Nu Skin Enterprises Reports Second-Quarter 2008 Results

Company Reports 52 Percent Earnings Increase

PROVO, Utah, July 31 /PRNewswire-FirstCall/ -- Nu Skin Enterprises, Inc.
(NYSE: NUS) today announced second-quarter revenue of $321.7 million, a 12
percent improvement over the prior-year period. Revenue was positively
impacted 6 percent by foreign currency fluctuations. Earnings per share for
the quarter were $0.32 compared to $0.21, a 52 percent improvement over the
same quarter of 2007. Quarterly earnings were positively impacted $0.03 from
the translation of yen-denominated debt to U.S. dollars.
"We're pleased with the strength of our business," said Truman Hunt,
president and chief executive officer. "We are seeing good global momentum due
to improved distributor alignment and strong product initiatives, which was
demonstrated by 31 percent growth in our personal care brand and continued
stability in our nutrition line. We also continue to reap benefits from our
business transformation efforts, particularly on our bottom line as evidenced
by a 170 basis point improvement in operating margin. Overall, our global
operations are generating positive results and we remain on track to deliver
our 2008 business objectives."
Regional Results
North Asia. Second-quarter revenue in North Asia was $151.0 million,
compared to $145.7 million for the same period in 2007. North Asia's results
were positively impacted approximately 7 percent by foreign currency
fluctuations. A local-currency revenue decline of 13 percent in Japan was
offset by a 23 percent revenue increase in South Korea. The number of
executive distributors in the region was down 6 percent while the number of
active distributors was essentially even with the prior-year period.
Americas. Revenue in the Americas was $57.3 million, a 26 percent increase
over the prior-year period. In the United States, revenue improved 21 percent,
while in Canada and Latin America revenue grew by 32 percent and 88 percent,
respectively. Both the executive and active distributor counts in the region
improved 13 percent over prior-year results.
Greater China. Revenue in Greater China increased 7 percent to $55.8
million for the quarter primarily due to foreign currency fluctuations. The
regional convention held in Hong Kong during the quarter generated local
currency revenue growth of 29 percent. Sales declines of 3 and 14 percent in
Taiwan and Mainland China, respectively, include the negative impact of
distributors from both markets making purchases at the regional convention in
Hong Kong. The executive distributor count in the region increased 1 percent,
while the number of active distributors was down 15 percent.
Europe. Revenue from Europe was $30.4 million, a 61 percent improvement
over the prior-year period. Results in the region were positively impacted
approximately 13 percent by foreign currency fluctuations and benefited from
strong growth in virtually all parts of the European region. Executive and
active distributor counts in the region increased 43 percent and 30 percent,
respectively, compared to the prior-year period.
South Asia/Pacific. Revenue in South Asia/Pacific was $27.2 million, a 9
percent improvement over the prior year. Regional results were positively
impacted approximately 6 percent by favorable foreign currency fluctuations,
as well as by solid results in most markets. The region's second-quarter
executive count improved 1 percent while the active distributor count
decreased 7 percent compared to the same period in 2007.
Operational Performance
The company's gross margin was 81.6 percent, a 60-basis-point decrease
over the prior-year period. The decline is due in part to a shift in global
revenue mix from Japan to other markets with slightly lower gross margins, and
by a dramatic increase in sales of the Galvanic Spa System II, which has a
slightly lower gross margin than the company average.
Selling expenses as a percent of revenue were 42.6 percent in the second
quarter, a 30-basis-point improvement. General and administrative expenses
were $96.5 million, or 30.0 percent of revenue, compared to $91.8 million, or
32.0 percent of revenue in the prior-year period. Second-quarter general and
administrative expenses were negatively impacted approximately $4.6 million by
foreign currency fluctuations and $5.0 million in distributor convention
expenses. Prior-year results did not include any significant convention
expenses but did include approximately $2.8 million of restructuring costs
associated with the closing of Brazil.
The company's income tax rate for the quarter was 37.7 percent. In
addition, the company's cash and short-term investment position at the end of
the quarter was $94.4 million while dividend payments during the quarter were
$7.0 million. The company repurchased $2.0 million of its outstanding shares
during the quarter.
Outlook
"Our second-quarter performance keeps us on course to achieve record
results in 2008," said Hunt. "Going forward, we will continue to fuel the
strong growth that we are seeing in the majority of our markets and capitalize
on the business transformation efforts that are yielding bottom-line
improvement. We also anticipate that the increasing geographic diversity of
our global revenue mix will continue to strengthen the company as we see
impressive growth continuing in South Korea, Europe, the United States and
Latin America.
"While we are seeing great strength in the majority of our markets, we
remain focused on improving our business in Japan. As we announced in a
separate release, we are deploying additional management resources to Japan
with the formation of a North Asia regional management team, a management
structure consistent with our other regions. This group is charged with
executing proven growth initiatives in Japan that are consistent with what is
working in our most successful markets.
"Looking ahead, we are optimistic about the potential of our business and
believe we are in an ideal position to capitalize on our competitive
advantages. From a product perspective, we are looking stronger than ever.
