UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
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ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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For the fiscal year ended December 31, 2023
or
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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For the transition period from ________ to ________
Commission file number: 001-12421
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(Exact name of registrant as specified in its charter)
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(State or other jurisdiction of incorporation or organization)
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(IRS Employer Identification No.)
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(Address of principal executive offices, including zip code)
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Registrant’s telephone number, including area code: (801 ) 345-1000
Securities registered pursuant to Section 12(b) of the Act:
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Title of each class
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Trading Symbol(s)
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Name of each exchange on which registered
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Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☑ No ☐
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☑
Indicate by check mark whether the Registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☑ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T
(§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☑ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging
growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
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Accelerated filer ☐
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Non-accelerated filer ☐
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Smaller reporting company
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Emerging growth company
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If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with
any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over
financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☑
If securities are registered pursuant to Section 12(b) of the Act, indicate by
check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ☐
Indicate by check mark whether any of those error corrections are restatements
that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐
Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☑
Based on the closing sales price of the Class A common stock on the New York Stock Exchange on June 30, 2023, the last business day of the Registrant’s second fiscal
quarter, the aggregate market value of the voting stock held by non-affiliates of the Registrant was approximately $1.64 billion. All
executive officers and directors of the Registrant, and all stockholders holding more than 10% of the Registrant’s outstanding voting stock (other than institutional investors, such as registered investment companies, eligible to file beneficial
ownership reports on Schedule 13G), have been deemed, solely for the purpose of the foregoing calculation, to be “affiliates” of the Registrant.
As of January 31, 2024, 49,420,882 shares of the
Registrant’s Class A common stock, $.001 par value per share, and no shares of the Registrant’s Class B common stock, $.001 par value per share, were outstanding.
Documents incorporated by reference. Portions of the Registrant’s Definitive
Proxy Statement for the Registrant’s 2024 Annual Meeting of Stockholders are incorporated by reference in Part III of this report. The Definitive Proxy Statement or an amendment to this Form 10-K will be filed with the Securities and Exchange
Commission within 120 days after the Registrant’s fiscal year end.
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Page
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1
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ITEM 1.
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1
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1
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3
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8
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8
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15
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15
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16
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17
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ITEM 1A.
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18
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ITEM 1B.
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43
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ITEM 2.
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43
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ITEM 3.
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44
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ITEM 4.
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44
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44
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ITEM 5.
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44
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ITEM 6.
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45
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ITEM 7.
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46
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ITEM 7A.
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59
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ITEM 8.
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61
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ITEM 9.
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98
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ITEM 9A.
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98
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ITEM 9B.
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98
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ITEM 9C.
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98
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99
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ITEM 10.
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DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
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99
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ITEM 11.
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EXECUTIVE COMPENSATION
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99
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ITEM 12.
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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
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99
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ITEM 13.
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CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
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99
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ITEM 14.
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PRINCIPAL ACCOUNTANT FEES AND SERVICES
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99
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99
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ITEM 15.
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99
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ITEM 16.
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100
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THIS ANNUAL REPORT ON FORM 10-K, IN PARTICULAR “ITEM 1. BUSINESS” AND “ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS,” CONTAINS FORWARD-LOOKING
STATEMENTS WITHIN THE MEANING OF SECTION 27A OF THE SECURITIES ACT OF 1933, AS AMENDED, AND SECTION 21E OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED, THAT REPRESENT OUR CURRENT EXPECTATIONS AND BELIEFS. ALL STATEMENTS OTHER THAN STATEMENTS OF
HISTORICAL FACT ARE “FORWARD-LOOKING STATEMENTS” FOR PURPOSES OF FEDERAL AND STATE SECURITIES LAWS AND INCLUDE, BUT ARE NOT LIMITED TO, STATEMENTS OF MANAGEMENT’S EXPECTATIONS REGARDING OUR PERFORMANCE, INITIATIVES, STRATEGIES, PRODUCTS, INGREDIENTS,
PRODUCT INTRODUCTIONS AND OFFERINGS, PRODUCT SOURCING, GROWTH, ACQUISITIONS AND ACQUIRED COMPANIES’ PERFORMANCE, GROWTH OF OUR RHYZ BUSINESSES, GLOBAL ECONOMIC CONDITIONS, OPPORTUNITIES AND RISKS; STATEMENTS OF PROJECTIONS REGARDING FUTURE SALES,
EXPENSES, OPERATING RESULTS, TAXES AND DUTIES, CAPITAL EXPENDITURES, SOURCES AND USES OF CASH, FOREIGN-CURRENCY FLUCTUATIONS OR DEVALUATIONS, REPATRIATION OF UNDISTRIBUTED EARNINGS, AND OTHER FINANCIAL ITEMS; STATEMENTS OF MANAGEMENT’S EXPECTATIONS,
PLANS AND BELIEFS REGARDING OUR MARKETS, SALES FORCE, SALES COMPENSATION PLAN AND CUSTOMER BASE; STATEMENTS REGARDING THE PAYMENT OF FUTURE DIVIDENDS AND STOCK REPURCHASES; STATEMENTS REGARDING THE OUTCOME OF LITIGATION, AUDITS, INVESTIGATIONS AND
OTHER LEGAL MATTERS, INCLUDING GOVERNMENT POLICIES AND REGULATIONS IN MAINLAND CHINA; ACCOUNTING ESTIMATES AND ASSUMPTIONS; STATEMENTS OF BELIEF; AND STATEMENTS OF ASSUMPTIONS UNDERLYING ANY OF THE FOREGOING. IN SOME CASES, YOU CAN IDENTIFY THESE
STATEMENTS BY FORWARD-LOOKING WORDS SUCH AS “BELIEVE,” “EXPECT,” “PROJECT,” “ANTICIPATE,” “ESTIMATE,” “COMMIT,” “INTEND,” “PLAN,” “TARGETS,” “LIKELY,” “WILL,” “WOULD,” “COULD,” “MAY,” “MIGHT,” THE NEGATIVE OF THESE WORDS AND OTHER SIMILAR WORDS. WE
UNDERTAKE NO OBLIGATION TO PUBLICLY UPDATE OR REVISE ANY FORWARD-LOOKING STATEMENT, WHETHER AS A RESULT OF NEW INFORMATION, FUTURE EVENTS OR OTHERWISE, EXCEPT AS REQUIRED BY LAW. WE CAUTION AND ADVISE READERS THAT THESE STATEMENTS ARE BASED ON
ASSUMPTIONS THAT MAY NOT BE REALIZED AND INVOLVE RISKS AND UNCERTAINTIES THAT COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM THE EXPECTATIONS AND BELIEFS CONTAINED HEREIN. FOR A SUMMARY OF THESE RISKS, SEE ITEM 1A. RISK FACTORS.
In this Annual Report on Form 10-K, references to “dollars” and “$” are to U.S. dollars.
Nu Skin, Pharmanex and ageLOC are our trademarks. The italicized product names used in this Annual Report on Form 10-K are product names and also, in certain cases, our trademarks.
Nu Skin Enterprises, Inc. develops and distributes a comprehensive line of premium-quality beauty and wellness solutions in nearly 50 markets worldwide. In 2023, our revenue of $2.0
billion was primarily generated by our three primary brands: our beauty brand, Nu Skin; our wellness brand, Pharmanex; and our anti-aging brand, ageLOC. We operate in the direct selling channel, primarily
utilizing person-to-person marketing to promote and sell our products, including through the use of social and digital platforms.
In addition to our core Nu Skin business, we also explore new areas of synergistic and adjacent growth through our business arm known as Rhyz Inc. Our Rhyz businesses primarily consist of consumer,
technology and manufacturing companies. In 2023, the Rhyz companies generated $216.6 million, or 11%, of our 2023 reported revenue (excluding sales to our core Nu Skin business). Rhyz is a key component of our business, and we anticipate its
continued growth in the coming years both on an absolute basis and as a percentage of our consolidated revenue. These companies enable us to diversify our revenue mix, serve more customers where they shop, and create synergies for our owned and
partner brands.
In 2023, we generated approximately 26% of our revenue from the United States (consisting of our Nu Skin United States and Rhyz businesses) and the remainder from our international markets. Given the
size of our international operations, our results, as reported in U.S. dollars, are often impacted by foreign-currency fluctuations; in 2023, our revenue was negatively impacted 3% from foreign-currency fluctuations compared to 2022. Our results
also can be impacted by global economic, political, demographic and business trends and conditions.
Our operations are subject to various laws and regulations globally, particularly with respect to our product categories and our distribution channel. See Item 1A. Risk Factors for a more detailed
description of the risks associated with our business.
We offer a branded, differentiated product portfolio. We believe our innovative approach to product development and distribution provides us with a competitive advantage in beauty and wellness products
and direct selling. We believe that our acquired and licensed technologies, manufacturing and innovation facilities, research collaborations and in-house research expertise enable us to introduce innovative, proprietary products. We seek to offer
products that are demonstrable and well suited for social sharing. Sustainability is also an important part of our product strategy; we take sustainability into account as we formulate our products, and we have an ongoing initiative to transition to
packaging that is recycled, recyclable, reusable, reduced or renewable.
During the past several years, we have generated success in our business with innovative beauty devices. Devices are an important part of our strategy. In the second half of 2022, we began launching our
first connected beauty device, ageLOC LumiSpa iO; market launches continued into 2023. In the second half of 2023, we began launching ageLOC WellSpa iO (not sold in
the United States), a connected device focused on holistic wellness and beauty, in most of our markets. We also began launching a similar, FDA-cleared device, Nu Skin RenuSpa iO, in the United States. When
connected to our mobile application, these connected devices gather data to provide insights into consumer behavior, with the goal of enabling us to provide more personalized experiences for our consumers. Please refer to “Distribution Channel” below
for additional information about our connected devices and our business strategy that they fit into.
Also during 2023, we launched our ageLOC TRMe personalized weight wellness line of products in several markets. We plan to preview and/or launch ageLOC TRMe in additional markets in 2024.
Product Categories
We have two primary product categories: beauty products and wellness products. We develop and distribute innovative, premium-quality products in these two categories under our Nu Skin and Pharmanex
brands, respectively. We also develop and distribute products under our ageLOC brand, which features innovative, premium-quality anti-aging products in both the beauty and wellness categories and in many cases is co-branded with our Nu Skin and
Pharmanex products. Most of our innovative devices are ageLOC beauty products; however, ageLOC WellSpa iO spans both the beauty and wellness categories.
Presented below are the U.S. dollar amounts and associated revenue percentages from the sale of beauty and wellness products, as well as our Rhyz companies, for the last three years. This table should
be read in conjunction with the information presented in Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations, which discusses the factors impacting revenue trends and the costs associated with generating
the aggregate revenue presented.
Revenue by Product Category
(U.S. dollars in millions)
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Year Ended December 31,
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Product Category
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2023
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2022
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2021
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Beauty(1)
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$
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858.6
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43.6
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%
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$
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1,069.7
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48.1
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%
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$
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1,442.7
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53.5
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%
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Wellness(1)
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886.1
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45.0
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%
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992.3
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44.6
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%
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1,062.5
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39.4
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%
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Other(2)
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224.4
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11.4
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%
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163.7
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7.3
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%
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190.5
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7.1
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%
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$
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1,969.1
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100.0
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%
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$
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2,225.7
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100.0
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%
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$
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2,695.7
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100.0
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%
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Includes sales of beauty and wellness products in our core Nu Skin business. The beauty category includes $342 million, $440 million and $658 million in sales of devices and related consumables for the years
ended December 31, 2023, 2022 and 2021, respectively. For purposes of this table, sales of ageLOC WellSpa iO are included in the beauty category, together with our other devices, though this product
spans both the beauty and wellness categories.
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Other includes the external revenue from our Rhyz companies along with a limited number of other products and services, including household products and technology services.
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Beauty Products. Our strategy for our beauty products category is to leverage our distribution channel to strengthen Nu Skin’s position as an
innovative leader in the masstige and premium beauty markets. Our products in this category include our innovative skin care devices, cosmetics and other personal care products. We are committed to continuously improving and evolving our product
formulations to develop and incorporate innovative and proven ingredients. We formulate many of the products in our beauty category with ingredients that are scientifically proven to provide visible results. In 2023, our top-selling product lines by
revenue in this category were our ageLOC LumiSpa devices (consisting of both ageLOC LumiSpa and ageLOC LumiSpa iO) and our
Nutricentials skin care products. Our ageLOC beauty products accounted for 46% of our beauty product category revenue and 20% of our total revenue in 2023.
Wellness Products. Our strategy for our wellness category is to continue to introduce innovative, substantiated nutritional supplements
based on research and development and quality manufacturing. Direct selling has proven to be an effective method of marketing our high-quality wellness products because our sales force can personally educate consumers on the quality and benefits of
our products, differentiating them from our competitors’ offerings. In 2023, our top-selling product lines by revenue in this category were our ageLOC TR90 weight management system, our Beauty Focus products (including Beauty Focus Collagen+) and our LifePak nutritional supplements. Our ageLOC wellness products
accounted for 46% of our wellness product category revenue and 21% of our total revenue in 2023.
Product Development
We are committed to developing and marketing innovative products. We have several products in development, including next-generation skin care products and nutritional supplements. In our
research and product development, we leverage the three disciplines of science, technology and sourcing to create innovative products that address consumer needs.
Our research and product development activities include:
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Global consumer research to identify needs and insights and refine product concepts;
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Internal research, product development and quality testing;
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Joint research projects, collaborations and clinical studies;
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Identification and assessment of technologies for potential licensing arrangements; and
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Acquisition of technologies.
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We maintain research and product development facilities in the United States and Mainland China. We also contract with third parties for clinical studies and collaborate on basic research projects with
researchers from universities and other research institutions in the United States and Asia, whose staffs include scientists with basic research expertise in, among others, natural product chemistry, biochemistry, dermatology, nutrition, pharmacology
and clinical studies.
We also work to identify and assess innovative technologies developed by third parties for potential licensing, supply or acquisition arrangements. Because of the nature of our distribution channel,
which allows us to provide a high level of product information on a person-to-person basis, we often have third parties who are interested in licensing innovative technologies to us to incorporate into our products and commercialize through our
distribution channel. Licensing arrangements allow us to leverage the research activities of third parties that have provided demonstrated technologies, clinical support and/or proprietary innovation, without all of the upfront costs and uncertainty
associated with internal development. We have also invested in acquisitions to supplement our research capabilities and to acquire technologies.
Intellectual Property
Our trademarks are registered in the United States and in markets where we operate, and we consider trademark protection to be very important to our business. Our major trademarks include Nu Skin®, our
fountain logos, Pharmanex®, ageLOC®, our ageLOC logos, LifePak®, Galvanic Spa®, TR90®, Epoch®, ageLOC Me®, LumiSpa®, Nutricentials®, WellSpa iO (registered outside of the United States) and ageLOC Boost (registered outside of the United States). In
addition, a number of our products, including our facial spas, ageLOC WellSpa iO, Nu Skin RenuSpa iO, ageLOC Body Spa, LumiSpa, ageLOC Boost, TR90 and Pharmanex BioPhotonic Scanner, are based on proprietary technologies and designs, some of which
utilize patented technologies and/or technologies licensed from third parties. We also rely on patent and trade secret protection to protect our proprietary technology and other proprietary information for some of our ageLOC products and other
products.
Sourcing and Production
For markets other than Mainland China, in 2023, we sourced most of our beauty and wellness products from trusted third-party suppliers and manufacturers, and approximately 23% from our manufacturing
subsidiaries. Our manufacturing entities also provide a cost of goods sold benefit and help us to maintain a more consistent supply source. In Mainland China, we operate manufacturing facilities where we produce the majority of our beauty and
wellness products sold in Mainland China. We also produce some products at these facilities that are exported to other markets.
In 2023, two of our manufacturing subsidiaries and one third-party supplier accounted for more than 10% of our product purchases. We procure our ageLOC Galvanic Facial
Spa, ageLOC Body Spa, and Nu Skin Facial Spa devices and some other products and ingredients from single vendors that may own or control the product formulations, ingredients, or other intellectual
property rights associated with the products or ingredients. While we generally maintain good relationships with our suppliers, in the event we become unable to source any products or ingredients from our current suppliers, we believe that we would
be able to locate alternative vendors, use substitute ingredients, or develop and manufacture alternative products and source them from other suppliers, as applicable. Please refer to Item 1A. Risk Factors for a discussion of risks and uncertainties
associated with our supplier relationships and with the sourcing of raw materials and ingredients.
Our manufacturing subsidiaries are owned by our Rhyz business arm. We plan to continue making strategic acquisitions going forward, as we believe these acquired companies allow us to diversify and
vertically integrate our business. We also leverage their expertise to enhance our innovation, sustainability, speed to market and supply chain capabilities. In addition to the products and services provided to our core Nu Skin business, our Rhyz
companies continue to operate outside of our core Nu Skin business, generating $216.6 million in revenue from sales to external customers in 2023.
Our Nu Skin business operates in the direct selling channel, primarily utilizing person-to-person marketing to promote and sell our products. We believe that direct selling, which has
traditionally relied on face-to-face, word-of-mouth marketing, is currently being impacted by the convergence of social commerce, influencer and affiliate marketing, and the growing gig economy. These macroeconomic shifts have also disrupted
traditional advertising and retail business practices, as well as e-commerce generally, in favor of socially enabled and direct-to-consumer models. The COVID-19 pandemic further accelerated disruption
across many industries by causing migration to remote work, gig engagement and online shopping.
We endeavor to transform and adapt our business to these trends by helping our sales force to become more socially enabled and to grow their businesses online. In addition, we are developing more robust approaches to
help our salesforce attract and develop affiliate marketers. We are currently working through a significant digital transformation in our business to achieve widespread adoption of social commerce in all of our markets. This transformation involves
the development of new and enhanced digital tools for our Sales Leaders and consumers, including new digital apps and an improved website design and functionality. Our products also have served an important role in our social commerce strategy as we
have developed products that are shareable and demonstrable on social media platforms. Products continue to play an important role as we transform to a more digital and socially enabled business; in particular, we believe that connected devices will
provide data on consumer behaviors and needs that will engender a more personalized experience for our consumers and improved brand loyalty.
Our digital transformation will require significant expenditures over the next several years. Our digital transformation, affiliate marketing and social sharing also present certain risks and challenges to our
business, and some social media platforms impose restrictions or prohibitions on content related to multi-level marketing. For further information, see Item 1A. Risk Factors.
We believe our direct selling distribution channel is an effective vehicle to distribute our products because:
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our sales force has rapid reach to potential customers through their social networks and the social networks of those to whom they are connected;
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our sales force can personally educate and share company content with consumers about our products, which we believe is more effective for differentiating our products than using traditional mass-media
advertising;
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our distribution channel allows for personalized product demonstrations and trial by potential consumers;
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our distribution channel allows our sales force to provide personal testimonials of product efficacy;
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as compared to other distribution methods, our sales force has the opportunity to provide consumers higher levels of personalized service based on consumers’ needs, including through providing
personalized purchasing offers, discounts and regimens;
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as compared to other distribution methods, our sales force knows their customers and can foster loyalty through data-driven customer-relationship management and our subscription program;
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prospecting for customers via social networks (both offline and online) allows affiliates and the company to attract a potentially wider audience of customers who would not typically seek out similar products
in a standard retail or e-commerce marketplace; and
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flexible and targeted compensation structures allow affiliates and the company to quickly enhance focus on specific products based on geographic, demographic, and seasonal needs and opportunities, as well as
specific segments of customers, affiliate marketers and business builders.
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While our person-to-person marketing philosophy remains consistent globally, various aspects of our business may differ from market to market, including product mix and pricing, customer type mix, the
manner and tools used to engage potential customers, social media and third-party platforms, compensation structure, the manner and tools used to engage potential affiliates (including programs and incentives), access to distribution outlets or
product stores, the manner of getting products to consumers, product claims, branding and product formulations. In addition, in Mainland China we have implemented a business model that, unlike the business model we use in our other markets, utilizes
retail stores, sales employees, independent direct sellers and independent marketers to market and sell our products.
Given that members of our sales force are independent contractors in most markets, we do not control or direct their business decisions or promotional efforts. We do, however, require that our sales
force abide by policies and procedures that require them to act in an ethical and consumer-protective manner and in compliance with applicable laws and regulations. As a member of direct selling associations globally, we promote and abide by the
industry’s codes of ethics and consumer-protective standards to support and protect those who sell and purchase our products through the direct selling channel.
In all of our markets besides Mainland China, we refer to members of our independent sales force as “Brand Affiliates” because their primary role is to promote our brand and sell products through their
personal and social networks.
Consumer Group and Sales Network
Our Nu Skin business’s distribution channel is composed of two primary groups: our consumer group—individuals who buy our products primarily for personal or family consumption and share products with
friends and family; and our sales network—individuals who personally buy, use and resell products, and who also attract new consumers, and recruit, train and develop new sellers. We strive to develop both our consumer group and our sales network. Our
strategy for growing our consumer group is to offer high-quality, personalized, innovative products that provide demonstrable benefits. Our strategy for growing our sales network is to provide a business opportunity for those persons who demonstrate
the desire and ability to develop both a consumer group and a team of sellers, including through sales compensation, incentives and recognition.
To monitor the growth trends in our consumer group, we track the number of persons who purchased directly from the company during the previous three months (“Customers”). Our Customer numbers include
members of our sales force who made such a purchase, including Paid Affiliates and those who qualify as Sales Leaders, but they do not include consumers who purchase directly from members of our sales force. We believe a significant majority of
Customers purchase our products primarily for personal or family consumption but are not actively pursuing the opportunity we offer to generate supplemental income by actively and consistently marketing and reselling products.
To monitor the growth in our sales network, we track the number of Paid Affiliates and Sales Leaders, which are defined as follows:
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“Paid Affiliates” are any Brand Affiliates, as well as members of our sales force in Mainland China, who earned sales compensation during the previous three months. As we continue to focus on customer
acquisition, our Paid Affiliates, who primarily share products, are a bridge to attracting new customers and nurturing relationships and community. Paid Affiliates power our social commerce model and are an important indicator of consumer
purchasing activity in our business.
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“Sales Leaders” are the three-month average of our monthly Brand Affiliates, as well as sales employees and independent marketers in Mainland China, who achieved certain qualification requirements as of the
end of each month of the quarter.
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The following chart sets forth information concerning our Customers, Paid Affiliates and Sales Leaders for the last three years. During the first quarter of 2022, in connection with the introduction of
the new metric Paid Affiliates, we reviewed how we define Sales Leaders and adjusted this metric’s definition to what we believe provides a better insight into the trends of our business. We have recast the 2021 Sales Leaders to the new definition.
The definition of our Customer metric remained unchanged.
Total Number of Customers, Paid Affiliates and Sales Leaders by Region
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Three Months Ended
December 31,
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2023
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2022
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2021
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Customers
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Americas
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231,183
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299,287
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336,564
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Mainland China
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207,276
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202,933
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315,418
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Southeast Asia/Pacific
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106,471
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141,183
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169,601
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South Korea
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103,151
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123,749
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146,354
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Japan
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113,670
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119,152
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122,813
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Europe & Africa
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163,178
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197,917
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210,414
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Hong Kong/Taiwan
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52,110
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62,903
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66,395
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Total Customers
|
977,039
|
1,147,124
|
1,367,559
|
|||||||||
Paid Affiliates
|
Americas
|
31,910
|
42,633
|
49,328
|
|||||||||
|
Mainland China
|
25,889
|
23,436
|
30,546
|
|||||||||
|
Southeast Asia/Pacific
|
34,404
|
38,653
|
44,050
|
|||||||||
|
South Korea(1)
|
22,166
|
45,058
|
52,036
|
|||||||||
|
Japan(1)
|
22,417
|
38,021
|
38,428
|
|||||||||
|
Europe & Africa(1)
|
18,888
|
31,869
|
36,482
|
|||||||||
|
Hong Kong/Taiwan(1)
|
11,212
|
17,286
|
20,155
|
|||||||||
|
Total Paid Affiliates
|
166,886
|
236,956
|
271,025
|
Sales Leaders
|
Americas
|
7,126
|
9,594
|
10,879
|
|||||||||
|
Mainland China(2)
|
11,296
|
12,359
|
18,207
|
|||||||||
|
Southeast Asia/Pacific
|
6,418
|
6,999
|
8,800
|
|||||||||
|
South Korea
|
5,249
|
6,094
|
8,224
|
|||||||||
|
Japan
|
7,086
|
5,936
|
5,864
|
|||||||||
|
Europe & Africa
|
3,968
|
4,740
|
5,743
|
|||||||||
|
Hong Kong/Taiwan
|
2,916
|
3,015
|
3,666
|
|||||||||
|
Total Sales Leaders
|
44,059
|
48,737
|
61,383
|
|
(1)
|
The December 31, 2023 number is affected by a change in eligibility requirements for receiving certain awards within our compensation structure, to more narrowly focus on those affiliates who are actively
building a consumer base. See Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations—“South Korea,” “Japan,” “Europe & Africa,” and “Hong Kong/Taiwan,” for more information.
|
|
(2)
|
The December 31, 2023 and 2022 numbers reflect a modified Sales Leader definition. During 2022, we made some modifications to the compensation plan, which provides leaders more flexible requirements to
maintain their business.
|
Global Direct Selling Channel
Outside of Mainland China, individuals can elect to participate in our business as follows:
| ● |
“Brand Affiliate-Direct Consumers”—Individuals who purchase products directly from a Brand Affiliate at a price established by the Brand Affiliate.
|
| ● |
“Company-Direct Consumers”—Individuals who purchase products directly from the company. These consumers are typically referred by a Brand Affiliate and may purchase at retail price or at a discount.
These individuals do not have the right to build a Nu Skin business by reselling products or by recruiting others.
|
| ● |
“Basic Brand Affiliates”—Brand Affiliates who purchase products for personal or family use or for resale to other consumers. These individuals are not eligible to receive compensation on a multi-level basis unless they elect to qualify as a Sales Leader under our global sales compensation plan. We consider these individuals to be part of our consumer group, as we believe a significant majority of these
Brand Affiliates are purchasing products for personal use and not actively building a sales network or consumer base.
|
| ● |
“Sales Leaders and Qualifiers”—Brand Affiliates who have qualified or are trying to qualify as a Sales Leader. These Brand Affiliates have elected to pursue the business opportunity as a Sales Leader and are
actively attracting consumers and building a sales network under our global sales compensation plan. These Sales Leaders and Qualifiers constitute our sales network.
|
To become a Brand Affiliate, an individual signs a Brand Affiliate agreement and receives access to a business portfolio, which is free in most markets. In some markets, we charge a small fee for the
business portfolio. The business portfolio, generally consists of documentation concerning the business, including copies of the sales compensation plan, Brand Affiliate policies and procedures, product catalog and other documentation, but does not
include products. There are no requirements to purchase products or other materials to become a Brand Affiliate, and no commissions are paid on any purchase of a business portfolio.
We offer a generous product return policy, which also includes returns of business support materials. In most markets, we offer a return policy that allows our Brand Affiliates to return
unopened and unused items for up to 30 days for a full refund, or 12 months subject to a 10% restocking fee. Brand Affiliates are not required to terminate their accounts to return product. Actual returns have historically been less than 5%
of annual revenue. We believe our generous return policy minimizes the financial risks associated with being a Brand Affiliate.
In addition to our product return policy, we strive to be as protective of our customers as possible. We seek to ensure that those who use our products or participate in our business opportunity are treated fairly and
are not misled by inappropriate product or earnings claims.
There are two fundamental ways in which our Brand Affiliates can earn money:
| ● |
through retail markups on resales of products purchased from the company; and
|
| ● |
through sales compensation earned on the sale of products under our global sales compensation plan.
|
We believe that our global sales compensation plan is among the most generous in the direct selling industry and is one of our competitive advantages. Our Brand Affiliates can receive
sales compensation for product sales from the company to their own consumer groups. Likewise, our Sales Leaders can receive sales compensation under our global sales compensation plan for product sales
from the company to their own consumer groups, as well as for product sales from the company to other Sales Leaders and their consumer groups. This type of sales compensation is often referred to as “multi-level” compensation. Our sales force is
not required to recruit or sponsor others, and we do not pay any sales compensation for recruiting or sponsoring. While all of our Brand Affiliates can sponsor others at any time, our Sales Leaders and
those in qualification to become Sales Leaders are those who generally are the most active in sponsoring others. Pursuant to our global sales compensation plan, we pay consolidated sales compensation in a
Sales Leader’s home market, in local currency, for product sales in the Sales Leader’s own consumer group and for product sales in the Sales Leader’s team of Sales Leaders across all geographic markets.
Mainland China Business Model
Because of restrictions on direct selling and multi-level commissions in Mainland China, we have implemented a business model for that market that is different from the business model we
use in our other markets. We have structured our business model in Mainland China based on several factors: the guidance we have received from government officials, our interpretation of applicable regulations, our understanding of the practices of
other international direct selling companies operating in Mainland China, and our understanding as to how regulators are interpreting and enforcing the regulations. The regulatory environment in Mainland China continues to be challenging and
restrictive. We are currently evaluating potential changes to the structure of our sales compensation in Mainland China due to the evolving commercial and regulatory environment. These changes could have a negative impact on our sales in
that market.
In Mainland China, we utilize sales employees to sell products through our retail stores, website and digital platforms; independent direct sellers, who can sell away from our stores where we have a
direct selling license and a service center and can also sell through our website and digital platforms; and independent marketers, who are licensed business owners authorized to sell our products at their own approved premises or through our stores,
website and digital platforms. (As used in the foregoing sentence, our digital platforms include not only those owned or run by our company but also a platform operated by a third party on which we have registered a flagship store.) We rely on our
sales employees, independent direct sellers and independent marketers to attract new consumers, promote repeat purchases, and educate our sales force about our products, culture and policies through training meetings.
Our sales employees, independent direct sellers and independent marketers in Mainland China do not participate in our global sales compensation plan but are instead compensated according to a separate
compensation model established for Mainland China, which is separate and different from our global compensation plan. Independent direct sellers and sales employees who have not achieved certain qualification requirements receive monthly bonuses
based on their monthly product sales. Sales employees who achieve qualification requirements and independent marketers earn (1) monthly bonuses based on their monthly product sales and other bonuses based on various performance metrics; and (2) a
salary (for sales employees, consisting of position pay and performance pay) or service fee (for independent marketers). The salary or service fee and position/title are reviewed and adjusted quarterly based on their performance relative to other
sales leaders, taking into account such factors as the sales productivity of the Sales Leader him/herself and of the sales force that such Sales Leader trains, collaborates with, supports and services. We utilize our global system to track and assess
the sales productivity of each Sales Leader him/herself and the sales force that such Sales Leader trains, collaborates with, supports and services in setting his/her salary or service fee and in connection with the evaluation of their
position/title. We generally compensate our Mainland China Sales Leaders at a level that is competitive with other direct selling companies in the market and comparable to the compensation of our Sales Leaders globally.
Operating in Mainland China entails certain risks and uncertainties to our business, as discussed further in Item 1. Business—“Regulation” and Item 1A. Risk Factors. We
endeavor to mitigate these risks and uncertainties through various measures, including by seeking to understand and obey laws and regulations, training our employees and sales force, engaging in dialogue with government officials to better understand
their goals and explain our plans, and cooperating in inquiries and other matters of interest to regulators. However, these efforts do not eliminate the significant risks associated with operating in Mainland China.
Our global sales compensation plan and our Mainland China business model, including our related know-how, processes and systems, play a significant role in helping us to attract and incentivize our
sales force. We have strategically developed and refined our global sales compensation plan and our Mainland China business model to distinguish the business opportunity that we offer from those of other companies and to seek to provide us with a
competitive advantage.
Sales Incentives, Meetings, Recognition and Training
An important part of our distribution channel is motivating our Sales Leaders and recognizing their achievements. We hold regular meetings and events globally to recognize Sales Leaders who have
achieved various levels of success in our business. These meetings, which may be held either virtually or in-person, also allow the company and key Sales Leaders to provide training to other Sales Leaders. We utilize a variety of sales incentives
such as incentive trips to motivate Sales Leaders. In addition to rewarding performance, incentive trips provide Sales Leaders and the company opportunities to share best practices, set goals, generate alignment of Sales Leaders around key
initiatives, and provide a high level of motivation and team building.
Product Launch Process
Prior to making a product generally available for purchase in a market, we often do one or more introductory offerings of the product, such as a preview of the product to our Sales Leaders or other product introduction
or promotion. We refer to the entire process, beginning with the introductory offering through general availability of the product, as a product launch or our product launch process. The timing of the launch of a particular product often varies from
market to market depending on such factors as customer demand, product registration or other local legal requirements, and product availability in our supply chain.
Sales Leader previews and other product introductions and promotions sometimes generate significant activity and a high level of purchasing, which can result in a higher-than-normal increase in revenue during the
quarter and can skew year-over-year and sequential comparisons. We believe our product launch process attracts new Customers, Paid Affiliates and Sales Leaders to our business, increases consumer trial, and provides us with important marketing and
forecasting information about our products. Please refer to Item 1A. Risk Factors for more information on risks related to our product launch process.
We currently sell and distribute our Nu Skin business’s products in nearly 50 markets. We have divided our markets into seven segments: Mainland China; South Korea; Southeast
Asia/Pacific, which includes Indonesia, Malaysia, the Philippines, Singapore, Thailand, Vietnam, Australia, New Zealand and other markets; Americas, which includes Canada, Latin America and the United States; Japan; Hong Kong/Taiwan, which also
includes Macau; and Europe & Africa, which includes markets in Europe as well as South Africa. Our Rhyz business arm also includes two additional segments: Manufacturing and Rhyz other. The following table
sets forth the revenue for each of the segments and the Other category for the last three years.
|
|
Year Ended December 31,
|
|||||||||||||||||||||||
|
(U.S. dollars in millions)
|
2023
|
2022
|
2021
|
|||||||||||||||||||||
|
Nu Skin
|
||||||||||||||||||||||||
|
Americas
|
$
|
398.2
|
20
|
%
|
$
|
508.5
|
23
|
%
|
$
|
547.8
|
20
|
%
|
||||||||||||
|
Mainland China
|
298.1
|
15
|
360.4
|
16
|
568.8
|
21
|
||||||||||||||||||
|
Southeast Asia/Pacific
|
267.2
|
14
|
344.4
|
16
|
336.7
|
13
|
||||||||||||||||||
|
South Korea
|
236.1
|
12
|
268.7
|
12
|
354.3
|
13
|
||||||||||||||||||
|
Japan
|
207.8
|
10
|
224.9
|
10
|
266.2
|
10
|
||||||||||||||||||
|
Europe & Africa
|
192.4
|
10
|
204.3
|
9
|
283.2
|
11
|
||||||||||||||||||
|
Hong Kong/Taiwan
|
153.6
|
8
|
157.2
|
7
|
162.6
|
6
|
||||||||||||||||||
|
Other
|
(0.9
|
)
|
—
|
4.0
|
—
|
3.5
|
—
|
|||||||||||||||||
|
Total Nu Skin
|
1,752.5
|
89
|
2,072.4
|
93
|
2,523.1
|
94
|
||||||||||||||||||
|
Rhyz
|
||||||||||||||||||||||||
|
Manufacturing
|
181.4
|
9
|
149.5
|
7
|
172.1
|
6
|
||||||||||||||||||
|
Rhyz other
|
35.2
|
2
|
%
|
3.8
|
—
|
0.5
|
—
|
|||||||||||||||||
|
Total Rhyz
|
216.6
|
11
|
153.3
|
7
|
172.6
|
6
|
||||||||||||||||||
|
Total
|
$
|
1,969.1
|
100
|
%
|
$
|
2,225.7
|
100
|
%
|
$
|
2,695.7
|
100
|
%
|
||||||||||||
Additional comparative revenue and related financial information is presented in Note 15 to the consolidated financial statements contained in this report.
Our business is subject to various laws and regulations globally, particularly with respect to our direct selling business models and our product categories. In addition, as a United States entity
operating through subsidiaries in foreign jurisdictions, we are subject to foreign exchange control, transfer pricing and customs laws that regulate the flow of funds between us and our subsidiaries and for product purchases, management services and
contractual obligations, such as the payment of sales commissions. As is the case with most companies in our industry, we receive inquiries from time to time from government regulatory authorities regarding the nature of our business and other
issues, such as compliance with local direct selling, transfer pricing, customs, taxation, foreign exchange control, securities and other laws.
Direct Selling Regulations
Direct selling is regulated by various national, state and local government agencies in the United States and foreign markets. These laws and regulations are generally intended to prevent
fraudulent or deceptive schemes, including “pyramid” schemes, which compensate participants primarily for recruiting additional participants without significant emphasis on product sales to
consumers. The laws and regulations in our current markets generally:
| ● |
impose requirements related to order cancellations, product returns, inventory buy-backs and cooling-off periods for our sales force and consumers;
|
| ● |
require us, or our sales force, to register with government agencies;
|
| ● |
impose limits on the amount and type of sales compensation we can pay;
|
| ● |
impose reporting requirements; and
|
| ● |
require that our sales force is compensated for sales of products and not for recruiting others.
|
The laws and regulations governing direct selling may be modified or reinterpreted from time to time, which may cause us to modify our sales compensation and business models.
In almost all of our markets, regulations are subject to discretionary interpretation by regulators and judicial authorities. There is often ambiguity and uncertainty with respect to the state of direct
selling and anti-pyramiding laws and regulations. In the United States, for example, federal law provides law enforcement agencies, such as the Federal Trade Commission (“FTC”), broad latitude in policing unfair or deceptive trade practices, but does
not provide a bright-line test for identifying a pyramid scheme. A number of states have passed legislation that more clearly distinguishes between illegal pyramid schemes and legitimate multi-level marketing business models. During the past several
years, settlements and other judicial orders between the FTC and other direct selling companies and guidance from the FTC have addressed inappropriate earnings and lifestyle claims, problematic compensation structures and the importance of focusing
on consumers. In addition, during 2021 the FTC announced that it is initiating a review of its Business Opportunity Rule, which imposes certain obligations on business opportunity sellers in their dealings with prospective buyers; the FTC issued a
request for public comment on this rule in November 2022. Currently, multi-level marketing companies have been deemed not covered by this rule. If this changes or if new regulations are adopted for multi-level marketing companies, it could negatively
impact the growth of our sales force and our revenue. Also during 2021, the FTC sent a notice to more than 1,100 companies, including us, that outlined several practices that the FTC determined to be unfair or deceptive in prior administrative cases.
These practices relate to earnings claims, other money-making opportunity claims, and endorsements and testimonials. Pursuant to the FTC’s “penalty offense authority,” companies that received the notice are expected to comply with the standards set
in the prior administrative cases and could incur significant civil penalties if they or their representatives fail to do so. In addition, during 2022, the FTC issued an Advanced Notice of Proposed Rulemaking (“ANPR”) indicating that it is
considering proposing a rule regarding earnings claims. The ANPR also suggested, among other things, that the FTC would likely not consider a disclaimer (such as “results not typical”) to be sufficient to correct a misleading impression from an
atypical earnings claim. For more information about these matters, other regulatory actions, and their potential impact on our business, see Item 1A. Risk Factors—“Challenges to the form of our network marketing
system or to our business practices could harm our business” and “Laws and regulations may prohibit or severely restrict direct selling and cause our revenue and profitability to decline, and regulators could adopt new regulations that harm
our business.”
The regulatory environment in Mainland China is particularly complex and continues to evolve. Mainland China’s direct selling and anti-pyramiding regulations contain various restrictions,
including a prohibition on the payment of multi-level compensation. The regulations are subject to discretionary interpretation by state, provincial and local regulators as well as local customs and practices. Regulators continue to act cautiously
as they monitor the development of direct selling in Mainland China. To expand our direct selling model into additional provinces in Mainland China, we currently must obtain a series of approvals from the local Department of Commerce in such
provinces, the Shanghai Municipal Commission of Commerce (our supervisory authority), as well as the Ministry of Commerce, PRC (“MOFCOM”), which is the national governmental authority overseeing direct selling. In the course of obtaining these
approvals, the respective authorities under MOFCOM must also consult and seek opinions on our business operations from the Ministry of Public Security and the Administration for Market Regulation at both provincial and state levels. Government
authorities have not been issuing new licenses for direct selling since the beginning of the 100-day action in early 2019.
Our operations in Mainland China are subject to significant government and media scrutiny and investigations. At times, investigations and other regulatory actions have limited our ability to conduct business in
Mainland China. For example, the government’s scrutiny of activities within the health products and direct selling industries has been at higher levels since 2019, following negative media coverage about healthcare-related product claims made by
another direct selling company in Mainland China. During this time, we have been receiving and addressing an increased number of government reviews, inspections, and inquiries and consumer complaints in Mainland China; our ability to hold certain
business meetings has been limited; and negative media coverage has spread to include additional companies, including ours. Another example occurred in 2014. In response to media and government scrutiny of our Mainland China business in 2014, we
voluntarily took a number of actions in Mainland China, including temporarily suspending our business meetings, temporarily suspending acceptance of applications for any new sales representatives, and extending our product refund and return policies.
These voluntary measures and the adverse publicity had a significant negative impact on our business. We face a risk that future investigations and other regulatory actions may result in fines, revocation of licenses or other significant sanctions.
Several markets, including Mainland China, South Korea, Indonesia and Vietnam, impose limits on the amount of sales compensation we can pay to our sales force. For example, under regulations in Mainland China, direct
selling companies may pay independent direct sellers in Mainland China up to a maximum 30% of the revenue they generate through their own sales of products to consumers. Additionally, in South Korea, local regulations limit sales compensation to 35%
of the total price of goods or services supplied in South Korea. We have implemented various measures to comply with these limits.
In some markets, regulations applicable to the activities of our Sales Leaders may affect our business because we are, or regulators may assert that we are, responsible for our Sales Leaders’ conduct. In these markets,
regulators may request or require that we take steps to ensure that our Sales Leaders comply with local regulations. For example, in Japan, we have taken steps to comply with strict requirements regarding how Brand Affiliates approach prospective
customers. From time to time, we receive information from consumer centers in certain prefectures about the number of general inquiries and complaints about us and our Brand Affiliates, and we also sometimes receive warnings to reduce such
complaints. Based on this information, we continually evaluate and enhance our Brand Affiliate compliance, education and training efforts in Japan.
Our sales force is required to comply with work authorization and other local legal requirements prior to working in a market. Some markets, including Mainland China and Vietnam, also prohibit or restrict participation
of overseas personnel or foreigners in direct selling activities. We have implemented policies that are designed to comply with these regulations and inform our sales force regarding the types of activities that are not permitted. However, we cannot
assure that actions of our sales force will not violate local laws or regulations or our policies.
Please refer to Item 1A. Risk Factors for more information on regulatory and other risks associated with our business.
Product Regulations
Our beauty and wellness products and related promotional and marketing activities are subject to extensive government regulation by numerous federal, state, and local government agencies and
authorities, including the United States Food and Drug Administration (the “FDA”), the Federal Trade Commission (the “FTC”), the Consumer Product Safety Commission, the Department of Agriculture, United States and State Attorneys General, and state
regulatory agencies in the United States, as well as the State Administration for Market Regulation in Mainland China, the Food and Drug Administration in Taiwan, the Ministry of Food and Drug Safety in South Korea, the Ministry of Health, Labour and
Welfare in Japan, and similar government agencies in all other markets in which we operate. In the United States, the FDA, in particular, regulates the formulation, manufacture and labeling of over-the-counter (“OTC”) drugs, cosmetics, dietary
supplements, foods and medical devices such as those that we distribute.
Regulation of Beauty Products in the United States. Our beauty products are subject to various laws and regulations that regulate cosmetic and
personal care products and set forth regulations that, among other things, determine whether a product can be marketed as a “cosmetic” or requires further submissions as an OTC drug. In the United States, the regulation of cosmetic content and
labeling is under the primary jurisdiction of the FDA. Cosmetics are not subject to pre-market approval by the FDA, but their ingredients and their label and labeling content are regulated by the FDA, and those who sell cosmetics have the burden to
ensure that they are safe for use as directed and not adulterated or misbranded. The labeling of cosmetic products is subject to the requirements of the Federal Food, Drug, and Cosmetic Act (“FDCA”), the Fair Packaging and Labeling Act and other FDA
regulations. In 2024, the FDA will begin implementation of portions of the Modernization of Cosmetics Regulation Act of 2022 (“MoCRA”). This implementation will create a greater burden for cosmetic manufacturer facility registration and audits,
mandate product notification for cosmetics, and mandate the reporting of serious adverse events to the FDA. Rollout of MoCRA is expected to continue for the coming years. Failure to correctly interpret and comply with the new requirements could lead
to government actions against us and the associated impairment to our business.
The FDCA defines cosmetics by their intended use, as “articles intended to be rubbed, poured, sprinkled, or sprayed on, introduced into, or otherwise applied to the human body . . . for cleansing,
beautifying, promoting attractiveness, or altering the appearance . . . .” Among the products included in this definition are skin moisturizers, perfumes, lipsticks, fingernail polishes, eye and facial makeup preparations, shampoos, permanent waves,
hair colors, toothpastes and deodorants, as well as material intended for use as a component of a cosmetic product. A product may be considered a drug if it is intended for use in the diagnosis, cure, mitigation, treatment, or prevention of disease,
or is intended to affect the structure or any function of the body (“structure/function claims”). A product’s intended use can be inferred from marketing or product claims, and regulators may consider the marketing claims of our sales force.
Structure/function claims are generally prohibited for cosmetic products as are disease prevention and treatment claims. The FDA prohibits certain ingredients from being included in cosmetic products. It is possible that cosmetic product ingredients
now commonly in use may be restricted or prohibited in the future as more is learned about such ingredients.
In recent years, the FDA has issued warning letters to many cosmetic companies alleging improper structure/function claims regarding their cosmetic products, including, for example, product claims
regarding gene activity, cellular rejuvenation, and rebuilding collagen. Cosmetic companies confront difficulty in determining whether a claim would be considered by the FDA to be an improper structure/function claim. Given this difficulty, and our
research and product development focus on the sources of aging and the influence of certain ingredients on gene expression, there is a risk that we could receive a warning letter, be required to modify our product claims, or take other actions to
satisfy the FDA if the FDA determines any of our marketing materials contain improper structure/function claims for our cosmetic products. In addition, plaintiffs’ lawyers have filed class action lawsuits against some of our competitors after our
competitors received these FDA warning letters. There can be no assurance that we will not be subject to government actions or lawsuits, which could harm our business.
