business primarily by managing its global sales
force. The Company does not use profitability reports on a regional or divisional basis for making business decisions. However, the Company
does recognize revenue in five geographic regions: North Asia, Greater China, Americas, South Asia/Pacific and Europe.
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