With robust personal care and nutrition portfolios, we are uniquely positioned
to deliver anti-aging technologies that enable our distributors to demonstrate
the difference of our products. Moreover, as the world's economic situation
remains relatively unstable, we are seeing more and more people looking at our
business opportunity as a source of supplemental or replacement income,"
concluded Hunt.
"Based on our recent results and continuing to model a yen rate of 108 to
the dollar, we are increasing our revenue guidance to $1.23 to $1.24 billion
with earnings per share of $1.17 to $1.22," said Ritch Wood, chief financial
officer. "We anticipate third-quarter revenue of $305 to $310 million, and
earnings per share in the $0.30 to $0.32 range," concluded Wood.
The company's management will host a webcast with the investment community
on July 31, 2008 at 11 a.m. (EDT). Those wishing to access the webcast, as
well as the financial information presented during the call, can visit the
Investor Relations page on Nu Skin Enterprises' website,
http://www.nuskinenterprises.com. An archive of the webcast will be available
at this same URL through Aug. 15, 2008.
The Company
Nu Skin Enterprises, Inc. is a global direct selling company operating in
47 markets throughout Asia, the Americas and Europe. The company markets
premium-quality personal care products under the Nu Skin(R) brand,
science-based nutritional supplements under the Pharmanex(R) brand, and
technology-based products and services under the Big Planet(R) brand. Nu Skin
Enterprises is traded on the New York Stock Exchange under the symbol "NUS."
Nu Skin Enterprises' press releases are available online at
http://www.nuskinenterprises.com.
Please note: This press release, particularly the "Outlook" section,
contains forward-looking statements within the meaning of Section 21E of the
Securities Exchange Act of 1934 that represent the company's current
expectations and beliefs, including, among other things: (i) management's
belief that it is on track to reach its 2008 objectives and targets; (ii)
management's anticipation that strong growth will continue, particularly in
South Korea, Europe, the United States and Latin America, and that business
transformation efforts will continue to yield bottom-line improvement; (iii)
management's confidence and optimism with respect to its business and product
portfolio; and (iv) management's revenue and earnings projections for 2008 and
the third quarter of 2008 set forth in the "Outlook" section. The
forward-looking statements and related assumptions involve risks and
uncertainties that could cause actual results and outcomes to differ
materially from any forward-looking statements or views expressed herein.
These risks and uncertainties include, but are not limited to: (a) risks that
could adversely impact the company's operations or financial results in its
markets, including its largest market, Japan, such as negative market
conditions, foreign currency exchange rate fluctuations, material decreases in
executive-level and active distributors, or the company's failure to execute
effective initiatives in these markets; (b) uncertainty regarding the impact
on our business of the increased regulatory scrutiny of the direct selling
industry in Japan and our efforts to increase distributor compliance efforts
in this market; (c) an increase in complaints to consumer protection agencies
in Japan regarding the activities of some distributors and the associated
risks to our business if such increase results in further regulatory scrutiny;
(d) regulatory risks associated with the company's tools and products, which
could inhibit our ability to market a tool or product in a market if it is
determined to be a medical device in any market or if our distributors make
unauthorized claims that would cause such products to be classified as drugs;
(e) continued regulatory scrutiny and investigations in Mainland China, which
have from time to time in the past, and could in the future, negatively impact
the company's business, including the interruption of sales activities in
stores, loss of licenses, and the imposition of fines; (f) risks that the
direct selling regulations in China are interpreted or enforced by
governmental authorities in a manner that negatively impacts the company's
current or planned business model there, including continued delays and
uncertainty in the provincial direct selling licensing process, and risk that
the implementation of a direct selling model will not result in the
anticipated growth of the company's business in China given the restrictive
nature of the direct selling laws; (g) any failure of current or planned
initiatives or products to generate interest among distributors and customers
and generate sponsoring and selling activities on a sustained basis; (h) any
inability of the company to obtain necessary product registrations for its
nutritional and personal care products in a timely manner, increased
regulatory scrutiny of nutritional products by regulators or changes in
regulatory requirements that impact our products; (i) any failure of the
implementation of recent business transformation initiatives to reduce
overhead and drive growth; (j) adverse publicity related to the company's
business, products, industry or any legal actions or complaints by
distributors or others similar to claims made against some of the company's
competitors; and (k) continued competitive pressures in the company's markets.
The company's financial performance and the forward-looking statements
contained herein are further qualified by a detailed discussion of associated
risks set forth in the documents filed by the company with the Securities and
Exchange Commission, including the company's Annual Report on Form 10-K filed
on February 29, 2008 and Quarterly Report on Form 10-Q filed on May 12, 2008.
The forward-looking statements set forth the company's beliefs as of the date
of this release, and the company assumes no duty to update the forward-looking
statements contained in this release to reflect any change except as required
by law.