Certain products, such as sunscreens and acne treatments, are classified as over-the-counter (“OTC”) drugs (and cosmetics, depending on claims) and have specific ingredient, labeling and manufacturing
requirements. OTC drug products may be marketed if they conform to the requirements of an FDA-established OTC drug monograph that is applicable to that drug. Drug products not conforming to monograph requirements require an approved New Drug
Application (“NDA”) before marketing may begin. Under these provisions, if the agency were to find that a product or ingredient of one of our OTC drug products is not generally recognized as safe and effective or is not included in a final monograph
that is applicable to one of our OTC drug products, we may be required to reformulate or cease marketing that product until it is the subject of an approved NDA or until the time, if ever, that the monograph is amended to include such product. The
labeling of these products is subject to the requirements of the FDCA and the Fair Packaging and Labeling Act and other FDA regulations.
Regulation of Beauty Products in Other Markets. The other markets in which we operate have similar regulations. In Mainland China, beauty
products, other than devices, are placed into one of two categories, “special-purpose cosmetics” and “general cosmetics.” Products in both categories require adequate substantiation of efficacy, which must be made available to authorities prior to
marketing a product and which can be reviewed and enforced upon at any time thereafter. The product registration process for some categories of beauty products in Mainland China takes from three to six months to complete under the latest regulations
governing cosmetics. Certain cosmetics are categorized as “special cosmetics” and carry a more unpredictable process and approval timing frequently in excess of two years. In Japan, the Ministry of Health, Labour and Welfare regulates the sale and
distribution of cosmetics and requires us to have an import business license and to register each beauty product imported into Japan. In Taiwan, all “medicated” cosmetic products require registration. In South Korea, all “functional” cosmetics are
required to either undergo examination by or be reported to the Ministry of Food and Drug Safety. The sale of cosmetic products is regulated in the European Union (the “EU”) under the EU Cosmetics Regulation, which requires a uniform application for
foreign companies placing finished beauty products on the EU market. Similar regulations in any of our markets may limit our ability to import products or utilize key ingredients or technologies globally and may delay product launches while the
registration and approval process is pending. Changing regulations may require us to stop selling, discontinue, or reformulate and re-register products in order to sell those products.
Regulation of Wellness Products in the United States. Our wellness products are also subject to applicable regulations of government agencies
in the markets in which we operate. In the United States, we generally market our wellness products as conventional foods or dietary supplements. The FDA has jurisdiction over this regulatory area. The FDA imposes specific requirements for the labels
and labeling of food and dietary supplements, including the requirements of the Food Allergen Labeling and Consumer Protection Act of 2004, which mandates declaration of the presence of major food allergens. In addition, the Public Health Security
and Bioterrorism Preparedness and Response Act of 2002 contains requirements with regard to the sale and importation of food products in the United States.
The FDA Food Safety Modernization Act (“FSMA”), which was signed into law in 2011, also increased the FDA’s authority with respect to food safety and made significant changes to the FDCA
with respect to strengthening the U.S. food safety system. It enables the FDA to focus more on preventing food safety problems rather than primarily reacting to problems after they occur. The law also provides the FDA with enforcement authorities
designed to achieve higher rates of compliance with prevention- and risk-based food safety standards and to better respond to and contain problems when they do occur. The law also gives the FDA important tools to hold imported foods to the same
standards as domestic foods and directs the FDA to build an integrated national food safety system in partnership with state and local authorities. The FDA is actively enforcing FSMA requirements,
subjecting food and nutritional supplements to increased regulatory scrutiny. Pursuant to FSMA, the FDA is authorized, among other things, to order mandatory recalls, issue “administrative detention” orders, and revoke manufacturing facility
registrations (effectively preventing the operation of a food or dietary supplement manufacturing facility), and importers of foods and nutritional supplements are subject to Foreign Supplier Verification Program requirements.
The FDA regulates dietary supplements principally under the Dietary Supplement Health and Education Act of 1994 (“DSHEA”). DSHEA formally defines what may be sold as a dietary supplement, defines
statements of nutritional support and the conditions under which they may lawfully be used, and includes provisions that permit the FDA to regulate manufacturing practices and labeling claims applicable to dietary supplements. Because the majority of
our wellness products are regulated under DSHEA, we are generally not required to obtain regulatory approval prior to introducing a dietary supplement into the United States market. Prior to marketing a product, we are obligated to notify the FDA of
any structure/function claims that we intend to make about the product in any product-related materials.
Generally, under DSHEA, dietary ingredients that were on the market before October 15, 1994 may be used in dietary supplements without notifying the FDA. However, a “new” dietary ingredient (i.e., a
dietary ingredient that was not marketed in the United States before October 15, 1994) must be the subject of a new dietary ingredient notification submitted to the FDA unless the ingredient has been “present in the food supply as an article used for
food” without having been “chemically altered.” The enforcement of the term “chemically altered” has and continues to evolve within the FDA. As such, an ingredient that is deemed today not to be “chemically altered” may be viewed otherwise in the
future, which could lead to our being required to reformulate or cease marketing the product until such time that we can find a suitable replacement. A new dietary ingredient notification must provide the FDA with evidence of a “history of use or
other evidence of safety” which establishes that use of the dietary ingredient “will reasonably be expected to be safe.” A new dietary ingredient notification must be submitted to the FDA at least 75 days before the new dietary ingredient can be
marketed. Under DSHEA, the FDA may seek to remove from the market any new dietary ingredient that the FDA determines to be unsafe. In addition, the FDA may also deem a dietary supplement an unapproved drug where the marketing claims made in
connection with the sale or promotion of the product effectively place it in the drug category.
From time to time, efforts are made by some individuals or groups to repeal DSHEA. If this were to happen, significant burdens would be imposed on our product development, and the costs of running our
business would increase significantly.
Regulation of Wellness Products Globally. In our foreign markets, nutritional supplements are generally regulated by similar government
agencies, such as the Mainland China State Administration for Market Regulation, the South Korea Ministry of Food and Drug Safety; the Japan Ministry of Health, Labour and Welfare and the Taiwan Department of Health. We typically market our wellness
products in international markets as foods, health foods, dietary supplements, food supplements or other similar categorizations under applicable regulatory regimes. With few exceptions, in the event a product or ingredient is classified as a drug or
pharmaceutical product in any market, we will generally not be able to distribute that product in that market through our distribution channel because of pre-market approvals and strict regulations applicable to drug and pharmaceutical products.
Mainland China also has highly restrictive nutritional supplement product regulations. A vast majority of products marketed as “health foods” are subject to extensive laboratory and clinical analysis by government authorities, and the product
registration process in Mainland China takes a minimum of two years and may be substantially longer. In some cases it has taken us four years or longer to obtain product registrations. A pre-market process has been established for a minority of
“health foods,” which allows products with only basic nutritional ingredients (some vitamins and minerals) to undergo a simplified approval process rather than the full registration process. We market both “health foods” and “general foods” in
Mainland China. There is some risk associated with the common practice in Mainland China of marketing a product as a “general food” without any health food claims while applying to the authorities for “health food” classification. If government
officials feel the categorization of our products is inconsistent with product claims, form of delivery, ingredients or function, this could end or limit our ability to market such products in Mainland China in their current form. In addition, we are
not permitted to market or sell “general foods” through our direct sales channel in Mainland China and any efforts by our independent direct sellers to do so could result in negative publicity, fines and other government sanctions being imposed
against us.
The markets in which we operate all have varied regulations that distinguish foods and nutritional supplements from “pharmaceutical products.” Because of the varied regulations, some products or
ingredients that are recognized as a “food” in certain markets may be treated as a “pharmaceutical” in other markets. In Japan, for example, if a specified ingredient is not listed as a “food” by the Ministry of Health and Welfare, we must either
modify the product to eliminate or substitute that ingredient, or petition the government to treat such ingredient as a food. We experience similar issues in our other markets. This is particularly a challenge in Europe, where regulations often still
differ from member state to member state, despite EU regulations designed to harmonize the laws of EU member states. With markets in the Association of Southeast Asian Nations (“ASEAN”), certain member states have amended some of their requirements
in anticipation of the harmonization of ASEAN supplement regulations, even though these changes may not be identical to the eventual ASEAN requirements nor consistent with other member states. As a result, we often must modify the ingredients and/or
the levels of ingredients in our products for certain markets or create unique formulations for multiple markets. In some circumstances, the regulations in foreign markets may require us to obtain regulatory approval prior to introduction of a new
product or limit our use of certain ingredients altogether.
Because of negative publicity associated with some adulterated or misbranded supplements, including pharmaceutical drugs marketed as dietary supplements, there has been an increased movement in the
United States and other markets to expand the regulation of dietary supplements, which could lead to additional restrictions or requirements in the future. In general, the regulatory environment is becoming more complex with increasingly stricter
regulations each year.
Manufacturing Process. In 2008, and as subsequently updated under the regulations implementing the FSMA, the FDA established regulations to
require current “good manufacturing practices” for dietary supplements and food products in the United States. The regulations ensure that dietary supplements and food products are produced in a quality manner, do not contain contaminants or
impurities above pre-established levels, and are accurately labeled. The regulations include requirements for establishing quality control procedures for us and our vendors and suppliers, designing and constructing manufacturing plants, and testing
ingredients and finished products throughout our supply chain. The regulations also include requirements for record keeping and handling consumer product complaints. If dietary supplements or food products contain contaminants or allergens or do
not contain the type or quantity of dietary ingredient they are represented to contain, the FDA would consider those products to be adulterated or misbranded. Our business is subject to additional FDA regulations, such as new dietary ingredient
regulations and adverse event reporting regulations that require us to document and track adverse events and report serious adverse events that involve hospitalization, permanent impairment or death associated with consumers’ use of certain of our
products. Compliance with these regulations has increased, and may further increase, the cost of manufacturing and selling certain of our products as we incur internal costs, oversee and inspect more aspects of third-party manufacturing and work
with our vendors to assure they are in compliance and maintain accurate recordkeeping to establish controls. Failure to comply with good manufacturing practices could also result in product recalls.
Advertising and Product Claims. Most of our major markets also regulate advertising and product claims regarding the efficacy and quality of
products and require adequate and reliable scientific substantiation of all claims. In most of our foreign markets, we are typically not able to make any “medicinal” claims with respect to our wellness products. In some cases, such regulations may
limit our ability to inform consumers of some of the benefits our products offer.
In the United States, the FDA generally prohibits disease diagnosis, prevention and treatment claims when made for a dietary supplement. DSHEA, however, permits substantiated, truthful and
non-misleading “statements of nutritional support” to be included in labeling for dietary supplements without FDA pre-approval. Such statements may describe how a particular dietary ingredient affects the structure, function or general
well-being of the body, or the mechanism of action by which a dietary ingredient may affect the structure, function or well-being of the body, but such statements may not state that a dietary supplement will reduce the risk or incidence of a disease
unless such claim has been reviewed and approved by the FDA. In addition, the FDA permits companies to use FDA-approved full and qualified health claims for products containing specific ingredients that meet stated requirements.
A company that uses a statement of nutritional support in labeling must possess evidence substantiating that the statement is truthful and not misleading. The FDA has issued guidance defining a manufacturer’s
obligations to substantiate structure/function claims. Such statements, when used in labeling, must also be submitted to the FDA no later than 30 days after first marketing the product with the statement that they possess the necessary evidence and
must be accompanied by an FDA mandated label disclaimer that “This statement has not been evaluated by the FDA. This product is not intended to diagnose, treat, cure or prevent any disease.” There can be no assurance, however, that the FDA or FTC
will not determine that a particular statement of nutritional support that we want to use is an unacceptable disease claim or an unauthorized nutrient-disease relationship claim otherwise permitted with FDA approval as a “health claim” or that such
claims have competent and reliable scientific evidence. Such a determination might prevent the use of such a claim or result in additional FDA enforcement.
We are aware of media reports regarding dietary supplements, which call for the repeal or amendment of DSHEA. Individuals or groups that are opposed to supplements or question their safety or efficacy attempt, from
time to time, to use these media reports to propose legislation intended to amend or repeal DSHEA. Some of the legislative proposals may include variations on premarket approval, enhanced premarket safety or substantiation required and changing the
definition of a “dietary ingredient” to remove either botanicals or selected classes of ingredients now treated as dietary ingredients.
Most of the other markets in which we operate have not adopted legislation like DSHEA, and we may be subject to more restrictive limitations on the claims we can make about our products in these
markets. For example, in Japan, our nutritional supplements are marketed as food products, which significantly limits our ability to make claims regarding these products. If marketing materials produced or used by us or our sales force globally make
claims that exceed the scope of allowed claims for nutritional supplements, the FDA or other regulatory authorities could deem our products to be unapproved drugs. In Mainland China, we also face significant restrictions on our ability to make
product claims regarding the efficacy of our products. Violations, alleged violations, or negative media attention related to our compliance with these restrictions could harm consumers’ perception of our business and products and could negatively
impact the registration, licensing status and sales of our products.
The FTC, which exercises primary jurisdiction over the advertising of all of our products in the United States, has instituted enforcement actions against dietary supplement, food, and cosmetic
companies for, among other things, deceptive advertising and lack of adequate scientific substantiation for claims. We also face limitations on our use of the scientific experts who have helped us develop and test some of our products. In the United
States, for example, the FTC’s Guides Concerning the Use of Endorsements and Testimonials in Advertising may restrict marketing to those results obtained by a “typical” consumer and require disclosure of any material connections between an endorser
and the company or products they are endorsing. In Mainland China, some media outlets have questioned the nature and extent of our connections with our Scientific Advisory Board and others who have helped in developing our scientific approach or
testing our products. This negative publicity could harm consumers’ perception of our business and our products, which could negatively impact our revenue. We cannot be sure that the FTC, or comparable foreign agencies, will not question our
advertising or other operations in the future.
In recent years, the FTC has initiated numerous investigations of and actions against companies that sell dietary supplements and cosmetic products. The FTC may enforce compliance with the
law in a variety of ways, both administratively and judicially, using compulsory process, cease and desist orders, and injunctions. FTC enforcement can result in consent decrees or orders requiring, among other things, injunctive provisions,
corrective advertising, consumer redress, and such other relief as the agency deems necessary to protect the public. Violation of these consent decrees or orders could result in substantial financial or other penalties. The FTC also sends warning
letters as it monitors companies’ activities. For example, during 2020 to 2022, the FTC issued letters that warned several direct-selling companies to remove and address claims that they or members of their sales force were making about their products’ ability to treat, cure or prevent COVID-19 and/or about the earnings that people who suffered the loss of a job or income could make. No assurance can be
given that the FTC will not question our advertising or other operations in the United States in the future. Any action in the future by the FTC could materially and adversely affect our ability to successfully market our products in the United
States. In addition, during 2023, the FTC sent notices of penalty offense to nearly 700 companies, including us, regarding the requirement of sufficient substantiation for product claims. Pursuant to the FTC’s “penalty offense authority,” companies
that received the notice are expected to comply with the standards set in the FTC’s prior administrative cases on this topic, and they could incur significant civil penalties if they or their representatives fail to do so.
In connection with investigations that occurred in the 1990s of certain alleged unsubstantiated product and earnings claims made by our Brand Affiliates, we entered into two consent
decrees with the FTC and various agreements with state regulatory agencies. The consent decrees require us to, among other things, supplement our procedures to enforce our policies, not allow our Brand Affiliates to make earnings representations
without making certain average earnings disclosures and not allow our Brand Affiliates to make unsubstantiated product claims. The FTC could initiate an enforcement action to the extent the FTC determines
that our advertising or promotional practices are deceptive or contrary to the requirements of the consent decrees.
Regulation of Medical Devices. In 2014, our Nu Skin Facial Spa device was cleared for marketing
through the 510(k) process with the FDA as a medical device with cosmetic benefit. More recently, our RenuSpa iO device was cleared for marketing through the FDA’s 510(k) process. Medical devices are highly
regulated by the FDA. Manufacturers of medical devices must register and list their products with the FDA annually, whether they are located domestically or overseas. Foreign jurisdictions may take note of the fact that we have registered a medical
device in the United States and require us to register in their market as well. The FDA has broad regulatory powers in the areas of clinical testing, manufacturing and labeling of medical devices. Medical devices must be labeled in accordance with
the FDA’s general device labeling requirements and whatever particular label requirements the FDA may designate for that type of device.
In addition, medical device manufacturers must adhere to certain “good manufacturing practices” in accordance with the FDA’s Quality System Regulation, which regulates the manufacture of medical
devices, prescribes record-keeping procedures and provides for the routine inspection of facilities for compliance with such regulations. If in connection with these inspections, the FDA believes the manufacturer has failed to comply with applicable
regulations and/or procedures, it may issue observations that would necessitate prompt corrective action. If the FDA inspection observations are not addressed and/or corrective action taken in a timely manner and to the FDA’s satisfaction, the FDA
may issue a warning letter (which would similarly necessitate prompt corrective action) and/or proceed directly to other forms of enforcement action. Failure to respond timely to FDA inspection observations, a warning letter or other notice of
noncompliance and to promptly come into compliance could result in the FDA bringing enforcement action against us, which could include the shutdown of our production facilities, denial of importation rights to the United States for products
manufactured in overseas locations and criminal and civil fines.
Our Pharmanex BioPhotonic Scanner and our current and future device products may be subject to the regulations of
various health, consumer-protection and other government authorities around the world. These regulations vary from market to market and affect whether our products are required to be registered as medical devices, the claims that can be made with
respect to these products, who can use them, and where they can be used. The interpretation of the line between medical devices and non-medical devices in each country is subjective and varied, as well as subject to change based on industry
precedent, influence from the medical device sector, and other factors. Our connected devices are subject to specific testing, certification, and/or registration governing the connectivity to mobile devices. We have been required to register our ageLOC Galvanic Facial Spa and ageLOC Body Spa systems as medical devices in a few markets, and we also have received clearance
from the FDA to market our Nu Skin Facial Spa and our Nu Skin RenuSpa iO devices for over-the-counter use. We have registered ageLOC
Boost as a medical device in Thailand, and we are seeking medical device registration in Thailand for Nu Skin WellSpa iO. We have been subject to regulatory inquiries in the United States, Japan and
other markets with respect to the status of the Pharmanex BioPhotonic Scanner as a non-medical device. Any determination that medical device clearance is required for one of our products, in a market where we
currently market and sell such product as a cosmetic or non-medical device, could require us to expend significant time and resources in order to meet the additional stringent standards imposed on medical device companies or prevent us from marketing
the product.
Under applicable direct selling regulations in Mainland China, our Pharmanex BioPhotonic Scanner, ageLOC LumiSpa, ageLOC Galvanic Facial Spa, ageLOC WellSpa iO and ageLOC Body Spa systems are registered as “health
care equipment” or “household appliances,” which enables us to market and sell them through our direct sales channel in that market. The process for registering products for the direct sales channel in Mainland China is subject to delays. However,
this process and registration requirement do not apply to all of our sales channels in Mainland China; although our independent direct sellers are prohibited from earning commissions by selling products that are not so registered, sales by our
sales employees or independent marketers are not subject to this requirement. Please refer to Item 1A. Risk Factors for more information on the regulatory risks associated with our device products.
The markets for our products are highly competitive. Our competitors include a broad array of marketers of beauty and wellness products and pharmaceutical companies, many of which have longer operating
histories and greater name recognition and financial resources than we do. We compete in these markets by emphasizing the innovation, value and premium quality of our products and the reach, convenience and customer servicing of our distribution
system.
Direct Selling
We compete with other direct selling companies, some of which have a longer operating history, and greater visibility, name recognition and financial resources than we do. Leading global direct selling
companies include Amway, Natura & Co and Herbalife. We also compete with local direct selling companies in the markets in which we operate. We compete with these companies to attract and retain our sales force and consumers based on the strength
of our product offerings, sales compensation, multiple business opportunities, management and international operations.
RHYZ COMPANIES
In addition to our core Nu Skin business, we also explore new areas of synergistic and adjacent growth through our business arm known as Rhyz Inc. Our Rhyz businesses, which are reported in two
segments, primarily consist of the following consumer, technology and manufacturing companies:
Rhyz Manufacturing Segment:
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Elevate Nutraceuticals LLC, dba Elevate Health Sciences—a manufacturer of private-label dietary supplements.
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Ingredient Innovations International Company, dba 3i Solutions—a manufacturer of dietary supplements.
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L&W Holdings, Inc., dba CasePak—a packaging company that consults with product developers to design and develop custom packaging.
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Wasatch Product Development, LLC—a developer and manufacturer of personal care products, dietary supplements and functional foods.
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Rhyz Other Segment:
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Beauty Biosciences LLC—a beauty company that sells its products through digital and retail channels.
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LifeDNA, Inc.—a DNA assessment and recommendation technology company that we believe holds potential for our broader personalization strategy.
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MyFavoriteThings, Inc., dba Mavely—a social commerce platform that offers creators a suite of social selling tools to help them promote products from Mavely partner brands and retailers and earn a commission
for their converted sales.
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In 2023, the Rhyz companies generated $216.6 million, or 11%, of our 2023 reported revenue (excluding sales to our core Nu Skin business). Rhyz is a key component of our business, and we
anticipate its continued growth in the coming years both on an absolute basis and as a percentage of our consolidated revenue. These companies enable us to diversify our revenue mix, serve more customers
where they shop, and create synergies for our owned and partner brands.
As of December 31, 2023, we had approximately 3,700 full- and part-time employees worldwide. This does not include approximately 11,500 sales employees in our Mainland China operations. Although we have
statutory employee representation obligations in certain markets, our employees are generally not represented by labor unions except where expressly required by law. We believe that our relationship with our employees is good, and we do not foresee a
shortage in qualified personnel necessary to operate our business.
Our human capital objectives include the following:
Culture. All of our full- and part-time employees are responsible for upholding the Nu Skin Code of Conduct and for striving to perpetuate the
Nu Skin Way, our global culture aspiration, which includes the following principles:
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A force for good |
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Direct and decisive | |
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Accountable and empowered |
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Exceptional | |
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Bold innovators |
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Fast speed | |
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Customer obsessed |
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One global team |
Hiring, Engagement, Development and Retention. We seek to hire and retain employees with the talents and capabilities to succeed at our
company. The level of competition for qualified employees is high, owing to employment market trends both internationally and in Utah, where our corporate headquarters are located and which has one of the lowest unemployment rates in the United
States. These conditions have made it more difficult for us to fill some job positions and retain employees. We address this issue by building a strong employer brand, allowing remote work options to reach potential employees in other locations, and
providing competitive compensation and benefits. In addition, our hiring and retention efforts must be consistent with our overall business size and strategy. During 2023, we engaged in restructuring initiatives, in which we canceled some open job
positions and reduced our employee headcount to enable us to operate more efficiently.
Developing our employees and keeping them engaged is crucial. We pursue these objectives by providing leadership training, encouraging managers to conduct one-on-one meetings with employees, holding
town hall meetings to promote dialogue between management and employees, and reinforcing the Nu Skin Way to maintain an invigorating and attractive culture. We conduct a global employee experience survey every six months to obtain our employees’
feedback, which helps to guide our human capital initiatives and to maintain robust employee engagement.
Diversity, Equity and Inclusion. We believe a diverse, equitable and inclusive work environment allows us to benefit from unique perspectives
and provides vitality, creativity, new ideas and growth. We are committed to our Diversity, Equity and Inclusion vision statement: “We are a force for good as we seek, develop, and empower diverse individuals and perspectives. We aspire to be a
global community where every employee, entrepreneur, and consumer knows and feels they belong.”
We have established employee resource groups to help ensure that under-represented populations feel welcome at Nu Skin, including people of color, women and LGBTQIA+ individuals. Our Healthy Workplace
Policy also aims to cultivate a culture of mutual respect and to provide all employees a work environment free from harassment, discrimination and unprofessional behavior. Our employees receive training on their responsibility in this important area,
and we make a Healthy Workplace Hotline available for employees to report concerns anonymously.
We also incorporate DEI practices into our hiring process. We conduct training to create awareness of unintentional biases that may be present in the hiring process. We work to ensure the wording of our
job postings is inclusive and utilize multiple broad-based candidate search engines to expand our talent pools and increase our access to diverse candidates.
Employee Health and Well-Being. Our employees’ health and well-being is an essential component of our human capital management strategy. We
established “The Best You” wellness program in the United States to improve the quality of each employee’s physical, emotional, intellectual and financial wellness by encouraging and incentivizing healthy lifestyle practices through health
screenings, prevention programs and education. Our employees also receive free product benefits, including our wellness products. Employees at our corporate headquarters also have access to an on-site gym, as well as our employee assistance program,
which includes free counseling services. Employees in our global markets also receive benefits and other services focused on maintaining health and well-being.
Our Board’s committees engage with our senior management and head of Human Resources regarding human capital management on a regular basis. Working with management, our Board’s committees oversee and
receive reports on matters including culture, compensation, benefits, key talent succession planning, employee engagement, and DEI. In addition, each year, our management reports to the Compensation and Human Capital Committee on management’s annual
assessment of risks related to our compensation policies and practices.
In addition to our employees, our human capital resources also include our sales force. For information about our sales force, see Item 1. Business—“Distribution Channel.”
Our website address is www.nuskin.com. We make available, free of charge on our Investor Relations website, ir.nuskin.com, our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K,
and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 as soon as reasonably practicable after we electronically file such material with, or furnish it to, the Securities and
Exchange Commission (the “SEC”).
We also use our Investor Relations website, ir.nuskin.com, as a channel of distribution of additional Company information that may be deemed material. Accordingly, investors should monitor this channel, in addition to
following our press releases, Securities and Exchange Commission filings and public conference calls and webcasts. The contents of our website shall not be deemed to be incorporated herein by reference.
We have adopted a Code of Conduct that applies to all of our employees, officers and directors, including those of our subsidiaries. Our Code of Conduct is available in the “Governance” section of our Investor
Relations website at ir.nuskin.com. In addition, stockholders may obtain a copy, free of charge, by making a written request to Investor Relations, Nu Skin Enterprises, Inc., 75 West Center Street, Provo, Utah 84601. Any amendments or waivers
(including implicit waivers) regarding the Code of Conduct requiring disclosure under applicable SEC rules or NYSE listing standards will be disclosed in the same section of our website.
Our executive officers as of February 14, 2024 are as follows:
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Name
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Position
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Steven J. Lund
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Executive Chairman of the Board
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Ryan S. Napierski
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50
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President and Chief Executive Officer
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James D. Thomas
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45
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Executive Vice President and Chief Financial Officer
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Chayce D. Clark
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41
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Executive Vice President and General Counsel
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Steven K. Hatchett
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52
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Executive Vice President and Chief Product Officer
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Steven J. Lund has served as Executive Chairman of our board of directors since 2012. Mr. Lund previously served as Vice Chairman of our board of directors from 2006 to 2012
and as President, Chief Executive Officer and a member of our board of directors from 1996, when we went public, until 2003. Mr. Lund is a trustee of the Nu Skin Force for Good Foundation, a charitable organization established in 1996 by our company
to help encourage and drive the philanthropic efforts of our company and its sales force and employees to enrich the lives of others. Mr. Lund worked as an attorney in private practice prior to joining our company as Vice President and General
Counsel. He received a B.A. degree from Brigham Young University and a J.D. degree from Brigham Young University’s J. Reuben Clark Law School.
Ryan S. Napierski has served as our Company’s President since 2017 and as our CEO since 2021. Previously, he served as President of Global Sales and Operations from 2015 to
2017. Prior to serving in that position, he served as both President of our North Asia region since 2014 and President of Nu Skin Japan since 2010. Mr. Napierski has fulfilled multiple leadership positions for Nu Skin since joining our company in
1995, including Vice President of Business Development for Nu Skin EMEA and General Manager of the United Kingdom. Mr. Napierski has a Bachelor’s degree in business, a Master of Business Administration degree from Duke University and a Master’s
degree in international business from Goethe Universitat in Germany.
James D. Thomas has served as our Chief Financial Officer since July 2023. Immediately preceding his appointment as CFO in July 2023, he served as Interim CFO since March 2023
and as Senior Vice President and Chief Accounting Officer since 2019. He previously served as our Vice President of Finance and Accounting from 2017 until his promotion to Chief Accounting Officer. Since joining Nu Skin in 2010, he also has served as
Corporate Controller and as an Internal Auditor. Before joining Nu Skin, he worked as an assistant controller of another publicly reporting company and served in the assurance practice at PricewaterhouseCoopers LLP. Mr. Thomas holds B.S. and Master
of Accounting degrees from Utah State University.
Chayce D. Clark has served as our Executive Vice President and General Counsel since 2021. Mr. Clark joined our company in 2015 as Assistant General Counsel and later served as
Vice President and Deputy General Counsel before beginning his current role. Prior to joining our company, he was a litigation attorney in private practice in Salt Lake City, Utah. He received a B.S. degree from Southern Utah University and a J.D.
degree from the University of Utah.
Steven K. Hatchett joined our company in 2018 and served as Senior Vice President of Global Manufacturing until 2021, when he began serving as Senior Vice President of Global
Products. He became Executive Vice President and Chief Product Officer in 2022. From 2015 to 2018, he served as CEO of a nutritional supplement manufacturer that our company acquired in 2018, at which time he began serving as president until December
2020. Previously, he served as vice president of manufacturing and product innovation at Forever Living Products, and as CEO and president at Cornerstone Research and Development.
Risk Factor Summary
We are providing the following summary of the risk factors contained in this Annual Report on Form 10-K to enhance the readability and accessibility of our risk factor disclosures.
We encourage you to carefully review the full risk factors contained after this summary for additional information regarding the material factors that make an investment in our securities speculative or risky. These risks include the following:
Risks Associated with Direct Selling and Our Sales Force
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Challenges to the form of our network marketing system or to our business practices could harm our business.
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Laws and regulations may prohibit or severely restrict direct selling and cause our revenue and profitability to decline, and regulators could adopt new regulations that harm our business.
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Improper sales force actions could harm our business.
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Social media platforms’ decisions to prohibit, block or decrease the prominence of our sales force’s content could harm our business.
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If our business practices or policies or the actions of our sales force are deemed to be in violation of applicable local regulations regarding foreigners, then we could be sanctioned and/or required to
change our business model, which could significantly harm our business.
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Our sales compensation plans or other incentives could be viewed negatively by some of our sales force, could be restricted by government regulators, and could fail to achieve desired long-term results and
have a negative impact on revenue.
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Limits on the amount of sales compensation we pay could inhibit our ability to attract and retain our sales force, negatively impact our revenue and cause regulatory risks.
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We may be held responsible for certain taxes, assessments and other requirements relating to the activities of our sales force, which could harm our financial condition and operating results.
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Risks Associated with Our Operations in Mainland China
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Our operations in Mainland China are subject to significant government scrutiny, and we could be subject to fines or other penalties.
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If direct selling regulations in Mainland China are modified, interpreted or enforced in a manner that results in negative changes to our business model or the imposition of a range of potential penalties,
our business could be significantly negatively impacted.
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Our ability to expand our business in Mainland China could be negatively impacted if we are unable to obtain additional necessary national and local government approvals in Mainland China.
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If we are not able to register products for sale in Mainland China, our business could be harmed.
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Risks Associated with Market Conditions and Competition
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Inability of products, platforms, business opportunities and other initiatives to gain or maintain sales force and market acceptance could harm our business, and trends among older and younger generations of
customers contribute to this risk.
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Difficult economic conditions could harm our business.
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Our markets are intensely competitive, and market conditions and the strengths of competitors may harm our business.
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Adverse publicity concerning our business, marketing plan, products or people could harm our business and reputation.
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Product diversion may have a negative impact on our business.
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Risks Associated with Epidemics and Other Widespread Crises
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Epidemics and other crises have negatively impacted our business and may do so in the future.
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International Risks
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Our ability to conduct business in international markets may be affected by political, legal, tax and regulatory risks.
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We are subject to financial risks as a result of our international operations, including exposure to foreign-currency fluctuations, currency controls and inflation in foreign markets, all of which could
impact our financial position and results of operations.
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Potential changes to tariff and import/export regulations, and trade disputes between the United States and other jurisdictions may have a negative effect on global economic conditions and our business,
financial results and financial condition.
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Human Capital Risks
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If we are unable to retain our existing sales force and recruit additional people to join our sales force, our revenue may not increase and may even decline.
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We depend on our key personnel and Sales Leaders, and the loss of the services provided by any of our executive officers, other key employees or key Sales Leaders could harm our business and results of
operations.
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Risks Associated with Our Manufacturing and Operations
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Production difficulties, quality control problems, inaccurate forecasting, shortages in ingredients, and reliance on our suppliers could harm our business.
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The loss of or a disruption in our manufacturing, supply chain and distribution operations, or significant expenses or violations incurred by such operations, could adversely affect our business.
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Our business could be negatively impacted if we fail to execute our product launch process or ongoing product sales due to difficulty in forecasting or increased pressure on our supply chain, information
systems and management.
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If we are unable to effectively manage our growth in certain markets, our business and operations could be harmed.
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System failures, capacity constraints and other information technology difficulties could harm our business.
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Any acquired companies or future acquisitions may expose us to additional risks.
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Product Legal and Regulatory Risks
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Regulations governing our products, including the formulation, registration, pre-approval, marketing and sale of our products, could harm our business.
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Government regulations and private party actions relating to the marketing and advertising of our products and services may restrict, inhibit or delay our ability to sell our products and harm our business.
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Our operations could be harmed if we or our vendors fail to comply with Good Manufacturing Practices.
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If our current or any future device products are determined to be medical devices in a particular geographic market, or if our sales force uses these products for medical purposes or makes improper medical
claims, our ability to continue to market and distribute such devices could be harmed, and we could face legal or regulatory actions.
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We may incur product liability claims that could harm our business.
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Legal, Regulatory and Compliance Risks
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We may become involved in legal proceedings and other matters that could adversely affect our operations or financial results.
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Non-compliance with anti-corruption laws could harm our business.
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A failure of our internal controls over financial reporting or our regulatory compliance efforts could harm our stock price and our financial and operating results or could result in fines or penalties.
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Risks Associated with Taxes, Customs and Debt
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We are subject to changes in tax and customs laws, changes in our tax rates, the adoption of new U.S. or international tax legislation or exposure to additional tax liabilities, which could have a material
and adverse impact on our effective tax rate, operating results, cash flows and financial condition.
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Government authorities may question our tax or customs positions or change their laws in a manner that could increase our effective tax rate or otherwise harm our business.
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A decline in our business could adversely affect our financial position and liquidity, and our debt covenants could limit our ability to pursue transactions or other opportunities that could be beneficial to
our business.
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Intellectual Property Risks
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We may be subject to claims of infringement on the intellectual property rights or trade secrets of others, resulting in costly litigation.
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If we are unable to protect our intellectual property rights or our proprietary information and know-how, our ability to compete could be negatively impacted and the value of our products could be adversely
affected.
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Data Security and Privacy Risks
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Failure to maintain satisfactory compliance with certain privacy and data protections laws and regulations, and the integrity of company, employee, sales force, customer or guest data could
expose us to litigation, liability, substantial negative financial consequences and harm to our reputation.
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The unauthorized access, use, theft or destruction of our information systems or of data that is stored in our information systems or by third parties on our behalf could impact our reputation
and brand and expose us to potential liability and loss of revenues.
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Sustainability Risks
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Our business could be negatively impacted by corporate citizenship and sustainability matters.
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Risks Related to Our Common Stock
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The market price of our Class A common stock is subject to significant fluctuations due to a number of factors that are beyond our control.
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Risk Factors
We face a number of substantial risks. Our business, financial condition or results of operations could be harmed by any of these risks. The trading price of our common stock could decline due to
any of these risks, which should be considered together with the other items in this Annual Report on Form 10-K, including Item 1. Business and Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
Risks Associated with Direct Selling and Our Sales Force
Challenges to the form of our network marketing system or to our business practices could harm our business.
We may be subject to challenges by government regulators regarding the form of our network marketing system. Legal and regulatory requirements concerning the direct selling industry generally do not include “bright
line” rules and are inherently fact-based and subject to interpretation. As a result, regulators and courts have discretion in their application of these laws and regulations, and the enforcement or interpretation of these laws and regulations by
government agencies or courts can change.
During the past several years, settlements and other judicial orders between the U.S. Federal Trade Commission (“FTC”) and other direct selling companies and guidance from the FTC have addressed inappropriate earnings
and lifestyle claims, problematic compensation structures and the importance of focusing on consumers. These developments have created ambiguity as to the proper interpretation of the law and related court decisions. The FTC has been active in its
enforcement activities, and any adverse rulings or legal actions could impact our business if direct selling laws or anti-pyramid laws are interpreted more narrowly or in a manner that results in additional burdens or restrictions on direct selling
companies. For example:
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In 2015, the FTC took aggressive actions against a multi-level marketing company, alleging an illegal business model and inappropriate earnings claims.
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In 2016, the FTC entered into a settlement with a multi-level marketing company, requiring the company to modify its business model, including basing sales compensation and qualification only on sales to retail and preferred customers
and on purchases by a distributor for personal consumption within allowable limits. Although this settlement does not represent judicial precedent or a new FTC rule, the FTC has indicated that the industry should look at this settlement,
and the principles underlying its specific measures, for guidance.
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In 2019, the FTC entered into a settlement with a multi-level marketing company, alleging an illegal business model and compensation structure and inappropriate earnings claims. The company agreed to a prohibition from engaging in
multi-level marketing.
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During 2020 to 2022, the FTC issued letters that warned several direct-selling companies to remove and address claims that they or members of their sales force were making about their products’ ability to treat, cure or prevent COVID-19
and/or about the earnings that people who suffered the loss of a job or income could make.
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In 2021, the FTC sent a notice to more than 1,100 companies, including us, that outlined several practices that the FTC determined to be unfair or deceptive in prior administrative cases. These practices relate to earnings claims, other
money-making opportunity claims, and endorsements and testimonials. Pursuant to the FTC’s “penalty offense authority,” companies that received the notice are expected to comply with the standards set in the prior administrative cases and
could incur significant civil penalties if they or their representatives fail to do so.
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In 2022, the FTC issued an Advanced Notice of Proposed Rulemaking (“ANPR”) indicating that it is considering proposing a rule regarding earnings claims. The ANPR also suggested, among other things, that the FTC would likely not consider
a disclaimer (such as “results not typical”) to be sufficient to correct a misleading impression from an atypical earnings claim.
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In 2023, the FTC won a suit against various entities and individuals involved in two multi-level marketing programs, alleging illegal business models and inappropriate earnings claims. The defendants were permanently barred from engaging
in multi-level marketing programs.
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Although we take steps to educate our sales force on proper claims, if members of our sales force make improper claims, or if regulators determine we are making any improper claims, this could lead to an FTC
investigation and could harm our business. In this regard, FTC’s increased scrutiny of disclaimers, as discussed in the ANPR, could lead to more FTC actions regarding improper claims.
In addition, if the requirements related to compensation structures in the actions listed above lead to new industry standards or new rules, or if they limit the levels in the network for which payments can be made,
our business could be impacted and we may need to amend our global sales compensation plan. With a majority of our revenue in the United States coming from sales to retail customers and preferred customers, we believe that we can demonstrate consumer
demand for our products, but we continue to monitor developments to assess whether we should make any changes to our business or global sales compensation plan. If we are required to make changes or if the FTC seeks to enforce similar measures in the
industry, either through rulemaking or an enforcement action against our company, our business could be harmed.
From time to time, we also are subject to challenges by private parties in civil actions. We are aware of civil actions against other direct-selling companies in the United States that have resulted, and may in the
future result, in significant settlements. Allegations directed at us and our competitors regarding the legality of multi-level marketing in various markets and adverse media reports have also created intense public scrutiny of us and our industry.
Our business has also been subject to formal and informal inquiries from various government regulatory authorities in the past regarding our business and our compliance with local laws and regulations. Consumer protection groups also generate media
and regulatory scrutiny of companies in our industry through regulatory referrals and other channels of publicity. All of these actions and any future scrutiny of us or our industry could generate negative publicity or further regulatory actions that
could result in fines, restrict our ability to conduct our business in our various markets, enter into new markets, motivate our sales force and attract consumers.
Laws and regulations may prohibit or severely restrict direct selling and cause our revenue and profitability to decline, and regulators could adopt new regulations that harm our business.
Various government agencies throughout the world regulate direct sales practices. Laws and regulations in the United States, Japan, South Korea, Vietnam and Mainland China are particularly stringent and subject to
broad discretion in enforcement by regulators. These laws and regulations are generally intended to prevent fraudulent or deceptive schemes, often referred to as “pyramid schemes,” that compensate participants primarily for recruiting additional
participants without significant emphasis on product sales to consumers. The laws and regulations in our current markets often:
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impose requirements related to sign-up, order cancellations, product returns, inventory buy-backs and cooling-off periods for our sales force and consumers;
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require us, or our sales force, to register with government agencies;
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impose limits on the amount and type of sales compensation we can pay;
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impose reporting requirements; and
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require that our sales force is compensated for selling products and not for recruiting others.
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Complying with these widely varying and sometimes inconsistent rules and regulations can be difficult, time-consuming and expensive, and requires significant resources. The laws and regulations governing direct selling
are modified from time to time, and like other direct selling companies, we are subject from time to time to government inquiries and investigations in our various markets related to our direct selling activities. This can require us to make changes
to our business model and aspects of our sales compensation plan in the markets impacted by such changes and investigations. During 2021, the FTC announced that it is initiating a review of its Business Opportunity Rule, which imposes certain
obligations on business opportunity sellers in their dealings with prospective buyers; the FTC issued a request for public comment on this rule in November 2022. Currently, multi-level marketing companies have been deemed not covered by this rule. If
this changes or if new regulations are adopted for multi-level marketing companies, it could negatively impact the growth of our sales force and our revenue. In addition, markets where we currently do business could change their laws or regulations
to prohibit direct selling. If we are unable to obtain necessary licenses and certifications within required deadlines or continue business in existing markets or commence operations in new markets because of these laws, our revenue and profitability
may decline. Any delay could negatively impact our revenue.
Improper sales force actions could harm our business.
Sales force activities that violate applicable laws, regulations or policies, or that are alleged to do so, have, and could in the future, harmed our business and reputation and resulted in government or third-party
actions against us.
For example, in 2014, allegations were made by various media outlets that certain of our sales representatives in Mainland China failed to adequately follow and enforce our policies and regulations. This adverse
publicity, as well as a government review and actions that we voluntarily took to address the situation, resulted in a significant negative impact on our revenue and the number of Sales Leaders and Customers in the region. Similar or more extreme
actions by government agencies in Mainland China or other markets in the future could have a significant adverse impact on our business and results of operations.
The direct selling industry in Japan continues to experience regulatory and media scrutiny, and other direct selling companies have been suspended from sponsoring activities. Japan imposes strict requirements regarding
how Brand Affiliates approach prospective customers. From time to time, we receive information from consumer centers in certain prefectures about the number of general inquiries and complaints about us and our Brand Affiliates, and we also sometimes
receive warnings to reduce such complaints. Based on this information, we continually evaluate and enhance our Brand Affiliate compliance, education and training efforts in Japan. However, we cannot be certain that our efforts will successfully
prevent regulatory actions against us, including fines, suspensions or other sanctions, or that the company and the direct selling industry will not receive further negative media attention, all of which could harm our business.
Except in Mainland China, members of our sales force are not employees and act independently of us. The most significant area of risk for such activities relates to improper product claims and claims regarding the
business opportunity of joining our sales force. For example:
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During 2020 to 2022, the FTC issued letters that warned several direct-selling companies to remove and address claims that they or members of their sales force were making about their products’ ability to treat, cure or prevent COVID-19
and/or about the earnings that people who suffered the loss of a job or income could make.
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In 2021, the FTC sent a notice to more than 1,100 companies, including us, that outlined several practices that the FTC determined to be unfair or deceptive in prior administrative cases. These practices relate to earnings claims, other
money-making opportunity claims, and endorsements and testimonials. Pursuant to the FTC’s “penalty offense authority,” companies that received the notice are expected to comply with the standards
set in the prior administrative cases and could incur significant civil penalties if they or their representatives fail to do so.
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We implement strict policies and procedures to ensure our sales force complies with legal requirements. However, given the size of our sales force, we experience problems from time to time. For example, product claims
made by some of our sales force in 1990 and 1991 led to a FTC investigation that resulted in our entering into two consent agreements with the FTC and various agreements with state regulatory agencies. In addition, rulings by the South Korean Fair
Trade Commission and by judicial authorities against us and other companies in South Korea indicate that, if our sales force engages in criminal activity, we may be held liable or penalized for failure to supervise them adequately. Our sales force
may attempt to anticipate which markets we will open in the future and begin marketing and sponsoring activities in markets where we are not qualified to conduct business. We could face fines, suspensions or other legal action if our sales force
violates applicable laws and regulations, and our reputation and brand could be negatively impacted.
In addition, as our sales force increasingly uses social media and our digital tools to promote our business opportunity and products, this increases the burden on us to monitor compliance of such activities, and it
increases the risk that such social media content or digital content (such as statements made on social media or within the chat feature of our apps) could contain claims that violate our policies and/or applicable regulations. For example, due to
the borderless nature of social media, a claim that is allowed in one market may ultimately reach another market where it is not allowed.
Social media platforms’ decisions to prohibit, block or decrease the prominence of our sales force’s content could harm our business.
Social media platforms have, and could in the future, decided to prohibit, block or decrease the prominence of our sales force’s content for any reason. For example, due to concerns with multi-level marketing, the
TikTok and WhatsApp Business platforms’ community guidelines prohibit content related to multi-level marketing. In addition, Pinterest and Facebook prohibit ads that promote multi-level marketing opportunities, and Pinterest has also imposed
restrictions on weight loss products, claims and photos. Our business is becoming increasingly dependent on social commerce. Additional social media platforms’ adoption of similar or stricter policies could significantly hamper our sales force’s
ability to promote our products and attract consumers, which could cause our revenue to decline. Our reputation could also be harmed if our sales force violates any social media platform’s community guidelines.
If our business practices or policies or the actions of our sales force are deemed to be in violation of applicable local regulations regarding foreigners, then we could be
sanctioned and/or required to change our business model, which could significantly harm our business.
Our sales force is required to comply with our residency and work authorization policies and other local legal requirements prior to working in a market. Some markets, including Mainland China and Vietnam, also
prohibit or restrict participation of foreigners in direct selling activities. We have implemented policies that are designed to comply with these regulations and inform our sales force regarding the types of activities that are not permitted.
However, we cannot assure that actions of our sales force will not violate local laws or regulations or our policies. If our business practices or policies or the actions of our sales force are deemed to be in violation of applicable regulations as
they may be interpreted or enforced, then we could be sanctioned and/or required to change our business model, which could result in adverse publicity and significantly harm our business.
