Nu Skin 2010 Annual Report - Direct Selling News

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NU SKIN ENTERPRISES, INC. Notes to Consolidated Financial Statements 21. QUARTERLY RESULTS The following table sets forth selected unaudited quarterly data for the periods shown (U.S. dollars in millions, except per share amounts): 1st Quarter 2nd Quarter 2009 2010 3rd Quarter 4th Quarter 1st Quarter 2nd Quarter 3rd Quarter 4th Quarter Revenue . . . . . . . . . . . . $ 296.2 $ 322.6 $ 334.2 $ 378.1 $ 364.1 $ 388.4 $ 383.6 $ 401.2 Gross profit. . . . . . . . . 242.4 261.9 272.1 311.0 299.3 320.4 314.8 330.3 Operating income . . 20.2 34.4 40.9 52.2 46.1 59.2 52.9 58.9 Net income . . . . . . . . 11.8 22.1 25.6 30.3 31.0 32.4 35.3 37.3 Net income per share: Basic . . . . . . . . . . . . 0.19 0.35 0.41 0.48 0.50 0.51 0.57 0.60 Diluted . . . . . . . . . . 0.19 0.35 0.40 0.47 0.48 0.50 0.55 0.58 22. OTHER INCOME (EXPENSE), NET Other income (expense), net was $9.4 million of expense in 2010 compared to $6.6 million of expense in 2009. The Company recorded foreign currency transaction losses with respect to its intercompany receivables and payables with certain of its international affiliates, including markets that are newly opened or have remained in a loss position since inception. Generally, foreign currency transaction losses with these affiliates would be offset by gains related to the foreign currency transactions of the Company’s yen-based bank debt. Other income (expense), net also includes approximately $7.8 million, $6.9 million and $5.8 million in interest expense during 2008, 2009 and 2010, respectively. It is impossible to predict foreign currency fluctuations. The Company cannot estimate the degree to which its operations will be impacted in the future, but it remains subject to these currency risks. However, the majority of these transaction losses are non-cash, non-operating losses. 76
Report of Independent Registered Public Accounting Firm To the Board of Directors and Shareholders of Nu Skin Enterprises, Inc.: In our opinion, the accompanying consolidated balance sheets and the related consolidated statements of income, shareholder’s equity and comprehensive income, and cash flows present fairly, in all material respects, the financial position of Nu Skin Enterprises, Inc and its subsidiaries at December 31, 2010 and December 31, 2009, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2010 in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2010, based on criteria established in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). The Company’s management is responsible for these financial statements, for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control over Financial Reporting, appearing in Item 9A. Our responsibility is to express opinions on these financial statements and on the Company’s internal control over financial reporting based on our integrated audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement and whether effective internal control over financial reporting was maintained in all material respects. Our audits of the financial statements included examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions. A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. /s/ PricewaterhouseCoopers LLP Salt Lake City, Utah February 23, 2011 77
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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
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chases, management services and con
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These declines could continue or in
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ous markets, including Japan, South
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creased scrutiny by the government.
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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
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Page 77 and 78: NU SKIN ENTERPRISES, INC. Notes to
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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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