NU SKIN ENTERPRISES, INC.
Consolidated Statements of Income (Unaudited)
For the Second Quarters Ended June 30, 2008 and 2007
(in thousands, except per share amounts)

2008 2007
Revenue:
North Asia $151,025 $145,693
Americas 57,253 45,469
Greater China 55,778 52,099
Europe 30,445 18,943
South Asia/Pacific 27,212 25,037
Total revenue 321,713 287,241

Cost of sales 59,319 51,090

Gross profit 262,394 236,151

Operating expenses:
Selling expenses 136,983 123,317
General and administrative expenses 96,480 91,810
Total operating expenses 233,463 215,127

Operating income 28,931 21,024

Other income (expense), net 4,110 897
Income before provision for income taxes 33,041 21,921
Provision for income taxes 12,440 8,129

Net income $20,601 $13,792

Net income per share:
Basic $0.32 $0.21
Diluted $0.32 $0.21

Weighted average common shares outstanding:
Basic 63,561 64,523
Diluted 64,269 65,343

NU SKIN ENTERPRISES, INC.
Consolidated Statements of Income (Unaudited)
For the Six Month Periods Ended June 30, 2008 and 2007
(in thousands, except per share amounts)

2008 2007
Revenue:
North Asia $300,459 $285,952
Americas 107,669 87,788
Greater China 105,682 101,052
Europe 53,278 37,466
South Asia/Pacific 52,714 48,623
Total revenue 619,802 560,881

Cost of sales 113,516 101,769

Gross profit 506,286 459,112

Operating expenses:
Selling expenses 264,896 239,755
General and administrative expenses 185,035 180,782
Total operating expenses 449,931 420,537

Operating income 56,355 38,575

Other income (expense), net (1,719) 103
Income before provision for income taxes 54,636 38,678
Provision for income taxes 20,546 14,386

Net income $34,090 $24,292

Net income per share:
Basic $0.54 $0.37
Diluted $0.53 $0.37

Weighted average common shares outstanding:
Basic 63,509 65,228
Diluted 64,242 66,098

NU SKIN ENTERPRISES, INC.
Consolidated Balance Sheets (Unaudited)
(in thousands)

June 30, 2008 December 31, 2007
ASSETS
Current assets:
Cash and cash equivalents $92,558 $87,327
Current investments 1,820 5,225
Accounts receivable 25,802 23,424
Inventories, net 107,675 100,792
Prepaid expenses and other 45,174 49,576
273,029 266,344

Property and equipment, net 84,743 88,529
Goodwill 112,446 112,446
Other intangible assets, net 84,392 86,163
Other assets 135,427 129,761
Total assets $690,037 $683,243

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $27,449 $24,108
Accrued expenses 106,739 115,620
Current portion of long-term debt 27,257 31,441
161,445 171,169

Long-term debt 158,904 169,229
Other liabilities 71,564 67,836
Total liabilities 391,913 408,234

Stockholders' equity:
Class A common stock 91 91
Additional paid-in capital 214,072 209,821
Treasury stock, at cost (414,220) (413,976)
Retained earnings 566,955 546,832
Accumulated other comprehensive loss (68,774) (67,759)
298,124 275,009
Total liabilities and
stockholders' equity $690,037 $683,243

NU SKIN ENTERPRISES, INC.
Distributor/Preferred Customer Growth by Market

% Increase
As of June 30, 2008 As of June 30, 2007 (Decrease)
Active* Executive Active* Executive Active* Executive

North Asia 329,000 14,292 329,000 15,188 - (5.9%)
Americas 174,000 4,921 154,000 4,346 13.0% 13.2%
Greater China 130,000 6,443 153,000 6,376 (15.0%) 1.1%
Europe 71,000 2,648 55,000 1,852 29.1% 43.0%
South Asia/
Pacific 64,000 2,168 69,000 2,142 (7.2%) 1.2%

Total 768,000 30,472 760,000 29,904 1.1% 1.9%

* Active distributors include preferred customers and distributors
purchasing products directly from the company during the quarter.

SOURCE Nu Skin Enterprises, Inc.

Investors, Scott Pond, +1-801-345-2657, spond@nuskin.com, or Media, Kara
Schneck, +1-801-345-2116, kschneck@nuskin.com, both of Nu Skin Enterprises,
Inc.