Our sales compensation plans or other incentives could be viewed negatively by some of our sales force, could be restricted by government regulators, and could fail to achieve
desired long-term results and have a negative impact on revenue.
Our sales compensation includes some components that differ from market to market. We modify components of our sales compensation from time to time to keep our sales compensation plans and business models competitive
and attractive to our existing sales force and people interested in joining our sales force, to address changing market dynamics, to provide incentives to our sales force that we believe will help grow our business, to conform to local regulations
and to address other business needs. Because of the size of our sales force and the complexity of our sales compensation plans, it is difficult to predict how such changes will be viewed by our sales force and whether such changes will achieve their
desired results. It also is difficult to predict how such changes may impact our ability to attract a larger potential target market of opportunity seekers. Certain changes we have made to our global sales compensation plan in the past, which were
successful in several markets, did not achieve anticipated results in certain other markets, were not viewed positively by some segments of our sales force, and negatively impacted our business. Similarly, we face the risk that we could fail to make
changes to our compensation plans that would be necessary to keep our compensation competitive with the market, compliant with changing regulations, and allow us to attract new opportunity seekers or segments of opportunity seekers, which could have
a negative impact on our sales force.
In addition, we have been required to modify our sales compensation plan in certain markets, including South Korea and Vietnam, from time to time to remain in compliance with applicable sales compensation limits.
Changes to reduce sales compensation have had a negative impact on the sales force in the past and could in the future.
Limits on the amount of sales compensation we pay could inhibit our ability to attract and retain our sales force, negatively impact our revenue and cause regulatory risks.
Several markets, including Mainland China, South Korea, Indonesia and Vietnam, impose limits on the amount of sales compensation we can pay to our sales force. For example, under regulations in Mainland China, direct
selling companies may pay independent direct sellers in Mainland China up to a maximum 30% of the revenue they generate through their own sales of products to consumers. Additionally, in South Korea, local regulations limit sales compensation to 35%
of the total price of goods or services supplied in South Korea. These regulations may limit the incentive for people to join our sales force and may reduce our ability to differentiate ourselves from our competitors in attracting and retaining our
sales force.
In addition, we have been required to modify our sales compensation plan in certain markets, including South Korea and Vietnam, from time to time to remain in compliance with applicable sales compensation limits.
Because sales compensation, as a percentage of revenue, can fluctuate as sales force productivity fluctuates, we may be required to make further changes to stay within applicable sales compensation limits or may be at risk of exceeding them. In
addition, which revenues and expenses are within the scope of these regulations is not always clear, and interpretation and enforcement of these laws are subject to change, which could require us to make further changes or result in non-compliance
with these regulations. Any failure to keep sales compensation within legal limits in Mainland China, South Korea, Indonesia, Vietnam or any other market that imposes a sales compensation limit could result in fines or other sanctions, including
suspensions.
We may be held responsible for certain taxes, assessments and other requirements relating to the activities of our sales force, which could harm our financial condition and
operating results.
We are subject to the risk in some jurisdictions of being responsible for social security taxes, withholding or other taxes, minimum wage laws, and related assessments and penalties with respect to our sales force.
This would occur if a jurisdiction classifies our sales force as our employees rather than as independent contractors, or if a jurisdiction expands the categories of personnel to whom these tax obligations apply.
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The laws and interpretations regarding “independent contractor” status in certain jurisdictions, including the United States and the European Union, continue to evolve, and in some cases,
authorities have sought to apply these laws unfavorably against gig economy, platform and direct selling companies. For example, in January 2024, the U.S. Department of Labor adopted a regulation that alters the employee vs. independent
contractor analysis under the Fair Labor Standards Act in a way that could potentially cause more workers to be classified as employees. This regulation is currently scheduled to go into effect in March 2024.
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In addition, some jurisdictions have, without challenging the “independent contractor” status, taken the position that direct sellers must nonetheless pay certain taxes with respect to payments to their sales force.
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In the event that local laws and regulations, or the interpretation of local laws and regulations, require us to treat members of our sales force as employees rather than independent contractors (or to comply with
similar requirements regardless of whether our sales force is classified as employees), this could harm our financial condition and operating results. This risk increases as our sales force increases its use of social sharing, as several
jurisdictions’ regulations protect in-person or in-home sales demonstrations from creating an employment relationship but are less protective of online demonstrations. If our Brand Affiliates were deemed to be employees rather than independent
contractors, we would also face the risk of increased liability for their actions.
Our Sales Leaders could also face similar risks with respect to the Brand Affiliates in their sales organizations who may claim they are employees of the Sales Leader rather than independent contractors or independent
business owners, which could impact their sales operations or lead them to cease their participation in our business.
Risks Associated with Our Operations in Mainland China
Our operations in Mainland China are subject to significant government scrutiny, and we could be subject to fines or other penalties.
Our operations in Mainland China are subject to significant regulatory scrutiny. The legal system in Mainland China provides government authorities broad latitude to conduct investigations, and many Chinese
regulations, including those governing our business, are subject to significant interpretation, which may vary from jurisdiction to jurisdiction. Because of significant government concerns in Mainland China regarding improper direct selling
activities, government regulators closely scrutinize activities of direct selling companies and activities that resemble direct selling. The government in Mainland China continues to inspect and review companies in the direct selling industry on a
regular basis. We believe the regulatory environment in Mainland China continues to be challenging and restrictive.
The government’s scrutiny of activities within the health products and direct selling industries has been at higher levels since 2019, when the government conducted a 100-day campaign
to review and inspect the health products and direct selling industries following negative media coverage generated by healthcare-related product claims made by another direct selling company in Mainland China. Since 2019, we have been receiving and
addressing an increased number of government reviews, inspections, and inquiries and consumer complaints in Mainland China; our ability to hold certain business meetings has been limited; and negative media coverage has spread to include additional
companies, including ours.
Government regulators frequently make inquiries into our business activities and investigate complaints from consumers and others regarding our business. Some of these inquiries and investigations in the past have
resulted in the payment of fines by us or members of our sales force, interruption of sales activities and warnings. Any determination by government regulators in these inquiries or investigations that our operations or activities, or the activities
of our sales force, are not in compliance with applicable regulations could result in substantial fines, extended interruptions of business, and termination of necessary licenses and permits, including our direct selling and other licenses, all of
which could harm our business.
We train our sales force in Mainland China on how our Mainland China business model differs from our global business model. However, Sales Leaders in Mainland China may attend regional and global events or interact
with Sales Leaders from other markets. Although our global model and Mainland China business model differ, mistakes may be made as to how those working in Mainland China should promote the business in Mainland China. These mistakes by our sales
force, or allegations of such mistakes, have, and may in the future, led to government reviews and investigations of our operations in Mainland China, as well as adverse publicity, reputational harm and adjustments or interruptions to our operations,
all of which has and could in the future have a significant negative impact on our revenue and the number of Sales Leaders and Customers in the region.
If direct selling regulations in Mainland China are modified, interpreted or enforced in a manner that results in negative changes to our business model or the imposition of a range
of potential penalties, our business could be significantly negatively impacted.
The government of Mainland China has adopted direct selling and anti-pyramiding regulations that impose significant restrictions and limitations on businesses in our industry. Most notably, the regulations prohibit
multi-level compensation, which is the basis of how we compensate our sales force outside of Mainland China. The regulations also prohibit overseas personnel from participating in direct selling in Mainland China. We have structured our business
model in Mainland China based on several factors: the guidance we have received from government officials, our interpretation of applicable regulations, our understanding of the practices of other international direct selling companies operating in
Mainland China, and our understanding as to how regulators are interpreting and enforcing the regulations. The regulatory environment in Mainland China continues to be challenging and restrictive. We are currently evaluating potential changes to the
structure of our sales compensation in Mainland China due to the evolving commercial and regulatory environment. These changes could have a negative impact on our sales in that market.
Members of our sales force in Mainland China do not participate in our global sales compensation plan but are instead compensated according to a separate compensation model. We generally compensate our Sales Leaders in
Mainland China at a level that is competitive with other direct selling companies in the market and comparable to the compensation of our Sales Leaders globally.
Other than our direct selling subsidiary, we also have a separate subsidiary in Mainland China that is a registered independent entity that engages in cross-border e-commerce, through which one of our U.S. subsidiaries
can sell a limited selection of products to consumers in Mainland China for their personal consumption. Cross-border e-commerce is separated from the direct selling sales channel in Mainland China. Our Sales Leaders can contract with the China
entity, promote this cross-border e-commerce platform to introduce consumers to place orders on this platform, and receive compensation in return. Through this entity, the U.S. subsidiary sells ageLOC Meta, ageLOC Youth and certain other products, which are neither registered for retail sale in Mainland China nor registered specifically as direct selling products and,
therefore, can only be sold to local consumers for their personal consumption and cannot be sold through the direct selling channel. We also plan to begin selling additional products through this channel. Although we take measures (1) to maintain
legal separation between our cross-border e-commerce entity and our direct selling entity; and (2) to ensure the products sold on our cross-border e-commerce platform are for consumers’ personal consumption only, our business in Mainland China could
be negatively impacted if regulatory authorities elect to attribute these cross-border e-commerce sales activities and related product claims, or the accompanying actions of our sales force, to our direct selling business, and make a determination
they are in violation of direct selling, customs or other applicable laws.
Our Mainland China business also has an e-commerce platform in which it sells products directly to customers. The products we sell on this platform are registered for retail sale in Mainland China, but they are not
registered for the direct selling channel. We permit members of our sales force, as non-direct sellers, to promote this platform and refer customers to it, in addition to their participation in our direct selling business. They receive a promotion
bonus based on our sales on this platform to customers they have referred. Although the promotion bonus is calculated separately from our sales force’s compensation for direct selling, it is possible that our business in Mainland China could be
negatively impacted if regulatory authorities elect to attribute these e-commerce sales activities and the promotion bonus to our direct selling business.
The nature of the political, regulatory and legal systems in Mainland China gives regulatory agencies at both the local and central levels of government broad discretion to interpret and enforce regulations as they
deem appropriate to promote social stability. We face a risk that regulators may change the way in which they currently interpret and enforce the direct selling regulations, or that such regulations may be modified. If our business practices are
deemed to be in violation of applicable regulations as they may be interpreted or enforced, in particular our use of the sales productivity of a Sales Leader him/herself and of the sales force that such Sales Leader trains, collaborates with,
supports and services in setting his/her salary or service fee and determining their position/title on a quarterly basis, then we could be sanctioned, required to change our business model, and/or have our direct selling license revoked, any of which
could significantly harm our business.
In January 2019, the Mainland China government announced a 100-day campaign to review and inspect the health products and direct selling industries. This campaign involved a number of regulatory agencies. Since the
100-day period ended, there has continued to be a heightened level of regulatory scrutiny of these industries and of our business and products. For example, government authorities have not been issuing new licenses for direct selling since the
beginning of the 100-day action in early 2019. There is also uncertainty whether any changes to the regulations that apply to these industries will be made based on the review. If changes are made to any of the regulations that apply to our business
model, products or operations, our business could be harmed.
Our ability to expand our business in Mainland China could be negatively impacted if we are unable to obtain additional necessary national and local government approvals in Mainland
China.
To expand our direct selling model into additional provinces in Mainland China, we currently must obtain a series of approvals from district, city, provincial and national government agencies with respect to each
province in which we wish to expand. Government authorities have not been issuing new licenses since the beginning of the 100-day action in early 2019. When the process for obtaining government approvals to conduct direct selling is operational, it
often evolves and is lengthy, as we are required to work with a large number of provincial, city, district and national government authorities. The complexity of the approval process as well as the government’s continued cautious approach as direct
selling develops in Mainland China makes it difficult to predict the timeline for obtaining these approvals. Furthermore, any media or regulatory scrutiny of our business in Mainland China could increase the time and difficulty we may face in
obtaining additional licenses. If media or regulatory scrutiny of our business in Mainland China results in significant delays in obtaining licenses elsewhere in Mainland China, or if the current processes for obtaining approvals are delayed further
for any reason or are changed or interpreted differently than currently understood, our ability to receive direct selling licenses in Mainland China and our growth prospects in this market could be negatively impacted.
If we are not able to register products for sale in Mainland China, our business could be harmed.
We face lengthy timelines with respect to product registrations in Mainland China. The process for obtaining product permits and licenses may require extended periods of time that may prevent us from launching new
product initiatives in Mainland China on the same timelines as other markets around the world. For example, a vast majority of products marketed in Mainland China as “health foods” are subject to extensive laboratory and clinical analysis by
government authorities, and with a few exceptions, the product registration process in Mainland China takes a minimum of two years and may be substantially longer. We market both “health foods” and “general foods” in Mainland China. There is some
risk associated with the common practice in Mainland China of marketing a product as a “general food” without any health food claims while applying to the authorities for “health food” classification. If government officials feel the categorization
of our products is inconsistent with product claims, form of delivery, ingredients or function, we could be prohibited or limited in marketing such products in Mainland China in their current form.
As we expand our direct selling channel, we face additional product marketing restrictions compared to our retail store channel. Under applicable direct selling regulations in Mainland China, we can only register
products for direct selling if we manufacture them and if they fall within categories that are authorized for direct selling, such as cosmetics, cleaning supplies, health foods, healthcare devices, small kitchen utensils and household appliances.
Products that are not registered for direct selling are prohibited from being marketed or sold through our direct sales channel. The process for registering products for the direct sales channel in Mainland China is
subject to delays; in fact, government authorities have not been processing new registrations for direct selling since the beginning of the 100-day action in early 2019. Any marketing or sale of
non-direct selling products by our independent direct sellers could result in negative publicity, fines and other government sanctions being imposed against us, including if a product is initially classified as a direct selling product but is later
re-classified.
Risks Associated with Market Conditions and Competition
Inability of products, platforms, business opportunities and other initiatives to gain or maintain sales force and market acceptance could harm our business, and trends among older
and younger generations of customers contribute to this risk.
Our ability to improve our financial performance largely depends on our ability to proactively anticipate, gauge and react in a timely and effective manner to changes in consumer spending
patterns and preferences regarding products, platforms, and business opportunities in the affiliate gig and sharing economy. Our operating results have been and could be adversely affected if our products, platforms, business opportunities
and other initiatives do not generate sufficient enthusiasm and economic benefit to retain our existing consumers and sales force or to attract new consumers and sales force members. For example, during 2022, sales of our ageLOC LumiSpa iO device were below our expectations. Potential factors affecting the attractiveness of our products, platforms, business opportunities and other initiatives include, among other things, shifting consumer demands,
perceived product quality and value, similarities to other products, product exclusivity or effectiveness, growth of the gig economy, disruption of retail commerce and e-commerce by social commerce, demographic trends, the strength of our brand and
public image, growth of connected commerce, sustainability factors, DEI initiatives, economic competitiveness of our business opportunity in the marketplace, perceived ability of potential affiliates to succeed in our business opportunity, the
quality and accuracy of the data we use in running our business, our technology infrastructure and capabilities, restrictions in social or digital media for sharing products and attracting consumers, adverse media attention and regulatory
restrictions on claims. In addition, we are currently pursuing an initiative to optimize the size of our product portfolio, which will include the discontinuation of some products. If we are unable to anticipate
changes in consumer and sales force preferences and trends, or if the discontinuation of products causes customer attrition, our business, financial condition and operating results could be materially adversely affected. Likewise, if we are unable
to anticipate changes in the affiliate marketing, gig and sharing economies and adapt our business opportunity accordingly, our ability to capture growth trends in the social commerce marketplace could be materially adversely affected.
In addition, our ability to develop and introduce new products could be impacted by, among other things, government regulations, changing policies in social media and other communications platforms, the inability to
attract and retain qualified staff, the termination of third-party research and collaborative arrangements, intellectual property of competitors that may limit our ability to offer innovative products or that challenge our own intellectual property,
problems related to manufacturing or quality control, and difficulties in anticipating changes in consumer tastes and buying preferences. Our operating results could be adversely impacted if our products fail to gain or maintain sales force and
market acceptance or if our successful new products undercut the sales of our other products.
To adapt our business to current macroeconomic trends, we are currently working through a significant digital transformation in our business to achieve widespread adoption of social commerce in all of our markets. This
transformation involves the development of new and enhanced digital tools for our Sales Leaders and consumers, including new digital apps and an improved website design and functionality, as well as new products, including connected devices. Our
digital transformation will require significant expenditures over the next several years. We face the risk that we will ultimately be unable to develop these items, that their development will be more costly than anticipated, or that the applications
and platforms we have and will develop will not meet the expectations of our sales force and/or consumers. Any of these eventualities could have a material negative impact on our business, sales force, consumer development and revenue.
In addition, in our more mature markets, one of the challenges we face is keeping Sales Leaders with established businesses and high-income levels motivated and actively engaged in business building activities and in
developing new Sales Leaders. We also face challenges retaining our sales force as the population of our markets transitions to a younger, millennial/Gen Z demographic, with its associated new and different dynamics of connection through social media
platforms, gratification and loyalty behaviors, particularly as this segment becomes a greater share of our revenue. It is possible that, over time, increasing negative perceptions about business opportunities that involve multi-level compensation
programs, particularly as affiliate marketing programs gain greater prominence in the gig economy, could develop and increase among these younger demographics, which would be detrimental to our business if we are unable to adapt. In addition, as
affiliate marketing programs gain greater market share, our competition for participants from our target market becomes more intense. Moreover, when sales through social sharing do not generate repeat purchases or subscriptions at the same rate as
other sales, this creates revenue volatility and/or declines. Many in the younger demographic are particularly savvy with social sharing across multiple business opportunity platforms. Some of our initiatives have not generated lasting excitement and
engagement among our sales force in the long term, and at times, our initiatives have not sufficiently generated sales force activity and productivity or motivated
Sales Leaders to remain engaged in business building and developing new Sales Leaders. These outcomes could recur in the future. Some initiatives have had, and could continue to have, unanticipated negative impacts on our sales force, particularly changes to our sales compensation plans, incentive rewards, and recognition practices. The introduction of a new product or key initiative can also negatively
impact other product lines to the extent our Sales Leaders focus their efforts on the new product or initiative. In addition, if any of our products fails to deliver on consumer or sales force expectations, we could see an increase in product
returns.
Difficult economic conditions could harm our business.
Difficult economic conditions, such as high unemployment levels, inflation, deflation, or recession, have in the past, and could continue to, adversely affect our business by causing a decline in demand for our
products, particularly if the economic conditions are prolonged or worsen. In addition, economic conditions may adversely impact access to capital for us and our suppliers, may decrease the ability of our sales force and consumers to obtain or
maintain credit cards, and may otherwise adversely impact our operations and overall financial condition. For example, we believe inflation had a negative impact on our 2022 and 2023 sales by curbing the discretionary spending of our consumers.
Inflation also has increased the cost of our inventory and shipping expenses. Higher interest rates have increased our interest expense, as our credit facility entails variable-rate interest. In addition, the economy in Mainland China has been
challenging in recent months, including with deflationary pressures. All of these conditions could continue in 2024. Current recessionary conditions also cause further uncertainty regarding the potential for growth in our business during 2024.
Our markets are intensely competitive, and market conditions and the strengths of competitors may harm our business.
The markets for our products are intensely competitive. The success of our products is dependent on our ability to anticipate and respond to market trends and changes in consumer preferences and to maintain a product
offering and pipeline that is relevant and priced accessibly to consumers. Our products compete directly with branded, premium retail products and with the products of other direct selling companies, and many of our competitors have much greater name
recognition and financial resources than we have, which may give them a competitive advantage. Because of regulatory restrictions concerning claims about the efficacy of beauty and wellness products, we may have difficulty differentiating our
products from our competitors’ products, and competing products entering the beauty and wellness market could harm our revenue. In addition, our business may be negatively impacted if we fail to adequately adapt to trends in consumer behavior and
technologies to meet consumers’ needs and demands and reach a wider audience.
In addition, the emergence and increased adoption of artificial intelligence (“AI”) could cause us to fall behind competitively. In the rapidly evolving landscape of e-commerce and digital enterprises, AI technologies
are expected to play a pivotal role in enhancing customer experiences through personalized recommendations, streamlined purchasing processes and targeted marketing strategies. Automation through AI also could streamline supply chain management,
inventory tracking and order fulfillment, leading to increased efficiencies and cost effectiveness. As AI technologies become integral to improving operational efficiency, customer engagement and decision-making processes, our competitiveness and
reputation could be harmed if we are unable to adopt and utilize these technologies as quickly or efficiently as our competition.
We also compete with other direct selling companies, affiliate marketing companies and gig economy companies to attract and retain our sales force and consumers. Some of these
competitors have longer operating histories and greater visibility, name recognition and financial resources than we do. Some of our competitors have also adopted and could continue to adopt some of our successful business strategies, including our
global sales compensation plan. Consequently, to successfully compete in this industry, and attract and retain our sales force and consumers, we must ensure that
our business opportunities and sales compensation plans are financially rewarding and innovative. Successfully marketing our sales compensation plan in a way that differentiates it from our competitors
could become more difficult as the FTC increases its scrutiny of earnings claims and also of disclaimers regarding atypical earnings claims. Although we believe we have significant competitive advantages, we cannot assure that we will be able to
continue to successfully compete in this industry.
Adverse publicity concerning our business, marketing plan, products or people could harm our business and reputation.
Growth in our sales force and consumers and our results of operations can be particularly impacted by adverse publicity. Given the nature of our operations, lack of clarity on applicable legal requirements and
standards, and our continuous need to recruit and retain consumers and members of our sales force, we are particularly vulnerable to adverse publicity. Specifically, we are susceptible to adverse publicity concerning:
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suspicions about the legality and ethics of network marketing;
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media or regulatory scrutiny regarding our business and our business models, including in Mainland China;
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the safety or effectiveness of our or our competitors’ products or the ingredients in such products;
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inquiries, investigations, fines, legal actions, or mandatory or voluntary product recalls involving us, our competitors, our business models or our respective products;
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the actions of our current or former sales force and employees, including any allegations that our sales force or employees have overstated or made false product claims or earnings representations, or engaged
in unethical or illegal activity;
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misperceptions about the types and magnitude of economic benefits offered at different levels of sales engagement in our business; and
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public, governmental or media perceptions of the direct selling, beauty product, or wellness product industries generally.
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These issues have previously resulted in negative publicity and have harmed our business.
Critics of our industry, consumer protection groups, short sellers and other individuals have in the past and may in the future utilize the internet, the press and other means to publish criticisms of the industry, our
company and our competitors, or make allegations regarding our business and operations, or the business and operations of our competitors. In some cases, such adverse publicity or allegations can lead to government and regulatory scrutiny. We
continue to see adverse publicity regarding our company and the direct selling and healthcare products industries. We or others in our industry may receive similar negative publicity or allegations in the future, and it may harm our business and
reputation. Furthermore, the availability of social media channels can increase the likelihood of negative publicity because these channels are an easily accessible public forum. For example, if a member of our sales force makes an improper claim
about our products or business opportunity on social media, or if a critic of our company posts negative information about our company on social media, it is more likely to be disseminated widely and potentially noticed by the media or regulators.
Product diversion may have a negative impact on our business.
We see our products being sold through online marketplace sites and other distribution channels in certain markets. Although we continually take steps to control product diversion, this activity continues to be a
challenge, and we believe that changes to our global sales compensation plan, divergence of product pricing across markets, or increased use of online channels for conducting sales transactions have and may continue to lead to increased product
diversion. Product diversion causes confusion regarding our distribution channels and negatively impacts the ability of our sales force to sell our products. It also creates a negative impression regarding
the viability of the business opportunity for our sales force, which can harm our ability to recruit new people to join our sales force. Product diversion may also
cause brand erosion and negatively impact the brand value perception. Product diversion schemes may also involve illegal importation, investment or other activities and harm our brand if gray market or counterfeit goods are passed off as our own. If
we are unable to effectively address this issue or if diversion increases, our business could be harmed.
Risks Associated with Epidemics and Other Widespread Crises
Epidemics and other crises have negatively impacted our business and may do so in the future.
Due to the person-to-person nature of direct selling, our results of operations have been, and likely will in the future be, harmed if the fear of a communicable and rapidly spreading disease, or another type of crisis
such as a natural disaster, results in travel restrictions or causes people to avoid group meetings, gatherings or interactions with other people.
The outbreak of COVID-19 in 2020 and ensuing pandemic resulted in significant contraction of economies around the world and interrupted global supply chains as many governments issued stay-at-home orders to combat
COVID-19. Government-imposed restrictions and public hesitance regarding in-person gatherings, travel and visiting public places reduced our sales force’s ability to hold sales meetings, resulted in cancellations of key sales leader events and
incentive trips, and required us to temporarily close our walk-in and fulfillment locations in some markets where we had such properties. Our supply chain and logistics also incurred some interruptions and cost impacts, such as difficulties in
obtaining some ingredients and in shipping products in some markets. Even as COVID-related factors were alleviated, the productivity of our sales force was negatively impacted as our sales force was able to travel more freely and take vacations. All
of these factors and other events related to COVID-19 negatively impacted our sales and operations and could repeat in the event of future epidemics or other crises.
In addition, during a widespread crisis, regulators are vigilant for companies that may be exploiting the crisis to the detriment of consumers. For example, during 2020 to 2022, the FTC issued letters that warned
several direct-selling companies to remove and address claims that they or members of their sales force were making about their products’ ability to treat, cure or prevent COVID-19 and/or about the earnings that people who suffered the loss of a job
or income could make. Although we take steps to educate our sales force on proper claims, if members of our sales force make improper claims, or if regulators determine we are making any improper claims, it could lead to an investigation and could
harm our business and reputation.
International Risks
Our ability to conduct business in international markets may be affected by political, legal, tax and regulatory risks.
Our ability to capitalize on growth in new international markets and to maintain the current level of operations in our existing international markets is exposed to risks associated with our international operations,
including:
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the possibility that a government might ban or severely restrict our sales compensation and business models;
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the possibility that local civil unrest, political instability, or changes in diplomatic or trade relationships might disrupt our supply chain or other operations in one or more markets—for example, the
ongoing conflict in Russia and Ukraine has caused distraction to our sales force;
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the lack of well-established or reliable legal systems in certain areas where we operate;
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the presence of high inflation in the economies of international markets in which we operate;
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the possibility that a government authority might impose legal, tax, customs, or other financial burdens on us or our sales force, due, for example, to the structure of our operations in various markets;
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the possibility that a government authority might challenge the status of our sales force as independent contractors or impose employment or social taxes on our sales force; and
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the possibility that governments may impose currency remittance restrictions limiting our ability to repatriate cash.
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There has been an increasing level of tension in U.S.-China relations over the last several years. Given the significant size of our China business, our business could be harmed if relations continue to deteriorate or
additional sanctions or restrictions are imposed by either government. In addition, there have been adverse public reaction and media attention to statements made by representatives of other businesses related to these issues that have adversely
affected business. We could similarly face adverse public or media attention, and potentially increased regulatory scrutiny, as a result of increased trade or political tensions or any statements or actions by employees or our sales force that
generate publicity with respect to these issues.
We are subject to financial risks as a result of our international operations, including exposure to foreign-currency fluctuations, currency controls and inflation in foreign
markets, all of which could impact our financial position and results of operations.
In 2023, approximately 74% of our sales occurred in markets outside of the United States in each market’s respective local currency. Foreign-currency fluctuations affect our
financial position and results of operations. We purchase inventory primarily in the United States in U.S. dollars. In preparing our financial statements, we translate revenue and expenses in our markets outside the United States from their local
currencies into U.S. dollars using weighted-average exchange rates. If the U.S. dollar strengthens relative to local currencies, our reported revenue, gross profit and net income will likely be reduced. Foreign-currency fluctuations also cause losses
and gains resulting from translation of foreign-currency-denominated balances on our balance sheet.
We also face the risk of currency controls. If foreign governments restrict transfers of cash out of their country and control exchange rates, we may be limited as to the timing and amount of cash we can repatriate and
may not be able to repatriate cash at beneficial exchange rates, which could have a material adverse effect on our financial position, results of operations or cash flows. We typically fund the cash requirements of our operations in the United States
through intercompany dividends, intercompany loans and intercompany charges for products, use of intangible property, and corporate services. However, some markets impose government-approval or other requirements for the repatriation of dividends.
For example, in Mainland China, we are unable to repatriate cash from current operations in the form of dividends until we file the necessary statutory financial statements for the relevant period. We also have experienced delays in repatriating cash
from Argentina. As of December 31, 2023, we had $31.8 million in cash denominated in Chinese RMB, and our intercompany receivable with our Argentina subsidiary was $17.7 million.
In addition, high levels of inflation and currency devaluations in any of our markets could negatively impact our balance sheet and results of operations. Gains and losses resulting from the remeasurement of non-U.S.
dollar monetary assets and liabilities of our subsidiaries operating in highly inflationary economies are recorded in our net earnings. For example, during 2018, Argentina was designated as a highly inflationary economy under U.S. generally accepted
accounting principles; accordingly, we began to apply highly inflationary accounting for our Argentina operations, which has resulted in additional foreign-currency charges. Other markets may be designated as highly inflationary economies in the
future, which could result in further foreign-currency charges.
Although we may engage in transactions intended to reduce our exposure to foreign-currency fluctuations, there can be no assurance that these transactions will be effective. Complex global political and economic
dynamics can affect exchange rate fluctuations. For example, the implementation of tariffs, border taxes or other measures related to the level of trade between the United States and other markets could impact the value of the U.S. dollar. It is
difficult to predict future fluctuations and the effect these fluctuations may have upon future reported results or our overall financial condition.
Potential changes to tariff and import/export regulations, and trade disputes between the United States and other jurisdictions may have a negative effect on global economic
conditions and our business, financial results and financial condition.
The United States and other foreign jurisdictions may change customs regulations or tariff rates that are applied to our imports or exports at any time. Tariff changes are difficult to predict and may cause us material
short-term or long-term cost fluctuations. We rely on the use of Free Trade Agreements, where available, that may experience alterations, suspensions or cancellations, which could increase our customs expense or otherwise harm our business. In
addition to tariffs, any actions taken by the United States or by foreign countries to further implement trade policy changes, including limiting foreign investment or trade, increasing regulatory requirements, or other actions that impact our
ability to obtain necessary licenses or approvals could negatively impact our business. These actions are unpredictable, and any of them could also have a material adverse effect on global economic conditions and the stability of global financial
markets, significantly reduce global trade, restrict our access to suppliers or customers, and have a material adverse effect on our business, financial condition and results of operations.
Human Capital Risks
If we are unable to retain our existing sales force and recruit additional people to join our sales force, our revenue may not increase and may even decline.
Our products are primarily marketed by our sales force, and we depend on them to generate virtually all of our revenue. Our sales force may terminate their services at any time, and like most direct selling companies,
we experience high turnover among our sales force from year to year. People who join our company to purchase our products for personal consumption or for short-term income goals frequently only stay with us for a short time or are less consistent in
their participation. Sales Leaders who have committed time and effort to build a sales organization will generally stay for longer periods. To increase our revenue, we must increase the number of and/or the sales productivity of our sales force. We
must also expand our outreach and outbound efforts to attract, connect and nurture new customers for a wider consumer base who purchase products and whom we can foster along a consumer journey to promote retention and higher lifetime value.
We have experienced periodic fluctuations in Sales Leaders, Paid Affiliates and Customers in the past and could experience such fluctuations again in the future. For example, our Sales Leaders in Mainland China
declined 32% from December 31, 2021 to December 31, 2022 due to pressures from COVID-related factors. If our business, products and initiatives do not drive growth and/or sales productivity in Sales Leaders, Paid Affiliates and Customers, our
operating results could be further harmed.
The number and productivity of our sales force is negatively impacted by several additional factors, including:
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any adverse publicity or negative public perception regarding us, our products or ingredients, our distribution channel, or our industry or competitors;
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lack of interest in, dissatisfaction with, or the technical failure of, our products or digital tools;
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lack of compelling products or income opportunities, including through our sales compensation plans and incentive trips and other offerings;
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negative sales force reaction to changes in our sales compensation plans or to our failure to make changes that would be necessary to keep our compensation competitive with the market;
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interactions with our company, including our actions to enforce our policies and procedures and the quality of our customer service;
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any regulatory actions or charges against us or others in our industry, as well as regulatory changes that impact product formulations and sales viability;
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general economic, business, public health and geopolitical conditions, including employment levels, employment trends such as the gig and sharing economies and affiliate marketing, pandemics or other
conditions that curtail person-to-person interactions, and the ongoing conflicts in Russia/Ukraine and Israel/Hamas which have caused distraction to our sales force;
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changes in the policies of social media platforms used to prospect or recruit potential consumers and sales force participants;
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recruiting efforts of our competitors and changes in consumer-loyalty trends;
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potential saturation or maturity levels in a given market, which could negatively impact our ability to attract and retain our sales force in such market;
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growing gig economy competition which may draw away potential product sellers, affiliates, and influencers;
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our sales force’s increased use of social sharing channels, which may enable them to more easily engage their consumers and sales network in other opportunities;
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lack of sufficient tools to create customer interest in our products and to manage and build a personalized business; and
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our and our sales force’s ability to implement social commerce and other selling platforms that appeal to consumers.
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We depend on our key personnel and Sales Leaders, and the loss of the services provided by any of our executive officers, other key employees or key Sales Leaders could harm our
business and results of operations.
Our success depends to a significant degree upon the continued contributions of our senior and regional management, many of whom would be difficult to replace. Our senior and regional management employees may
voluntarily terminate their employment with us at any time, and it is not uncommon for employees of direct-selling companies, including employees of our company, to terminate their employment and begin working for another direct-selling company. In
addition, we need to continue to attract and develop qualified management personnel to sustain growth in our markets. Attracting and retaining qualified personnel has been an increased challenge during the current competitive employment environment.
In addition, there has been downward pressure on our employees’ incentive compensation in recent years, and our recent restructurings have in some cases caused employees to take on additional responsibilities, both of which have presented challenges
to our employee morale and could lead to employee attrition. If we are not able to successfully retain existing personnel and identify, hire and integrate new personnel, our business and growth prospects could be harmed.
The success of our business also depends on our key Sales Leaders. For the three months ended December 31, 2023, we had approximately 44,059 Sales Leaders. As of December 31, 2023,
approximately 294 Sales Leaders occupied the highest levels under our global sales compensation plan, and in Mainland China approximately 98 key Sales Leaders were playing a significant role in managing, training and servicing our sales force in
that market and driving sales. We rely on these Sales Leaders (or other sales force members that they train, collaborate with, support and service) for a substantial majority of our revenue. As a result, the loss of a high-level or key Sales
Leader or a group of leading Sales Leaders, whether by their own choice or through disciplinary actions by us for violations of our policies and procedures, could negatively impact our growth and our revenue.
Risks Associated with Our Manufacturing and Operations
Production difficulties, quality control problems, inaccurate forecasting, shortages in ingredients, and reliance on our suppliers could harm our business.
Production difficulties, quality control problems, inaccurate forecasting, and our reliance on third-party suppliers to manufacture and deliver products that meet our specifications in a timely manner could harm our
business. Occasionally, we have experienced production difficulties with respect to our products, including the availability of labor, raw materials, components, packaging, and products that do not meet our specifications and quality control
standards. These production difficulties and quality problems have in the past, and could in the future, result in stock outages or shortages in our markets with respect to such products, harm our sales, or create inventory write-downs for unusable
products.
In addition, we and manufacturers in our supply chain acquire ingredients, components, products, and packaging from third-party suppliers and manufacturers. A loss of any of these suppliers and any difficulties in
finding or transitioning to alternative suppliers could harm our business. In addition, we obtain our ageLOC Galvanic Facial Spa, ageLOC Body Spa, and Nu Skin Facial Spa devices and some other products and ingredients from sole suppliers that own or control the product
formulations, ingredients or other intellectual property rights associated with such products. We also license the right to distribute some of our products from third parties. In the event we are unable to maintain or renew our contracts with any of
these suppliers, manufacturers or other third parties, we may need to discontinue some products or develop substitute products, which could harm our revenue. In addition, if we experience supply shortages, price increases or regulatory impediments
with respect to the raw materials, ingredients, components or packaging we use for our products, we may need to seek alternative supplies or suppliers and may experience difficulties in finding replacements that are comparable in quality and price.
For example, some of our products, including ageLOC Meta and ageLOC Youth (Youthspan or Y-Span
in some markets), incorporate unique natural ingredients that are only harvested once per year and/or may have limited global supplies. If demand exceeds forecasts, we may have difficulties in obtaining additional supplies to meet the excess demand
until the next growing season. If we are unable to successfully respond to such issues, our business could be harmed.
The loss of or a disruption in our manufacturing, supply chain and distribution operations, or significant expenses or violations incurred by such operations, could adversely affect
our business.
As a company engaged in manufacturing, distribution, and research and development on a global scale, we are subject to the risks inherent in such activities, including industrial accidents, climate or environmental
events, fires, floods, earthquakes, labor shortages, strikes and other labor or industrial disputes, disruptions in logistics or information systems, loss or impairment of key manufacturing or distribution sites, import and export restrictions or
delays, product quality control, safety, licensing requirements and other regulatory or government issues, as well as natural disasters, pandemics, border disputes, global uncertainties, acts of terrorism, and other external or macroeconomic factors
over which we have no control. For example, the long-term impacts of climate change, whether involving physical risks (such as extreme weather conditions, drought, or rising sea levels) or transition risks (such as regulatory or technology changes)
may be widespread and unpredictable. Certain impacts of physical risk may include temperature changes that increase the heating and cooling costs at our facilities; extreme weather patterns that affect the production or sourcing of certain
components; flooding and storms that damage or destroy our buildings and inventory; and heat and extreme weather events that cause long-term disruption or threats to the habitability of our customers’ communities. These risks may be heightened if we
consolidate certain of our manufacturing, distribution, or supply facilities or if we are unable to successfully enhance our disaster recovery planning. These risks also increase as we pursue our current strategy of acquiring manufacturing companies
and thereby conducting more of our manufacturing in-house. The loss of, or disruption or damage to, any of our facilities or centers or those of our third-party manufacturers could have a material adverse effect on our business, reputation, results
of operations and financial condition.
We have experienced, and may continue to experience, disruptions to the transportation channels used in our supply chain and distribution operations, including increased airport and shipping port congestion, a lack of
transportation capacity, increased fuel expenses, import or export controls or delays, and labor disputes or shortages. Disruptions in our container shipments may result in increased costs, including the additional use of air freight to meet demand.
Congestion to ports can affect previously negotiated contracts with shipping companies, resulting in unexpected increases in shipping costs and reduction in our profitability. For example, the COVID-19 pandemic resulted in several disruptions and
delays, as well as quantity limits and price increases, in our global transportation channels.
In addition, our manufacturing facilities are subject to numerous regulations, including labor regulations and environmental regulations that govern the storage, discharge, handling, emission, generation, manufacture,
use and disposal of chemicals and other materials. We will also likely become subject to new regulations in these areas, which could require substantial expenditures. Violations of existing or new requirements could result in financial penalties and
other enforcement actions and could require us to halt one or more portions of our operations until a violation is cured. The costs of curing incidents of non-compliance, resolving enforcement actions or private-party actions that might be initiated
against us, or of satisfying new legal requirements could have a material adverse effect on our business, financial condition, or results of operations.
Our business could be negatively impacted if we fail to execute our product launch process or ongoing product sales due to difficulty in forecasting or increased pressure on our
supply chain, information systems and management.
Prior to making a product generally available for purchase in a market, we often do one or more introductory offerings of the product, such as a preview of the product to our Sales Leaders or other product introduction
or promotion. These offerings sometimes generate significant activity and a high level of purchasing, which can result in a higher-than-normal increase in revenue during the quarter and skew year-over-year and sequential comparisons. These offerings
may also increase our product return rate. We have, and may in the future, experienced difficulty effectively managing growth associated with these offerings and may face
increased risk of improper sales force activities and related government scrutiny.
In addition, the size and condensed schedule of these product offerings increase pressure on our supply chain and order processing systems. We have, and may in the future, failed to appropriately scale
our system capacity and operations in response to unanticipated changes in demand for our existing products or to the demand for new products, which reduces our sales force’s confidence in our business and could harm our reputation and profitability.
As our sales force increases its use of social platforms to interact with customers, our business results could be adversely affected if our implementation of new platforms and processes to support our
sales force is delayed. In addition, we are dependent on third parties for testing and delivery of portions of these and other of our information system platforms. Unanticipated changes or system failures by third parties could harm our ability to
meet the expectations of our sales force, thus resulting in harm to our revenue, reputation and sales force confidence in our systems.
If we do not accurately forecast sales levels in each market for product launches or ongoing product sales, obtain sufficient ingredients, components or packaging, or produce a sufficient supply to meet
demand, we may incur higher expedited shipping costs and we may temporarily run out of stock of certain products, which could negatively impact the enthusiasm of our sales force and consumers. Conversely, if demand does not meet our expectations for
a product launch or ongoing product sales or if we change our planned launch strategies or initiatives, we could incur inventory write-downs. For example, during the third quarter of 2023, we made the strategic decision to re-balance and narrow our
product portfolio, which resulted in an incremental $65.7 million inventory write-off. Each of these issues has impacted us in the past, and they could again occur with our ongoing or future product offerings. If we fail to effectively forecast
product demand in the product launch process or for ongoing product sales, our reputation and profitability also could be negatively impacted.
If we are unable to effectively manage our growth in certain markets, our business and operations could be harmed.
At times, we can experience significant growth in one or more of our markets. For example, during 2020 we experienced significant growth in some of the markets in the Americas and Europe. Growth can
strain our ability to effectively manage our operations, as it requires us to expand our management team, labor force, technology bandwidth and capabilities, and manufacturing operations. Insufficient management execution to support growth could
result in, among other things, product delays or shortages, decreases in product quality, service level challenges, operating mistakes and errors, inadequate customer service, inappropriate claims or promotions by our sales force, and governmental
inquires and investigations, all of which could harm our revenue and ability to generate sustained growth and result in unanticipated expenses. In addition, we need to continue to attract and develop qualified management personnel to sustain
growth. If we are not able to successfully retain existing personnel and identify, hire and integrate new personnel, our business and growth prospects could be harmed.
In addition, to the extent we expand into new markets, our efforts might not be successful in driving growth. New markets may have competitive conditions, consumer tastes and discretionary spending
patterns that are more difficult to predict or satisfy than our existing markets. We may have difficulty attracting Brand Affiliates to our business opportunity due to our lack of name recognition or other reasons, and it may be difficult to find
and retain qualified employees and vendors. We also might be unable to successfully navigate the risks inherent in international operations, such as differing legal and regulatory requirements that may apply to our products and/or operations,
including those that pertain to privacy and data protection, direct selling, employment and intellectual property. If we do not successfully execute plans to enter new markets, these new markets may not generate growth and may be unprofitable,
causing our business, financial condition or results of operations to be adversely affected.
System failures, capacity constraints and other information technology difficulties could harm our business.
With global operations and a complex sales compensation plan, our business is highly dependent on efficiently functioning information technology systems, including websites, mobile applications, third-party cloud
providers, data centers, databases, networks and other systems. We rely on these systems for accepting and processing sales orders, operating our sales force and customer support operations, tracking and compensating our sales force, conducting our
corporate and regional operations, preparing our financial statements, and other aspects of our business. Accordingly, the performance, reliability and availability of our systems are critical to our business, reputation, financial reporting, and
ability to attract and retain our sales force and customers.
Our or our third-party providers’ systems may be damaged or disrupted by fires, floods, earthquakes or other natural disasters, human error, telecommunications failures, power loss, physical or electronic break-ins,
computer viruses, cyberattacks, changes in our information technology systems or organization, and other events. We have experienced system failures, outages and cyberattacks, and we may experience them in the future. We cannot guarantee that the
preventive measures we take, including redundancies, security protocols, network protection mechanisms and other procedures, will be adequate to prevent or remedy system failure or interruption, data loss, security breaches or other data security
incidents. Furthermore, any mitigation process could take several days or more, resulting in a loss of revenue, loss of ability to track and timely pay sales compensation to our sales force, loss of confidence of our sales force and harm to our
reputation. Two third-party providers that we rely on are Amazon Web Services (for our network, compute and storage needs) and Infosys Limited (for e-commerce and managed services). Any significant disruption or limitation of, or interference with,
our use of these providers’ services would negatively impact our operations, and any transition to a different provider would cause us to incur significant time and expense. We currently plan to outsource additional technology functions to third
parties, which may significantly increase our reliance on third-party services for the operation and protection of our information technology systems. We may also experience disruptions to our systems as we transition these functions to third
parties.
In addition, we make significant expenditures on our information technology infrastructure and other technology initiatives, and these items could become obsolete or impaired, which has and may in the future cause us
to incur significant expenses to address. For example, in 2018, following an evaluation of our information technology infrastructure and organization and our social sharing and digital initiatives, we determined to alter our strategic direction with
respect to some of our systems and tools, resulting in impairment charges of approximately $49 million. We also incurred approximately $22 million in severance payments and other expenses related to the reorganization of our Information Technology
Department and other corporate and regional offices. Additional cash outlay and new personnel were also necessary for execution of new plans and strategy. In this strategic shift in direction, we continue to identify and re-architect additional
legacy systems to help mitigate the risk and exposure these systems introduce to our business. We also continue to allocate resources to new technology and digital initiatives. There can be no assurance that we will be able to build and roll-out our
new technology and digital tools on a global scale or that they will function as intended, and these initiatives may entail significant expenses and could cause disruptions in our business.
Our systems could also be strained by growth in our business. Although we work to expand and enhance our e-commerce features, network infrastructure and other technologies to accommodate increases in the volume of
traffic to our ecommerce channels, we may be unsuccessful in these efforts. Our failure, or our third-party providers’ failure, to achieve or maintain system capacity could significantly reduce our ability to process orders and could harm our
business, reputation, revenue and financial condition.
Any acquired companies or future acquisitions may expose us to additional risks.
We have acquired certain businesses, and we plan to continue to do so in the future as we encounter acquisition prospects that would complement our current product offerings, increase the size and geographic scope of
our operations or otherwise offer growth and operating efficiency opportunities. For example, in April 2023, we acquired 60% of LifeDNA, Inc., a DNA assessment company for consideration of $4.0 million of cash, along with the conversion of a previous
$3.0 million Simple Agreement for Future Equity (“SAFE”), and a $0.2 million convertible note. Also, in June 2023, we acquired 100% ownership in Beauty Biosciences, LLC, a clean and clinically proven skin care and beauty device company. The purchase
price for BeautyBio was $75.0 million, net of cash acquired of $1.5 million, all payable in cash. At any particular time, we may be in various stages of assessment, discussion and/or negotiation with regard to one or more potential acquisitions or
investments, not all of which will be consummated. Acquisitions involve numerous risks and uncertainties, and some of our past acquisition targets have been in industries in which we lack operational or market experience. Our past acquisitions have,
and future acquisitions could, entailed numerous risks, including:
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difficulties in integrating acquired operations or products;
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the difficulties of imposing financial and operating controls on the acquired companies and their management and the potential costs of doing so;
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the potential loss of key employees, customers, suppliers or distributors from acquired businesses;
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disruption to our direct selling channel;
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diversion of management’s and other employees’ attention from our core business;
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the failure to achieve the strategic objectives of these acquisitions;
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increased fixed costs;
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financing structures that dilute the interests of our stockholders and/or result in an increase in our indebtedness;
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the failure of the acquired businesses to achieve the results we have projected in either the near or long term;
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the assumption of unexpected liabilities, including litigation risks or compliance issues not discovered during pre-acquisition diligence;
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adverse effects on existing business relationships with our suppliers, sales force or consumers;
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the risk of being unable to protect intellectual property related to newly acquired technologies; and
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risks associated with entering markets or industries in which we have limited or no prior experience, including limited expertise in running the business, developing the technology, and selling and servicing
the products.
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The expansion of our Rhyz business into new businesses has been viewed negatively by some of our Sales Leaders as these new companies sell products that are similar to those of our core business and are viewed as using
our resources for non-core businesses. These perspectives of our Sales Leaders could have a material negative impact on the number or productivity of our Sales Leaders and result in a reduction in our revenue.
Our failure to successfully complete the integration of any acquired business, a failure to adjust our fixed costs quickly enough or sufficiently to adapt to rapidly changing market conditions, or any other of the
risks discussed above could have a material adverse effect on our business, financial condition and operating results. In addition, there can be no assurance that we will be able to identify suitable acquisition candidates, consummate acquisitions on
favorable terms or realize the anticipated benefits of an acquisition.
Product Legal and Regulatory Risks
Regulations governing our products, including the formulation, registration, pre-approval, marketing and sale of our products, could harm our business.
Our products are subject to extensive government regulation by numerous federal, state, and local government agencies and authorities. Many of these laws and regulations involve a high level of subjectivity, are
subject to interpretation, and vary significantly from market to market. These laws and regulations can, and often do, have several impacts on our business, including but not limited to:
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delays, or altogether prohibitions, in introducing or selling a product or ingredient in one or more markets;
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delays and expenses associated with the registration and approval process for a product;
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limitations on our ability to import products into a market;
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delays and expenses associated with compliance, such as record keeping, documentation of the properties of certain products, labeling, and scientific substantiation;
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limitations on the claims we can make regarding our products; and
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product reformulations, or the recall or discontinuation of certain products that cannot be reformulated to comply with new regulations.
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We have observed a general increase in regulatory activity and activism in the United States and across many markets globally where we operate, and the regulatory landscape is becoming more complex with increasingly
strict requirements. In particular, the requirements are impacting the ingredients we can include in our products, the accepted quantities of those ingredients, and the quality and characterization of the ingredients. Global regulators have in recent
years become overall more restrictive on the accepted levels of active ingredients that we can use in our product, in some cases banning them outright. They have also become more restrictive on permitted contaminant levels in ingredients and, in many
cases, have forced complete removal of such contaminants. In certain cases, such as regarding some pesticides which are virtually ubiquitous in nature, it has proven difficult to comply with the requirements. Further, many of the restrictions
regarding ingredient quality are not directly applicable to our products, leaving the possibility that our interpretation of compliance may not match that of the enforcing authorities. Often there is a lack of an equivalent active ingredient present
in the marketplace. In other cases, the removal or reduction of a technical ingredient, such as various types of parabens, leads to a significant change to the character of the product that may make it no longer desirable or safe to the consumer. If
this trend in new regulations continues, we may find it necessary to alter some of the ways we have traditionally marketed our products in order to stay in compliance with a changing regulatory landscape and this could add to the costs of our
operations and/or have an adverse impact on our business.
Many laws and regulations govern the registration, pre-market approval or other aspects of regulatory oversight of our products. For example, in the United States, some legislators and industry critics have pushed for
years to increase regulatory authority by the FDA over nutritional supplements. In 2011, the FDA proposed draft guidance to clarify the FDA’s interpretation of the dietary ingredient notification requirements, and in 2016, the FDA issued a revised
draft guidance that superseded the 2011 version. This draft guidance is not yet final but appears to indicate that the FDA is expanding its definition of what is considered a “new dietary ingredient” in the United States. The industry has worked with
the FDA for several years, providing comments to the FDA to modify this guidance. While still in flux, if enacted in final form as proposed, this guidance could impose new and significant regulatory barriers for our nutritional supplement products or
unique ingredients, which could delay or inhibit our ability to formulate, introduce and sell nutritional supplements as we have in the past. Similarly, from time to time, efforts are made by some individuals or
groups to repeal the Dietary Supplement Health and Education Act of 1994 (“DSHEA”), the U.S. law that provides a separate body of regulations for dietary supplements as compared to drugs. Such a repeal would result in significant burdens to our
product development, and the costs of running our business would increase significantly. We face similar pressures in our other markets, which continue to set restrictions on ingredients and their acceptable maximum levels, as well as on
ingredient characterization, quality and levels. In Europe, for example, we are unable to market supplements that contain ingredients that were not marketed in Europe prior to May 1997 (“novel foods”) without going through an extensive registration
and pre-market approval process.
The FDA currently does not have a pre-market approval system for cosmetics. However, cosmetic products may become subject to more extensive regulation in the future, even beyond the requirements mandated by the
recently enacted Modernization of Cosmetics Regulation Act of 2022. These events could interrupt the marketing and sale of our products, severely damage our brand reputation and image in the marketplace,
increase the cost of our products, cause us to fail to meet customer expectations or cause us to be unable to deliver merchandise in sufficient quantities or of sufficient quality to our stores, any of which could result in lost sales.
Our operations could be harmed if new laws or regulations are enacted that restrict our ability to market or distribute our products or impose additional burdens or requirements on us in order to continue selling our
products. In addition, the adoption of new regulations or changes in the interpretations and enforcement of existing regulations may result in significant compliance costs or discontinuation of product sales and may impair the marketability of our
products, resulting in significant loss of net sales. We cannot predict the nature of any future laws, regulations, interpretations, or applications, nor can we determine what effect additional governmental regulations or administrative orders, when
and if promulgated, would have on our business. If new or existing laws and regulations restrict, inhibit or delay our ability to introduce or market our products or limit the claims we are able to make regarding our products, this could have a
material adverse effect on our business, financial condition, and operating results. If we fail to comply with the laws and regulations governing our products, we could face enforcement action, and we could be fined or forced to alter or stop selling
our products.
Government regulations and private party actions relating to the marketing and advertising of our products and services may restrict, inhibit or delay our ability to sell our
products and harm our business.
Government authorities regulate advertising and product claims regarding the efficacy and benefits of our products. These regulatory authorities typically require adequate and reliable scientific substantiation to
support any marketing claims. What constitutes such reliable scientific substantiation can vary widely from market to market and there is no assurance that the research and development efforts that we undertake to support our claims will be deemed
adequate for any particular product or claim. If we are unable to show adequate and reliable scientific substantiation for our product claims, or if our marketing materials or the marketing materials of our sales
force make claims that exceed the scope of allowed claims for dietary supplements, cosmetics or devices that we offer, the FDA or other regulatory authorities could take enforcement action requiring us to revise our marketing materials,
amend our claims or stop selling certain products, which could harm our business.
For example, in recent years, the FDA has issued warning letters to many cosmetic companies alleging improper structure/function claims regarding their cosmetic products, including, for example, product claims
regarding gene activity, cellular rejuvenation, and rebuilding collagen. There is a degree of subjectivity in determining whether a claim is an improper structure/function claim. Given this subjectivity and our research and development focus on the
sources of aging and the influence of certain ingredients on gene expression, there is a risk that we could receive a warning letter, be required to modify our product claims or take other actions to satisfy the FDA if the FDA determines any of our
marketing materials include improper structure/function claims for our cosmetic products. In addition, plaintiffs’ lawyers have filed class action lawsuits against some of our competitors after our competitors received these FDA warning letters.
There can be no assurance that we will not be subject to government actions or class action lawsuits, which could harm our business.
In the United States, the FTC’s Guides Concerning the Use of Endorsements and Testimonials in Advertising (“Guides”) require disclosure of material connections between an endorser and the company they are endorsing,
and they generally do not allow marketing using atypical results. Our sales force has historically used testimonials and “before and after” photos to market and sell some of our popular products such as our spa devices and ageLOC Transformation anti-aging skin care system. We intend to continue to use testimonials for our popular products, including weight management products and beauty products. In highly regulated and scrutinized product categories such as
weight management, if we or our sales force fails to comply with the Guides or makes improper product claims, the FTC could bring an enforcement action against us and we could be fined and/or forced
to alter our marketing materials. In addition, during 2023, the FTC sent notices of penalty offense to nearly 700 companies, including us, regarding the requirement of sufficient substantiation for product claims. Pursuant to the FTC’s “penalty
offense authority,” companies that received the notice are expected to comply with the standards set in the FTC’s prior administrative cases on this topic, and they could incur significant civil penalties if they or their representatives fail to do
so.
Our operations could be harmed if we or our vendors fail to comply with Good Manufacturing Practices.
Across our markets, there are regulations on a diverse range of Good Manufacturing Practices that apply to us and to our vendors covering product categories such as dietary supplements, cosmetics, foods,
over-the-counter drugs and medical devices. The Good Manufacturing Practices impose stringent requirements on a variety of topics, including vendor qualifications, ingredient identification, manufacturing controls and record keeping. Ingredient
identification requirements, which often require us to confirm the levels, identity and potency of ingredients listed on our product labels within a narrow range, are particularly burdensome and difficult for us because our products contain many
different ingredients. Additionally, certain Good Manufacturing Practices obligate us to track and periodically report adverse events to government agencies. Compliance with these increasing regulations may further increase the cost of manufacturing
certain of our products as we work with our vendors to assure they are qualified and in compliance. In addition, our operations could be harmed if regulatory authorities determine that we or our vendors are not in compliance with these regulations or
if public reporting of adverse events harms our reputation for quality and safety. A finding of noncompliance may result in administrative warnings, penalties or actions impacting our ability to continue selling certain products, including public
withdrawals, seizures and recalls. For example, we have had product recalls in the United States based on labeling issues. Problems associated with product recalls could be exacerbated due to the global nature of
our business because a recall in one jurisdiction could lead to recalls in other jurisdictions. In addition, these risks associated with noncompliance could increase as we acquire businesses, including our current and future Rhyz businesses.
If our current or any future device products are determined to be medical devices in a particular geographic market, or if our sales force uses these products for medical
purposes or makes improper medical claims, our ability to continue to market and distribute such devices could be harmed, and we could face legal or regulatory actions.
One of our strategies is to market unique and innovative products that allow our sales force to distinguish our products. As we pursue this strategy with our current and future device products, there is
a risk that regulatory authorities in our markets could determine that these products must receive clearance or be registered as medical devices. Such a determination could restrict our ability to import or sell the product in such market until
registration or clearance is obtained. The process for obtaining such registrations and clearances could require us to provide documentation concerning product manufacturing and clinical utility; to make design, specification and manufacturing
process modifications to meet standards imposed on medical device companies; and to modify our marketing claims regarding the registered product.
While we have not been required to register our device products as medical devices in most markets, we have registered some of them in some markets, including ageLOC
Boost in Thailand and our ageLOC Galvanic Facial Spa and ageLOC Body Spa systems in Indonesia, Thailand, Peru and Colombia. We also sought and received
clearance from the United States Food and Drug Administration to market our Nu Skin Facial Spa device and, more recently, our Nu Skin RenuSpa iO device for
over-the-counter use. We are currently pursuing medical device registration of Nu Skin WellSpa iO in Thailand, and the registration process could delay the launch of this product in Thailand.
In some cases, challenges can arise even after we have completed the required registration/clearance process or determined that a product does not need registration/clearance. This could occur if a
jurisdiction changes its laws or interpretations thereof, for example. In addition, if, in violation of our policies, our sales force attempts to import or export products from one market to another, makes medical claims regarding our products, or
uses our products to perform medical diagnoses or other activities limited to licensed professionals or approved medical devices (in markets where the product is not approved), it could negatively impact our ability to market or sell these products
and subject us to legal or regulatory actions.
Because medical device regulations vary widely from market to market, registration or clearance in one market does not preclude challenges or delays in obtaining registration or clearance in
other markets, nor does it preclude other markets from requiring us to make additional modifications or provide additional documentation as conditions to granting clearance. Furthermore, in some cases, registration or clearance to sell a product in
one market may be used as precedent for requiring similar approval for the product in another market, or for similar products in the same market. These additional requirements could increase the cost associated with manufacturing and selling these
products as non-medical devices in such markets.
Any of the above factors could have a material negative impact on our ability to sell products and could negatively affect our financial results.
We may incur product liability claims that could harm our business.
We sell a variety of different products for human consumption and use, including cosmetics, dietary supplements, conventional foods, OTC drugs and devices. Our cosmetics and conventional foods, as well as some of our
dietary supplements, are not generally subject to pre-market approval or registration processes so we cannot rely upon a government safety panel to qualify or approve our products for use, and some ingredients may not have long histories of human
consumption or use. We rely upon published and unpublished safety information including clinical studies on ingredients used in our products and conduct our own clinical and safety studies on some key ingredients and products, but not all products. A
product may be safe for the general population when consumed or used as directed but could cause an adverse reaction for some individuals, such as a person who has a health condition or allergies or who is taking a prescription medication. While we
include what we believe are adequate instructions and warnings and we have historically had low numbers of reported reactions, previously unknown adverse reactions could occur. If we discover that our products are causing adverse reactions, or if we
determine that any of our employees have not properly handled reports of adverse reactions, we could suffer further adverse publicity or government sanctions.
As a result of the type of products that we sell, we may be subject to various product liability claims, including that the products fail to meet quality or manufacturing specifications, contain contaminants, include
inadequate instructions as to their proper use, include inadequate warnings concerning side effects and interactions with other substances or for persons with health conditions or allergies, or cause adverse reactions or side effects. Consumer
protection laws and regulations governing our business continue to expand, and in some states such as California, class-action lawsuits based on increasingly novel theories of liability are expanding. Product liability claims could increase our
costs, cause negative publicity, and adversely affect our business and financial results. As we continue to offer an increasing number of new products through large product offerings our product liability risk may increase.
If our sales force or employees provide improper advice regarding our products or our products’ use or safety, we may be subject to additional product liability.
We have generally elected to self-insure our product liability risks. We periodically evaluate whether we can and should obtain product liability insurance. Based upon our current approach to product liability risk
management, if any of our products are found to cause any injury or damage or we become subject to product liability claims, we will be subject to the full amount of liability associated with any injuries or damages. This liability could be
substantial and may exceed our existing reserves and harm our business.
Legal, Regulatory and Compliance Risks
We may become involved in legal proceedings and other matters that could adversely affect our operations or financial results.
We have been, and regularly are, a party to litigation, government inquiries or investigations, audits or other legal matters. These legal proceedings may include, among other things, claims alleging violation of the
federal securities laws or state corporate laws, or claims related to employment matters, contracts, intellectual property, fair-competition/anti-trust laws, our products, business opportunity or advertising, defamation, negligence, data breaches,
privacy compliance, or other matters. Claims may be brought by a regulator, investor, member of our sales force, consumer, employee or other private parties and in some cases may be brought as class action lawsuits.
Our increased activity during the past several years with acquisitions, divestments and other investment-related activities introduces an additional area of litigation risk, and we have had litigation and threats of
litigation related to these matters. Other parties in the transactions or potential transactions, or other parties involved in the businesses themselves, could bring claims against us. For example, from 2019 until January 2023, we were in litigation with a dairy farmer who claimed he was a general partner in our former indoor-growing business and related businesses. He also sought damages exceeding $250 million. Although we ultimately reached a settlement
agreement with him in January 2023, there can be no assurance that the resolution of future cases will be favorable to us.
In general, litigation claims, regulatory actions or other legal matters are expensive and time consuming and can result in settlements, adverse rulings or damages that could significantly affect financial results and
the conduct of our business. It is not possible to predict the final resolution of any legal proceeding to which we may become party, and the impact of these matters on our business, results of operations and financial condition could be material.
Non-compliance with anti-corruption laws could harm our business.
Our international operations are subject to various anti-corruption laws, including principally the U.S. Foreign Corrupt Practices Act (the “FCPA”). The FCPA and the anti-corruption laws of other jurisdictions where we
operate generally prohibit companies and their agents or intermediaries from making improper payments for the purpose of obtaining or retaining business, and they require companies to maintain books and records and internal accounting controls. We
dedicate time and resources to internal investigations of any allegation that we are not or may not be in compliance with anti-corruption laws. Such allegations, even if untrue, may result in a government investigation by a foreign or U.S. regulator,
including the U.S. Department of Justice and the Securities and Exchange Commission. Our corporate policies require all employees to comply with the FCPA and other applicable anti-corruption laws, including the FCPA’s books-and-records and
internal-accounting-controls requirements. Any regulatory determination, however, that our operations or activities are not in compliance with existing anti-corruption laws or regulations could result in the imposition of substantial fines and other
penalties from U.S. or other regulatory entities.
Although we have implemented anti-corruption policies, controls and training globally to maintain a sufficient system of books and records and internal accounting controls, we have in the past and may in the future
have regulatory investigations and penalties. We cannot guarantee that our compliance efforts will prevent future investigations, fines or penalties under the FCPA or other anti-corruption laws. Our competitors operating in Mainland China have also
faced allegations from U.S. regulators and been fined accordingly in some circumstances. For example, in 2020, one of our competitors entered into a large settlement with U.S. regulators related to allegations that its employees violated the FCPA in
Mainland China.
Additionally, we cannot predict the nature, scope or effect of future regulatory requirements to which our international operations might be subject or the manner in which existing or new laws might be administered or
interpreted. Alleged or actual violations of any such existing or future laws (either due to our own acts or our inadvertence, or due to the acts or inadvertence of others) may result in criminal or civil sanctions or reputational harm, which could
have a material adverse effect on our business, financial condition and results of operations.
A failure of our internal controls over financial reporting or our regulatory compliance efforts could harm our stock price and our financial and operating results or could result
in fines or penalties.
We have implemented internal controls to help ensure the completeness and accuracy of our financial reporting and to detect and prevent fraudulent actions within our financial and accounting processes. We have also
implemented compliance policies and programs to help ensure that our employees and sales force comply with applicable laws and regulations. Our internal audit team regularly audits our internal controls and
various aspects of our business and compliance program, and we regularly assess the effectiveness of our internal controls. There can be no assurance, however, that our internal or external assessments and audits will identify all fraud,
misstatements in our financial reporting, and significant deficiencies or material weaknesses in our internal controls. Material weaknesses have in the past, and may in the future, resulted in a material misstatement of our financial results,
requiring us to restate our financial statements.
From time to time, we initiate further investigations into our business operations to further bolster our regulatory compliance efforts or based on the results of our internal and external audits or on complaints,
questions or allegations made by employees or other parties regarding our business practices and operations. In addition, our business and operations may be investigated by applicable government authorities. In the event any of these investigations
identify material violations of applicable laws by our employees, sales force or affiliates, we could be subject to adverse publicity, fines, penalties or loss of licenses or permits.
Risks Associated with Taxes, Customs and Debt
We are subject to changes in tax and customs laws, changes in our tax rates, the adoption of new U.S. or international tax legislation or exposure to additional tax
liabilities, which could have a material and adverse impact on our effective tax rate, operating results, cash flows and financial condition.
As a U.S. company doing business globally, we are subject to applicable tax and customs laws, including those relating to intercompany pricing regulations and transactions between our corporate entities in the
jurisdictions in which we do business, as well as customs valuation and classification, income taxes, value-added taxes, withholding taxes, payroll taxes, and other applicable taxes. Tax and customs laws, regulations, administrative practices and
interpretations in each jurisdiction are subject to change, with or without notice, due to economic, political or other conditions. For example, in 2022, the United States enacted the Inflation Reduction Act, which imposes a 1% excise tax on stock
repurchases, subject to certain adjustments or exceptions. Changes in the law or in authorities’ interpretation of the law can materially increase our tax or customs expense and our effective tax rate.
Due to the numerous jurisdictions in which our subsidiaries are organized and changes in laws and their interpretations, significant judgment is required in evaluating and estimating our provision for income taxes. Our
future effective tax rates could be affected by numerous factors, such as intercompany transactions, changes in our business operations, acquisitions and dispositions, entry into new markets, the amount of our earnings and where earned, losses
incurred, the inability to realize tax benefits, changes in foreign currency exchange rates, changes in our stock price, uncertain tax positions, allocation and apportionment of state taxes, changes in our deferred tax assets and liabilities and
changes in their valuation. In addition, U.S. and foreign governments may enact tax laws or enter into tax treaties that could result in further changes to global taxation and may materially affect our operating results and financial condition.
Government authorities may question our tax or customs positions or change their laws in a manner that could increase our effective tax rate or otherwise harm our business.
Despite our best efforts to be aware of and comply with tax and customs laws, including changes to and interpretations thereof, local authorities can and sometimes do question our tax and customs positions. We are
regularly subject to tax and customs audits, investigations, inquiries or other tax controversies by tax and customs authorities around the world regarding income taxes, customs valuation and classification, transfer pricing, value-added taxes,
withholding taxes, payroll taxes, and other applicable taxes. The ultimate resolution of these matters can take several years, and the outcome is uncertain and can include additional taxes/customs duties, the payment of back taxes/customs duties,
interest and penalties. We reserve in our consolidated financial statements amounts that we believe are in accordance with U.S. GAAP, and we regularly assess the likelihood of an adverse outcome in these matters to determine the adequacy of our
accruals and adjust them as appropriate. However, developments in these matters could warrant an additional accrual and expense, and the ultimate outcome could be materially different from our accruals, which could materially impact our effective tax
rate and/or our overall tax or customs expense.
A decline in our business could adversely affect our financial position and liquidity, and our debt covenants could limit our ability to pursue transactions or other opportunities that could be
beneficial to our business.
Any significant decline in our operating results could adversely affect our financial position and liquidity. Under the terms of our credit facility, we are required to maintain certain interest coverage and leverage
ratios. In addition, our outstanding borrowings under our credit facility and related term loan impose debt service and amortization requirements. A significant deterioration in our results of operations, whether as a result of prevailing economic,
financial and industry conditions, or other causes, could impact our ability to comply with our debt covenants and debt service and amortization obligations, which could result in an event of default under the terms of our credit facility. An event
of default under our credit facility could result in an inability to access funding under the agreement and cause all outstanding amounts to become immediately due and payable, which would have a material adverse effect on our financial condition and
liquidity.
In addition, even if we do not default, our debt covenants could impose limitations on our ability to pursue transactions or other opportunities that could be beneficial to our business. For example, in June 2023, we
borrowed $80 million under our revolving credit facility in connection with our purchase of Beauty Biosciences LLC. We will be unable to borrow additional funds to pursue other transactions or opportunities if such additional borrowing would cause us
to be in violation of our debt covenants.
Intellectual Property Risks
We may be subject to claims of infringement on the intellectual property rights or trade secrets of others, resulting in costly litigation.
In recent years, there has been significant litigation in the United States involving patents and other intellectual property rights. In particular, there has been an increase in the filing of suits alleging
infringement of intellectual property rights, which pressure defendants into entering into settlement arrangements quickly to dispose of such suits, regardless of their merit. Other companies or individuals may allege that we, or our sales force, consumers, licensees or other parties indemnified by us, infringe on their intellectual property rights. Even if we believe that such claims are without merit, defending such intellectual property
litigation can be costly, distract management’s attention and resources, and the outcome is inherently uncertain. Claims of intellectual property infringement also might require us to redesign affected products, enter into costly settlement or
license agreements, pay costly damage awards, or face a temporary or permanent injunction prohibiting us from marketing or selling certain of our products. Any of these results may adversely affect our financial condition.
As a result of claims against us regarding suspected infringement, our technologies may be subject to injunction, we may be required to pay damages, or we may have to seek a license to continue certain practices (which
may not be available on reasonable terms, if at all), all of which may significantly increase our operating expenses or may require us to restrict our business activities and limit our ability to deliver our products and services and/or certain
features, integrations, and capabilities of our platform. As a result, we may also be required to develop alternative non-infringing technology, which could require significant effort and expense and/or cause us to alter our products or services,
which could negatively affect our business.
We employ individuals who were previously employed at other beauty or wellness product companies, including our competitors or potential competitors. To the extent that our employees are involved in research areas that
are similar to those in which they were involved with their former employers, we may be subject to claims that such employees have inadvertently or otherwise used or disclosed the alleged trade secrets or other proprietary information of the former
employers. Litigation may be necessary to defend against such claims.
If we are unable to protect our intellectual property rights or our proprietary information and know-how, our ability to compete could be negatively impacted and the value of our
products could be adversely affected.
The market for our products depends to a significant extent upon the value associated with our product innovations and our brand equity. We rely upon patent, copyright, trademark, and trade secret laws in the United
States and other markets, and non-disclosure, confidentiality, and other types of agreements with our employees, sales force, customers, suppliers and other parties, to establish, maintain and enforce our
intellectual property rights. Despite these measures, any of our intellectual property rights could be challenged, invalidated, circumvented, or misappropriated, or such intellectual property rights may not be sufficient to permit us to provide
competitive advantages, which could result in costly product redesign efforts, discontinuance of certain product offerings or other competitive harm. In addition, the laws of certain foreign markets where we have significant business, including
markets such as Mainland China, do not protect our intellectual property rights to the same extent as the laws of the United States.
The costs required to protect our patents and trademarks may be substantial. In some cases it may not even be practical to seek to register our intellectual property for various reasons, including costs and
enforceability. We have filed patent and trademark applications globally to protect our intellectual property rights in our new technologies; however, there can be no assurance that our patent and trademark applications will be approved and issued,
that any patents and trademarks issued will adequately protect our intellectual property, or that such patents and trademarks will not be challenged by third parties or found by a judicial authority to be invalid or unenforceable. Additionally, we
cannot guarantee that our intellectual property rights will be respected and not infringed by third parties. Moreover, many of our products rely on technologies developed or licensed by third parties, and we may not be able to obtain or continue to
obtain licenses and technologies from these third parties on reasonable terms or at all.
From time to time, we become aware of potential violations of our intellectual property rights. For example, we are aware of the use of and attempts to obtain trademark registrations for “Nu Skin” or phonetically
similar marks and of some products that may infringe on our intellectual property related to the ageLOC LumiSpa device. To enforce and protect our intellectual property rights, we may initiate actions against
third parties to protect our intellectual property, such as patent, copyright, and trademark infringement lawsuits or interference proceedings, and seek indemnification by contract or otherwise. Any lawsuits that we initiate could be expensive, take
significant time and divert management’s attention from other business concerns, and we may ultimately fail to prevail or recover on any indemnification claim. Litigation also puts our patents and trademarks at risk of being invalidated or
interpreted narrowly and our patent and trademark applications at risk of not issuing. Additionally, we may provoke third parties to assert claims against us. We may not prevail in any lawsuits that we initiate and the damages or other remedies
awarded, if any, may not be commercially valuable. The occurrence of any of these events may adversely affect our financial condition or diminish our investments in this area.
In addition to patented technology, we rely on our unpatented proprietary technology, trade secrets, processes and know-how. We generally seek to protect this information by confidentiality, non-disclosure and
assignment of invention agreements with our employees, consultants, scientific advisors and third parties. Our employees may leave to work for competitors. Our sales force members may seek other opportunities. These agreements may be breached, and we
may not have adequate remedies for any such breach. In addition, our trade secrets may be disclosed to or otherwise become known or be independently developed by competitors. To the extent that our current or former employees, sales force,
consultants or contractors use intellectual property owned by others in their work for us, disputes may arise as to the rights in related or resulting know-how and inventions. If, for any of the above reasons, our intellectual property is disclosed
or misappropriated, it would harm our ability to protect our rights and adversely affect our financial condition.
Data Security and Privacy Risks
Failure to maintain satisfactory compliance with certain privacy and data protections laws and regulations, and the integrity of company, employee, sales force, customer or guest data could expose us
to litigation, liability, substantial negative financial consequences and harm to our reputation.
We collect, transmit and/or store large volumes of company, employee, sales force, customer and guest data, including payment card information, personally identifiable information, health-related data and other
personal information, for business purposes, including for transactional and promotional purposes, and our various information technology systems enter, process, summarize, report and transmit such data. The various mobile applications, connected
beauty and wellness devices, and other connected tools that we have developed or are developing also collect data. The integrity and protection of this data is critical to our business.
We are subject to various security and privacy regulations in the markets where we do business, as well as requirements imposed by the payment card industry. For example, the General Data Protection Regulation, which
went into effect in the European Union in 2018, imposes increased data protection regulations, the violation of which could result in fines of up to 4% of annual consolidated revenue. Many other U.S. states and foreign jurisdictions have similarly
enacted security and privacy regulations. California’s newest privacy laws, the California Consumer Privacy Act and the California Privacy Rights Act, enacted in 2018 and 2020, respectively, provide a private right of action for consumers against
businesses who have violated their rights under these laws, including the right to recover statutory damages ranging between $100 and $750 per consumer per incident for certain types of data breaches. Other data privacy or data protection laws or
regulations have been adopted or are under consideration in many other jurisdictions. We anticipate that federal, state and international regulators will continue to enact legislation related to data protection and privacy. These laws may impose
restrictions on our ability to gather and/or transfer personal data, provide individuals with additional rights around their personal data, and place downstream obligations on our Brand Affiliates or other business partners relating to their use of
information we provide. Many other jurisdictions, including California and Mainland China, have increased enforcement of laws and regulations that have recently taken effect. We believe these trends will continue.
In the United States, congressional committees have held preliminary hearings about the advisability of a federal data privacy law, but it is uncertain whether the federal government will adopt such a law and whether
it would preempt state data privacy laws. Efforts have been made in recent years at the federal level to establish a comprehensive privacy regime including many of the concepts found in other state and federal privacy bills and laws, such as consent
requirements for entities providing services to the public that collect, store, process, use or otherwise control sensitive personal information. The prospect of new data privacy laws and ambiguity regarding the interpretation of new and existing
laws has resulted in significant uncertainty and compliance costs.
In addition to laws specifically governing privacy and data security, in some cases, federal and state regulators and state attorneys general and administrative agencies have interpreted more general consumer
protection laws to impose standards for the online collection, use, dissemination and security of data. Plaintiffs’ counsels have also put forward a number of novel theories suing companies on the basis of their collection and use of information
under existing privacy-adjacent laws. Although we monitor regulatory developments in this area, laws may be implemented, interpreted, or enforced in a non-uniform or inconsistent way across jurisdictions, and we may not be aware of every development
that impacts our business. Any actual or perceived failure by us to comply with these requirements could subject us to significant penalties, lawsuits and negative publicity and require changes to our business practices. The costs of complying with
existing or new data privacy or data protection laws and regulations may limit our ability to gather personal information needed to provide our products and services, delay or impede the development of new products and services, or negatively impact
the use of or demand for our products and services, any of which could harm our business. In particular, maintaining compliance with these and other evolving regulations and requirements around the world has required changes to our information system
architecture, data transfer and data storage processes. For example, data privacy laws in Mainland China and other jurisdictions place restrictions on the cross-border transmission of personal data, which could impede our ability to perform many
business functions, including calculating and paying compensation to our sales force, absent significant changes to our information system architecture. Changing our information system architecture and data transfer and storage processes is difficult
and expensive. Investigations by the regulators of data security or protection laws across jurisdictions could also result in the payment of fines, reputational harm and an inability to continue doing business in certain jurisdictions. Class actions
or other private actions by affected individuals in some jurisdictions could also result in significant monetary or reputational damage.
The following additional factors also cause risks related to the use of data:
| ● |
Sales force—We share certain data with our sales force. We could face fines, investigations, lawsuits or other legal action if our sales force violates, or is perceived to violate, applicable laws and regulations, and our reputation and
brand could be negatively impacted.
|
| ● |
Payment card industry data security standards—A failure to adhere to the payment card industry’s data security standards could cause us to incur penalties from payment card associations, termination of our ability to accept credit or
debit card payments, litigation and adverse publicity, any of which could have a material adverse effect on our business and financial condition.
|
| ● |
Artificial intelligence (“AI”)—If we introduce AI technologies into new or existing offerings or back-office functions, it may result in new or expanded risks and liabilities due to enhanced governmental or regulatory scrutiny,
litigation, compliance issues, ethical concerns, and data privacy and security risks, all of which could adversely affect our business, reputation, and financial results. For example, the use of AI technologies could lead to unintended
consequences, such as accuracy issues, cybersecurity risks, unintended biases, and discriminatory outputs, which could impact our ability to protect our data, intellectual property, and client information, or could expose us to intellectual
property claims by third parties.
|
The unauthorized access, use, theft or destruction of our information systems or of data that is stored in our information systems or by third parties on our behalf could impact our reputation and
brand and expose us to potential liability and loss of revenues.
A breached or compromised data system or the intentional, inadvertent or negligent release, misuse or disclosure of data could result in theft, loss, or fraudulent or unlawful use of company, employee, sales force,
customer or guest data. Although we take measures to protect the security, integrity, accessibility and confidentiality of our data systems, we experience cyberattacks of varying degrees and types on a regular basis. Our infrastructure may be
vulnerable to these attacks, and in some cases it could take time to discover them. Our security measures may also be breached due to employee error or malfeasance, system errors or otherwise. Additionally, outside parties may attempt to fraudulently
induce employees, users, or customers to disclose confidential information to gain access to our systems, our data, or our users’ or customers’ data. Any such breach or unauthorized access could result in the unauthorized disclosure, misuse or loss
of sensitive information and lead to significant legal and financial exposure, regulatory inquiries or investigations, loss of confidence by our sales force and customers, disruption of our operations, damage to our reputation, and costs associated
with remediating the incident.
In addition, should a threat-actor successfully breach our systems to a significant extent, they could disable our systems or take our systems offline via ransomware, and such actions could stop or significantly impair
our ability to conduct business, including processing orders and tracking and timely paying sales compensation to our sales force. Additionally, threat-actors regularly extort money from victims as a condition to returning the victim’s systems to
operation and/or to not releasing stolen data to the public.
These risks are heightened as we work with third-party providers, including providers of mobile and cloud technologies, and as our sales force uses social media, as our third-party providers and the social media
platforms could be vulnerable to the same types of breaches and other risks. These risks also are heightened as a result of our recent restructurings, which affected several functions at our company, including our information technology and
information security functions. Acquisition activity, which we have engaged in and which we plan to continue to engage in, may also heighten these risks, as the systems of the companies we acquire are not under our control prior to the acquisitions
and it may take time to evaluate these systems and implement appropriate modifications to them.
Sustainability Risks
Our business could be negatively impacted by corporate citizenship and sustainability matters.
There are increased and increasing expectations and focus from certain investors, Brand Affiliates, consumers, employees, regulators and other stakeholders concerning corporate citizenship and sustainability matters,
including environmental, social and governance matters; packaging; responsible sourcing; and diversity, equity and inclusion matters. In addition, some jurisdictions, including California and the European Union, have enacted laws requiring public
disclosure of information in these areas, and from time to time, we announce certain initiatives and goals in these areas. We could fail, or be perceived to fail, in our achievement of such initiatives or goals or in meeting stakeholders’
expectations, or we could fail in complying with laws or accurately reporting our progress on such initiatives, goals and expectations. Moreover, the standards by which corporate citizenship and sustainability efforts and related matters are measured
are developing and evolving, and certain areas are subject to assumptions. The standards or assumptions could change over time. In addition, we could be criticized for the scope of our initiatives or goals or perceived as not acting responsibly in
connection with these matters, such as with our carbon footprint, recyclability of our packaging, ingredients used in our products or the sourcing of such ingredients. Any such matters, or related corporate citizenship and sustainability matters,
could have a material adverse effect on our business.
Risks Related to Our Common Stock
The market price of our Class A common stock is subject to significant fluctuations due to a number of factors that are beyond our control.
Our Class A common stock closed at $48.19 per share on January 31, 2022 and closed at $18.56 per share on January 31, 2024. During this two-year period, our common stock traded as low as $16.15 per share and as high as
$56.76 per share. Many factors, including some we may be unable to control, could cause the market price of our Class A common stock to fall. Some of these factors include:
| ● |
fluctuations in our operating results;
|
| ● |
government investigations of our business;
|
| ● |
trends or adverse publicity related to our business, products, industry or competitors;
|
| ● |
the sale of shares of Class A common stock by significant stockholders;
|
| ● |
demand, and general trends in the market, for our products;
|
| ● |
acquisitions by us or our competitors;
|
| ● |
economic or currency exchange issues in markets in which we operate;
|
| ● |
changes in estimates of our operating performance or changes in recommendations by securities analysts;
|
| ● |
speculative trading, including short selling and options trading; and
|
| ● |
general economic, business, regulatory and political conditions.
|
Broad market fluctuations could also lower the market price of our Class A common stock regardless of our actual operating performance.
None.
Our company is exposed to a variety of evolving cybersecurity risks. We invest in our cybersecurity program to proactively manage and mitigate these risks. On an annual basis, we utilize our Enterprise
Risk Management (“ERM”) program to estimate our annual loss potential based on our defined control framework and its overall effectiveness. In conjunction with our ERM program, the cybersecurity program references the CIS Critical Security Controls
and the NIST Cybersecurity Framework (CSF) to guide our organization’s risk identification and mitigation procedures. In addition, we undergo an annual third-party external penetration test, as well as third-party attack-surface monitoring to
understand our potential vulnerabilities, threat vectors, and additional impacts to critical assets and operations. In addition, our cybersecurity team performs procedures to identify risks that inform our annual security roadmap.
We engage third-party cybersecurity experts to provide independent assessments of our cybersecurity readiness and control effectiveness. Our goal in collaborating with external cybersecurity firms is to
gain insights and knowledge into emerging threats and vulnerabilities, industry trends and best practices to inform our risk remediation efforts. Additionally, we engage with our externally retained incident response team and select internal teams to
perform tabletop exercises that inform our cybersecurity response capabilities and resilience.
We also enact a process to perform a risk assessment of new third-parties, inclusive of new third-party contracts, which provides an additional layer of oversight in identifying material risks
associated with the use of particular external service providers.
At this time, we have not identified risks from known cybersecurity threats, including as a result of any previous
cybersecurity incidents, that have materially affected our business strategy, results of operations or financial condition, but we cannot provide assurance that such risks or future material incidents will not materially affect us in the future.
For more information regarding the risks we face from cybersecurity threats, please see Item 1A. Risk Factors.
Our management plays a pivotal role in assessing and managing material risks from cybersecurity threats. Our management has implemented a broad and continuous process for cyber event monitoring,
analysis of emerging threats, and the development and implementation of risk mitigation strategies. Led by our Chief Technology Officer (“CTO”) and Chief Information Security Officer (“CISO”), we implement cybersecurity policies, procedures and
strategies, including employee training programs, security assessments and attack detection alerts designed to address the constantly evolving threat landscape. Our CTO has over 20 years of technology experience, including roles at Amazon Web
Services, Dell EMC, and Ball Aerospace. Our CISO has over 30 years of cybersecurity and IT leadership experience.
At the Board of Directors level, our Audit Committee oversees our risks related to information security and privacy. To accomplish this responsibility, the Audit Committee meets quarterly with our CTO
and CISO to receive and discuss updates on our cybersecurity program. Top risks, key initiatives, material cyber incidents, remediation activity and security metrics are shared to report the overall loss potential, program effectiveness, risk
management conditions and current threat landscape. Our Board of Directors is committed to maintaining a well-informed and security-aware business by regularly engaging through updates on the organization’s roadmap and evolving threat landscape.
Our principal properties consist of the following:
Offices
Our principal administrative offices are our corporate headquarters in Provo, Utah and our offices in Shanghai, China.
Distribution Centers
We distribute our products through distribution centers and warehouses in many of our markets, with our principal facilities being in Provo, Utah and Mainland China.
Research and Development Centers
We operate research and development centers in Provo, Utah and Shanghai, China.
Manufacturing Facilities
We operate manufacturing facilities in Mainland China, and two of our Rhyz companies (Manufacturing segment) operate manufacturing facilities in Provo, Utah, Draper, Utah and West Valley City, Utah.
We own the above properties, except we lease the manufacturing facilities in Provo, Utah and West Valley City, Utah, certain of the manufacturing facilities in China, and the land for our facilities
in Shanghai, China.
From time to time, we are involved in legal proceedings arising in the ordinary course of business.
Not applicable.
| ITEM 5. |
MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
|
Market Information and Holders
Our Class A common stock is listed on the New York Stock Exchange and trades under the symbol “NUS.” The approximate number of holders of record of our Class A common stock as of January 31, 2024 was
210. This number of holders of record does not represent the actual number of beneficial owners of shares of our Class A common stock because shares are frequently held in “street name” by securities dealers and others for the benefit of individual
owners who have the right to vote their shares.
Purchases of Equity Securities by the Issuer
|
(a)
|
(b)
|
(c)
|
(d)
|
|||||||||||||
|
Period
|
Total
Number
of Shares
Purchased
|
Average
Price Paid
per Share
|
Total Number of
Shares Purchased
as Part of Publicly
Announced Plans
or Programs
|
Approximate Dollar
Value of Shares that May
Yet Be Purchased Under
the Plans or Programs
(in millions)(1)
|
||||||||||||
|
October 1 – 31, 2023
|
—
|
$
|
—
|
—
|
$
|
162.4
|
||||||||||
|
November 1 – 30, 2023
|
—
|
—
|
—
|
$
|
162.4
|
|||||||||||
|
December 1 – 31, 2023
|
—
|
—
|
—
|
$
|
162.4
|
|||||||||||
|
Total
|
—
|
$
|
—
|
—
|
||||||||||||
| (1) |
In August 2018, we announced that our board of directors approved a stock repurchase plan. Under this plan, our board of directors authorized the repurchase of up to $500 million of our outstanding Class A
common stock on the open market or in privately negotiated transactions.
|
Recent Sales of Unregistered Securities
None.
Stock Performance Graph
The following graph shows the changes in value over the five-year period ended December 31, 2023 of an assumed $100 investment in our Class A common stock, the S&P SmallCap 600 Consumer Staples Index (the “SmallCap
Index”) and the S&P 500 Index. The stock performance graph in our Annual Report on Form 10-K for the 2022 fiscal year included the S&P MidCap 400 Consumer Staples Index (the “MidCap Index”). We have determined to begin including the SmallCap
Index rather than the MidCap Index because we believe the SmallCap Index is better reflective of our current market cap. As required by SEC rules, we include the MidCap Index in the graph below because we included it for the immediately preceding
fiscal year.
COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN
Among Nu Skin Enterprises, Inc., the S&P 500 Index, the S&P SmallCap 600 Consumer Staples Index, and the S&P MidCap 400 Consumer Staples Index
|
Measured Period
|
Nu Skin
|
S&P 500 Index
|
S&P MidCap 400
Consumer Staples Index
|
S&P SmallCap 600
Consumer Staples Index
|
||||
|
December 31, 2018
|
100.00
|
100.00
|
100.00
|
100.00
|
||||
|
December 31, 2019
|
68.99
|
131.49
|
110.85
|
116.91
|
||||
|
December 31, 2020
|
95.75
|
155.68
|
135.49
|
129.93
|
||||
|
December 31, 2021
|
91.60
|
200.37
|
149.15
|
167.35
|
||||
|
December 31, 2022
|
78.83
|
164.08
|
148.00
|
156.52
|
||||
|
December 31, 2023
|
38.56
|
207.21
|
171.24
|
179.98
|
The stock performance graph above shall not be deemed to be “soliciting material” or to be “filed” with the U.S. Securities and Exchange Commission or subject to the liabilities of Section 18
under the Securities Exchange Act of 1934, as amended (the “Exchange Act”). In addition, it shall not be deemed incorporated by reference by any statement that incorporates this Annual Report on Form 10-K by reference into any filing under the
Securities Act of 1933 (the “Securities Act”) or the Exchange Act, except to the extent that we specifically incorporate this information by reference.
Not applicable.
The following discussion of our financial condition and results of operations should be read in conjunction with the consolidated financial statements and related notes, which are included in this
Annual Report on Form 10-K.
Business Overview
Our Products
Nu Skin Enterprises, Inc. develops and distributes a comprehensive line of premium-quality beauty and wellness solutions in nearly 50 markets worldwide. In 2023, our revenue of $2.0
billion was primarily generated by our three primary brands: our beauty brand, Nu Skin; our wellness brand, Pharmanex; and our anti-aging brand, ageLOC. We operate in the direct selling channel, primarily
utilizing person-to-person marketing to promote and sell our products, including through the use of social and digital platforms. In all of our markets besides Mainland China, we refer to members of our independent sales force as “Brand Affiliates”
because their primary role is to promote our brand and products through their personal and social networks.
In addition to our core Nu Skin business, we also explore new areas of synergistic and adjacent growth through our business arm known as Rhyz Inc. Our Rhyz businesses primarily consist of consumer,
technology and manufacturing companies. In 2023, the Rhyz companies generated $216.6 million, or 11% of our 2023 reported revenue (excluding sales to our core Nu Skin business). Rhyz is a key component of our business, and we anticipate its
continued growth in the coming years both on an absolute basis and as a percentage of our consolidated revenue. These companies enable us to diversify our revenue mix, serve more customers where they shop, and create synergies for our owned and
partner brands.
Our Global Operations
In 2023, we generated approximately 26% of our revenue from the United States (consisting of our Nu Skin United States and Rhyz businesses) and the remainder from our international markets. Given the
size of our international operations, our results, as reported in U.S. dollars, are often impacted by foreign-currency fluctuations; in 2023, our revenue was negatively impacted 3% from foreign-currency fluctuations compared to 2022. In addition,
our results can be impacted by global economic, political, demographic and business trends and conditions.
A Global Network of Customers, Paid Affiliates and Sales Leaders
As of December 31, 2023, we had 977,039 persons who purchased directly from the company during the previous three months (“Customers”). Our Customer numbers include members of our sales force who made
such a purchase, including Paid Affiliates and those who qualify as Sales Leaders, but they do not include consumers who purchase directly from members of our sales force. We believe a significant majority of Customers purchase our products
primarily for personal or family consumption but are not actively pursuing the opportunity to generate supplemental income by actively and consistently marketing and reselling products.
Our revenue is highly influenced by the number and productivity of our Sales Leaders. “Sales Leaders” are our Brand Affiliates, as well as sales employees and independent marketers in Mainland China,
who achieve certain qualification requirements. Our reported Sales Leaders number is the three-month average of our monthly Sales Leaders as of the end of each month of the quarter.
As we continue to focus on customer acquisition and social commerce, we believe our number of Paid Affiliates is an important indicator of consumer purchasing activity in our business. “Paid
Affiliates” are any Brand Affiliates, as well as members of our sales force in Mainland China, who earned sales compensation during the previous three months. Paid Affiliates power our social commerce model and are a bridge to attracting new
customers and nurturing relationships and community.
We have been successful in attracting and motivating our sales force by:
|
●
|
developing and marketing innovative, technologically and scientifically advanced products;
|
| ● |
providing compelling initiatives and strong support; and
|
| ● |
offering an attractive sales compensation structure.
|
Our global sales force helps us to rapidly introduce products and penetrate our markets with modest up-front promotional expense. We rely on our sales force to create consumer demand for our products,
as opposed to a traditional approach of advertising-generated consumer awareness. Our approach is particularly effective with products that benefit from personal education and demonstration. Similar to other companies in our industry, we experience
relatively high turnover among our sales force.
To enhance customer retention, we have developed product subscription and loyalty programs that provide incentives for consumers to commit to purchase a specific amount of product on a monthly basis.
All purchases under these programs are subject to our standard product payment and return policies. We believe these subscription and loyalty programs have improved consumer retention, have had a stabilizing impact on revenue and have helped
generate recurring sales.
Product Innovation
Our sales force markets and sells our products, and attracts others to the opportunity, based on the distinguishing benefits and innovative characteristics of our products. As a result, we leverage
our scientific expertise and product development resources to introduce innovative beauty, wellness and anti-aging products. Our sales force is increasingly using social media to market and sell our products. To continue to leverage social media,
it is imperative that we develop demonstrable products that are unique and engaging to younger consumers.
Any delays or difficulties in introducing compelling products or attractive initiatives or tools into our markets may have a negative impact on our revenue and our number of Customers, Paid Affiliates
and Sales Leaders.
Our Product Launch Process
Prior to making a product generally available for purchase in a market, we often do one or more introductory offerings of the product, such as a preview of the product to our Sales Leaders or other product introduction
or promotion. We refer to the entire process, beginning with the introductory offering through general availability of the product, as a product launch or our product launch process. The timing of the launch of a particular product often varies from
market to market depending on such factors as customer demand, product registration or other local legal requirements, and product availability in our supply chain.
Sales Leader previews and other product introductions and promotions sometimes generate significant activity and a high level of purchasing, which can result in a higher-than-normal increase in revenue during the
quarter and can skew year-over-year and sequential comparisons. We believe our product launch process attracts new Customers, Paid Affiliates and Sales Leaders to our business, increases consumer trial and provides us with important marketing and
forecasting information about our products. Please refer to Item 1A. Risk Factors for more information on risks related to our product launch process.
Income Statement Presentation
We report revenue in nine segments, and we translate revenue from each market’s local currency into U.S. dollars using weighted-average exchange rates. Revenue is measured as the amount of
consideration we expect to receive in exchange for transferring products. All revenue is recognized when we satisfy our performance obligations under the contract. We recognize revenue by transferring the promised products to the customer, with
revenue recognized at shipping point, the point in time the customer obtains control of the products. We recognize revenue for shipping and handling charges at the time the products are delivered to or picked up by the customer. In most markets, we
offer a return policy that allows our sales force to return unopened and unused product for up to 12 months subject to a 10% restocking fee. Reported revenue is net of returns, which have historically been less than 5% of annual revenue. Sales
taxes and value added taxes in foreign jurisdictions that are collected from customers and remitted to governmental authorities are accounted for on a net basis and therefore are excluded from net sales.
Cost of sales primarily consists of:
| ● |
cost of products purchased from third-party vendors;
|
| ● |
cost of self-manufactured products;
|
| ● |
cost of adjustments to inventory carrying value;
|
| ● |
freight cost of shipping products to our sales force and import duties for the products; and
|
| ● |
royalties and related expenses for licensed technologies.
|
For markets other than Mainland China, in 2023, we sourced most of our beauty products and wellness products from trusted third-party suppliers and manufacturers. In Mainland China, we operate
manufacturing facilities where we produce the majority of our beauty and wellness products sold in Mainland China. We also produce some products at these facilities that are exported to other markets. In addition, our Rhyz Manufacturing entities in
the United States are producing some of our products. Cost of sales and gross profit, on a consolidated basis, may fluctuate as a result of changes in the ratio between self-manufactured products and products sourced from third-party vendors. In
addition, because we purchase a significant amount of our goods in U.S. dollars and recognize revenue in local currencies, our gross margin is subject to exchange rate risks. Because our gross margins vary from product to product and due to higher
pricing in some markets, changes in product mix and geographic revenue mix can impact our gross margin on a consolidated basis.
Selling expenses are our most significant expense and are classified as operating expenses. Selling expenses include sales commissions paid to our sales force, special incentives, costs for incentive
trips, cost of sales force conventions and other rewards, as well as salaries, service fees, benefits, bonuses and other labor and unemployment expenses we pay to our sales force in Mainland China. The sales force conventions are held in various
markets worldwide, which we generally expense in the period in which they are incurred. Because our various sales force conventions are not held during each fiscal year, or in the same period each year, their impact on our general and administrative
expenses may vary from year to year and from quarter to quarter. For example, we currently plan to hold a global convention approximately every other year. We held our last in-person global convention in October 2019, as our 2021 global convention
was held virtually due to the COVID-19 pandemic. We are currently planning to hold a global convention in 2024 to celebrate our 40th anniversary. In addition, we hold
regional conventions and conventions in our major markets at different times during the year. These conventions have significant expenses associated with them. Because we have not incurred expenses for these conventions during every fiscal year or in
comparable interim periods, year-over-year comparisons have been impacted accordingly. Selling expenses do not include amounts we pay to our sales force based on their personal purchases; rather, such amounts are reflected as reductions to revenue.
Our global sales compensation plan, which we employ in all our markets except Mainland China, is an important factor in our ability to attract and retain our Sales Leaders. Under our global sales compensation plan, Sales Leaders can earn
“multi-level” compensation, where they earn commissions for product sales to their consumer groups as well as the product sales made through the sales network they have developed and trained. We do not pay commissions on sales materials. Fluctuations
occur in the amount of commissions paid as our numbers of Customers and Sales Leaders change from month to month, but the fluctuation in the overall payout as a percentage of revenue tends to be relatively small. Selling expenses as a percentage of
revenue typically increase in connection with a significant product offering, due to growth in the number of Sales Leaders qualifying for increased sales compensation and promotional incentives. From time to time, we make modifications and
enhancements to our global sales compensation plan in an effort to help motivate our sales force and develop leadership characteristics, which can have an impact on selling expenses.
Outside of Mainland China, Brand Affiliates also have the opportunity to make profits by purchasing products from us at a discount and selling them to consumers with a mark-up. We do not account for,
nor pay, additional commissions on these mark-ups received by Brand Affiliates. In many markets, we also allow individuals who are not part of our sales force, whom we refer to as “preferred customers,” to buy products directly from us at a
discount. We pay commissions on preferred customer purchases to the referring member of our sales force.
General and administrative expenses include:
| ● |
wages and benefits;
|
| ● |
rents and utilities;
|
| ● |
depreciation and amortization;
|
| ● |
promotion and advertising;
|
| ● |
professional fees;
|
| ● |
travel;
|
| ● |
research and development; and
|
| ● |
other operating expenses.
|
Labor expenses are the most significant portion of our general and administrative expenses.
Provision for income taxes depends on the statutory tax rates and the withholding taxes in each of the jurisdictions in which we operate. For example, statutory tax rates in 2023 were approximately
17% in Hong Kong, 20% in Taiwan, 21% in South Korea, 32% in Japan and 25% in Mainland China. We are subject to taxation in the United States at the statutory corporate federal tax rate of 21% in 2023, and we pay taxes in multiple states within the
United States at various tax rates. Our overall effective tax rate was 67.7% for the year ended December 31, 2023.
Critical Accounting Policies and Estimates
The following critical accounting policies and estimates should be read in conjunction with our audited consolidated financial statements and related notes thereto. Management considers our critical
accounting policies to be accounting for income taxes and accounting for intangible assets. In each of these areas, management makes estimates based on historical results, current trends and future projections.
Income Taxes. We account for income taxes in accordance with the Income Taxes Topic of the Financial Accounting Standards Codification. This Topic
establishes financial accounting and reporting standards for the effects of income taxes that result from an enterprise’s activities during the current and preceding years. We take an asset and liability approach for financial accounting and
reporting of income taxes. We pay income taxes in many foreign jurisdictions based on the profits realized in those jurisdictions, which can be significantly impacted by terms of intercompany transactions between Nu Skin affiliates around the
world. Deferred tax assets and liabilities are created in this process. As of December 31, 2023, we had net deferred tax assets of $105.0 million. We net these deferred tax assets and deferred tax liabilities by jurisdiction. Valuation allowances
are established when necessary to reduce deferred tax assets to the amounts expected to be ultimately realized. These deferred tax assets assume sufficient future earnings will exist for their realization, and are calculated using anticipated tax
rates. In certain jurisdictions, valuation allowances have been recorded against the deferred tax assets specifically related to use of foreign tax credits, research and development credits and net operating losses. The valuation allowance
assessment requires estimates as to future operating results. These estimates are made on an ongoing basis based upon the Company’s business plans and growth strategies in each market and consequently, future material changes in the valuation
allowance are possible. The valuation allowance reduces the deferred tax assets to an amount that management determined is more-likely-than-not to be realized. When we determine that there is sufficient taxable income to utilize the foreign tax
credits, the research and development credits, or the net operating losses, the valuation allowances will be released. In the event we were to determine that we would not be able to realize all or part of our deferred tax assets in the future, an
adjustment to the deferred tax assets would be charged to earnings in the period such determination was made.
We evaluate our indefinite reinvestment assertions with respect to foreign earnings for each period. Other than earnings we intend to reinvest indefinitely, we accrue for the U.S. federal and state
income taxes applicable to the earnings. For all foreign earnings, we accrue the applicable foreign income taxes. We intend to utilize the offshore earnings to fund foreign investments, specifically capital expenditures. Undistributed earnings that
we have indefinitely reinvested aggregate to $60.0 million as of December 31, 2023. If this amount were repatriated to the United States, the amount of incremental taxes would be approximately $6.0 million.
The company operates in and files income tax returns in the U.S. and numerous foreign jurisdictions, which are subject to examination by tax authorities. Years open to examination
contain matters that could be subject to differing interpretations of applicable tax laws and regulations related to the amount and/or timing of income, deductions, and tax credits. We account for uncertain tax positions in accordance with
Accounting Standards Codification (“ASC”) 740, Income Taxes. This guidance prescribes a minimum probability threshold that a tax position must meet before a financial statement benefit is recognized. The minimum threshold is defined as a tax
position that is more likely than not to be sustained upon examination by the applicable taxing authority, including resolution of any related appeals or litigation processes, based on the technical merits of the position. The tax benefit to be
recognized is measured as the largest amount of benefit that is greater than 50 percent likely of being realized upon ultimate settlement. In 2009, we entered into a voluntary program with the IRS called Compliance Assurance Process (“CAP”).
Under the CAP program, the IRS audits the tax position of the Company to identify and resolve any tax issues that may arise throughout the tax year. The IRS has developed
a new pilot phase called “Bridge Plus.” Under Bridge Plus the taxpayer is required to provide book-to-tax reconciliations, credit utilization and other supporting documentation shortly after their audited financial statement is finalized. The company was selected for Bridge Plus for the 2022, 2023 and 2024 tax years. As of December 31, 2023, all open tax years except 2021 have been audited and are effectively closed
to further examination. For the tax year 2021, the Company was in the Bridge phase of the CAP program, pursuant to which the IRS did not accept disclosures, did not conduct reviews and did not provide letters of assurance for the Bridge year.
There are limited circumstances that tax years in the Bridge phase will be opened for examination. With a few exceptions, we are no longer subject to state and local income tax examination by tax authorities for the years before 2020. Foreign
jurisdictions, have varying lengths of statutes of limitations for income tax examinations. Some statutes are as short as three years and in certain markets may be as long as ten years. We are currently under examination in certain foreign
jurisdictions; however, the outcomes of those reviews are not yet determinable.
Our unrecognized tax benefits are related to multiple foreign and domestic jurisdictions. Due to potential changes in unrecognized tax benefits from the multiple jurisdictions in which we operate, as
well as the expiration of various statutes of limitation, it is reasonably possible that our gross unrecognized tax benefits, net of foreign currency adjustments, may increase within the next 12 months by a range of approximately $2.0 to $3.0
million.
At December 31, 2023, we had $22.0 million in unrecognized tax benefits of which $22.0 million, if recognized, would affect the effective tax rate. In comparison, at December 31, 2022, we had $23.1
million in unrecognized tax benefits of which $23.1 million, if recognized, would affect the effective tax rate. We recognized an increase of approximately $0.6 million in interest and penalties expense during the year ended December 31, 2023 and
$5.7 million in interest and penalties during the year ended December 31, 2022. We had approximately $13.0 million, $12.4 million and $6.7 million of accrued interest and penalties related to uncertain tax positions at December 31, 2023, 2022 and
2021, respectively. Interest and penalties related to uncertain tax positions are recognized as a component of income tax expense.
We are subject to regular audits by federal, state and foreign tax authorities. These audits may result in additional tax liabilities. We account for such contingent liabilities in accordance with
relevant accounting standards and believe we have appropriately provided for income taxes for all years. Several factors drive the calculation of our tax reserves. Some of these factors include: (i) the expiration of various statutes of
limitations; (ii) changes in tax law and regulations; (iii) issuance of tax rulings; and (iv) settlements with tax authorities. Changes in any of these factors may result in adjustments to our reserves, which would impact our reported financial
results.
Intangible Assets. Acquired intangible assets may represent indefinite-lived assets, determinable-lived intangibles or goodwill. Of these, only the costs of determinable-lived intangibles are
amortized to expense over their estimated life. The value of indefinite-lived intangible assets and residual goodwill is not amortized, but is tested at least annually for impairment. Our impairment testing for goodwill is performed separately from
our impairment testing of indefinite-lived intangibles. We test goodwill for impairment, at least annually, by reviewing the book value compared to the fair value at the reportable unit level. We have the option to perform a qualitative assessment
to determine whether further impairment testing is necessary or to perform a quantitative assessment by comparing the fair value of a reporting unit to its carrying amount, including goodwill. Under the qualitative assessment, an entity is not
required to calculate the fair value of a reporting unit unless the entity determines that it is more likely than not that its fair value is less than its carrying amount. If under the quantitative assessment the fair value of a reporting unit is
less than its carrying amount, then the amount of the impairment loss, if any, must be measured. We elected to perform the quantitative assessment for fiscal years 2022 and we used the qualitative assessment for fiscal years 2023 and 2021.
Considerable management judgment and assumptions are used in our goodwill impairment assessment, including with respect to the estimated future cash
flows, the earnings multiples used in the market approach, the discount rate used to discount such estimated future cash flows to their net present value and the reasonableness of the implied control premium relative to our market capitalization.
These factors could materially increase or decrease the fair value of our reporting units and, accordingly, could result in a related impairment charge. Declines in our market capitalization or in our business performance could also result in a
material impairment charge in a future period.
We completed the annual goodwill and indefinite-lived intangible asset impairment testing as of October 1, 2023, and concluded the qualitative assessment indicated that the fair value of the
reporting units exceeded their carrying value and therefore were not at risk for impairment. As of the October 1, 2022 testing date, the fair value of the Manufacturing reporting unit was estimated to be approximately 8% in excess of
its carrying amount, and therefore the reporting unit is considered to be at risk of future impairment. The Manufacturing reporting unit’s fair value remains sensitive to significant unfavorable changes in revenue, gross margin and discount rates
that could negatively impact future analyses.
During 2022, we recognized an impairment charge of $1.7 million associated with determinable-lived intangibles. During 2021, we recognized an impairment charge associated with our exit of the Grow
Tech segment. We did not recognize any impairment charges for goodwill or intangible assets during 2023.
Results of Operations
The following table sets forth our operating results as a percentage of revenue for the periods indicated:
|
Year Ended December 31,
|
||||||||||||
|
2023
|
2022
|
2021
|
||||||||||
|
Revenue
|
100.0
|
%
|
100.0
|
%
|
100.0
|
%
|
||||||
|
Cost of sales
|
31.1
|
28.3
|
25.0
|
|||||||||
|
Gross profit
|
68.9
|
71.7
|
75.0
|
|||||||||
|
Operating expenses:
|
||||||||||||
|
Selling expenses
|
37.7
|
39.5
|
40.1
|
|||||||||
|
General and administrative expenses
|
27.8
|
25.0
|
24.3
|
|||||||||
|
Restructuring and impairment expenses
|
1.0
|
2.2
|
2.0
|
|||||||||
|
Total operating expenses
|
66.5
|
66.7
|
66.3
|
|||||||||
|
Operating income
|
2.4
|
5.0
|
8.7
|
|||||||||
|
Other income (expense), net
|
(1.1
|
)
|
(1.0
|
)
|
(0.1
|
)
|
||||||
|
Income before provision for income taxes
|
1.3
|
4.0
|
8.6
|
|||||||||
|
Provision (benefit) for income taxes
|
0.9
|
(0.7
|
)
|
3.1
|
||||||||
|
Net income
|
0.4
|
%
|
4.7
|
%
|
5.5
|
%
|
||||||
2023 Compared to 2022
Overview
Revenue in 2023 decreased 12% to $1.97 billion from $2.23 billion in 2022. Our 2023 revenue was negatively impacted 3% from foreign-currency fluctuations. As of the end of the fourth quarter of
2023, Customers decreased 15%, Paid Affiliates decreased 30% and Sales Leaders decreased 10% compared to the prior year.
The year-over-year decrease in our 2023 revenue was primarily driven by the continued macroeconomic pressures we’ve been facing in our markets, which have negatively impacted consumer spending and customer
acquisition. In addition, while we continue to make progress on our long-term vision, we have experienced headwinds from the transformation process. During 2023 we began the launch process of ageLOC TRMe, our new personalized approach to weight management, which generated approximately $87.5 million in revenue in 2023. In the third quarter of 2023, we began the
launch process of our next smart connected device system, ageLOC WellSpa iO, which generated $62.2 million in revenue. The decline in our core Nu Skin segments was partially offset by 41% growth in our
Rhyz segments, partially from acquisitions during the year as well as organic growth.
Earnings per share in 2023 decreased 92% to $0.17 from $2.07 in 2022. The decrease in earnings per share was primarily driven by a third quarter of 2023 inventory write-off charge of $65.7 million, a $19.8 million
restructuring charge and the overall decline in revenue, partially offset by our 2022 $48.5 million restructuring charge and $26.9 million third quarter of 2022 inventory write-off charge. In addition, our Earnings per share was impacted by an
increase in our effective tax rate for 2023.
Segment Results
We report our business in nine segments to reflect our current management approach. These segments consist of our seven geographic Nu Skin segments—Americas, Mainland China, Southeast Asia/Pacific, South Korea,
Japan, Europe & Africa, and Hong Kong/Taiwan—and our two Rhyz segments—Manufacturing and Rhyz other. The Nu Skin Other category includes miscellaneous corporate revenue and related adjustments. The Rhyz other segment includes other
investments by our Rhyz business arm, which were entered into during 2021 and 2023. Our Europe & Africa segment was previously Europe, Middle East and Africa (“EMEA”), but was changed following the June 2023 closure of the Israel market.
The following table sets forth revenue for the years ended December 31, 2023 and 2022 for each of our reportable segments (U.S. dollars in thousands):
|
Constant
|
||||||||||||||||
|
Year Ended December 31,
|
Currency
|
|||||||||||||||
|
2023
|
2022
|
Change
|
Change(1)
|
|||||||||||||
|
Nu Skin
|
||||||||||||||||
|
Americas
|
$
|
398,222
|
$
|
508,537
|
(22
|
)%
|
(18
|
)%
|
||||||||
|
Mainland China
|
298,079
|
360,389
|
(17
|
)%
|
(13
|
)%
|
||||||||||
|
Southeast Asia/Pacific
|
267,206
|
344,411
|
(22
|
)%
|
(21
|
)%
|
||||||||||
|
South Korea
|
236,099
|
268,707
|
(12
|
)%
|
(11
|
)%
|
||||||||||
|
Japan
|
207,833
|
224,896
|
(8
|
)%
|
(1
|
)%
|
||||||||||
|
Europe & Africa
|
192,352
|
204,275
|
(6
|
)%
|
(8
|
)%
|
||||||||||
|
Hong Kong/ Taiwan
|
153,589
|
157,197
|
(2
|
)%
|
1
|
%
|
||||||||||
|
Other
|
(858
|
)
|
3,959
|
(122
|
)%
|
(122
|
)%
|
|||||||||
|
Total Nu Skin
|
1,752,522
|
2,072,371
|
(15
|
)%
|
(13
|
)%
|
||||||||||
|
Rhyz
|
||||||||||||||||
|
Manufacturing
|
181,395
|
149,458
|
21
|
%
|
21
|
%
|
||||||||||
|
Rhyz Other
|
35,214
|
3,830
|
819
|
%
|
819
|
%
|
||||||||||
|
Total Rhyz
|
216,609
|
153,288
|
41
|
%
|
41
|
%
|
||||||||||
|
Total
|
$
|
1,969,131
|
$
|
2,225,659
|
(12
|
)%
|
(9
|
)%
|
||||||||
| (1) |
Constant-currency revenue change is a non-GAAP financial measure. See “Non-GAAP Financial Measures,” below.
|
The table below sets forth segment contribution for the years ended December 31, 2023 and 2022 for each of our reportable segments (U.S. dollars in thousands). Segment contribution excludes
certain intercompany charges, specifically royalties, license fees, transfer pricing and other miscellaneous items. We use segment contribution to measure the portion of profitability that the segment managers have the ability to control for
their respective segments. For additional information regarding our segments and the calculation of segment contribution, see Note 15 to the consolidated financial statements contained in this report.
|
Year Ended December 31,
|
||||||||||||
|
2023
|
2022
|
Change
|
||||||||||
|
Nu Skin
|
||||||||||||
|
Americas
|
$
|
78,943
|
$
|
97,298
|
(19
|
)%
|
||||||
|
Mainland China
|
62,259
|
72,362
|
(14
|
)%
|
||||||||
|
Southeast Asia/Pacific
|
47,743
|
75,902
|
(37
|
)%
|
||||||||
|
South Korea
|
74,091
|
78,811
|
(6
|
)%
|
||||||||
|
Japan
|
54,076
|
51,620
|
5
|
%
|
||||||||
|
Europe & Africa
|
18,592
|
15,959
|
16
|
%
|
||||||||
|
Hong Kong/Taiwan
|
40,582
|
32,584
|
25
|
%
|
||||||||
|
Total Nu Skin
|
376,286
|
424,536
|
(11
|
)%
|
||||||||
|
Rhyz
|
||||||||||||
|
Manufacturing
|
12,321
|
3,570
|
245
|
%
|
||||||||
|
Rhyz Other
|
(20,564
|
)
|
(6,180
|
)
|
(233
|
)%
|
||||||
|
Total Rhyz
|
(8,243
|
)
|
(2,610
|
)
|
216
|
%
|
||||||
The following table provides information concerning the number of Customers, Paid Affiliates and Sales Leaders in our core Nu Skin business as of December 31, 2023 and 2022.
| ● |
“Customers” are persons who have purchased directly from the Company during the three months ended as of the date indicated. Our Customer numbers include members of our sales force who made such a purchase, including Paid Affiliates
and those who qualify as Sales Leaders, but they do not include consumers who purchase directly from members of our sales force.
|
| ● |
“Paid Affiliates” are any Brand Affiliates, as well as members of our sales force in Mainland China, who earned sales compensation during the three-month period. In all of our markets besides Mainland China, we refer to members of our
independent sales force as “Brand Affiliates” because their primary role is to promote our brand and products through their personal social networks.
|
| ● |
“Sales Leaders” are the three-month average of our monthly Brand Affiliates, as well as sales employees and independent marketers in Mainland China, who achieved certain qualification requirements as of the end of each month of the
quarter.
|
|
Three Months Ended
December 31,
|
||||||||||||
|
2023
|
2022
|
Change
|
||||||||||
|
Customers
|
||||||||||||
|
Americas
|
231,183
|
299,287
|
(23
|
)%
|
||||||||
|
Mainland China
|
207,276
|
202,933
|
2
|
%
|
||||||||
|
Southeast Asia/Pacific
|
106,471
|
141,183
|
(25
|
)%
|
||||||||
|
South Korea
|
103,151
|
123,749
|
(17
|
)%
|
||||||||
|
Japan
|
113,670
|
119,152
|
(5
|
)%
|
||||||||
|
Europe & Africa
|
163,178
|
197,917
|
(18
|
)%
|
||||||||
|
Hong Kong/Taiwan
|
52,110
|
62,903
|
(17
|
)%
|
||||||||
|
Total Customers
|
977,039
|
1,147,124
|
(15
|
)%
|
||||||||
|
Paid Affiliates
|
||||||||||||
|
Americas
|
31,910
|
42,633
|
(25
|
)%
|
||||||||
|
Mainland China
|
25,889
|
23,436
|
10
|
%
|
||||||||
|
Southeast Asia/Pacific
|
34,404
|
38,653
|
(11
|
)%
|
||||||||
|
South Korea(1)
|
22,166
|
45,058
|
(51
|
)%
|
||||||||
|
Japan(1)
|
22,417
|
38,021
|
(41
|
)%
|
||||||||
|
Europe & Africa(1)
|
18,888
|
31,869
|
(41
|
)%
|
||||||||
|
Hong Kong/Taiwan(1)
|
11,212
|
17,286
|
(35
|
)%
|
||||||||
|
Total Paid Affiliates
|
166,886
|
236,956
|
(30
|
)%
|
||||||||
|
Sales Leaders
|
||||||||||||
|
Americas
|
7,126
|
9,594
|
(26
|
)%
|
||||||||
|
Mainland China
|
11,296
|
12,359
|
(9
|
)%
|
||||||||
|
Southeast Asia/Pacific
|
6,418
|
6,999
|
(8
|
)%
|
||||||||
|
South Korea
|
5,249
|
6,094
|
(14
|
)%
|
||||||||
|
Japan
|
7,086
|
5,936
|
19
|
%
|
||||||||
|
Europe & Africa
|
3,968
|
4,740
|
(16
|
)%
|
||||||||
|
Hong Kong/Taiwan
|
2,916
|
3,015
|
(3
|
)%
|
||||||||
|
Total Sales Leaders
|
44,059
|
48,737
|
(10
|
)%
|
||||||||
| (1) |
The December 31, 2023 number is affected by a change in eligibility requirements for receiving certain rewards within our compensation structure, to more narrowly focus on those affiliates who are actively building a consumer base. See
“South Korea,” “Japan,” “Europe & Africa,” and “Hong Kong/Taiwan,” below. We plan to implement these changes in additional segments over the next several quarters.
|
Following is a narrative discussion of our results in each segment, which supplements the tables above.
Americas. The decline in revenue, Customers, Paid Affiliates and Sales Leaders in our Americas segment for the fiscal year 2023 is attributable to the continued
decline in momentum in our North America markets, while our Latin America markets continue to be challenged by macroeconomic issues. In the first quarter of 2023 we launched our new affiliate rewards and recognition program in North America. In
the second quarter of 2023, we adjusted the structure of our sales compensation program in our Latin America markets and implemented our new e-commerce platform in North America. In connection with the transformation efforts, we experienced
disruptions to our subscriptions in North America, which negatively impacted revenue. Despite some early difficulties with migration and adoption of the new programs and platforms, we believe these changes will be beneficial for our future
growth opportunities.
The year-over-year decrease in segment contribution primarily reflects the decline in revenue.
Mainland China.
Our Mainland China market continued to be challenged during 2023. Although we saw certain improving trends during the second quarter, ongoing macroeconomic factors in the third quarter and the associated decrease in consumer spending led to
declines in revenue. The year-over-year increases in our Paid Affiliates reflect the second quarter growth in these metrics from promotional activities and our ageLOC TRMe preview. Our Customers increased from promotions in the fourth quarter of 2023. Our revenue for fiscal year 2023 was negatively impacted 4% by unfavorable foreign currency fluctuations. While we
continue to believe in the potential of this market, we anticipate the current deflationary pressures and other economic challenges
persisting as the economy works to recover.
The year-over-year decrease in segment contribution for fiscal year 2023 primarily reflects a decrease in revenue, partially offset by a 0.8 percentage point improvement in gross margin from a
favorable sales mix as well as decreased production promotions and discounts during the year.
Southeast Asia/Pacific. The decline in revenue, Customers, Paid Affiliates and Sales Leaders for 2023 is partially attributable to slowing momentum from the general macroeconomic factors in
the markets along with price increases that we implemented to address inflation. In addition, in the first half of 2022 we launched ageLOC Meta (locally referred to as ageLOC Reset in our Southeast Asia markets), which generated $48.1 million in
revenue for fiscal year 2022, respectively, compared to $22.2 million for fiscal year 2023.
The year-over-year decrease in segment contribution is primarily attributable to the decline in revenue, along with a 1.7 percentage point decline in gross margin due to product mix, and a 1.0
percentage point increase in selling expenses as a percent of revenue from incremental cost associated with our Sales Leader growth program, which is aimed at channel development efforts.
South Korea. Our South Korea market was challenged by difficult macroeconomic trends, including inflationary pressures, and our associated price increases which negatively impacted our
revenue, Customers, Paid Affiliates and Sales Leaders for the year ended December 31, 2023. Our Paid Affiliates were also negatively impacted by a change in eligibility requirements for receiving certain rewards within our compensation
structure. We estimate the change in eligibility requirements resulted in a reduction of approximately 14 thousand Paid Affiliates for the three months ended December 31, 2023.
The year-over-year decrease in segment contribution primarily reflects the decline in revenue, partially offset by a $9.0 million decrease in general and administrative expenses from savings
generated by our 2022 restructuring plan.
Japan. The decline in revenue is primarily attributable to a 7% negative impact from unfavorable foreign-currency fluctuations. On a local currency basis, revenue decreased
less than 1%. The increase in Sales Leaders is primarily from a modification we made to the compensation plan starting in June 2023. Our Paid Affiliates were also negatively impacted by a change in eligibility requirements made in the
fourth quarter of 2023 for receiving certain rewards within our compensation structure. We estimate the change in eligibility requirements resulted in a reduction of approximately 15 thousand Paid Affiliates for the fourth quarter of 2023.
The year-over-year decline in segment contribution reflects the decline in revenue, partially offset by cost savings generated from the 2022 restructuring plan, and a decrease in selling expenses
due to a reduction in the incentive trips accrual.
Europe & Africa. The reduction in revenue, Customers, Paid Affiliates and Sales Leaders reflects the softening of momentum that occurred during the first half of
2023, as well as macroeconomic factors that have led to a decline in the purchasing power of our customers. Our Paid Affiliates were also negatively impacted by a change in eligibility requirements for receiving certain rewards within our
compensation structure. We estimate the change in eligibility requirements resulted in a reduction of approximately 6 thousand Paid Affiliates for the fourth quarter of 2023. Effective June 2023, we closed our Israel market. This market generated
$65 thousand of revenue for the first half of 2023 prior to its closure and $172 thousand for the full year 2022.
The year-over-year decline in segment contribution reflects the decline in revenue, partially offset by a slight 1.4 percentage point improvement in gross margin due to favorable sales mix and price increase.
Hong Kong/Taiwan. Our Hong Kong/Taiwan segment revenue decreased 2% for fiscal year 2023. Our revenue was negatively impacted 3% from unfavorable foreign-currency fluctuations. During the back half of 2023,
we previewed and launched our ageLOC WellSpa iO, which generated approximately $13.5 million of revenue. Our decline in Customers is primarily related to the product launch process, under which the
product was initially only available to our Sales Leaders for purchase. Our Paid Affiliates were also negatively impacted by a change in eligibility requirements for receiving certain rewards within our compensation structure. We estimate the
change in eligibility requirements resulted in a reduction of approximately 3 thousand Paid Affiliates for the fourth quarter of 2023.
Our segment contribution benefited from a 2.0 percentage point improvement in gross margin from cost saving initiatives to reduce freight and overhead cost, a 2.1 percentage point decrease in selling expenses as a
percentage of revenue from lower incentive trip accruals, and a 1.7 percentage point decrease in general and administrative expenses from cost savings in occupancy and labor resulting primarily from our 2022 restructuring plan.
Manufacturing. Our Manufacturing segment revenue increased 21%, primarily driven by our Wasatch Manufacturing entity. During 2023, Wasatch revenue increased approximately 46%,
primarily from onboarding new customers and continued automation efforts to increase efficiencies, enabling an increase in production capacity.
The increase in segment contribution for 2023 is primarily from the increased revenue and efficiencies gained from automation. In addition, segment contribution benefited from a favorable revenue mix between our
manufacturing entities, which have differing profitability levels.
Rhyz Other. The increase in revenue in our Rhyz other segment is primarily driven by $20.8 million growth at Mavely, our previously acquired social commerce platform for 2023. In addition, we recognized $10.6 million of revenue for 2023, from our entities acquired in the second quarter of 2023. Because we acquired these entities during the year, our reported revenue for these entities consists only of the
revenue after the acquisition dates, not the full year.
In April 2023, we acquired 60 percent of LifeDNA, Inc. (“LifeDNA”), a DNA assessment company. Consideration paid included $4.0 million of cash, along with the conversion of a previous $3.0 million
Simple Agreement for Future Equity (“SAFE”), and a $0.2 million convertible note. In June 2023, we acquired 100 percent ownership in Beauty Biosciences, LLC (“BeautyBio”), a clean and clinically proven skin care and beauty device company. The
purchase price for BeautyBio was $75.0 million, net of cash acquired of $1.5 million, all payable in cash.
The decline in segment contribution for 2023 is primarily from our recent acquisitions, which we are currently investing in to enable future growth, as well as the impacts of purchase accounting,
which resulted in $3.3 million of incremental amortization of intangible assets.
Consolidated Results
Revenue
Revenue for the year ended December 31, 2023 decreased 12% to $1.97 billion, compared to $2.23 billion in the prior-year period. For a discussion and analysis of this increase in revenue, see
“Overview” and “Segment Results,” above.
Gross profit
Gross profit as a percentage of revenue decreased to 68.9% in 2023, compared to 71.7% in 2022. Gross profit as a percentage of revenue for core Nu Skin decreased 2.2 percentage points
to 73.2%, primarily driven by our third quarter of 2023 strategic decision to re-balance and narrow our product portfolio, which resulted in an incremental $65.7 million inventory write-off, compared to an incremental $26.9 million
write-off in the third quarter of 2022. Our gross margin was also impacted by the gross margin of our owned manufacturing entities, which as previously disclosed, is significantly lower than the gross margin
of our core Nu Skin business. With the year-over-year growth within our Manufacturing segment, their revenue represented a higher proportion of our overall consolidated revenue for the year ended December 31, 2023 than in the prior-year.
Selling expenses
Selling expenses as a percentage of revenue decreased to 37.7% in 2023, compared to 39.5% for 2022. Our core Nu Skin business’s selling expense as a percentage of revenue decreased 1.2 percentage
points to 41.1% for 2023, compared to 42.3% for 2022. Selling expenses for our core Nu Skin business are driven by the specific performance of our individual Sales Leaders. Given the size of our sales force and the various components of our
compensation and incentive programs, selling expenses as a percentage of revenue typically fluctuate plus or minus approximately 100 basis points from period to period. Our selling expenses is also impacted by the growth within our
Manufacturing segment, which has minimal selling expenses. We expect to see future fluctuations in our selling expenses as a result of growth in the Rhyz segments and varying level of selling expenses by entity. For example, as discussed above,
Manufacturing has minimal selling expenses, and within Rhyz other, Mavely has selling expenses of approximately 80% and BeautyBio and LifeDNA are minimal.
General and administrative expenses
General and administrative expenses decreased to $546.9 million in 2023, compared to $555.8 million in 2022. The $8.9 million decrease primarily was from contraction in labor
expense and occupancy related expenses, both attributable to our 2022 restructuring in which we reduced our physical footprint and headcount. As a percentage of revenue, general and administrative increased 2.8
percentage points to 27.8% for 2023, compared to 25.0% for 2022.
Restructuring and impairment expenses
In the third quarter of 2022, we adopted a strategic plan to focus resources on our strategic priorities and optimize future growth and profitability. The global program included workforce reductions and footprint
optimization. Total charges incurred under the program were approximately $53.3 million, with $40.8 million in cash charges of severance and lease termination cost and approximately $12.5 million of non-cash charges of impairment of fixed assets,
acceleration of depreciation and impairment of other intangibles related to our footprint optimization. During 2022, we incurred charges to be settled in cash of $20.1 million in severance charges, $7.4 million in lease termination cost, and $5.2
million in other associated cost, and non-cash charges of $8.2 million in fixed asset impairments, $0.9 million in accelerated depreciation and $1.7 million in impairment of other intangibles. During 2023, we incurred charges to be settled in
cash of $4.0 million in severance charges, $1.9 million in lease termination cost, and $2.2 million in other associated cost, and non-cash charges of $1.7 million in accelerated depreciation.
In the fourth quarter of 2023, we adopted another strategic plan to focus resources on our global priorities and optimize future growth and profitability. The global program includes workforce reductions. We
estimate total charges under the program will approximate $15–$25 million in severance charges, which will be paid in cash. We expect to substantially complete the program during the first half of 2024. The program may expand as we continue to
evaluate our business, including our product portfolio, global processes and organization, and operational footprint. During the fourth quarter of 2023, we incurred charges to be settled in cash of $10.0 million in severance charges.
Other income (expense),
net
Other income (expense), net for 2023 was $(21.7) million, compared to $(21.9) million in 2022. The decrease in other expense for year ended
December 31, 2023 reflects a $7.2 million decline in foreign currency losses and a $9.3 million unrealized investment loss recorded in 2022 related to a controlled environment agriculture company that we invested in, partially offset by a $12.1 million increase in interest expense and a $4.0 million decline in contingent consideration that was recorded in 2022 in connection with a previous
acquisition.
Provision for income taxes
Provision (benefit) for income taxes increased to $18.0 million in 2023 from $(15.8) million in 2022. Our effective tax rate increased to 67.7% of pre-tax income in 2023 from (17.8)%
in 2022. The increase in the effective tax rate for 2023 is primarily due to the restructuring charges that affected our U.S. earnings. These additional expenses in the U.S. reduced our ability to utilize
foreign tax credits. As a result, we recorded an additional $6.1 million valuation allowance against our foreign tax credits.
For 2024, we currently anticipate that our effective tax rate will be approximately 25-35%. Our actual 2024 effective tax rate could differ materially from this estimate. Our future effective tax
rates could fluctuate significantly, being affected by numerous factors, such as intercompany transactions, changes in our business operations, foreign audits, increases in uncertain tax positions, acquisitions, entry into new markets, the
amount of our foreign earnings, including earnings being lower than anticipated in jurisdictions where we have a lower statutory rate and higher than anticipated in jurisdictions where we have a higher statutory rate, losses incurred in
jurisdictions, the inability to realize tax benefits, withholding taxes, changes in foreign currency exchange rates, changes in our stock price, changes in our deferred tax assets and liabilities and their valuation.
Net income
As a result of the foregoing factors, net income in 2023 decreased to $8.6 million, compared to $104.8 million in 2022.
2022 Compared to 2021
For a comparison of our operating results for 2022 compared to 2021, see Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations beginning on page 44 of our Annual Report on Form 10-K for the fiscal year
ended December 31, 2022, as filed with the SEC on February 16, 2023.
Liquidity and Capital Resources
Historically, our principal uses of cash have included operating expenses (particularly selling expenses) and working capital (principally inventory purchases), as well as capital
expenditures, stock repurchases, dividends, debt repayment and the development of operations in new markets. We have at times incurred long-term debt, or drawn on our revolving line of credit, to fund strategic transactions, stock
repurchases, capital investments and short-term operating needs. We typically generate positive cash flow from operations due to favorable margins and have generally relied on cash from operations to fund operating activities. We generated
$118.6 million in cash from operations during 2023, compared to $108.1 million in cash from operations during 2022. The increase in cash flow from operations primarily reflects higher payout of our accruals in 2022, attributable to
our 2021 restructuring and higher commission charges incurred during the fourth quarter of 2021, partially offset by a lower net income in 2023.
As of December 31, 2023, cash and cash equivalents, including current investments, were $267.8 million compared to $278.5 million as of December 31, 2022. The decrease was
primarily driven by our second quarter of 2023 acquisitions of BeautyBio and LifeDNA, quarterly dividend payments, capital expenditures, as discussed below, and payment on liabilities associated with our 2022 restructuring plan, partially offset
by borrowings on our revolving credit facility, a substantial portion of which was to fund our acquisition of BeautyBio. Working capital as of December 31, 2023 was $373.0 million compared to $400.6 million as of
December 31, 2022. The decrease in working capital is attributable to the decline in inventory, primarily from our third quarter of 2023 $65.7 million write-off, partially offset by an increase in accounts receivable from the growth in our Rhyz
segments.
Cash requirements. For 2024, we currently expect that our material cash requirements will include the following:
| ● |
Cash requirements for operating activities. Our operating expenses typically total approximately 85%-90% of our revenue, with compensation to our sales force constituting 40%-43% of our core Nu Skin revenue.
These compensation expenses consist primarily of commission payments, which we generally pay to our sales force within approximately one to two months of the sale. Inventory purchases have historically constituted approximately 15%-20%
of our revenue. On average, we purchase our inventory approximately three to six months prior to sale. While our actual cash usage may vary based on the timing of payments, we currently expect these approximate percentages and payment
practices to continue in 2024. In addition, we expect our 2024 lease payments will be approximately $27.2 million.
|
| ● |
Cash requirements for investing activities. As discussed in more detail below, our capital expenditures are expected to be $40-60 million for 2024.
|
| ● |
Cash requirements for financing activities. In 2024 we are obligated to make a total of $25.0 million in quarterly principal payments plus
the associated interest on our term loan. We also anticipate paying quarterly cash dividends throughout 2024, approximating $3 million per quarter
depending on the number of shares outstanding as of record date. Additional details about our dividends and term loan are provided below.
|
For 2024 and onward, we currently expect the above material cash requirements will remain. See Note 6 and Note 7 to the consolidated financial statements contained in this report for our future
cash requirements related to our debt principal repayment and our maturities of lease liabilities.
We intend to fund the aforementioned cash requirements with our cash from operations and draw on our revolving credit facility, as needed, to address any short-term funding requirements.
Capital expenditures. Capital expenditures in 2023
totaled $58.5 million. We expect that our capital expenditures in
2024 will be primarily related to:
| ● |
Rhyz plant expansion to increase capacity and capabilities;
|
| ● |
purchases and expenditures for computer systems and equipment, software, and application development; and
|
| ● |
the expansion and upgrade of facilities in our various markets.
|
We estimate that capital expenditures for the uses listed above will total approximately $40-60 million for 2024. The construction of the new manufacturing plant in Mainland China was substantially completed during 2023; production began in the fourth quarter of 2023. As of December 31, 2023, we
had spent approximately $53.9 million on this project, including $9.2 million in 2023.
Credit Agreement. On June 14, 2022, we entered into an
Amended and Restated Credit Agreement (the “Credit Agreement”) with various financial institutions as lenders and Bank of America, N.A., as administrative agent. The Credit Agreement provides for a $400.0 million term loan facility and a $500.0
million revolving credit facility, each with a term of five years. We used the proceeds of the term loan and the draw on the revolving facility to pay off the previous credit agreement. Both facilities bear interest at the Secured Overnight Financing Rate (“SOFR”), plus a margin based on our consolidated leverage ratio. The term loan facility amortizes in quarterly installments in
amounts resulting in an annual amortization of 2.5% during the first year and 5.0% during the subsequent years after the closing date of the Credit Agreement, with the remainder payable at final maturity. As of December 31, 2023 and 2022, we
had $120.0 million and $10.0 million of outstanding borrowings under our revolving credit facility, and $385.0 million and $395.0 million on our term loan facility. The carrying value of the debt also reflects debt issuance costs of $2.0
million and $2.5 million as of December 31, 2023 and 2022, respectively, related to the Credit Agreement. The Credit Agreement requires us to maintain a consolidated leverage ratio not exceeding 2.25 to 1.00 and a consolidated interest coverage
ratio of no less than 3.00 to 1.00. As of December 31, 2023, we were in compliance with all debt covenants under the Credit Agreement.
Modification of previous credit agreement. On June 14, 2022, we repaid our outstanding debt under our previous credit agreement, dated as of April 18, 2018, with several financial institutions as lenders and
Bank of America, N.A., as administrative agent. We had indebtedness of $70.0 million on our revolver as of December 31, 2021, and $307.5 million on our term loan as of December 31, 2021.
Derivative instruments. As of December 31, 2023, we had four interest rate swaps, with a total notional principal amount of $200 million and a maturity date of July 31, 2025. We entered into these interest
rate swap arrangements during the third quarter of 2020 to hedge the variable cash flows associated with our variable-rate debt under the Credit Agreement.
Stock repurchase plan. In 2018, our board of directors approved a stock repurchase plan authorizing us to repurchase up to $500.0 million of our outstanding shares of Class A common stock on
the open market or in private transactions. During 2023, we repurchased approximately 0.6 million shares of our Class A common stock under the plan for $13.0 million. As of December 31, 2023, $162.4 million was available for repurchases under the
plan. Our stock repurchases are used primarily to offset dilution from our equity incentive plans and for strategic initiatives.
Dividends. In February, May, July and October 2023, our
board of directors declared quarterly cash dividends of $0.39 per share. These quarterly cash dividends of $19.4 million, $19.5 million, $19.5 million and $19.3 million were paid on March 8, 2023, June 7, 2023, September 6, 2023 and December 6,
2023 to stockholders of record on February 27, 2023, May 26, 2023, August 25, 2023 and November 24, 2023. In February 2024, our board of directors declared a reduced quarterly cash dividend of $0.06 per share to be paid on March 6, 2024 to stockholders of record on February 26, 2024. The reduction of our quarterly dividend is expected to preserve approximately $65.0 million of capital on an annualized basis, better positioning us to allocate additional capital to our growth initiatives to execute on our business strategy. Currently, we anticipate
that our board of directors will continue to declare quarterly cash dividends and that the cash flows from operations will be sufficient to fund our future dividend payments. However, the continued declaration of dividends is subject to the
discretion of our board of directors and will depend upon various factors, including our net earnings, financial condition, cash requirements, future prospects and other relevant factors.
Cash from foreign subsidiaries. As of December 31, 2023 and 2022, we held $267.8 million and $278.5 million, respectively, in cash and cash equivalents, including current investments. These
amounts include $213.7 million and $223.0 million as of December 31, 2023 and 2022, respectively, held in our operations outside of the United States. Substantially all of our non-U.S. cash and cash equivalents are readily convertible into U.S.
dollars or other currencies, subject to procedural or other requirements in certain markets, as well as an indefinite-reinvestment designation, as described below.
We typically fund the cash requirements of our operations in the United States through intercompany dividends, intercompany loans and intercompany charges for products, use of
intangible property, and corporate services. However, some markets impose government-approval or other requirements for the repatriation of dividends. For example, in Mainland China, we are unable to repatriate cash from current operations in
the form of dividends until we file the necessary statutory financial statements for the relevant period. As of December 31, 2023 and 2022, we had $31.8 million and $33.4 million, respectively, in cash denominated in Chinese RMB. We
also have experienced delays in repatriating cash from Argentina. As of December 31, 2023 and 2022, we had $17.7 million and $14.9 million, respectively, in intercompany receivable with our Argentina subsidiary. We
also have intercompany loan arrangements with some of our markets, including Mainland China, that allow us to access available cash, subject to certain limits in Mainland China and other jurisdictions. We also have drawn on our revolving line
of credit to address cash needs until we can repatriate cash from Mainland China or other markets, and we may continue to do so. Except for $60 million of earnings in Mainland China that we designated as indefinitely reinvested during the
second quarter of 2018, we currently plan to repatriate undistributed earnings from our non-U.S. operations as necessary, considering the cash needs of our non-U.S. operations and the cash needs of our U.S. operations for dividends, stock
repurchases, capital investments, debt repayment and strategic transactions. Repatriation of non-U.S. earnings is subject to withholding taxes in certain foreign jurisdictions. Accordingly, we have accrued the necessary withholding taxes
related to the non-U.S. earnings.
We currently believe that existing cash balances, future cash flows from operations and existing lines of credit will be adequate to fund our cash needs on both a short- and long-term basis. The
majority of our historical expenses have been variable in nature and as such, a potential reduction in the level of revenue would reduce our cash flow needs. In the event that our current cash balances, future cash flow from operations and
current lines of credit are not sufficient to meet our obligations or strategic needs, we would consider raising additional funds in the debt or equity markets or restructuring our current debt obligations. Additionally, we would consider
realigning our strategic plans, including a reduction in capital spending, stock repurchases or dividend payments.
Non-GAAP Financial Measures
Constant-currency revenue change is a non-GAAP financial measure that removes the impact of fluctuations in foreign-currency exchange rates, thereby facilitating period-to-period comparisons of the Company’s
performance. It is calculated by translating the current period’s revenue at the same average exchange rates in effect during the applicable prior-year period and then comparing that amount to the prior-year period’s revenue. We believe that
constant-currency revenue change is useful to investors, lenders, and analysts because such information enables them to gauge the impact of foreign-currency fluctuations on our revenue from period to period.
Contingent Liabilities
Please refer to Note 16 to the consolidated financial statements contained in this report for information regarding our contingent liabilities.
Seasonality and Cyclicality
In addition to general economic factors, we are impacted by seasonal factors and trends such as major cultural events and vacation patterns. For example, most Asian markets celebrate their
respective local New Year in the first quarter, which generally has a negative impact on that quarter. We believe that direct selling is also generally negatively impacted during the third quarter, when many individuals, including our sales
force, traditionally take vacations.
Prior to making a product generally available for purchase in a market, we often do one or more introductory offerings of the product, such as a preview of the product to our Sales Leaders or
other product introduction or promotion. These offerings sometimes generate significant activity and a high level of purchasing, which can result in a higher-than-normal increase in revenue, Sales Leaders, Paid Affiliates and/or Customers
during the quarter and can skew year-over-year and sequential comparisons.
Recent Accounting Pronouncements
A description of new accounting pronouncements is contained in Note 2 to consolidated financial statements contained in this report.
Currency Risk and Exchange Rate Information
A majority of our revenue and many of our expenses are recognized outside of the United States, except for inventory purchases, a significant portion of which are primarily transacted in U.S.
dollars from vendors in the United States. The local currency of each of our Subsidiaries’ primary markets is considered the functional currency with the exception of our Asia product-distribution subsidiary in Singapore and, as discussed
below, our subsidiary in Argentina. All revenue and expenses are translated at weighted-average exchange rates for the periods reported. Therefore, our reported revenue and earnings will be positively impacted by a weakening of the U.S. dollar
and will be negatively impacted by a strengthening of the U.S. dollar. These impacts may be significant because a large portion of our business is derived from outside of the United States. Given the uncertainty of exchange rate fluctuations,
it is difficult to predict the effect of these fluctuations on our future business, product pricing and results of operations or financial condition.
In the second quarter of 2018, published inflation indices indicated that the three-year cumulative inflation in Argentina exceeded 100%, and as of July 1, 2018, we elected to adopt highly
inflationary accounting for our subsidiary in Argentina. Under highly inflationary accounting, Argentina’s functional currency became the U.S. dollar, and its income statement and balance sheet have been measured in U.S. dollars using both
current and historical rates of exchange. The effect of changes in exchange rates on peso-denominated monetary assets and liabilities has been reflected in earnings in Other income (expense), net and was not material. As of December 31, 2023,
our Argentina subsidiary had a small net peso monetary position. Net sales of Argentina were less than 2% of our consolidated net sales for 2023, 2022 and 2021.
We may seek to reduce our exposure to fluctuations in foreign currency exchange rates through the use of foreign currency exchange contracts and
through intercompany loans of foreign currency. We do not use derivative financial instruments for trading or speculative purposes. We regularly monitor our foreign currency risks and periodically take measures to reduce the impact of
foreign exchange fluctuations on our operating results. As of December 31, 2023, and 2022, we did not hold non-designated mark-to-market forward derivative contracts to hedge foreign-denominated intercompany positions or third-party foreign
debt. As of December 31, 2023 and 2022, we did not hold any forward contracts designated as foreign-currency cash flow hedges. We continue to evaluate our foreign currency hedging policy.
Following are the weighted-average currency exchange rates of U.S. $1 into local currency for each of our international or foreign markets in
which revenue exceeded U.S. $5.0 million for at least one of the quarters listed:
|
2023
|
2022
|
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|
4th Quarter
|
3rd Quarter
|
2nd Quarter
|
1st Quarter
|
4th Quarter
|
3rd Quarter
|
2nd Quarter
|
1st Quarter
|
|||||||||||||||||||||||||
|
Argentina
|
429.5
|
295.7
|
232.9
|
190.2
|
162.6
|
136.8
|
118.6
|
107.0
|
||||||||||||||||||||||||
|
Australia
|
1.5
|
1.5
|
1.5
|
1.5
|
1.5
|
1.5
|
1.4
|
1.4
|
||||||||||||||||||||||||
|
Canada
|
1.4
|
1.3
|
1.3
|
1.4
|
1.4
|
1.3
|
1.3
|
1.3
|
||||||||||||||||||||||||
|
Chile
|
896.1
|
847.7
|
800.2
|
810.3
|
915.8
|
930.6
|
840.9
|
809.1
|
||||||||||||||||||||||||
|
Eurozone countries
|
0.9
|
0.9
|
0.9
|
0.9
|
1.0
|
1.0
|
0.9
|
0.9
|
||||||||||||||||||||||||
|
Hong Kong
|
7.8
|
7.8
|
7.8
|
7.8
|
7.8
|
7.8
|
7.8
|
7.8
|
||||||||||||||||||||||||
|
Indonesia
|
15,605
|
15,229
|
14,885
|
15,235
|
15,553
|
14,933
|
14,536
|
14,344
|
||||||||||||||||||||||||
|
Japan
|
147.6
|
144.8
|
137.4
|
132.4
|
140.8
|
138.1
|
129.5
|
116.2
|
||||||||||||||||||||||||
|
Mainland China
|
7.2
|
7.2
|
7.0
|
6.9
|
7.1
|
6.8
|
6.6
|
6.3
|
||||||||||||||||||||||||
|
Malaysia
|
4.7
|
4.6
|
4.5
|
4.4
|
4.6
|
4.5
|
4.3
|
4.2
|
||||||||||||||||||||||||
|
Mexico
|
17.5
|
17.1
|
17.6
|
18.7
|
19.7
|
20.2
|
20.0
|
20.5
|
||||||||||||||||||||||||
|
Philippines
|
56.0
|
56.0
|
55.6
|
54.8
|
57.2
|
56.3
|
52.7
|
51.6
|
||||||||||||||||||||||||
|
Singapore
|
1.4
|
1.3
|
1.3
|
1.3
|
1.4
|
1.4
|
1.4
|
1.4
|
||||||||||||||||||||||||
|
South Korea
|
1,321.1
|
1,316.6
|
1,314.5
|
1,283.0
|
1,358.2
|
1,342.2
|
1,262.1
|
1,206.2
|
||||||||||||||||||||||||
|
Taiwan
|
31.7
|
31.8
|
30.7
|
30.4
|
31.1
|
30.4
|
29.4
|
28.0
|
||||||||||||||||||||||||
|
Thailand
|
35.6
|
35.2
|
34.4
|
34.0
|
36.2
|
36.4
|
34.5
|
33.0
|
||||||||||||||||||||||||
|
Vietnam
|
24,374
|
23,926
|
23,478
|
23,587
|
24,303
|
23,463
|
23,081
|
22,770
|
||||||||||||||||||||||||
Interest Rate Risk
We are exposed to risks related to fluctuations in interest rates on our outstanding variable rate debt. As of December 31, 2023, we had $503.0
million outstanding on the term loan, net of unamortized debt issuance cost and outstanding borrowings on our revolving credit facility. Our four interest rate swaps reduce our exposure to interest rate risk on our term loan by $200.0
million as of December 31, 2023. As a result, the total variable debt of $303.0 million was exposed to market risks as of December 31, 2023. A hypothetical one percentage point increase (decrease) in interest rates on our variable rate debt
would increase (decrease) our annual interest expense by approximately $3.0 million.
For variable rate debt, interest rate changes generally do not affect the fair value of the debt instrument, but do impact future earnings and cash
flows, assuming other factors are held constant. We have not entered into and currently do not hold derivatives for trading or speculative purposes.
For additional information about our market risk see Note 14 to the consolidated financial statements contained in this report.
| 1. |
Financial Statements. Set forth below is the index to the Financial Statements included in this Item 8:
|
|
Page
|
|
|
62
|
|
|
63
|
|
|
64
|
|
|
65
|
|
|
66
|
|
|
67
|
|
| 96 |
|
2.
|
Financial Statement Schedules: Financial statement schedules have been omitted because they are not required or are not applicable, or because the required information is shown in the financial
statements or notes thereto.
|
NU SKIN ENTERPRISES, INC.
(U.S. dollars in thousands)
|
December 31,
|
||||||||
|
2023
|
2022
|
|||||||
|
ASSETS
|
||||||||
|
Current assets
|
||||||||
|
Cash and cash equivalents
|
$
|
|
$
|
|
||||
|
Current investments
|
|
|
||||||
|
Accounts receivable, net
|
|
|
||||||
|
Inventories, net
|
|
|
||||||
|
Prepaid expenses and other
|
|
|
||||||
|
Total current assets
|
|
|
||||||
|
Property and equipment, net
|
|
|
||||||
|
Operating lease right-of-use assets
|
|
|
||||||
|
Goodwill
|
|
|
||||||
|
Other intangible assets, net
|
|
|
||||||
|
Other assets
|
|
|
||||||
|
Total assets
|
$
|
|
$
|
|
||||
|
LIABILITIES AND STOCKHOLDERS’ EQUITY
|
||||||||
|
Current liabilities
|
||||||||
|
Accounts payable
|
$
|
|
$
|
|
||||
|
Accrued expenses
|
|
|
||||||
|
Current portion of long-term debt
|
|
|
||||||
|
Total current liabilities
|
|
|
||||||
|
Operating lease liabilities
|
|
|
||||||
|
Long-term debt
|
|
|
||||||
|
Other liabilities
|
|
|
||||||
|
Total liabilities
|
|
|
||||||
|
Commitments and contingencies (Notes 7 and 16)
|
|
|
||||||
|
Stockholders’ equity
|
||||||||
|
Class A common stock –
|
|
|
||||||
|
Additional paid-in capital
|
|
|
||||||
|
Treasury stock, at cost –
|
(
|
)
|
(
|
)
|
||||
|
Accumulated other comprehensive loss
|
(
|
)
|
(
|
)
|
||||
|
Retained earnings
|
|
|
||||||
|
Total stockholders’ equity
|
|
|
||||||
|
Total liabilities and stockholders’ equity
|
$
|
|
$
|
|
||||
The accompanying notes are an integral part of these consolidated financial statements.
NU SKIN ENTERPRISES, INC.
(U.S. dollars in thousands, except per share amounts)
|
Year Ended December 31,
|
||||||||||||
|
2023
|
2022
|
2021
|
||||||||||
|
Revenue
|
$
|
|
$
|
|
$
|
|
||||||
|
Cost of sales
|
|
|
|
|||||||||
|
Gross profit
|
|
|
|
|||||||||
|
Operating expenses:
|
||||||||||||
|
Selling expenses
|
|
|
|
|||||||||
|
General and administrative expenses
|
|
|
|
|||||||||
|
Restructuring and impairment expenses
|
|
|
|
|||||||||
|
Total operating expenses
|
|
|
|
|||||||||
|
Operating income
|
|
|
|
|||||||||
|
Other income (expense), net (Note 17)
|
(
|
)
|
(
|
)
|
(
|
)
|
||||||
|
Income before provision for income taxes
|
|
|
|
|||||||||
|
Provision (benefit) for income taxes
|
|
(
|
)
|
|
||||||||
|
Net income
|
$
|
|
$
|
|
$
|
|
||||||
|
Net income per share:
|
||||||||||||
|
Basic
|
$
|
|
$
|
|
$
|
|
||||||
|
Diluted
|
$
|
|
$
|
|
$
|
|
||||||
|
Weighted-average common shares outstanding (000s):
|
||||||||||||
|
Basic
|
|
|
|
|||||||||
|
Diluted
|
|
|
|
|||||||||
The accompanying notes are an integral part of these consolidated financial statements.
NU SKIN ENTERPRISES, INC.
(U.S. dollars in thousands)
|
Year Ended December 31,
|
||||||||||||
|
2023
|
2022
|
2021
|
||||||||||
|
Net income
|
$
|
|
$
|
|
$
|
|
||||||
|
Other comprehensive income (loss):
|
||||||||||||
|
Foreign currency translation adjustment, net of taxes of $(
|
(
|
)
|
(
|
)
|
(
|
)
|
||||||
|
Net unrealized gains/(losses) on cash flow hedges, net of taxes of $(
|
|
|
|
|||||||||
|
Less: Reclassification adjustment for realized losses/(gains) in current earnings on cash flow hedges, net of taxes of $
|
(
|
)
|
(
|
)
|
|
|||||||
|
(
|
)
|
(
|
)
|
(
|
)
|
|||||||
|
Comprehensive income
|
$
|
(
|
)
|
$
|
|
$
|
|
|||||
The accompanying notes are an integral part of these consolidated financial statements.
NU SKIN ENTERPRISES, INC.
(U.S. dollars in thousands)
|
Class A
Common
Stock
|
Additional
Paid-in
Capital
|
Treasury
Stock, at
cost
|
Accumulated
Other
Comprehensive
Loss
|
Retained
Earnings
|
Total
|
|||||||||||||||||||
|
Balance at January 1, 2021
|
$
|
|
$
|
|
$
|
(
|
)
|
$
|
(
|
)
|
$
|
|
$
|
|
||||||||||
|
Net income
|
|
|
|
|
|
|
||||||||||||||||||
|
Other comprehensive loss, net of tax
|
|
|
|
(
|
)
|
|
(
|
)
|
||||||||||||||||
|
Repurchase of Class A common stock (Note 8)
|
|
|
(
|
)
|
|
|
(
|
)
|
||||||||||||||||
|
Exercise of employee stock options (
|
|
(
|
)
|
|
|
|
|
|||||||||||||||||
|
Stock-based compensation
|
|
|
|
|
|
|
||||||||||||||||||
|
Cash dividends
|
|
|
|
|
(
|
)
|
(
|
)
|
||||||||||||||||
|
Balance at December 31, 2021
|
$
|
|
$
|
|
$
|
(
|
)
|
$
|
(
|
)
|
$
|
|
$
|
|
||||||||||
|
Net income
|
|
|
|
|
|
|
||||||||||||||||||
|
Other comprehensive loss, net of tax
|
|
|
|
(
|
)
|
|
(
|
)
|
||||||||||||||||
|
Repurchase of Class A common stock (Note 8)
|
|
|
(
|
)
|
|
|
(
|
)
|
||||||||||||||||
|
Exercise of employee stock options (
|
|
(
|
)
|
|
|
|
|
|||||||||||||||||
|
Stock-based compensation
|
|
|
|
|
|
|
||||||||||||||||||
|
Cash dividends
|
|
|
|
|
(
|
)
|
(
|
)
|
||||||||||||||||
|
Balance at December 31, 2022
|
$
|
|
$
|
|
$
|
(
|
)
|
$
|
(
|
)
|
$
|
|
$
|
|
||||||||||
|
Net income
|
|
|
|
|
|
|
||||||||||||||||||
|
Other comprehensive loss, net of tax
|
|
|
|
(
|
)
|
|
(
|
)
|
||||||||||||||||
|
Repurchase of Class A common stock (Note 8)
|
|
|
(
|
)
|
|
|
(
|
)
|
||||||||||||||||
|
Exercise of employee stock options (
|
|
(
|
)
|
|
|
|
|
|||||||||||||||||
|
Stock-based compensation
|
|
|
|
|
|
|
||||||||||||||||||
|
Cash dividends
|
|
|
|
|
(
|
)
|
(
|
)
|
||||||||||||||||
|
Balance at December 31, 2023
|
$
|
|
$
|
|
$
|
(
|
)
|
$
|
(
|
)
|
$
|
|
$
|
|
||||||||||
The accompanying notes are an integral part of these consolidated financial statements.
NU SKIN ENTERPRISES, INC.
(U.S. dollars in thousands)
|
Year Ended December 31,
|
||||||||||||
|
2023
|
2022
|
2021
|
||||||||||
|
Cash flows from operating activities:
|
||||||||||||
|
Net income
|
$
|
|
$
|
|
$
|
|
||||||
|
Adjustments to reconcile net income to net cash provided by operating activities:
|
||||||||||||
|
Depreciation and amortization
|
|
|
|
|||||||||
|
Non-cash lease expense
|
|
|
|
|||||||||
|
Stock-based compensation
|
|
|
|
|||||||||
|
Inventory write-down(1)
|
||||||||||||
|
Foreign currency (gains)/losses
|
|
|
|
|||||||||
|
Loss on disposal of assets
|
|
|
|
|||||||||
|
Impairment of fixed assets and other intangibles
|
|
|
|
|||||||||
|
Unrealized (gain)/losses on equity investments
|
( |
) | ||||||||||
|
Deferred taxes
|
(
|
)
|
(
|
)
|
|
|||||||
|
Changes in operating assets and liabilities:
|
||||||||||||
|
Accounts receivable, net
|
(
|
)
|
(
|
)
|
|
|||||||
|
Inventories, net
|
(
|
)
|
(
|
)
|
(
|
)
|
||||||
|
Prepaid expenses and other
|
|
|
|
|||||||||
|
Other assets
|
|
|
(
|
)
|
||||||||
|
Accounts payable
|
(
|
)
|
|
(
|
)
|
|||||||
|
Accrued expenses
|
(
|
)
|
(
|
)
|
(
|
)
|
||||||
|
Other liabilities
|
(
|
)
|
(
|
)
|
|
|||||||
|
Net cash provided by operating activities
|
|
|
|
|||||||||
|
Cash flows from investing activities:
|
||||||||||||
|
Purchases of property and equipment
|
(
|
)
|
(
|
)
|
(
|
)
|
||||||
|
Proceeds on investment sales
|
|
|
|
|||||||||
|
Purchases of investments
|
(
|
)
|
(
|
)
|
(
|
)
|
||||||
|
Acquisitions (net of cash acquired)
|
(
|
)
|
|
(
|
)
|
|||||||
|
Net cash used in investing activities
|
(
|
)
|
(
|
)
|
(
|
)
|
||||||
|
Cash flows from financing activities:
|
||||||||||||
|
Exercise of employee stock options and taxes paid related to the net shares settlement of stock awards
|
||||||||||||
|
Payment of cash dividends
|
(
|
)
|
(
|
)
|
(
|
)
|
||||||
|
Repurchase of shares of common stock
|
(
|
)
|
(
|
)
|
(
|
)
|
||||||
|
Finance lease principal payments
|
(
|
)
|
(
|
)
|
(
|
)
|
||||||
|
Payment of debt issuance cost
|
( |
) | ||||||||||
|
Payments on debt
|
(
|
)
|
(
|
)
|
(
|
)
|
||||||
|
Proceeds from debt
|
|
|
|
|||||||||
|
Net cash provided by (used in) financing activities
|
|
(
|
)
|
(
|
)
|
|||||||
|
Effect of exchange rate changes on cash
|
(
|
)
|
(
|
)
|
(
|
)
|
||||||
|
Net increase (decrease) in cash and cash equivalents
|
(
|
)
|
(
|
)
|
(
|
)
|
||||||
|
Cash and cash equivalents, beginning of period
|
|
|
|
|||||||||
|
Cash and cash equivalents, end of period
|
$
|
|
$
|
|
$
|
|
||||||
The accompanying notes are an integral part of these consolidated financial statements.
| (1) |
|
NU SKIN ENTERPRISES, INC.
| 1. |
The Company
|
Nu Skin Enterprises, Inc. (the “Company”) is a holding company, with Nu Skin being the primary operating
unit. Nu Skin develops and distributes premium-quality, innovative beauty and wellness products that are sold worldwide under the Nu Skin, Pharmanex and ageLOC brands and a small number of other products and services. The Company reports
revenue from nine segments, consisting of its seven geographic Nu Skin segments—Americas, which includes Canada, Latin America and the United States; Mainland
China; Southeast Asia/Pacific, which includes Indonesia, Malaysia, the Philippines, Singapore, Thailand, Vietnam, Australia, New Zealand, and other markets; South Korea; Japan; Europe and Africa, which includes markets in Europe as well as
South Africa; and Hong Kong/Taiwan, which also includes Macau—and two Rhyz segments—Manufacturing, which includes
manufacturing and packaging subsidiaries it has acquired; and Rhyz other, which includes other investments by its Rhyz business arm (the Company’s subsidiaries operating within each segment are collectively referred to as the “Subsidiaries”).
| 2. |
Summary of Significant Accounting Policies
|
Consolidation
The consolidated financial statements include the accounts of the Company and the Subsidiaries. All intercompany accounts and transactions are eliminated in
consolidation.
Use of estimates
The preparation of these financial statements, in conformity with accounting principles generally accepted
in the United States of America (“U.S. GAAP”), required management to make estimates and assumptions that affected the reported amounts of assets and liabilities, and disclosure of contingent assets and liabilities, at the date of the
financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results may differ from these estimates.
Cash and cash equivalents
Cash equivalents are short-term, highly liquid instruments with original maturities of 90 days or less.
Accounts receivable
Accounts receivable represents amounts owed to us through
our operating activities and are presented net of allowance for doubtful accounts. Accounts receivable for core Nu Skin consists primarily of credit card receivables, while accounts receivable for our Rhyz businesses consists primarily of trade
receivables from customer sales. For the Company’s trade receivables from its Rhyz customers, the Company performs ongoing credit evaluations of its customers and maintains an allowance for expected credit
losses. The allowance for expected credit losses represents the Company’s best estimate based on current and historical information, and reasonable and supportable forecasts of future events and circumstances.
Inventories
Inventories consist primarily of merchandise purchased for resale and are stated at the lower of standard cost or net realizable value, using a standard cost method
which approximates the first-in, first-out method. The Company had reserves of its inventory carrying value totaling $83.4 million and $37.3 million as of December 31, 2023 and 2022, respectively.
Inventories consist of the following (U.S. dollars in thousands):
|
December 31,
|
||||||||
|
2023
|
2022
|
|||||||
|
Raw materials
|
$
|
|
$
|
|
||||
|
Finished goods
|
|
|
||||||
|
Total inventory, net
|
$
|
|
$
|
|
||||
Reserves of inventories consist of the following (U.S. dollars in thousands):
|
2023
|
2022
|
2021
|
||||||||||
|
Beginning balance
|
$
|
|
$
|
|
$
|
|
||||||
|
Additions (1)
|
|
|
|
|||||||||
|
Disposals
|
(
|
)
|
(
|
)
|
(
|
)
|
||||||
|
Ending balance
|
$
|
|
$
|
|
$
|
|
||||||
|
(1)
|
|
Prepaid expense and other
Prepaid expenses and other consist of the following (U.S. dollars in thousands):
|
December 31,
|
||||||||
|
2023
|
2022
|
|||||||
|
Deferred charges
|
$
|
|
$
|
|
||||
|
Prepaid income tax
|
|
|
||||||
|
Prepaid inventory and import costs
|
|
|
||||||
|
Prepaid rent, insurance and other occupancy costs
|
|
|
||||||
|
Prepaid promotion and event cost
|
|
|
||||||
|
Prepaid other taxes
|
|
|
||||||
|
Derivative financial instruments
|
||||||||
|
Prepaid software license
|
|
|
||||||
|
Deposits
|
|
|
||||||
|
Other
|
|
|
||||||
|
Total prepaid expense and other
|
$
|
|
$
|
|
||||
Property and equipment
Property and equipment are stated at cost less accumulated depreciation. Depreciation is recorded using the straight-line method over the following estimated useful
lives:
|
Buildings
|
|
|
Furniture and fixtures
|
|
|
Computers and equipment
|
|
|
Leasehold improvements
|
|
|
Scanners
|
|
|
Vehicles
|
|
Expenditures for maintenance and repairs are charged to expense as incurred. When an asset is sold or otherwise disposed of, the cost and associated accumulated
depreciation are removed from the accounts and the resulting gain or loss is recognized in the statement of income. Property and equipment are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of
such assets may not be recoverable. An impairment loss is recognized if the carrying amount of the asset exceeds its fair value.
Leases
The Company determines if an arrangement is a lease at inception. Operating leases are included in operating lease right-of-use (“ROU”) assets, accrued expenses and
operating lease liabilities on the consolidated balance sheets. Finance leases are included in other assets, accrued expenses and other liabilities on the consolidated balance sheets.
Operating lease ROU assets represent the Company’s right to
use an underlying asset for the lease term, and lease liabilities represent the Company’s obligation to make lease payments arising from the lease. ROU assets and lease liabilities are recognized at the lease commencement date based on the
estimated present value of lease payments over the lease term. The Company uses its estimated incremental borrowing rate based on the information available at commencement date in determining the present value of future payments. The operating
lease ROU assets also include any lease payments made and exclude lease incentives and initial direct costs incurred. The Company’s lease terms may include options to extend or terminate the lease when it is reasonably certain that the Company will
exercise that option. Lease expense for minimum lease payments is recognized on a straight-line basis over the lease term. Leases with a term of 12 months or less are not recorded on the balance sheet. The Company’s lease agreements do not contain
any residual value guarantees.
The Company has lease agreements with lease and non-lease components. The Company accounts for the lease and non-lease components as a single lease component.
Goodwill and other intangible assets
Goodwill is recorded when the cost of acquired businesses exceeds the fair value of the identifiable net
assets acquired. Goodwill and intangible assets with indefinite useful lives are not amortized, but are assessed for impairment annually on October 1. In addition, impairment testing is conducted when events occur or circumstances change
that would more likely than not reduce the fair value of a reporting unit below its carrying amount. Goodwill and intangible assets with indefinite useful lives would be written down to fair value if considered impaired. Guidance under
Accounting Standards Codification (“ASC”) 350, Intangibles - Goodwill and Other (“ASC 350”), requires an entity to test goodwill for
impairment on at least an annual basis. The Company had the option to perform a qualitative assessment to determine whether further impairment testing is necessary or to perform a quantitative assessment by comparing the fair value of a
reporting unit to its carrying amount, including goodwill. Under the qualitative assessment, an entity is not required to calculate the fair value of a reporting unit unless the entity determines that it is more likely than not that its
fair value is less than its carrying amount. If under the quantitative assessment the fair value of a reporting unit is less than its carrying amount, then the amount of the impairment loss, if any, must be measured. The Company elected to
perform the qualitative assessment during fiscal year 2023 and 2021, and determined that it is not more likely than not the carrying value exceeds the fair value of the reporting units. In fiscal years 2022, a quantitative assessment was
performed. Intangible assets with finite useful lives are amortized to their estimated residual values over such finite lives using the straight-line method and reviewed for impairment whenever events or circumstances warrant such a review.
As discussed further in Note 20 of the Notes
to Consolidated Financial Statements, during the fourth quarter of fiscal year 2021, the Company recognized an $18.2 million goodwill
and intangibles impairment charge related to the Grow Tech segment, which was included in in
the consolidated statement of income. During fiscal year 2022, the Company recorded a $1.7 million impairment of other intangibles.
The Company completed the annual goodwill and indefinite-lived intangible asset impairment testing as of
October 1, 2023, and concluded the qualitative assessment indicated that the fair value of the Company’s reporting units exceeded their carrying value and
therefore were not at risk for impairment. If there is continued deterioration of economic conditions it may lead to an impairment. As of the October 1, 2022
quantitative analysis testing date, the fair value of the Manufacturing reporting unit was estimated to be approximately 8 % in excess
of its carrying amount, and therefore the reporting unit is considered to be at risk of future impairment. The Manufacturing reporting unit’s fair value remains sensitive to significant unfavorable changes in revenue, gross margin and discount
rates that could negatively impact future analyses.
Equity investments
The Company holds strategic investments in other companies.
These investments are accounted for under the measurement alternative described in ASC 321, Investments - Equity Securities (“ASC 321”) for equity investments that do not have readily determinable fair values. These investments are measured at cost, less impairment, if any, plus or minus changes resulting
from observable price changes in orderly transactions for identical or similar investments of the same issuer. The Company does not exercise significant influence over these companies. These investments are carried on the consolidated balance
sheets within Other Assets. Changes in fair value based on impairments or resulting from observable price changes are recorded in Other Income (expense), net on the consolidated statements of income. See Note 10 – Fair Value and Equity
Investments, for further details around the Company’s equity investments.
Other assets
Other assets consist of the following (U.S. dollars in thousands):
|
December 31,
|
||||||||
|
2023
|
2022
|
|||||||
|
Deferred taxes
|
$
|
|
$
|
|
||||
|
Deposits for noncancelable operating leases
|
|
|
||||||
|
Cash surrender value for life insurance policies
|
|
|
||||||
|
|
|
|
||||||
|
Derivative financial instruments
|
||||||||
| Long-term investments | ||||||||
|
Other
|
|
|
||||||
|
Total other assets
|
$
|
|
$
|
|
||||
Accrued expenses
Accrued expenses consist of the following (U.S. dollars in thousands):
|
December 31,
|
||||||||
|
2023
|
2022
|
|||||||
|
Accrued sales force commissions and other payments
|
$
|
|
$
|
|
||||
|
Accrued other taxes
|
|
|
||||||
|
Accrued payroll and other employee expenses
|
|
|
||||||
|
Accrued payable to vendors
|
|
|
||||||
|
|
|
|
||||||
|
Accrued royalties
|
|
|
||||||
|
Sales return reserve
|
|
|
||||||
|
Deferred revenue
|
|
|
||||||
|
Contingent consideration
|
||||||||
|
Other
|
|
|
||||||
|
Total accrued expenses
|
$
|
|
$
|
|
||||
Other liabilities
Other liabilities consist of the following (U.S. dollars in thousands):
|
December 31,
|
||||||||
|
2023
|
2022
|
|||||||
|
Deferred tax liabilities
|
$
|
|
$
|
|
||||
|
Reserve for other tax liabilities
|
|
|
||||||
|
Liability for deferred compensation plan
|
|
|
||||||
|
Contingent consideration
|
|
|
||||||
|
|
|
|
||||||
|
Asset retirement obligation
|
|
|
||||||
|
Other
|
|
|
||||||
|
Total other liabilities
|
$
|
|
$
|
|
||||
Revenue recognition
Net sales include products and shipping and handling charges, net of estimates for product returns and any related sales incentives. Revenue is measured as the amount of
consideration we expect to receive in exchange for transferring products. All revenue is recognized when we satisfy our performance obligations under the contract. The Company recognizes revenue by transferring the promised products to the customer,
with revenue recognized at shipping point, the point in time the customer obtains control of the products. The Company recognizes revenue for shipping and handling charges at the time the products are delivered to or picked up by the customer. A
reserve for product returns is accrued based on historical experience totaling $4.7 million and $3.4 million as of December 31, 2023 and 2022, respectively. During the years ended December 31, 2023, 2022 and 2021, the Company recorded sales returns of $34.7 million, $31.6 million and $52.1 million, respectively. The majority of the Company’s contracts have a single performance obligation and are short term in nature. Sales taxes and
value added taxes in foreign jurisdictions that are collected from customers and remitted to governmental authorities are accounted for on a net basis and therefore are excluded from net sales.
Contract Liabilities – Customer Loyalty Programs
Contract
liabilities, recorded as deferred revenue within the accrued expenses line in the consolidated balance sheets, include loyalty point program deferrals with certain customers which are accounted for as a reduction in the transaction price and are
generally recognized as points are redeemed for additional products.
The balance of deferred revenue related to contract
liabilities was $12.6 million and $18.7
million as of December 31, 2023, and 2022, respectively. The contract liabilities impact to revenue for the years ended December 31, 2023, 2022 and 2021 was an increase of $6.1 million, an increase of $3.3 million and a decrease of $3.8 million, respectively.
Disaggregation of Revenue
Please refer to Note 15 - Segment Information for revenue by segment and product line.
Arrangements with Multiple Performance Obligations
The Company’s contracts with customers may include multiple performance obligations. For such arrangements, the Company allocates revenues to each performance obligation
based on its relative standalone selling price. The Company generally determines standalone selling prices based on the prices charged to customers for individual products sales to customers.
Shipping and handling costs
Shipping and handling costs are recorded as cost of sales and are expensed as incurred.
Advertising expenses
Advertising costs are expensed as incurred and are included
in general and administrative expenses in the accompanying consolidated statements of income. Advertising expense incurred for the years ended December 31, 2023, 2022 and 2021 totaled $18.0 million, $14.5 million and $15.5 million, respectively.
Selling expenses
Selling expenses are the Company’s most significant expense and are classified as
operating expenses. Selling expenses include commissions the Company pays to its Brand Affiliates, as well as salaries, service fees, benefits, bonuses and other labor and unemployment expenses the Company pays to its sales force in Mainland
China. Selling expenses do not include amounts the Company pays to its sales force based on their personal purchases; rather, such amounts are reflected as reductions to revenue. The term “Brand Affiliates” refers to members of the Company’s independent sales force in all of the Company’s markets besides Mainland China. In each of the Company’s markets, except Mainland China, Sales Leaders can
earn “multi-level” compensation under the Company’s global sales compensation plan, including commissions for product sales to their consumer groups as well as the product sales made through the sales network they have developed and trained.
The Company does not pay commissions on sales materials.
Outside of Mainland China, the Company’s Brand Affiliates may
make profits by purchasing the products from the Company at a discount and selling them to consumers with a mark-up. The Company does not account for nor pay additional commissions on these mark-ups received by Brand Affiliates. In many markets,
the Company also allows individuals who are not members of its sales force, referred to as “preferred customers,” to buy products directly from the Company at a discount. The Company pays commissions on preferred customer purchases to the referring
member of its sales force.
Research and development
Research and development costs are expensed as incurred and
are included in general and administrative expenses in the accompanying consolidated statements of income and totaled $22.6 million, $23.3 million and $27.2 million in 2023,
2022 and 2021, respectively.
Deferred tax assets and liabilities
The Company accounts for income taxes in accordance with ASC 740
“Income Taxes.” These standards establish financial accounting and reporting standards for the effects of income taxes that result from an enterprise’s
activities during the current and preceding years. The Company takes an asset and liability approach for financial accounting and reporting of income taxes. The Company pays income taxes in many foreign jurisdictions based on the profits
realized in those jurisdictions, which can be significantly impacted by terms of intercompany transactions between the Company and its foreign affiliates. Deferred tax assets and liabilities are created in this process. The Company has netted
these deferred tax assets and deferred tax liabilities by jurisdiction. These deferred tax assets assume sufficient future earnings will exist for their realization, and are calculated using anticipated tax rates. Valuation allowances are
established when necessary to reduce deferred tax assets to the amounts expected to be ultimately realized.
Uncertain tax positions
The Company files income tax returns in the U.S. federal jurisdiction, and in
various state and foreign jurisdictions. In 2009, we entered into a voluntary program with the IRS called Compliance Assurance Process (“CAP”). Under the CAP program, the IRS audits the tax position of the Company to identify and resolve any
tax issues that may arise throughout the tax year. The IRS has developed a new pilot phase called “Bridge Plus.” Under Bridge Plus the taxpayer is required to provide book-to-tax reconciliations, credit utilization and other supporting
documentation shortly after their audited financial statement is finalized. The company was selected for Bridge Plus for the 2022, 2023, and 2024 tax years. As of December 31, 2023, all open tax
years except 2021 have been audited and are effectively closed to further examination. For the tax year 2021, the Company was in the Bridge phase of the CAP program, pursuant to which the IRS did not accept disclosures, did not conduct
reviews and did not provide letters of assurance for the year. There are limited circumstances that tax years in the Bridge phase will be opened for examination. With a few exceptions, we are no longer subject to state and local income tax
examination by tax authorities for the years before 2020. Foreign jurisdictions have varying lengths of statutes of limitations for income tax examinations. Some statutes are as short as three years and in certain markets may be as long as ten years . The Company is currently under examination in certain foreign jurisdictions; however, the outcomes of those reviews are not yet determinable.
A reconciliation of the beginning and ending amount of
unrecognized tax benefits included in other liabilities is as follows (U.S. dollars in thousands):
|
2023
|
2022
|
2021
|
||||||||||
|
Gross balance at January 1
|
$
|
|
$
|
|
$
|
|
||||||
|
Increases related to prior year tax positions
|
|
|
|
|||||||||
|
Increases related to current year tax positions
|
|
|
|
|||||||||
|
Settlements
|
(
|
)
|
(
|
)
|
(
|
)
|
||||||
|
Decreases due to lapse of statutes of limitations
|
(
|
)
|
(
|
)
|
(
|
)
|
||||||
|
Currency adjustments
|
(
|
)
|
(
|
)
|
(
|
)
|
||||||
|
Gross balance at December 31
|
$
|
|
$
|
|
$
|
|
||||||
At December 31, 2023, the Company had $22.0 million in unrecognized tax benefits of which $22.0
million, if recognized, would affect the effective tax rate. In comparison, at December 31, 2022, the Company had $23.1 million in
unrecognized tax benefits of which $23.1 million, if recognized, would affect the effective tax rate. The Company’s unrecognized tax
benefits relate to multiple foreign and domestic jurisdictions. Due to potential changes in unrecognized tax benefits from the multiple jurisdictions in which the Company operates, as well as the expiration of various statutes of limitation, it
is reasonably possible that the Company’s gross unrecognized tax benefits, net of foreign currency adjustments, may increase within the next 12 months by a range of approximately $2.0 to $3.0 million.
During the years ended December 31, 2023, 2022 and 2021 the
Company recognized $0.6 million, $5.7
million and $1.6 million, respectively in interest and penalties expenses related to uncertain tax positions. The Company had $13.0 million, $12.4 million and $6.7 million of accrued interest and penalties related to uncertain tax positions at December 31, 2023, 2022 and 2021, respectively. Interest and penalties
related to uncertain tax positions are recognized as a component of income tax expense.
Net income per share
Net income per share is computed based on the weighted-average number of common shares outstanding during the periods presented. Additionally, diluted earnings per share
data gives effect to all potentially dilutive common shares that were outstanding during the periods presented (Note 8).
Foreign currency translation
A significant portion of the Company’s business operations
occurs outside of the United States. The local currency of each of the Company’s Subsidiaries is considered its functional currency, except for the Company’s subsidiaries in Singapore and countries deemed highly inflationary where the U.S. dollar
is used. All assets and liabilities are translated into U.S. dollars at exchange rates existing at the balance sheet dates, revenue and expenses are translated at weighted-average exchange rates and stockholders’ equity is recorded at historical
exchange rates. The resulting foreign currency translation adjustments are recorded as a separate component of stockholders’ equity in the consolidated balance sheets and transaction gains and losses are included in other income (expense) in the
consolidated statements of income. Net of tax, the accumulated other comprehensive loss related to the foreign currency translation adjustments are $110.0
million (net of tax of $7.4 million), $102.0
million (net of tax of $8.1 million), and $79.1
million (net of tax of $7.5 million), at December 31, 2023, 2022 and 2021, respectively.
Classification of a highly inflationary economy
A market is considered to have a highly inflationary economy if it has a cumulative inflation rate of approximately 100% or more
over a three-year period as well as other qualitative factors including historic inflation rate trends (increasing and decreasing), the capital intensiveness of the operation and other pertinent economic factors. The functional currency in highly
inflationary economies is required to be the functional currency of the entity’s parent company, and transactions denominated in the local currency are remeasured to the functional currency. The remeasurement of local currency into U.S. dollars
creates foreign currency transaction gains or losses, which the Company includes in its consolidated statements of income.
In the second quarter of 2018, published inflation indices indicated that the three-year cumulative inflation in Argentina exceeded 100 percent, and as of July 1, 2018,
we elected to adopt highly inflationary accounting for our subsidiary in Argentina. Under highly inflationary accounting, Argentina’s functional currency became the U.S. dollar, and its income statement and balance sheet have been measured in U.S.
dollars using both current and historical rates of exchange. The effect of changes in exchange rates on peso-denominated monetary assets and liabilities has been reflected in earnings in Other expense, net and was not material. As of December 31, 2023, and 2022, Argentina had a small net peso monetary position. Net sales of Argentina were less than 1
Fair value of financial instruments
The carrying value of financial instruments including cash and cash equivalents, accounts receivable and accounts payable approximate fair values due
to the short-term nature of these instruments. The Company’s current investments as of December 31, 2023 include certificates of deposits and pre-refunded municipal bonds that are classified by management as held-to-maturity as the Company had
the positive intent and ability to hold to maturity. The carrying value of these current investments approximate fair values due to the short-term nature of these instruments. As of December 31, 2023 and 2022, the fair value of debt was $505.0 million and $405.0 million,
respectively. The fair value of the Company’s debt is estimated using level 2 inputs based on interest rates available for debt with similar terms and remaining
maturities.
The FASB Codification defines fair value as the price that would be received to sell an asset or paid to transfer a liability in the principal or most advantageous
market for the asset or liability in an orderly transaction between market participants at the measurement date. On a quarterly basis, the Company measures at fair value certain financial assets, including cash equivalents. Accounting standards
specify a hierarchy of valuation techniques based on whether the inputs to those valuation techniques are observable or unobservable. Observable inputs reflect data obtained from independent sources, while unobservable inputs reflect the Company’s
market assumptions. These two types of inputs have created the following fair-value hierarchy:
| ● |
Level 1 – quoted prices in active markets for identical assets or liabilities;
|
| ● |
Level 2 – inputs, other than the quoted prices in active markets, that are observable either directly or indirectly;
|
| ● |
Level 3 – unobservable inputs based on the Company’s own assumptions.
|
Accounting standards permit companies, at their option, to measure many financial instruments and certain other items at fair value. The Company has elected not to
apply the fair value option to existing eligible items.
Stock-based compensation
All share-based payments, including grants of stock options
and restricted stock units, are required to be recognized in the Company’s financial statements based upon their respective grant date fair values. The Black-Scholes option-pricing model is used to estimate the fair value of stock options. The
determination of the fair value of stock options is affected by the Company’s stock price and a number of assumptions, including expected volatility, expected life, risk-free interest rate and expected dividends. The Company uses historical
volatility as the expected volatility assumption required in the Black-Scholes model. The expected life of the stock options is based on historical data trended into the future. The risk-free interest rate assumption is based on observed interest
rates appropriate for the expected terms of the Company’s stock options. The fair value of the Company’s restricted stock units is based on the closing market price of its stock on the date of grant less the Company’s expected dividend yield. The
Company recognizes stock-based compensation net of actual forfeitures over the requisite service period of the award.
The total compensation expense related to equity compensation
plans was $15.6 million, $12.4
million and $23.2 million for the years ended December 31, 2023, 2022 and 2021, respectively. In 2023, 2022 and 2021, these amounts reflect
the reversal of $0 , $1.3 ,
and $0 , respectively, for certain performance-based awards that were no longer expected to vest. For the years ended December 31, 2023,
2022 and 2021, all stock-based compensation expense was recorded within general and administrative expenses.
Reporting comprehensive income
Comprehensive income is defined as the change in equity of a
business enterprise during a period from transactions and other events and circumstances from non-owner sources, and it includes all changes in equity during a period except those resulting from investments by owners and distributions to owners.
Derivative instruments and hedging activities
FASB ASC 815, Derivatives and Hedging (“ASC 815”), provides
the disclosure requirements for derivatives and hedging activities with the intent to provide users of financial statements with an enhanced understanding of: (a) how and why an entity uses derivative instruments, (b) how the entity accounts for
derivative instruments and related hedged items, and (c) how derivative instruments and related hedged items affect an entity’s financial position, financial performance, and cash flows. Further, qualitative disclosures are required that explain
the Company’s objectives and strategies for using derivatives, as well as quantitative disclosures about the fair value of and gains and losses on derivative instruments, and disclosures about credit-risk-related contingent features in derivative
instruments.
As required by ASC 815, the Company records all derivatives
on the balance sheet at fair value. The accounting for changes in the fair value of derivatives depends on the intended use of the derivative, whether the Company has elected to designate a derivative in a hedging relationship and apply hedge
accounting and whether the hedging relationship has satisfied the criteria necessary to apply hedge accounting. Derivatives designated and qualifying as a hedge of the exposure to changes in the fair value of an asset, liability, or firm commitment
attributable to a particular risk, such as interest rate risk, are considered fair value hedges. Derivatives designated and qualifying as a hedge of the exposure to variability in expected future cash flows, or other types of forecasted
transactions, are considered cash flow hedges. Derivatives may also be designated as hedges of the foreign currency exposure of a net investment in a foreign operation. Hedge accounting generally provides for the matching of the timing of gain or
loss recognition on the hedging instrument with the recognition of the changes in the fair value of the hedged asset or liability that are attributable to the hedged risk in a fair value hedge or the earnings effect of the hedged forecasted
transactions in a cash flow hedge. The Company may enter into derivative contracts that are intended to economically hedge certain of its risk, even though hedge accounting does not apply or the Company elects not to apply hedge accounting.
In accordance with the FASB’s fair value measurement guidance
in ASU 2011-04, the Company made an accounting policy election to measure the credit risk of its derivative financial instruments that are subject to master netting agreements on a net basis by counterparty portfolio.
Recent accounting pronouncements
In November 2023, the FASB issued ASU 2023-07,Segment Reporting (Topic 280):Improvements to Reportable Segment Disclosures, expanding segment disclosure requirements. The amendments require enhanced disclosure for certain segment items and
required disclosure on how management uses reported measures to assess segment performance. The amendments do not change how segments are determined, aggregated, or how thresholds are applied to determine reportable segments. ASU 2023-07 is
effective for the Company’s annual periods beginning January 1, 2024, and for interim periods beginning January 1, 2025, with early adoption permitted. The Company is currently evaluating the potential effect that the updated standard will have
on their financial statement disclosures.
In December 2023, the FASB issued ASU 2023-09, Income Taxes
(Topic 740): Improvements to Income Tax Disclosures. The guidance requires disclosure of disaggregated income taxes paid, prescribes standardized categories for the components of the effective tax rate reconciliation, and modifies other income
tax-related disclosures. ASU 2023-09 is effective for the Company’s annual periods beginning January 1, 2025, with early adoption permitted. The Company is currently evaluating the potential effect that the updated standard will have on their
financial statement disclosures.
| 3. |
Property and Equipment
|
Property and equipment are comprised of the following (U.S. dollars in thousands):
|
December 31,
|
||||||||
|
2023
|
2022
|
|||||||
|
Land
|
$
|
|
$
|
|
||||
|
Buildings
|
|
|
||||||
|
Construction in progress(1)
|
|
|
||||||
|
Furniture and fixtures
|
|
|
||||||
|
Computers and equipment
|
|
|
||||||
|
Leasehold improvements
|
|
|
||||||
|
Scanners
|
|
|
||||||
|
Vehicles
|
|
|
||||||
|
|
|
|||||||
|
Less: accumulated depreciation
|
(
|
)
|
(
|
)
|
||||
|
$
|
|
$
|
|
|||||
| (1) |
|
Depreciation of property and equipment totaled $57.7
million, $61.0 million and $62.9
million for the years ended December 31, 2023, 2022 and 2021, respectively. The Company recorded impairments of $8.2 million and $13.7 million for the years ended December 31, 2022, and 2021, respectively in connection with our fiscal year 2022 and 2021 restructuring plans, see Note
20 – Restructuring and Severance Charges.
| 4. |
Goodwill
|
The following table
presents goodwill allocated to the Company’s reportable segments for the periods ended December 31, 2023 and 2022 (U.S. dollars in thousands):
|
December 31,
|
||||||||
|
2023
|
2022
|
|||||||
|
Nu Skin
|
||||||||
|
Americas
|
$
|
|
$
|
|
||||
|
Mainland China
|
|
|
||||||
|
Southeast Asia/Pacific
|
|
|
||||||
|
South Korea
|
|
|
||||||
|
Japan
|
|
|
||||||
|
Europe & Africa
|
|
|
||||||
|
Hong Kong/Taiwan
|
|
|
||||||
|
Rhyz
|
||||||||
|
Manufacturing
|
|
|
||||||
|
Rhyz Other
|
|
|
||||||
|
Total
|
$
|
|
$
|
|
||||
All of the Company’s
goodwill is recorded in U.S. dollar functional currency and allocated to the respective segments. Goodwill is not amortized; rather, it is subject to annual impairment tests.
The increase in the Rhyz
Other segment goodwill during the year ended December 31, 2023 is due to acquisitions. See Note 19 for further discussions of these acquisitions.
| 5. |
Other Intangible Assets
|
Other intangible assets consist of the following (U.S. dollars in thousands):
|
Carrying Amount at December 31,
|
||||||||
|
2023
|
2022
|
|||||||
|
Indefinite life intangible assets:
|
||||||||
|
Trademarks and trade names
|
$
|
|
$
|
|
||||
|
December 31, 2023
|
December 31, 2022
|
Weighted-average | |||||||||||||||
|
Finite life intangible assets:
|
Gross Carrying
Amount
|
Accumulated
Amortization
|
Gross Carrying
Amount
|
Accumulated
Amortization
|
Amortization
Period
|
||||||||||||
|
Scanner technology
|
$
|
|
$
|
|
$
|
|
$
|
|
|
||||||||
|
Developed technology
|
|
|
|
|
|
||||||||||||
|
Sales force network
|
|
|
|
|
|
||||||||||||
|
Trademarks
|
|
|
|
|
|
||||||||||||
|
Customer relationships
|
|||||||||||||||||
|
Other
|
|
|
|
|
|
||||||||||||
|
$
|
|
$
|
|
$
|
|
$
|
|
|
|||||||||
Amortization of finite-life intangible assets totaled $11.9
million, $9.7 million and $11.7
million for the years ended December 31, 2023, 2022 and 2021, respectively.
The estimated annual amortization expense for each of the five succeeding fiscal years are as follows (U.S. dollars in thousands):
|
Year Ending December 31,
|
||||
|
2024
|
$
|
|
||
|
2025
|
|
|||
|
2026
|
|
|||
|
2027
|
|
|||
|
2028
|
|
|||
Indefinite life intangible assets are not amortized, rather they are
subject to annual impairment tests. Finite life intangibles are amortized over their useful lives unless circumstances occur that cause the Company to revise such lives or review
such assets for impairment. In connection with the Company’s decision to exit the Grow Tech segment, a $3.8 million impairment
charge related to other indefinite lived intangibles and a $5.2 million
impairment charge related to other finite lived intangibles was recorded in the year ended December 31, 2021, see Note 20 for further discussion restructuring and impairment of the Grow Tech segment. During 2022, the Company recorded a
$1.7 million impairment charge for other intangibles associated with our 2022 restructuring. See Note 20 for further discussion.
| 6. |
Long-Term Debt
|
Credit Agreement
On June 14, 2022, the Company entered into an Amended and Restated Credit Agreement (the “Credit Agreement”) with several
financial institutions as lenders and Bank of America, N.A., as administrative agent, which amended and restated the 2018 Credit Agreement. The Credit Agreement provides for a $400 million term loan facility and a $500 million revolving
credit facility, each with a term of five years 0.175 % to 0.30 % on the unused portion of the total lender
commitments then in effect. The term loan facility amortizes in quarterly installments in amounts resulting in an annual amortization of 2.5 %
during the first year and 5.0 65 % of the capital stock of certain foreign subsidiaries. The Credit Agreement requires the Company to maintain a consolidated leverage ratio not exceeding 2.75 to 1.00 and a consolidated interest coverage ratio of no less than 3.00 to 1.00. As of December 31, 2023, the Company was in compliance with all covenants under the Credit Agreement.
The following table summarizes the Company’s debt facilities as of December 31, 2023 and 2022:
|
Facility or Arrangement
|
Original
Principal
Amount
|
Balance as of
December 31,
2023 (1)(2)
|
Balance as of
December 31,
2022 (1)(2)
|
Interest
Rate
|
Repayment Terms
|
|||||
|
Credit Agreement term loan facility
|
$
|
$
|
$
|
|
|
|||||
|
Credit Agreement revolving credit facility
|
$
|
$
|
|
|
| (1) |
|
| (2) |
|
Maturities of all long-term debt at December 31, 2023, are as follows (U.S. dollars in thousands):
|
Year Ending December 31,
|
||||
|
2024
|
$
|
|
||
|
2025
|
|
|||
|
2026
|
|
|||
|
2027
|
|
|||
|
2028
|
|
|||
|
Thereafter
|
|
|||
|
Total (1)
|
$
|
|
||
| (1) |
|
| 7. |
Leases
|
The Company has operating and finance leases for regional offices, manufacturing facilities, retail
centers, distribution centers and certain equipment. The Company’s leases have remaining lease terms of 1 year to 20 years, some of which include options to extend the leases for up to 20 years, and some of which include options to terminate the leases within 1 year.
As of December 31, 2023, the weighted average remaining lease term was 8.5
and 3.7 years for operating and finance leases, respectively. As of December 31, 2023, the weighted average discount rate was 3.6 % and 3.7 % for operating and finance
leases, respectively.
The components of lease expense were as follows (U.S. dollars in thousands):
| Year Ended December 31, | ||||||||||||
|
2023
|
2022 |
2021 |
||||||||||
|
Operating lease expense
|
||||||||||||
|
Operating lease cost
|
$ |
$
|
|
$
|
|
|||||||
|
Variable lease cost
|
|
|
||||||||||
|
Short-term lease cost
|
|
|
||||||||||
|
Sublease income
|
|
(
|
)
|
|||||||||
|
Finance lease expense
|
||||||||||||
|
Amortization of right-of-use assets
|
|
|
||||||||||
|
Interest on lease liabilities
|
|
|
||||||||||
|
Total lease expense
|
$ |
$
|
|
$
|
|
|||||||
Supplemental cash flow information related to leases was as follows (U.S. dollars in thousands):
|
Year Ended December 31,
|
||||||||||||
| 2023 |
2022
|
2021
|
||||||||||
|
Operating cash outflow from operating leases
|
$ |
$
|
|
$
|
|
|||||||
|
Operating cash outflow from finance leases
|
$ |
$
|
|
$
|
|
|||||||
|
Financing cash outflow from finance leases
|
$ |
$
|
|
$
|
|
|||||||
|
Right-of-use assets obtained in exchange for operating lease obligations
|
$ |
$
|
|
$
|
|
|||||||
|
Right-of-use assets obtained in exchange for finance lease obligations
|
$ |
$
|
|
$
|
|
|||||||
Maturities of lease liabilities were as follows (U.S. dollars in thousands):
|
Year Ending December 31,
|
Operating
Leases
|
Finance
Leases
|
||||||
|
2024
|
$
|
|
$
|
|
||||
|
2025
|
|
|
||||||
|
2026
|
|
|
||||||
|
2027
|
|
|
||||||
|
2028
|
|
|
||||||
|
Thereafter
|
|
|
||||||
|
Total
|
|
|
||||||
|
Less: Finance charges
|
|
|
||||||
|
Total principal liability
|
$
|
|
$
|
|
||||
The Company has additional lease liabilities of $0.8
million which have not yet commenced as of December 31, 2023, and as such, have not been recognized on the consolidated balance sheets.
| 8. |
Capital Stock
|
The Company’s authorized capital stock consists of 25
million shares of preferred stock, par value $0.001 per share, 500 million shares of Class A common stock, par value $0.001 per
share, and 100 million shares of Class B common stock, par value $0.001 per share. As of December 31, 2023 and 2022, there were no one vote on matters submitted to a vote of the Company’s stockholders. Stock dividends of Class A common stock may be paid
only to holders of Class A common stock. Class A common stock has no conversion rights.
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,
|
||||||||||||
|
2023
|
2022
|
2021
|
||||||||||
|
Basic weighted-average common shares outstanding
|
|
|
|
|||||||||
|
Effect of dilutive securities:
|
||||||||||||
|
Stock awards and options
|
||||||||||||
|
Diluted weighted-average common shares outstanding
|
|
|
|
|||||||||
For the years ended December 31, 2023, 2022 and 2021, other stock options totaling 1.8 million, 0.1 million and 0.1 million, respectively, were excluded from the calculation of diluted earnings per share because they were anti-dilutive.
Dividends
Quarterly cash dividends for the years ended December 31, 2023 and 2022 totaled $77.6 million and $77.0 million or $0.39 0.385 0.06 per share of Class A common stock to be paid on March 6, 2024 to stockholders of record on February 26, 2024 .
Repurchases of common stock
In July 2018, the Company’s board of directors approved a stock repurchase plan with an authorization amount of $500 million. The repurchases are used primarily for strategic initiatives and to offset dilution from the Company’s equity incentive plans. During the years ended December 31, 2023, 2022 and 2021, the Company
purchased 0.6 million, 1.7
million and 1.6 million shares under the 2018 plan for $13.0 million, $70.0 million and $80.4 million, respectively. At December 31, 2023, $162.4 million
was available for repurchases under the 2018 stock repurchase plan.
| 9. |
Stock–Based Compensation
|
At December 31, 2023, the Company had the following stock-based employee compensation plans:
Equity Incentive Plans
In April 2010, the Company’s board of directors approved the Nu Skin Enterprises, Inc. 2010 Omnibus Incentive Plan (the “2010 Omnibus Incentive Plan”). This plan was
approved by the Company’s stockholders at the Company’s 2010 Annual Meeting of Stockholders held in May 2010. The 2010 Omnibus Incentive Plan provides for granting of a variety of equity-based awards including stock options, stock appreciation
rights, restricted stock, restricted stock units, other share-based awards, performance cash, performance shares and performance units to executives, other employees, independent consultants and directors of the Company and its subsidiaries. Options
granted under the 2010 Omnibus Incentive Plan are generally non-qualified stock options, but the 2010 Omnibus Incentive Plan permits some stock options granted to qualify as “incentive stock options” under the U.S. Internal Revenue Code. The exercise
price of a stock option generally is equal to the fair market value of the Company’s common stock on the stock option grant date. The contractual term of a stock option granted under the 2010 Omnibus Incentive Plan is seven years . Currently, all shares issued upon the exercise of stock options are from the Company’s treasury shares. Subject to certain adjustments, 7.0 million shares were authorized for issuance under the 2010 Omnibus Incentive Plan. On June 3, 2013, the Company’s stockholders approved an Amended and
Restated 2010 Omnibus Incentive Plan, which among other things increased the number of shares available for awards by 3.2 million shares.
On May 24, 2016, the Company’s stockholders approved a Second Amended and Restated 2010 Omnibus Incentive Plan, which among other things increased the number of shares available for awards by 3.8 million shares. On June 3, 2020, the Company’s stockholders approved a Third Amended and Restated 2010 Omnibus Incentive Plan, which among other things increased the number of shares available for awards by 5.9 million shares.
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:
|
Stock Options:
|
December 31,
2021
|
|||
|
Weighted-average grant date fair value of grants
|
$
|
|
||
|
Risk-free interest rate(1)
|
|
%
|
||
|
Dividend yield(2)
|
|
%
|
||
|
Expected volatility(3)
|
|
%
|
||
|
Expected life in months(4)
|
|
|||
| (1) |
|
| (2) |
|
| (3) |
|
| (4) |
|
Options under the plans as of December 31, 2023 and changes during the year ended December 31, 2023 were as follows:
|
Shares
(in thousands)
|
Weighted-
average
Exercise
Price
|
Weighted-
average
Remaining
Contractual
Term (in years)
|
Aggregate
Intrinsic
Value
(in thousands)
|
|||||||||||||
|
Options activity – service based
|
||||||||||||||||
|
Outstanding at December 31, 2022
|
|
$
|
|
|||||||||||||
|
Granted
|
|
|
||||||||||||||
|
Exercised
|
(
|
)
|
|
|||||||||||||
|
Forfeited/cancelled/expired
|
(
|
)
|
|
|||||||||||||
|
Outstanding at December 31, 2023
|
|
|
—
|
$
|
|
|||||||||||
|
Exercisable at December 31, 2023
|
|
|
—
|
|
||||||||||||
|
Options activity – performance based
|
||||||||||||||||
|
Outstanding at December 31, 2022
|
|
$
|
|
|||||||||||||
|
Granted
|
|
|
||||||||||||||
|
Exercised
|
(
|
)
|
|
|||||||||||||
|
Forfeited/cancelled/expired
|
(
|
)
|
|
|||||||||||||
|
Outstanding at December 31, 2023
|
|
|
|
$
|
|
|||||||||||
|
Exercisable at December 31, 2023
|
|
|
|
|
||||||||||||
|
Options activity – all options
|
||||||||||||||||
|
Outstanding at December 31, 2022
|
|
$
|
|
|||||||||||||
|
Granted
|
|
|
||||||||||||||
|
Exercised
|
(
|
)
|
|
|||||||||||||
|
Forfeited/cancelled/expired
|
(
|
)
|
|
|||||||||||||
|
Outstanding at December 31, 2023
|
|
|
|
$
|
|
|||||||||||
|
Exercisable at December 31, 2023
|
|
|
|
|
||||||||||||
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, 2023. This amount varies
based on the fair market value of the Company’s stock.
Cash proceeds, tax benefits and intrinsic value related to total stock options exercised during 2023, 2022 and 2021, were as follows (U.S. dollars in thousands):
|
December 31,
|
||||||||||||
|
2023
|
2022
|
2021
|
||||||||||
|
Cash proceeds from stock options exercised
|
$
|
|
$
|
|
$
|
|
||||||
|
Tax benefit / (expense) realized for stock options exercised
|
|
|
|
|||||||||
|
Intrinsic value of stock options exercised
|
|
|
|
|||||||||
Nonvested restricted stock awards as of December 31, 2023 and changes during the year ended December 31, 2023 were as follows:
|
Number
of Shares
(in thousands)
|
Weighted-
average
Grant Date
Fair Value
|
|||||||
|
Nonvested at December 31, 2022
|
|
$
|
|
|||||
|
Granted
|
|
|
||||||
|
Vested
|
(
|
)
|
|
|||||
|
Forfeited
|
(
|
)
|
|
|||||
|
Nonvested at December 31, 2023
|
|
$
|
|
|||||
Nonvested performance share units as of December 31, 2023 and changes during the year ended December 31, 2023 were as follows:
|
Number
of Shares
(in thousands)
|
Weighted-
average
Grant Date
Fair Value
|
|||||||
|
Nonvested at December 31, 2022
|
|
$
|
|
|||||
|
Granted
|
|
|
||||||
|
Vested
|
|
|
||||||
|
Forfeited
|
(
|
)
|
|
|||||
|
Nonvested at December 31, 2023
|
|
$
|
|
|||||
Stock-based compensation expense is recognized on a straight-line basis, except for performance-based awards for which expense is recognized using a graded-attribution
method if the results are materially different than the straight-line method. The Company recognized no 14.4 million, $14.3 million and $15.4 million of expense related to service condition restricted
stock units in 2023, 2022 and 2021, respectively. For performance stock options and performance stock units, an expense is recorded each period for the estimated expense associated with the projected achievement of the performance-based targets. The
Company recognized none , $2.0
million of income and $7.8 million of expense related to performance stock options in 2023, 2022 and 2021, respectively; and $1.2 million expense, none and none related to performance stock units in 2023, 2022 and 2021, respectively. The amount in 2022 reflects the reversal of stock compensation for awards no
longer expected to vest.
As of December 31, 2023, there was no unrecognized
stock-based compensation expense related to nonvested stock option awards. As of December 31, 2023, there was $26.8 million of unrecognized
stock-based compensation expense related to nonvested restricted stock awards. That cost is expected to be recognized over a weighted-average period of 2.5
years.
| 10. |
Fair Value and Equity Investments
|
Fair Value
The carrying value of financial instruments including cash and cash equivalents, accounts receivable and accounts payable approximate fair values due to the short-term
nature of these instruments. Fair value estimates are made at a specific point in time, based on relevant market information.
The following tables present the fair value hierarchy for those assets and liabilities measured at fair value on a recurring basis (U.S. dollars in thousands):
|
Fair Value at December 31, 2023
|
||||||||||||||||
|
Level 1
|
Level 2
|
Level 3
|
Total
|
|||||||||||||
|
Financial assets (liabilities):
|
||||||||||||||||
|
Cash equivalents and current investments
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||
|
Derivative financial instruments asset
|
|
|
|
|
||||||||||||
|
Life insurance contracts
|
|
|
|
|
||||||||||||
|
Contingent consideration
|
|
|
(
|
)
|
(
|
)
|
||||||||||
|
Total
|
$
|
|
$
|
|
|
|
$
|
|
||||||||
|
Fair Value at December 31, 2022
|
||||||||||||||||
|
Level 1
|
Level 2
|
Level 3
|
Total
|
|||||||||||||
|
Financial assets (liabilities):
|
||||||||||||||||
|
Cash equivalents and current investments
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||
| Derivative financial instruments asset | ||||||||||||||||
|
Life insurance contracts
|
|
|
|
|
||||||||||||
| Contingent consideration | ( |
) | ( |
) | ||||||||||||
|
Total
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||
The following methods and assumptions were used to determine the fair value of each class of assets and liabilities recorded at fair value in the consolidated balance
sheets:
Cash equivalents and current investments: Cash equivalents and current
investments primarily consist of highly rated money market funds with maturities of three months or less, and are purchased daily at par value with specified yield rates. Due to the high ratings and short-term nature of the funds, the Company
considers all cash equivalents and current investments as Level 1. Current investments include $4.0 million and $4.9 million as of December 31, 2023 and 2022, respectively, that is restricted for the Company’s voluntary participation in a consumer protection
cooperative in South Korea, along with investments in corporate securities.
Life insurance contracts: ASC 820 preserves practicability exceptions to fair
value measurements provided by other applicable provisions of U.S. GAAP. The guidance in ASC 715-30-35-60 allows a reporting entity, as a practical expedient, to use cash
surrender value or conversion value as an expedient for fair value when it is present. Accordingly, the Company determines the fair value of its life insurance contracts as the cash-surrender value of life insurance policies held in its Rabbi Trust
as disclosed in Note 13, “Deferred Compensation Plan.”
Derivative financial instruments asset and liability: Derivative financial instruments are measured at fair value based on observable market information and appropriate valuation methods. See Note 14, “Derivative Financial Instruments” for more information on derivative financial instruments.
Contingent consideration: Contingent consideration represents the obligations
incurred in connection with acquisitions. The estimate of fair value of the contingent consideration obligations requires subjective assumptions to be made regarding the future business results, discount rates, discount periods and probabilities
assigned to various potential business result scenarios and was determined using probability assessments with respect to the likelihood of reaching various targets or of achieving certain milestones. The fair value measurement is based on
significant inputs unobservable in the market and thus represents a level 3 measurement. Changes in current expectations of progress could change the probability of achieving the targets within the measurement periods and result in an increase or
decrease in the fair value of the contingent consideration obligation.
The following table provides a summary of changes in fair value of the Company’s Level 3 life insurance contracts (U.S. dollars in thousands):
|
|
2023
|
2022
|
||||||
|
Beginning balance at January 1
|
$
|
|
$
|
|
||||
|
Actual return on plan assets
|
|
(
|
)
|
|||||
|
Sales and settlements
|
(
|
)
|
(
|
)
|
||||
|
Ending balance at December 31
|
$
|
|
$
|
|
||||
The following table
provides a summary of changes in fair value of the Company’s Level 3 contingent consideration (U.S. dollars in thousands):
|
|
2023
|
2022
|
||||||
|
Beginning balance at January 1
|
$
|
(
|
)
|
$
|
(
|
)
|
||
|
Changes in fair value of contingent consideration
|
|
|
||||||
|
Ending balance at December 31
|
$
|
(
|
)
|
$
|
(
|
)
|
||
Equity Investments
The Company maintains equity investments in companies which are accounted for under
the measurement alternative described in ASC 321-10-35-2 for equity securities that lack readily determinable fair values. The carrying amount of equity securities held by the Company without readily determinable fair values was $28.1 18.1 million of upward fair value adjustments, based on the third quarter of 2021 valuation of additional equity issued by the investee which was deemed
to be an observable transaction of a similar investment under ASC 321. The gain was recorded within Other expense, net on the consolidated statement of income. The upward fair value adjustment represents a nonrecurring fair value measurement based
on observable price changes and is classified as a level 2 fair value measurement.
| 11. |
Income Taxes
|
Consolidated income before provision for income taxes consists of the following for the years ended December 31, 2023, 2022 and 2021 (U.S. dollars in thousands):
|
2023
|
2022
|
2021
|
||||||||||
|
U.S.
|
$
|
(
|
)
|
$
|
|
$
|
|
|||||
|
Foreign
|
|
|
|
|||||||||
|
Total
|
$
|
|
$
|
|
$
|
|
||||||
The provision for current and deferred taxes for the years ended December 31, 2023, 2022 and 2021 consists of the following (U.S. dollars in thousands):
|
2023
|
2022
|
2021
|
||||||||||
|
Current
|
||||||||||||
|
Federal
|
$
|
|
$
|
|
$
|
|
||||||
|
State
|
|
|
|
|||||||||
|
Foreign
|
|
|
|
|||||||||
|
|
|
|
||||||||||
|
Deferred
|
||||||||||||
|
Federal
|
(
|
)
|
(
|
)
|
|
|||||||
|
State
|
(
|
)
|
(
|
)
|
(
|
)
|
||||||
|
Foreign
|
|
|
|
|||||||||
|
(
|
)
|
(
|
)
|
|
||||||||
|
Provision for income taxes
|
$
|
|
$
|
(
|
)
|
$
|
|
|||||
The principal components of deferred taxes are as follows (U.S. dollars in thousands):
|
Year Ended December 31,
|
||||||||
|
2023
|
2022
|
|||||||
|
Deferred tax assets:
|
||||||||
|
Inventory differences
|
$
|
|
$
|
|
||||
|
Foreign tax credit and other foreign benefits
|
|
|
||||||
|
Stock-based compensation
|
|
|
||||||
|
Accrued expenses not deductible until paid
|
|
|
||||||
|
Net operating losses
|
|
|
||||||
|
Capitalized research and development
|
|
|
||||||
|
R&D credit carryforward
|
|
|
||||||
|
Other
|
|
|
||||||
|
Gross deferred tax assets
|
|
|
||||||
|
Deferred tax liabilities:
|
||||||||
|
Foreign currency exchange
|
||||||||
|
Foreign withholding taxes
|
|
|
||||||
|
Intangibles step-up
|
|
|
||||||
|
Overhead allocation to inventory
|
|
|
||||||
|
Amortization of intangibles
|
|
|
||||||
|
Other
|
|
|
||||||
|
Gross deferred tax liabilities
|
|
|
||||||
|
Valuation allowance
|
(
|
)
|
(
|
)
|
||||
|
Deferred taxes, net
|
$
|
|
$
|
|
||||
At December 31, 2023, the Company had foreign operating loss carryforwards of $46.7 million for tax purposes, which will be available to offset future taxable income. If not used, $34.9 million of carryforwards will expire between and , while $11.8 million do not expire.
Tax effected, the foreign operating losses are $19.7 million. A valuation allowance has been placed on foreign operating loss carryforwards
of $19.7 million. In addition, a valuation allowance of $25.1 million has been recorded on a portion of the foreign tax credit carryforwards which will expire between and , and all of the R&D credit carryforward of $2.3 million which will expire between
and .
The Company uses the tax law ordering approach when determining when excess tax benefits have been realized.
Valuation allowances have been recognized for a portion of the foreign tax credit, the foreign net operating loss carryforwards, and the R&D
credit carryforward. During
2023, the Company incurred restructuring charges that primarily affected their U.S. earnings. These additional expenses in the U.S. reduced the Company’s ability to utilize foreign tax credits. As a result, the Company recorded an additional $6.1 million valuation allowance against the Company’s foreign tax credits. The remaining valuation allowances were recognized for assets
which it is more likely than not some portion or all of the deferred tax asset will not be realized. In making such determination, the Company considers all available positive and negative evidence, including future reversals of existing taxable
temporary difference, projected future taxable income, tax planning strategies and recent financial operations. When the Company determines that there is sufficient positive evidence to utilize the remaining foreign tax credits, the foreign net
operating losses, or the R&D credit carryforward, the valuation allowance will be released which would reduce the provision for income taxes.
The deferred tax asset valuation adjustments for the years ended December 31, 2023, 2022 and 2021 are as follows (U.S. dollars in thousands):
|
Year Ended December 31,
|
||||||||||||
|
2023
|
2022
|
2021
|
||||||||||
|
Balance at the beginning of period
|
$
|
|
$
|
|
$
|
|
||||||
|
Additions charged to cost and expenses
|
|
(1)
|
|
(4)
|
|
(6)
|
||||||
|
Decreases
|
(
|
)(2)
|
(
|
)(5)
|
|
(7)
|
||||||
|
Adjustments
|
|
(3)
|
|
(3)
|
|
(3)
|
||||||
|
Balance at the end of the period
|
$
|
|
$
|
|
$
|
|
||||||
|
(1)
|
|
|
(2)
|
|
|
(3)
|
|
|
(4)
|
|
|
(5)
|
|
|
(6)
|
|
|
(7)
|
|
The components of deferred taxes, net on a jurisdiction basis are as follows (U.S. dollars in thousands):
|
Year Ended December 31,
|
||||||||
|
2023
|
2022
|
|||||||
|
Net noncurrent deferred tax assets
|
$
|
|
$
|
|
||||
|
Net noncurrent deferred tax liabilities
|
|
|
||||||
|
Deferred taxes, net
|
$
|
|
$
|
|
||||
The Company is subject to regular audits by federal, state and foreign tax authorities. These audits may result in proposed assessments that may result in additional tax
liabilities.
The actual tax rate for the years ended December 31, 2023, 2022 and 2021 compared to the statutory U.S. Federal tax rate is as follows:
|
Year Ended December 31,
|
||||||||||||
|
2023
|
2022
|
2021
|
||||||||||
|
Income taxes at statutory rate
|
|
%
|
|
%
|
|
%
|
||||||
|
Excess tax benefit from equity award
|
|
%
|
(
|
)%
|
(
|
)%
|
||||||
| Deferred compensation |
( |
)% | % | ( |
)% | |||||||
| Executive salary limitation |
% | % | % | |||||||||
| State taxes | % | % | % | |||||||||
| Foreign exchange | ( |
)% | % | ( |
)% | |||||||
|
Non-U.S. income taxed at different rates
|
|
%
|
|
%
|
|
%
|
||||||
|
Foreign withholding taxes
|
|
%
|
(
|
)%
|
|
%
|
||||||
|
Change in reserve for uncertain tax positions
|
|
%
|
|
%
|
(
|
)%
|
||||||
|
Valuation allowance recognized foreign tax credit & others
|
|
%
|
(
|
)%
|
|
%
|
||||||
|
Foreign-Derived Intangible Income (FDII)
|
(
|
)%
|
(
|
)%
|
(
|
)%
|
||||||
|
Other
|
|
%
|
(
|
)%
|
|
%
|
||||||
|
|
%
|
(
|
)%
|
|
%
|
|||||||
The increase in the Company’s effective tax rate for 2023 was primarily due to the Company incurring restructuring charges that
primarily affected their U.S. earnings. These additional expenses in the U.S. reduced the Company’s ability to utilize foreign tax credits. The decrease in the effective tax rate for 2022 was primarily due to the Company making an
election to change its capitalization policy for tax purposes related to certain direct and indirect costs for inventory and self-constructed assets under Internal Revenue Code (“IRC”) Section 263A. This method change allows the Company to
utilize a portion of its tax attributes related to foreign tax credits in the United States that were previously fully reserved.
The cumulative amount of undistributed earnings of the Company’s non-U.S. Subsidiaries held for indefinite reinvestment is approximately $60.0 million, at December 31, 2023. If this amount were repatriated to the United States, the amount of incremental taxes would be approximately $6.0 million.
| 12. |
Employee Benefit Plan
|
The Company has a 401(k) defined-contribution plan which permits participating employees to defer up to a maximum of 100 % of their compensation, subject to limitations established by the IRS. Employees age 18 and older are eligible to contribute to the plan starting the first day of employment. After completing at least one day of service, employees are eligible to receive matching contributions from the Company. In 2023, 2022, and 2021 the Company provided matching contributions of up to 4 two years of service. The Company recorded compensation expense of $3.6 million, $3.8 million and $4.8 million for the years
ended December 31, 2023, 2022 and 2021, respectively, related to its contributions to the plan. The Company may make additional discretionary contributions to the plan of up to 10 % of employees’ base pay. The Company’s discretionary contributions vest 20 %
per year for an employee’s first five years of service. For the years ended December 31, 2023, 2022 and 2021, the Company did not make any
additional discretionary contributions.
| 13. |
Deferred Compensation Plan
|
The Company has a deferred compensation plan for select management personnel, highly compensated employees, and members of the Company’s board of directors. Under this
plan, the Company may make discretionary contributions to participants’ deferred compensation accounts; prior to 2021, the Company historically contributed 10 % of base salary for
participants above a specified job level. In addition, each participant has the option to defer a portion of their compensation up to a maximum of 80 %
of their base salary and 100 % of their bonuses or director fees. Participant contributions are immediately vested. Company contributions
made on or prior to December 31, 2020 will vest 50 % after ten years of service and 5 % each year of
service thereafter. In addition, any unvested company contributions will fully vest on the earlier of: (a) the participant attaining 60 years
of age; and (b) death or disability.
Effective January 1, 2021, the Company amended its deferred compensation plan. Under the revision, the Company shall make matching contributions up to 5 % of base salary for participants above a specified job level. The revision continues to authorize the Company to make discretionary contributions to participants’ deferred compensation accounts. In view of the opportunity to receive a 5 % match, the Company reduced its discretionary contributions to 5 % of base salary each year, though the Company is not obligated to make these contributions. Under the amendment, the amounts contributed by
the Company, adjusted for earnings and losses thereon, will vest 20 % per year over five years , subject to acceleration upon the occurrence of certain events, including the completion of at least ten years of employment above a specified job level. All amounts a participant elects to defer, adjusted for earnings and losses thereon, are 100 % vested at all times.
The Company recorded compensation expense of $2.8 million,
$2.3 million and $4.0
million for the years ended December 31, 2023, 2022 and 2021, respectively, related to its contributions to the plan. The total long-term deferred compensation liability under the deferred compensation plan was $49.2 million and $44.4 million for the
years ended December 31, 2023 and 2022, respectively, related to its contributions to the plan and is included in other long-term liabilities.
All benefits under the deferred compensation plan are unsecured obligations of the Company. The Company has contributed assets to a “rabbi trust” for the payment of
benefits under the deferred compensation plan. As the assets of the trust are available to satisfy the claims of general creditors if the Company becomes insolvent, the amounts held in the trust are accounted for as an investment on the Company’s
consolidated balance sheets of $45.0 million and $40.1 million for the years ended December 31, 2023 and 2022, respectively.
| 14. |
Derivative Financial Instruments
|
Risk Management Objective of Using Derivatives
The Company is exposed to certain risks arising from both its business operations and economic conditions. The Company principally manages its exposures to a wide
variety of business and operational risks through management of its core business activities. The Company manages economic risks, including interest rate, liquidity, and credit risk primarily by managing the amount, sources, and duration of its
assets and liabilities and the use of derivative financial instruments. Specifically, the Company enters into derivative financial instruments to manage exposures that arise from business activities that result in the receipt or payment of future
known and uncertain cash amounts, the value of which are determined by interest rates. The Company’s derivative financial instruments are used to manage differences in the amount, timing, and duration of the Company’s known or expected cash receipts
and its known or expected cash payments principally related to the Company’s borrowings.
Cash Flow Hedges of Interest Rate Risk
The Company’s objectives in using interest rate derivatives are to add stability to interest expense and to manage its exposure to interest rate movements. To accomplish
this objective, the Company primarily uses interest rate swaps as part of its interest rate risk management strategy. Interest rate swaps designated as cash flow hedges involve the receipt of variable-rate amounts from a counterparty in exchange for
the Company making fixed-rate payments over the life of the agreements without exchange of the underlying notional amount. During 2023, such derivatives were used to hedge the variable cash flows associated with existing variable-rate debt.
For derivatives designated and that qualify as cash flow hedges of interest rate risk, the gain or loss on the derivative is recorded in Accumulated Other Comprehensive
Income and subsequently reclassified into interest expense/income in the same period(s) during which the hedged transaction affects earnings. Amounts reported in accumulated other comprehensive income related to derivatives will be reclassified to
interest expense/income as interest payments are made/received on the Company’s variable-rate debt. During the next twelve months, the Company estimates that an additional $9.0 million will be reclassified as a reduction to interest expense.
As of December 31, 2023, the Company had four outstanding
interest rate derivatives that were designated as cash flow hedges of interest rate risk with a total notional amount of $200 million.
Fair Values of Derivative Instruments on the Balance Sheet
The table below presents the fair value of the Company’s derivative financial instruments as well as their classification on the Balance Sheet:
|
Fair Values of
Derivative Instruments
|
||||||||||
| December 31, |
||||||||||
|
Derivatives in Cash Flow Hedging Relationships:
|
Balance Sheet Location
|
2023
|
2022
|
|||||||
|
Interest Rate Swap – Asset
|
Prepaid expenses and other
|
$ | $ | |||||||
|
Interest Rate Swap – Asset
|
Other assets
|
$
|
|
$
|
|
|||||
Effect of Cash Flow Hedge Accounting on Accumulated Other Comprehensive Income
The tables below present the effect of cash flow hedge accounting on Accumulated Other Comprehensive Income.
|
Amount of Gain
Recognized in OCI on Derivatives
|
||||||||||||
|
|
Year Ended December 31,
|
|||||||||||
|
Derivatives in Cash Flow Hedging Relationships:
|
2023
|
2022
|
2021
|
|||||||||
|
Interest Rate Swaps
|
$
|
|
$
|
|
$
|
|
||||||
|
Amount of Gain (Loss)
Reclassified from Accumulated
Other Comprehensive Loss into Income
|
||||||||||||||
|
Year Ended December 31,
|
||||||||||||||
|
Derivatives in Cash Flow Hedging Relationships:
|
Income Statement Location
|
2023
|
2022
|
2021
|
||||||||||
|
Interest Rate Swaps
|
Other income (expense), net
|
$
|
|
$
|
|
$
|
(
|
)
|
||||||
| 15. |
Segment Information
|
The Company reports revenue from nine
segments, consisting of its seven geographic Nu Skin segments—Americas, Mainland China, Southeast Asia/Pacific, South Korea, Japan, Europe
& Africa, and Hong Kong/Taiwan—and two Rhyz segments—Manufacturing and Rhyz other. The Nu Skin other
category includes miscellaneous corporate revenue and related adjustments. The Rhyz other segment includes other investments by our Rhyz business arm. These segments reflect the way the chief operating decision maker evaluates the
Company’s business performance and allocates resources. Reported revenue includes only the revenue generated by sales to external customers.
Profitability by segment as determined under US GAAP is driven primarily by the
Company’s transfer pricing policies. Segment contribution, which is the Company’s segment profitability metric presented in the table below, excludes certain intercompany charges, specifically royalties, license fees, transfer pricing, discrete
charges and other miscellaneous items. These charges have been included in Corporate and other expenses. Corporate and other expenses also include costs related to the Company’s executive and administrative offices, information technology, research
and development, and marketing and supply chain functions not recorded at the segment level.
In the first quarter of 2023, the Company adjusted how it allocates certain
corporate overhead costs to the segments. The prior-year segment information has been recast to comply with current presentation. Consolidated financial information is not affected.
Effective June 2023, the Company closed its Israel market. As a result the Europe,
Middle East and Africa (“EMEA”) segment has been renamed Europe & Africa.
The accounting policies of the segments are the same as those described in Note 2, “Summary of Significant Accounting Policies.” The Company
evaluates the performance of its segments based on revenue and segment contribution. Each segment records direct expenses related to its employees and its operations.
Summarized
financial information for the Company’s reportable segments is shown in the following tables. Asset information is not reviewed or included with the Company’s internal management reporting. Therefore, the Company has not disclosed asset
information for each reportable segment.
Revenue by Segment
|
Year Ended December 31,
|
||||||||||||
|
(U.S. dollars in thousands)
|
2023
|
2022
|
2021
|
|||||||||
|
Nu Skin
|
||||||||||||
|
Americas
|
$
|
|
$
|
|
$
|
|
||||||
|
Mainland China
|
|
|
|
|||||||||
|
Southeast Asia/Pacific
|
|
|
|
|||||||||
|
South Korea
|
|
|
|
|||||||||
|
Japan
|
|
|
|
|||||||||
|
Europe & Africa
|
|
|
|
|||||||||
|
Hong Kong/Taiwan
|
|
|
|
|||||||||
|
Nu Skin Other
|
(
|
)
|
|
|
||||||||
|
Total Nu Skin
|
|
|
|
|||||||||
|
Rhyz
|
||||||||||||
|
Manufacturing (1)
|
|
|
|
|||||||||
|
Rhyz Other
|
|
|
|
|||||||||
|
Total Rhyz
|
|
|
|
|||||||||
|
Total
|
$
|
|
$
|
|
$
|
|
||||||
| (1) |
|
Segment Contribution
|
Year Ended December 31,
|
||||||||||||
|
(U.S. dollars in thousands)
|
2023
|
2022
|
2021
|
|||||||||
|
Nu Skin
|
||||||||||||
|
Americas
|
$
|
|
$
|
|
$
|
|
||||||
|
Mainland China
|
|
|
|
|||||||||
|
Southeast Asia/Pacific
|
|
|
|
|||||||||
|
South Korea
|
|
|
|
|||||||||
|
Japan
|
|
|
|
|||||||||
|
Europe & Africa
|
|
|
|
|||||||||
|
Hong Kong/Taiwan
|
|
|
|
|||||||||
|
Nu Skin contribution
|
|
|
|
|||||||||
|
Rhyz
|
||||||||||||
|
Manufacturing
|
|
|
|
|||||||||
|
Rhyz Other
|
(
|
)
|
(
|
)
|
(
|
)
|
||||||
|
Rhyz contribution
|
(
|
)
|
(
|
)
|
|
|||||||
|
Total segment contribution
|
|
|
|
|||||||||
|
Corporate and other
|
(
|
)
|
(
|
)
|
(
|
)
|
||||||
|
Operating income
|
|
|
|
|||||||||
|
Other income (expense)
|
(
|
)
|
(
|
)
|
(
|
)
|
||||||
|
Income before provision for income taxes
|
$
|
|
$
|
|
$
|
|
||||||
Depreciation and Amortization
|
Year Ended December 31,
|
||||||||||||
|
(U.S. dollars in thousands)
|
2023
|
2022
|
2021
|
|||||||||
|
Nu Skin
|
||||||||||||
|
Americas
|
$
|
|
$
|
|
$
|
|
||||||
|
Mainland China
|
|
|
|
|||||||||
|
Southeast Asia/Pacific
|
|
|
|
|||||||||
|
South Korea
|
|
|
|
|||||||||
|
Japan
|
|
|
|
|||||||||
|
Europe & Africa
|
|
|
|
|||||||||
|
Hong Kong/Taiwan
|
|
|
|
|||||||||
|
Total Nu Skin
|
|
|
|
|||||||||
|
Rhyz
|
||||||||||||
|
Manufacturing
|
|
|
|
|||||||||
|
Rhyz Other
|
|
|
|
|||||||||
|
Total Rhyz
|
|
|
|
|||||||||
|
Corporate and other
|
|
|
|
|||||||||
|
Total
|
$
|
|
$
|
|
$
|
|
||||||
|
Year Ended December 31,
|
||||||||||||
|
(U.S. dollars in thousands)
|
2023
|
2022
|
2021
|
|||||||||
|
Nu Skin
|
||||||||||||
|
Americas
|
$
|
|
$
|
|
$
|
|
||||||
|
Mainland China
|
|
|
|
|||||||||
|
Southeast Asia/Pacific
|
|
|
|
|||||||||
|
South Korea
|
|
|
|
|||||||||
|
Japan
|
|
|
|
|||||||||
|
Europe & Africa
|
|
|
|
|||||||||
|
Hong Kong/Taiwan
|
|
|
|
|||||||||
|
Total Nu Skin
|
|
|
|
|||||||||
|
Rhyz
|
||||||||||||
|
Manufacturing
|
|
|
|
|||||||||
|
Rhyz Other
|
|
|
|
|||||||||
|
Total Rhyz
|
|
|
|
|||||||||
|
Corporate and other
|
|
|
|
|||||||||
|
Total
|
$
|
|
$
|
|
$
|
|
||||||
Revenue by Major Market
A major market is defined as one with total revenue greater than 10% of consolidated total revenue. Based on this criteria, the Company has identified four major markets: Mainland China, South Korea, United States, and Japan. There are approximately 45 other markets, each of which individually is less than 10%. No single customer accounted for 10% or more of net sales
for the periods presented. Sales are recorded in the jurisdiction in which the transactions occurred:
|
Year Ended December 31,
|
||||||||||||
|
(U.S. dollars in thousands)
|
2023
|
2022
|
2021
|
|||||||||
|
United States
|
$
|
|
$
|
|
$
|
|
||||||
|
Mainland China
|
|
|
|
|||||||||
|
South Korea
|
|
|
|
|||||||||
|
Japan
|
|
|
|
|||||||||
|
All others
|
|
|
|
|||||||||
|
Total
|
$
|
|
$
|
|
$
|
|
||||||
Revenue by Product Line
|
Year Ended December 31,
|
||||||||||||
|
(U.S. dollars in thousands)
|
2023
|
2022
|
2021
|
|||||||||
|
Beauty
|
$
|
|
$
|
|
$
|
|
||||||
|
Wellness
|
|
|
|
|||||||||
|
Other
|
|
|
|
|||||||||
|
Total
|
$
|
|
$
|
|
$
|
|
||||||
Long-Lived Assets by Major Market
A major market is defined as a market with long-lived assets greater than 10% of consolidated long-lived assets and also includes the Company’s country of domicile (the
United States). Long-lived assets in Mainland China consist primarily of property, plant and equipment related to manufacturing, distribution facilities and the Mainland China headquarters. Long-lived assets in the United States consist primarily of
property, plant and equipment, including the Company’s corporate offices and distribution facilities. Long-lived assets by major market are set forth below for the periods ended December 31, 2023, 2022 and 2021:
|
Year Ended December 31,
|
||||||||||||
|
(U.S. dollars in thousands)
|
2023
|
2022
|
2021
|
|||||||||
|
United States
|
$
|
|
$
|
|
$
|
|
||||||
|
Mainland China
|
|
|
|
|||||||||
|
South Korea
|
|
|
|
|||||||||
|
Japan
|
|
|
|
|||||||||
|
All others
|
|
|
|
|||||||||
|
Total
|
$
|
|
$
|
|
$
|
|
||||||
| 16. |
Commitments and Contingencies
|
The Company is subject to government regulations pertaining to product formulation, labeling and packaging, product claims and advertising, and the Company’s direct
selling system. The Company is also subject to the jurisdiction of numerous foreign tax and customs authorities. Any assertions or determination that either the Company or the Company’s sales force is not in compliance with existing statutes, laws,
rules or regulations could have a material adverse effect on the Company’s operations. In addition, in any country or jurisdiction, the adoption of new statutes, laws, rules or regulations or changes in the interpretation of existing statutes, laws,
rules or regulations could have a material adverse effect on the Company and its operations. No assurance can be given that the Company’s compliance with applicable statutes, laws, rules and regulations will not be challenged by foreign authorities
or that such challenges will not have a material adverse effect on the Company’s financial position, results of operations or cash flows. The Company and its Subsidiaries are defendants in litigation, investigations and other proceedings involving
various matters. The Company is subject to loss contingencies, including various legal and regulatory proceedings, asserted and potential claims that arise in the ordinary course of business. An estimated loss from such contingencies is recognized as
a charge to income if it is probable that a liability has been incurred and the amount of the loss can be reasonably estimated.
The Company is subject to regular audits by federal, state and foreign tax authorities. These audits may result in additional tax liabilities. The Company believes it
has appropriately provided for income taxes for all years. Several factors drive the calculation of its tax reserves. Some of these factors include: (i) the expiration of various statutes of limitations; (ii) changes in tax law and regulations;
(iii) issuance of tax rulings; and (iv) settlements with tax authorities. Changes in any of these factors may result in adjustments to the Company’s reserves, which would impact its reported financial results.
| 17. |
Other Income (Expense), Net
|
Other income (expense), net was $21.7 million, $21.9 million and $1.5 million of expense in 2023, 2022 and 2021, respectively. Other income (expense), net
includes $25.6 million, $13.5
million and $11.0 million in interest expense during 2023, 2022 and 2021,
respectively.
| 18. |
Supplemental Cash Flow Information
|
Cash paid for interest totaled $33.3 million, $14.5 million and $8.6 million for the
years ended December 31, 2023, 2022 and 2021, respectively. Cash paid for income taxes totaled $32.4 million, $42.1 million and $96.0 million for the years ended December 31, 2023, 2022 and 2021, respectively.
| 19. |
Acquisitions
|
In April 2023, the Company acquired 60
percent of LifeDNA, Inc. (“LifeDNA”), a DNA assessment company. Consideration paid included $4.0 million of cash, along with the
conversion of a previous $3.0 million Simple Agreement for Future Equity (“SAFE”), and a $0.2 million convertible note. The acquisition enables the Company to continue to expand its digital tools. The Company allocated the fair value of $12.0 million to the assets acquired and liabilities assumed at estimated fair values. The estimated fair value of assets acquired included $7.3 million of intangible assets, $1.7
million of cash, $0.1 million of current assets, $0.9 million of accrued liabilities and also resulted in a deferred tax liability of $0.9
million. The excess purchase price over the aggregate fair value of assets acquired less liabilities assumed of $4.7 million was recorded
as goodwill. The goodwill recognized is attributable primarily to expected synergies. None of the goodwill is expected to be deductible for income tax purposes. The intangible assets acquired comprised $0.6 million of customer relationships, $1.7 million of
technology, $1.0 million of tradenames and $4.1
million of other intangibles. The intangibles were assigned useful lives of 7 2 years for the customer relationships. All the goodwill was assigned to our Rhyz Other segment. The numbers above are stated net of measurement period adjustments recorded during the fourth quarter of 2023 of $1.1
million to deferred tax liability and goodwill. The allocation of the fair value of assets acquired and liabilities assumed for the acquisition was finalized during the three months ended December 31, 2023.
In June 2023, the Company acquired 100
percent ownership in Beauty Biosciences, LLC (“BeautyBio”), making BeautyBio a wholly owned subsidiary of the Company. The acquisition expands the Company’s product and device offerings within its Rhyz segment. The purchase price for BeautyBio was
$75.0 million, net of cash acquired of $1.5
million, all payable in cash. The Company allocated the gross purchase price of $76.5 million to the assets acquired and liabilities
assumed at estimated fair values. The estimated fair value of assets acquired included $43.0 million of intangible assets, $1.5 million of cash, $3.5 million of
accounts receivable, $10.3 million of inventory, $0.8 million of prepaid and other assets, $1.0 million of fixed assets, $1.2 2.5 million of accounts payable and accrued liabilities and also resulted in a deferred tax liability of $0.7 million. The excess purchase price over the aggregate fair value of assets acquired less liabilities assumed of $19.6 million was recorded as goodwill. The goodwill recognized is attributable primarily to expected synergies. None of the goodwill is expected to be deductible for income tax purposes. The
intangible assets acquired comprised $18.4 million of customer relationships, $2.3 million of technology, $20.9 million of tradenames and $1.4 million of other intangibles. The intangibles were assigned useful lives of approximately 19 9
years for the customer relationships and 3 years for the other intangibles. All the goodwill was assigned to our Rhyz Other segment. The numbers above are stated net of measurement period adjustments recorded during the fourth quarter of 2023 of $(1.2 ) million to accounts receivable, $(0.7 ) million of
inventory, $(0.5 ) million of accrued liabilities, $0.7 million of deferred tax liability, $(0.3 ) of intangible assets and $2.4 million of goodwill. As of December 31, 2023, the allocation of the purchase price for the acquisition of BeautyBio is not yet finalized
and is subject to adjustments as the Company completes the valuation analysis for this acquisition.
The financial results of LifeDNA and BeautyBio are included in the Rhyz other segment from the date of acquisition. For the year ended December
31, 2023, the Company included $10.6 million of revenue from these acquisitions. The unaudited pro forma revenue for the Company,
including LifeDNA and BeautyBio, as if the acquisitions occurred on January 1, 2021, would have been $1,978.8 million and $2,254.2 million and $2,719.8 million for
the years ended December 31, 2023, 2022 and 2021, respectively.
| 20. |
Restructuring and Severance Charges
|
In 2021, the Company determined to exit the Grow Tech segment to better align its resources on key strategic initiatives to achieve the
future growth objectives and priorities of the core Nu Skin business. The Grow Tech segment was pursuing the commercialization of controlled-environment agriculture for use in the agriculture feed industry. This segment operated as part of
the Company’s Rhyz strategic investment arm. As a result of the restructuring program, the Company recorded a non-cash charge of $38.5
million in 2021, including $9.2 million for impairment of goodwill, $9.0 million for impairment of intangibles, $13.7 million of fixed asset impairments and $6.6 million for inventory write-off, and $20.0
million of cash charges, including $6.5 million for employee severance and $13.5 million for other related cash charges with our restructuring. The restructuring charges were recorded in the Grow Tech segment. During 2022, the Company incurred $5.0 million in incremental cash charges associated with the exit activities and legal settlements. During 2022, the Company made cash payments of
$20.0 million, leaving a restructuring accrual of $5.0 no
restructuring accrual related to our exit of the Grow Tech segment as of December 31, 2023.
In the third quarter of 2022, the Company adopted a strategic plan (“2022 Plan”) to focus resources on the Company’s strategic priorities and
optimize future growth and profitability. The global program includes workforce reductions and footprint optimization. The Company incurred total charges under the program
of approximately $53.3 million, with $40.8 million in cash charges of severance and lease termination cost and approximately
$12.5 million of non-cash charges of impairment of fixed assets,
acceleration of depreciation and impairment of other intangibles related to the footprint optimization. During 2022, the Company incurred charges to be settled in cash of $20.1 million in severance charges, $7.4 million in lease termination cost, and $5.2 million in other associated cost, and non-cash charges of $8.2 million in fixed asset impairments, $0.9 million in accelerated depreciation and $1.7 million in impairment of other intangibles. During 2022, the
Company made cash payments of $21.0 million related to this
global program, leaving an ending restructuring accrual of $11.7 million. During 2023, the Company incurred charges to be settled in cash of $4.0 million in severance charges, $1.9 million in lease termination cost, and $2.2
million in other associated cost, and non-cash charges of $1.7 million in accelerated depreciation. In 2023, the Company made
cash payments of $19.8 million, leaving no restructuring accrual related to this plan as of December 31, 2023.
Restructuring expense by segment – 2022 Plan
|
|
Year Ended
December 31,
|
|||||||
|
(U.S. dollars in thousands)
|
2023
|
2022
|
||||||
|
|
||||||||
|
Nu Skin
|
||||||||
|
Americas
|
$
|
|
$
|
|
||||
|
Mainland China
|
|
|
||||||
|
Southeast Asia/Pacific
|
|
|
||||||
|
South Korea
|
|
|
||||||
|
Japan
|
|
|
||||||
|
Europe & Africa
|
(
|
)
|
|
|||||
|
Hong Kong/Taiwan
|
(
|
)
|
|
|||||
|
Total Nu Skin
|
|
|
||||||
|
Rhyz
|
||||||||
|
Manufacturing
|
|
|
||||||
|
Rhyz other
|
|
|
||||||
|
Total Rhyz
|
|
|
||||||
|
Corporate and other
|
|
|
||||||
|
Total
|
$
|
|
$
|
|
||||
In the fourth quarter of 2023, the Company adopted another strategic plan (“2023 Plan”) to focus resources on the Company’s global priorities and optimize
future growth and profitability. The global program includes workforce reductions. The Company estimates total charges under the program will approximate $15 –$25 million in cash charges of severance. The Company expects to substantially complete the
program during the first half of 2024. During the fourth quarter of 2023 the Company incurred charges to be settled in cash of $10.0
million in severance charges. During the fourth quarter of 2023, the Company made cash payments of $0.3 million, leaving an
ending restructuring accrual of $9.7 million.
Restructuring
expense by segment – 2023 Plan
|
(U.S. dollars in thousands)
|
Year Ended
December 31, 2023
|
|||
|
|
||||
|
Nu Skin
|
||||
|
Americas
|
$
|
|
||
|
Mainland China
|
|
|||
|
Southeast Asia/Pacific
|
|
|||
|
South Korea
|
|
|||
|
Japan
|
|
|||
|
Europe & Africa
|
|
|||
|
Hong Kong/Taiwan
|
|
|||
|
Total Nu Skin
|
|
|||
|
Rhyz
|
||||
|
Manufacturing
|
|
|||
|
Rhyz other
|
|
|||
|
Total Rhyz
|
|
|||
|
Corporate and other
|
|
|||
|
Total
|
$
|
|
||
To the Board of Directors and Stockholders of Nu Skin Enterprises, Inc.
Opinions on the Financial Statements and Internal Control over Financial Reporting
We have audited the accompanying consolidated balance sheets of Nu Skin Enterprises, Inc. and its subsidiaries (the “Company”) as of
December 31, 2023 and 2022, and the related consolidated statements of income, of comprehensive income, of stockholders’ equity and of cash flows for each of the three years in the period ended December 31, 2023, including the related notes
(collectively referred to as the “consolidated financial statements”). We also have audited the Company’s internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2023 and 2022, and the results
of its operations and its cash flows for each of the three years in the period ended December 31, 2023 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, 2023, based on criteria established in Internal Control - Integrated Framework (2013) issued by the COSO.
Basis for Opinions
The Company’s management is responsible for these consolidated 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 Management’s Report on Internal Control over Financial Reporting appearing under Item 9A. Our responsibility is
to express opinions on the Company’s consolidated financial statements and on the Company’s internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board
(United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the
audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all
material respects.
Our audits of the consolidated financial statements included performing procedures to assess the risks of material
misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the
consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. 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.
As described in Management’s Report on Internal Control over Financial
Reporting, management has excluded LifeDNA, Inc. and Beauty Biosciences, LLC from its assessment of internal control over financial reporting as of December 31, 2023 because they were acquired by the Company in purchase business combinations
during 2023. We have also excluded LifeDNA, Inc. and Beauty Biosciences, LLC from our audit of internal control over financial reporting. LifeDNA, Inc. and Beauty Biosciences, LLC are consolidated subsidiaries whose total assets and total
revenues excluded from management’s assessment and our audit of internal control over financial reporting collectively represent 1.0% and 0.5%, respectively, of the related consolidated financial statement amounts as of and for the year ended
December 31, 2023.
Definition and Limitations of Internal Control over Financial Reporting
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.
Critical Audit Matters
The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial
statements that was communicated or required to be communicated to the audit committee and that (i) relates to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging,
subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below,
providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
Income Taxes
As described in Notes 2 and 11 to the consolidated financial statements, the Company recorded a provision for income taxes of $18 million for the year ended December 31, 2023 and reported $105 million in
deferred tax assets net of a valuation allowance of $47 million and $53 million in deferred tax liabilities. The Company also reported uncertain tax positions of $22 million as of December 31, 2023. The Company pays income taxes in many foreign
jurisdictions based on the profits realized in those jurisdictions, which can be significantly impacted by terms of intercompany transactions between the Company and its foreign affiliates. The Company takes an asset and liability approach for
financial accounting and reporting of income taxes. Deferred tax assets and liabilities are created in this process and are calculated using anticipated tax rates and are then netted by jurisdiction. Management establishes valuation allowances
when necessary to reduce deferred tax assets to the amounts expected to be ultimately realized. The Company has recorded unrecognized tax benefits related to multiple foreign and domestic jurisdictions. As disclosed by management, potential
changes in unrecognized tax benefits can arise from the multiple jurisdictions in which the Company operates, as well as the expiration of various statutes of limitation and possible completion of tax examinations.
The principal considerations for our determination that performing procedures relating to income taxes is a critical audit
matter are (i) the significant judgment by management when developing the provision for income taxes, deferred tax assets and the liability for unrecognized tax benefits, which in turn, led to significant auditor judgment, subjectivity and effort
in performing audit procedures and evaluating audit evidence relating to these account balances and tax positions; and (ii) the audit effort included the involvement of professionals with specialized skill and knowledge.
Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall
opinion on the consolidated financial statements. These procedures included testing the effectiveness of controls relating to income taxes. These procedures also included, among others, (i) testing the accuracy of the global income tax provision,
including the rate reconciliation, return to provision adjustments, and permanent and temporary differences; (ii) evaluating management’s assessment of the realizability of deferred tax assets on a jurisdictional basis; (iii) evaluating the
identification of reserves for uncertain tax positions and the reasonableness of the “more likely than not determination” in consideration of the expiration of various statutes of limitations, changes in tax law and regulations, terms of
intercompany agreements, and issuance of tax rulings and settlements with tax authorities. Professionals with specialized skill and knowledge were used to assist in the evaluation of the reasonableness of management’s estimates and application of
local and international income tax law.
/s/ PricewaterhouseCoopers LLP
February 14, 2024
We have served as the Company’s auditor since 1994, which includes periods before the Company became subject to SEC
reporting requirements.
None.
Evaluation of Disclosure Controls and Procedures. Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief
Financial Officer, we evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as such term is defined in Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)).
Disclosure controls and procedures are the controls and other procedures that we designed to ensure that we record, process, summarize and report in a timely manner the information we must disclose in reports that we file with or submit to the
Securities and Exchange Commission under the Exchange Act, and they include, without limitation, controls and procedures designed to ensure that such information is accumulated and communicated to our management, including our Chief Executive
Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure. Based on this evaluation, our Chief Executive Officer and our Chief Financial Officer concluded that our disclosure controls and
procedures were effective as of December 31, 2023.
Management’s Report on Internal Control over Financial Reporting. Our management is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting is defined in Rule 13a-15(f) under the Exchange
Act as a process designed by, or under the supervision of, our Chief Executive Officer and Chief Financial Officer and effected by our board of directors, management and other personnel, 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 and includes those policies and procedures that:
| ● |
pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of our assets;
|
| ● |
provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that our receipts and
expenditures are being made only in accordance with authorization of management and directors; and
|
| ● |
provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our 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.
Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we
assessed, as of December 31, 2023, the effectiveness of our internal control over financial reporting. This assessment was based on criteria established in the framework Internal Control-Integrated Framework
(2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on our assessment, our management concluded that our internal control over financial reporting was effective as of December 31, 2023.
The effectiveness of our internal control over financial reporting as of December 31, 2023, has been audited by PricewaterhouseCoopers LLP, an
independent registered public accounting firm, as stated in their report which appears herein.
On April 26, 2023, and June 15, 2023, we completed the acquisitions of LifeDNA, Inc. and Beauty Biosciences, LLC, respectively. As permitted by guidance published by the Staff of the SEC, we have excluded LifeDNA, Inc. and Beauty Biosciences, LLC from our assessment of internal control over financial reporting as of December 31, 2023. LifeDNA, Inc. and
Beauty Biosciences, LLC are consolidated subsidiaries whose total assets and total revenues excluded from management’s assessment collectively represent 1.0% and 0.5%, respectively, of the related consolidated financial statement amounts as of
and for the year ended December 31, 2023.
Changes in Internal Control over Financial Reporting. There was no change during the fiscal quarter ended December 31, 2023 in our internal control over financial reporting (as
such term is defined in Rule 13a-15(f) under the Exchange Act) that materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
Not applicable.
The information required by Items 10, 11, 12, 13 and 14 of Part III will be included in an amendment to this Annual Report on Form 10-K or incorporated by reference to our Definitive Proxy Statement
for our 2024 Annual Meeting of Stockholders to be filed with the Securities and Exchange Commission within 120 days after our fiscal year end, except for certain information required by Item 10 with respect to our executive officers which is set
forth under Item 1. Business of this Annual Report on Form 10-K.
Documents filed as part of this Form 10-K:
| 1. |
Financial Statements. See Index to Consolidated Financial Statements under Item 8 of Part II.
|
| 2. |
Financial Statement Schedules. N/A
|
| 3. |
Exhibits. References to the “Company” shall mean Nu Skin Enterprises, Inc. Unless otherwise noted, the SEC file number for exhibits incorporated by
reference is 001-12421.
|
|
3.1
|
|
|
3.2
|
|
|
3.3
|
|
|
3.4
|
|
|
4.1
|
|
|
*4.2
|
|
|
10.1
|
|
|
#10.2
|
|
|
#10.3
|
|
|
#10.4
|
|
|
*#10.5
|
Form of Third Amended and Restated 2010 Plan Restricted Stock Unit Grant Agreement. |
|
*#10.6
|
|
|
#10.7
|
|
#10.8
|
|
|
#10.9
|
|
|
#10.10
|
|
|
#10.11
|
|
|
#10.12
|
|
|
*#10.13
|
|
|
#10.14
|
|
|
*21.1
|
|
|
*23.1
|
|
|
*31.1
|
|
|
*31.2
|
|
|
*32.1
|
|
|
*32.2
|
|
|
*97.1
|
|
|
*101.INS
|
Inline XBRL Instance Document (the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document).
|
|
*101.SCH
|
Inline XBRL Taxonomy Extension Schema Document.
|
|
*101.CAL
|
Inline XBRL Taxonomy Extension Calculation Linkbase Document.
|
|
*101.DEF
|
Inline XBRL Taxonomy Extension Definition Linkbase Document.
|
|
*101.LAB
|
Inline XBRL Taxonomy Extension Label Linkbase Document.
|
|
*101.PRE
|
Inline XBRL Taxonomy Extension Presentation Linkbase Document.
|
|
*104
|
Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101).
|
|
*
|
Filed or furnished herewith.
|
|
#
|
Management contract or compensatory plan or arrangement.
|
None.
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized on February 14, 2024.
|
NU SKIN ENTERPRISES, INC.
|
||
|
By:
|
/s/ Ryan. S. Napierski
|
|
|
Ryan S. Napierski
|
||
|
President and Chief Executive Officer
|
||
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities indicated on
February 14, 2024.
|
Signatures
|
Capacity in Which Signed
|
|
|
/s/ Steven J. Lund
|
Executive Chairman of the Board
|
|
|
Steven J. Lund
|
||
|
/s/ Ryan S. Napierski
|
President, Chief Executive Officer and Director
|
|
|
Ryan S. Napierski
|
(Principal Executive Officer)
|
|
|
/s/ James D. Thomas
|
Chief Financial Officer
|
|
|
James D. Thomas
|
(Principal Financial Officer and Principal Accounting Officer)
|
|
|
/s/ Emma S. Battle
|
Director
|
|
|
Emma S. Battle
|
||
|
/s/ Daniel W. Campbell
|
Director
|
|
|
Daniel W. Campbell
|
||
|
/s/ Andrew D. Lipman
|
Director
|
|
|
Andrew D. Lipman
|
||
|
/s/ Laura Nathanson
|
Director
|
|
|
Laura Nathanson
|
||
|
/s/ Thomas R. Pisano
|
Director
|
|
|
Thomas R. Pisano
|
||
|
/s/ Zheqing Shen
|
Director
|
|
|
Zheqing Shen
|
||
|
/s/ Edwina D. Woodbury
|
Director
|
|
|
Edwina D. Woodbury
|
101
EXHIBIT 4.2
DESCRIPTION OF THE REGISTRANT’S SECURITIES
REGISTERED UNDER SECTION 12 OF THE
SECURITIES EXCHANGE ACT OF 1934
As of December 31, 2023, Nu Skin Enterprises, Inc. (the “Company”) has one class of securities registered under Section 12 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”): Class A Common Stock. This class of securities has
a par value of $0.001 per share. The Company’s certificate of incorporation authorizes 500 million shares of this class, and as of January 31, 2024, 49,420,882 shares were outstanding, held by a total of approximately 210 holders of record.
The Company’s certificate of incorporation also authorizes 25 million shares of preferred stock and 100 million shares of Class B common stock, both with a par value of $0.001 per share, but these classes of securities are not registered under
Section 12 of the Exchange Act, nor were any shares of these classes outstanding as of January 31, 2024. As used in this Exhibit 4.2, the term “common stock” refers, collectively, to our Class A Common Stock and our Class B Common Stock.
The description below does not purport to be complete and is qualified in its entirety by reference to the terms of our certificate of incorporation and our bylaws, each of which is incorporated by reference as an
exhibit to the Annual Report on Form 10-K of which this Exhibit 4.2 is a part. We encourage you to read our certificate of incorporation, our bylaws and the applicable provisions of the Delaware General Corporation Law for additional information.
Common Stock
Voting Rights
Each share of our Class A Common Stock entitles the holder to one vote on each matter submitted to a vote of our stockholders, including the election of directors. Each share of our Class B Common Stock entitles the
holder to ten votes on each matter submitted to a vote of our stockholders, including the election of directors. There is no cumulative voting. With respect to corporate changes, including liquidations, reorganizations, recapitalizations, mergers,
consolidations and sales of substantially all of our assets, the approval of 66 2/3% of the outstanding voting power is required to authorize or approve the transactions.
Dividends
The holders of our common stock are entitled to receive dividends if, as and when the dividends are declared by our board of directors out of assets legally available for the dividends after payment of dividends
required to be paid on shares of preferred stock, if any.
Liquidation Preference
In the event of liquidation, after payment of the debts and other liabilities of our Company and after making provision for the holders of our preferred stock, if any, our remaining assets will be distributable ratably
among holders of our common stock.
Mergers and Other Business Combinations
Upon the merger or consolidation of our Company, holders of our common stock are entitled to receive equal per-share payments or distributions. We may not dispose of all or any substantial part of our assets to, or
merge or consolidate with, any person, entity or group (as the term “group” is defined in Rule 13d-5 of the Exchange Act) that beneficially owns, in the aggregate, 10% or more of our outstanding common stock without the affirmative vote of the
holders, other than a related person, of not less than 66 2/3% of the voting power. For the sole purpose of determining the 66 2/3% vote, a related person will also include the seller or sellers from whom the related person acquired, during the
preceding six months, at least 5% of the outstanding shares of common stock pursuant to one or more agreements or other arrangements and not through a brokers’ transaction, but only if the seller or sellers have beneficial ownership of shares of
common stock having a fair market value in excess of $10 million in the aggregate at the time of the proposed disposition, merger, or consolidation. Notwithstanding the foregoing, neither our Company nor any of our subsidiaries shall be a related
person. This 66 2/3% voting requirement is not applicable, however, if:
| • |
the proposed transaction is approved by a vote of not less than a majority of our directors who are neither affiliated nor associated with the related person or the seller of shares to the related person as described above; or
|
| • |
in the case of a transaction pursuant to which the holders of common stock are entitled to receive cash, property, securities or other consideration, the cash or fair market value of the property, securities or other consideration to be
received per share in the transaction is not less than the higher of:
|
| o |
the highest price per share paid by the related person for any of its holdings of common stock within the two-year period immediately prior to the announcement of the proposed transaction; or
|
| o |
the highest closing sale price during the 30-day period immediately preceding that date or during the 30-day period immediately preceding the date on which the related person became a related person, whichever is higher.
|
Transfer Agent and Registrar
The transfer agent and registrar for our Class A Common Stock is EQ Shareowner Services.
Listing
Our Class A Common Stock is traded on the New York Stock Exchange under the trading symbol “NUS.”
Preferred Stock
Our board of directors is authorized, subject to the limitations prescribed by the Delaware General Corporation Law or the rules of the New York Stock Exchange or other organizations on whose systems our stock may be
quoted or listed, to:
| • |
provide for the issuance of shares of preferred stock in one or more series;
|
| • |
establish from time to time the number of shares to be included in each series;
|
| • |
fix the rights, powers, preferences and privileges of the shares of each wholly unissued series and any qualifications, limitations or restrictions on such shares; and
|
| • |
increase or decrease the number of shares of each series, without any further vote or action by the stockholders.
|
2
The approval of the holders of at least 66 2/3% of the combined voting power of the outstanding shares of common stock, however, is required for the issuance of shares of preferred stock that have the right to vote for
the election of directors under ordinary circumstances or to elect 50% or more of the directors under any circumstances.
Depending upon the terms of the preferred stock established by our board of directors, any or all series of preferred stock could have preference over the common stock with respect to dividends and other distributions
and upon liquidation of our Company or could have voting or conversion rights that could adversely affect the holders of the outstanding common stock. In addition, the preferred stock could delay, defer or prevent a change of control of our Company.
We have no present plans to issue any shares of preferred stock.
Anti-Takeover Provisions
Special Stockholder Meetings
Special meetings of stockholders may be called only by the board of directors pursuant to a resolution adopted by the affirmative vote of a majority of the board, the chairman of the board of directors, or the
president. Except as otherwise required by law, stockholders are not entitled to request or call a special meeting of the stockholders.
Director Nominations and Business Proposals
Our stockholders are required to provide advance notice of nominations of directors to be made at, and of business proposed to be brought before, a meeting of the stockholders. The failure to deliver proper notice
within the periods specified in our bylaws will result in the denial of the stockholder of the right to make any nominations or propose any action at the meeting.
Section 203 of the Delaware General Corporation Law
We are a Delaware corporation and are subject to the provisions of Section 203 of the Delaware General Corporation Law. This law prevents many Delaware corporations, including those whose securities are listed on the
New York Stock Exchange, from engaging, under specific circumstances, in a business combination with an interested stockholder for three years following the date that the stockholder became an interested stockholder, unless the business combination
or interested stockholder is approved in a prescribed manner. An interested stockholder is a stockholder who, together with affiliates and associates, within the prior three years did own 15% or more of the corporation’s outstanding voting stock.
A Delaware corporation may opt out of the provisions of Section 203 of the Delaware General Corporation Law with an express provision in its original certificate of incorporation or an express provision in its
certificate of incorporation or bylaws resulting from a stockholders’ amendment approved by at least a majority of the outstanding voting shares. We have not opted out of the provisions of Section 203.
3
Exhibit 10.5
NU SKIN ENTERPRISES, INC.
THIRD AMENDED AND RESTATED 2010 OMNIBUS INCENTIVE PLAN
RESTRICTED STOCK UNIT AGREEMENT
This Restricted Stock Unit Agreement, Participant’s award information (the “Award Summary”), which can be accessed on the Fidelity website (currently www.fidelity.com) or the website of any other stock plan
administrator selected by the Company in the future, and the Appendix for Participant’s country contained in this agreement, if any, (collectively, this “Agreement”) set forth the terms and conditions of the Restricted Stock Units granted to
Participant under the Third Amended and Restated Nu Skin Enterprises, Inc. 2010 Omnibus Incentive Plan (the “Plan”). In the event of a conflict between (i) the terms and conditions of the Plan; and (ii) the terms and conditions of this Agreement,
the terms and conditions of the Plan shall prevail. Unless otherwise defined herein, the capitalized terms in this Agreement shall have the same defined meaning assigned to them in the Plan.
1. Grant of Restricted Stock Units.
1.1 Grant of Restricted Stock Units. Effective as of the date of grant specified in the Award Summary (the “Grant Date”), the Company grants to Participant
an award of the number of Restricted Stock Units as set forth in the Award Summary. Each Restricted Stock Unit is a bookkeeping entry representing the Company’s unfunded promise to deliver one Share on the terms provided herein and in the Plan.
1.2 Vesting of Restricted Stock Units. The Restricted Stock Units shall vest on the dates (the “Vesting Dates”) and in the
amounts determined by the Committee and set forth in the Award Summary, except as otherwise provided in this Agreement, including pursuant to Sections 1.3 and 4.
1.3 Termination of Continuous Service. In the event Participant’s Continuous Service (as defined below) is terminated for any
reason prior to the full vesting of the Restricted Stock Units, the Restricted Stock Units granted hereunder shall terminate to the extent they are not vested as of the termination of Participant’s Continuous Service, as determined in accordance with
Section 9(h) below, and Participant shall not have any right to receive any Shares subject to such unvested Restricted Stock Units.
For purposes of this Agreement:
“Continuous Service” means that Participant’s service with the Company or a Subsidiary, whether as an Employee, Director, or Consultant, is not interrupted or terminated. Participant’s Continuous Service shall not be
deemed to have terminated merely because of a change in the capacity in which Participant renders service to the Company or a Subsidiary as an Employee, Consultant, or Director, or a change in the entity for which Participant renders such service,
provided that there is no interruption or termination of Participant’s Continuous Service. For example, a change in status from an Employee of the Company to a Consultant of a Subsidiary or a Director will not constitute an interruption of
Continuous Service. Subject to the requirements of applicable law, the Committee, in its sole discretion, shall determine whether Continuous Service shall be considered interrupted in the case of any leave of absence approved by the Company or a
Subsidiary, including sick leave, military leave or any other personal leave.
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1.4 Settlement of Restricted Stock Units. Subject to the terms of the Plan and this Agreement, Restricted Stock Units shall be
settled in Shares, provided that Participant has satisfied any Tax-Related Items pursuant to Section 8 below. Shares will be issued to Participant within 70 days following the applicable Vesting Date unless subject to the terms of the Company’s
deferred compensation plan; provided, however, that if the Participant is subject to taxation in the U.S. (a “U.S. Taxpayer”), the Restricted Stock Units vest pursuant to Section 1.6 below and the Restricted Stock Units are considered “non-qualified
deferred compensation” subject to Section 409A of the Code (“Code Section 409A,” and such compensation, “Deferred Compensation”), the Shares will be issued in accordance with the following schedule: (i) if the termination event giving rise to the
vesting acceleration occurs prior to the Change in Control and the Change in Control constitutes a “change in control event” (within the meaning of U.S. Treasury Regulation 1.409A-3(i)(5)(i)) (a “409A CIC”), the Shares will be issued on the date of
the Change in Control, and if the Change in Control does not constitute a 409A CIC, the Shares will be issued on the date that is six months following the Participant’s “separation from service” (within the meaning of Code Section 409A) (a
“Separation from Service”); (ii) if the termination event giving rise to the vesting acceleration occurs on or following the Change in Control and the Change in Control constitutes a 409A CIC, then the Shares will be issued within 30 days following
the Participant’s Separation from Service, and if the Change in Control is not a 409A CIC, then the Shares will be issued on the date that is six months following the Participant’s Separation from Service.
Notwithstanding the foregoing, for purposes of complying with Code Section 409A, if the Participant is a U.S. Taxpayer, the Restricted Stock Units are considered Deferred Compensation and the Restricted Stock Units
are to be settled in connection with a termination contemplated under Section 1.6 below, the Company and the Participant shall take all steps necessary (including with regard to any post-termination services by the Participant) to ensure that a
termination contemplated under Section 1.6 constitutes a Separation from Service. In addition, if the Restricted Stock Units are Deferred Compensation, the Restricted Stock Units are settled upon the Participant’s Separation from Service and the
Participant is a “specified employee,” within the meaning of Code Section 409A, on the date the Participant experiences a Separation from Service, then the Shares will be issued on the first business day of the seventh month following the
Participant’s Separation from Service, or, if earlier, on the date of the Participant’s death, to the extent such delayed payment is required in order to avoid a prohibited distribution under Code Section 409A.
1.5 Stockholder Rights. Unless and until Shares are issued by the Company after the Vesting Date, Participant shall have none of
the rights or privileges of a shareholder of the Company (including voting, dividend and liquidation rights) with respect to the Shares covered by the Restricted Stock Units.
1.6 Change in Control. Notwithstanding any provision in this Agreement to the contrary, if, within six months prior to and in
connection with a Change in Control or within two years following such Change in Control, Participant’s employment is terminated (i) by the Company and its Subsidiaries without Cause, or (ii) by Participant for Good Reason, the vesting of the
Restricted Stock Units governed by this Agreement shall be accelerated such that all such Restricted Stock Units shall be deemed to be vested in full immediately prior to the termination of Participant’s employment.
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For purposes of this Agreement:
“Cause” shall mean that Participant has engaged in any one of the following:
(a) a material breach by Participant of the Company’s Employee Covenants Agreement, other employee covenants or any employment agreement, which breach is not cured within any applicable cure
period set forth in the respective document;
(b) any willful violation by Participant of any material law or regulation applicable to the business of the Company or any of its Subsidiaries;
(c) Participant’s conviction of, or a plea of guilty or nolo contendere to, a felony or any willful perpetration of common law fraud (or analogous violation of law in a jurisdiction outside
the United States); or
(d) any other willful misconduct by Participant that is materially injurious to the financial condition or business reputation of, or is otherwise materially injurious to, the Company or any
of its Subsidiaries.
For purposes of the foregoing, in determining whether a “material breach” has occurred, or whether there has been a willful violation of a “material” law or regulation, the standard shall be a breach or violation that
is, or will reasonably likely be, materially injurious to the financial condition or business reputation of, or is, or will reasonably likely be, otherwise materially injurious to, the Company or any of its Subsidiaries.
“Good Reason” shall mean the occurrence any of the following events that result in a material negative change to Participant:
(a) without Participant’s consent, a material reduction in the scope of Participant’s duties and responsibilities or the level of management to which Participant reports;
(b) without Participant’s consent, a reduction in base salary (other than an across-the-board reduction of not more than 10% applicable to all similarly situated employees);
(c) without Participant’s consent, a material reduction in Participant’s benefits in the aggregate (in terms of benefit levels) from those provided to Participant under any employee benefit
plan, program and practice in which Participant participates;
(d) without Participant’s consent, a relocation of Participant’s principal place of employment of more than 50 miles from Participant’s primary residence;
(e) the failure of the Company to have a successor entity specifically assume this Agreement or any employment agreement within 10 business days after a Change in Control; or
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(f) a material breach by the Company a successor entity of this Agreement or any employment agreement.
Notwithstanding the foregoing, Good Reason shall only be found to exist if Participant, not later than 90 days after the initial occurrence of an event deemed to give rise to a right to terminate for Good Reason, has
provided 30 days written notice to the Company prior to Participant’s resignation indicating and describing the event resulting in such Good Reason, and the Company does not cure such event (other than the event in clause vi), which shall not be
subject to cure) within 90 days following the receipt of such notice from Participant.
2. Securities Law Compliance. Participant represents that Participant has received and carefully read a
copy of the Prospectus for the Plan, together with the Company’s most recent Annual Report to Stockholders. Participant hereby acknowledges that Participant is aware of the risks associated with the Shares and that there can be no assurance the
price of the Shares will not decrease in the future. Participant hereby acknowledges no representations or statements have been made to Participant concerning the value or potential value of the Shares. Participant acknowledges that Participant has
relied only on information contained in the Prospectus and has received no representations, written or oral, from the Company or its employees, attorneys or agents, other than those contained in the Prospectus or this Agreement. Participant
acknowledges that the Company has made no representations or recommendations, and is not providing any tax, legal or financial advice, regarding Participant’s participation in the Plan, or Participant’s acquisition or sale of the underlying Shares.
Participant is hereby advised to consult with his or her own personal tax, legal and financial advisors regarding his or her participation in the Plan before taking any action related to the Plan.
3. Transfer Restrictions. Participant shall not transfer, assign, sell, encumber, pledge, grant a
security interest in or otherwise dispose of the Restricted Stock Units subject to this Agreement in any manner other than by the laws of descent or distribution. Any such transfer, assignment, sale, encumbrance, pledge, security interest or
disposition shall be void.
4. Forfeiture. If, at any time during Participant’s Continuous Service or at any time during the 12-month
period following termination of Participant’s Continuous Service, Participant engages in conduct that constitutes Cause (as defined above), then at the election of the Committee, (a) this Agreement and all unvested Restricted Stock Units granted
hereunder shall terminate, and (b) Participant shall return to the Company for cancellation all Shares held by Participant plus pay the Company the amount of any proceeds received from the sale of any Shares, to the extent such Shares were issued
pursuant to Restricted Stock Units granted under this Agreement that vested (i) during the 12-month period immediately preceding the Cause, or (ii) on the date of or at any time after such Cause.
The forfeiture provisions of this Section 4 shall be applied by the Committee, at its discretion, to the maximum extent permitted under applicable laws. Further, these provisions are in addition to, and not in lieu
of, any recoupment requirements under the Sarbanes-Oxley Act or under other applicable laws, rules, regulations or stock exchange listing standards, including, without limitation, Section 954 of the Dodd-Frank Wall Street Reform and Consumer
Protection Act of 2010 or Section 10D of the U.S. Securities Exchange Act of 1934, as amended, and shall apply notwithstanding anything to the contrary in this Agreement or in the Plan.
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Additionally, if Participant is or becomes subject to the Nu Skin Enterprises, Inc. Executive Officer Incentive Compensation Recovery Policy (the “Recovery Policy”), Participant agrees that any Restricted Stock Units
granted hereunder may be terminated, any Shares held by Participant shall be returned to the Company, and any proceeds from the sale of such Shares shall be paid by Participant to the Company, to the extent the Company determines such actions are
necessary to satisfy a recoupment requirement under the Recovery Policy.
Participant expressly agrees that the Company may take such actions as are necessary or appropriate to effectuate the foregoing provisions of this Section 4 (as applicable to Participant) or applicable law without
further consent or action being required by Participant. For purposes of the foregoing and as a condition to the grant, Participant expressly and explicitly authorizes the Company to issue instructions, on Participant’s behalf, to Fidelity (or any
other stock plan service provider engaged by the Company to administer awards granted under the Plan) to re-convey, transfer or otherwise return any Shares held by Participant and/or other amounts to the Company.
5. Governing Plan Document. This Agreement incorporates by reference all of the terms and conditions of the
Plan, as presently existing and as hereafter amended. Participant expressly acknowledges and agrees that the terms and provisions of this Agreement are subject in all respects to the provisions of the Plan. Participant also expressly:
(a) Acknowledges receipt of the Plan and represents that Participant is familiar with the provisions of the Plan, and that Participant enters into this Agreement subject to all of the
provisions of the Plan;
(b) Recognizes that the Committee has been granted complete authority to administer the Plan in its sole discretion, and agrees to accept all decisions related to the Plan and all interpretations of the Plan
made by the Committee as final and conclusive upon Participant and upon all persons at any time claiming any interest through Participant in the Restricted Stock Units or the Shares subject to this Agreement; and
(c) Acknowledges and understands that the establishment of the Plan and the existence of this Agreement are not sufficient, in and of themselves, to exempt Participant from the requirements
of Section 16(b) of the Exchange Act and any rules or regulations promulgated thereunder, and that Participant (to the extent Section 16(b) applies to Participant) shall not be exempt from such requirements pursuant to Rule 16b-3 unless and until
Participant shall comply with all applicable requirements of Rule 16b-3, including without limitation, the possible requirement that Participant must not sell or otherwise dispose of any Shares acquired pursuant to Restricted Stock Units unless and
until a period of at least six months shall have elapsed between the Grant Date and the date upon which Participant desires to sell or otherwise dispose of such Shares.
6. Representations and Warranties. As a condition to the
receipt of any Shares upon vesting of the Restricted Stock Units, the Company may require Participant to make any representations and warranties to the Company that legal counsel to the Company may determine to be required or advisable under any
applicable law or regulation, including without limitation, representations and warranties that the Shares are being acquired only for investment and without any present intention or view to sell or distribute any such Shares.
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7. Compliance With Law and Regulations. Notwithstanding any other provision of the Plan or this
Agreement, unless there is an available exemption from any registration, qualification or other legal requirement applicable to the Shares, the Company shall not be required to deliver any Shares issuable upon settlement of the Restricted Stock Units
prior to the completion of any registration or qualification of the Shares under any local, state, federal or foreign securities or exchange control law or under rulings or regulations of the U.S. Securities and Exchange Commission (“SEC”) or of any
other governmental regulatory body, or prior to obtaining any approval or other clearance from any local, state, federal or foreign governmental agency, which registration, qualification or approval the Company shall, in its absolute discretion, deem
necessary or advisable. Participant understands that the Company is under no obligation to register or qualify the Shares with the SEC or any state or foreign securities commission or to seek approval or clearance from any governmental authority for
the issuance or sale of the Shares. Further, Participant agrees that the Company shall have unilateral authority to amend the Plan and this Agreement without Participant’s consent to the extent necessary to comply with securities or other laws
applicable to issuance of Shares.
8. Responsibility for Taxes. Participant acknowledges that, regardless of any action taken by the Company
or, if different, Participant’s employer (the “Employer”), the ultimate liability for all income tax, social insurance, payroll tax, fringe benefits tax, payment on account or other tax-related items related to Participant’s participation in the Plan
and legally applicable to Participant or deemed by the Company or the Employer in its discretion to be an appropriate charge to Participant even if legally applicable to the Company or the Employer (“Tax-Related Items”), is and remains Participant’s
responsibility and may exceed the amount, if any, actually withheld by the Company or the Employer. Participant further acknowledges that the Company and the Employer (a) make no representations or undertakings regarding the treatment of any
Tax-Related Items in connection with any aspect of the Restricted Stock Units, including, but not limited to, the grant, vesting or settlement of the Restricted Stock Units, the subsequent sale of any Shares acquired at settlement and the receipt of
any dividends; and (b) do not commit to and are under no obligation to structure the terms of the grant or any aspect of the Restricted Stock Units to reduce or eliminate Participant’s liability for Tax-Related Items or achieve any particular tax
result. Further, if Participant is subject to Tax-Related Items in more than one jurisdiction, Participant acknowledges that the Company and/or the Employer (or former employer, as applicable) may be required to withhold or account for Tax-Related
Items in more than one jurisdiction.
In connection with any relevant taxable or tax withholding event, as applicable, Participant agrees to make adequate arrangements satisfactory to the Company and/or the Employer to satisfy all Tax-Related Items.
Full payment of the Tax-Related Items shall be made by any of the following, or a combination thereof, subject to the Committee’s or Company’s right to eliminate, prior to vesting, any of the following as permissible
payment methods: (i) in cash or cash equivalents (including certified check, bank check or wire transfer of immediately available funds); (ii) by tendering previously acquired Shares (either actually or by attestation) valued at their then-Fair
Market Value; (iii) by withholding Shares otherwise issuable in connection with the vesting of the RSUs; (iv) through same-day voluntary or involuntary (on Participant’s behalf pursuant to this authorization) sales through a broker if permitted by
the Company’s Securities Trading Policy; (v) withholding from Participant’s wages or other cash compensation paid to Participant by the Company and/or the Employer; or (vi) any combination of any of the foregoing. In the absence of Participant’s
timely election or in the event Section 16(b) applies to Participant, the Company will withhold in Shares upon the relevant taxable or tax withholding event, as applicable. In the event that such withholding in Shares is problematic under applicable
tax or securities law or has materially adverse accounting consequences, the Participant authorizes and directs the Company and/or the Employer, or their respective agents, at their discretion, to satisfy any applicable withholding obligation with
regard to all Tax-Related Items by one or a combination of the methods above.
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Depending on the withholding method, the Company and/or the Employer may withhold or account for Tax-Related Items by considering applicable withholding rates in Participant’s jurisdiction(s) (up to the rate that will
not cause an adverse accounting consequence or cost, including pursuant to ASC Topic 718, as applicable). If the Company and/or the Employer withhold more than the amount necessary to satisfy the liability for Tax-Related Items, Participant may
receive a refund of any over-withheld amount in cash and will have no entitlement to the equivalent Shares, or if not refunded, Participant may be able to seek a refund from the applicable tax authorities. If the Company and/or the Employer withhold
less than the amount necessary to satisfy the liability for Tax-Related Items, Participant may be required to pay additional Tax-Related Items directly to the applicable tax authorities or to the Company and/or the Employer. If the obligation for
Tax-Related Items is satisfied by withholding in Shares, for tax purposes, Participant is deemed to have been issued the full number of Shares subject to the vested Restricted Stock Units, notwithstanding that a number of the Shares are held back
solely for the purpose of paying the Tax-Related Items.
Participant agrees to pay to the Company or the Employer any amount of Tax-Related Items that the Company or the Employer may be required to withhold or account for as a result of Participant’s participation in the
Plan that cannot be satisfied by the means previously described. The Company may refuse to issue or deliver the Shares or the proceeds of the sale of Shares if Participant fails to comply with Participant’s obligations in connection with the
Tax-Related Items.
9. Nature of Grant. In accepting the Restricted Stock Units, Participant acknowledges, understands and
agrees that:
(a) the Plan is established voluntarily by the Company, it is discretionary in nature and may be modified, amended, suspended or terminated by the Company at any time, to the extent
permitted by the Plan;
(b) the grant of Restricted Stock Units is exceptional, voluntary and occasional and does not create any contractual or other right to receive future awards of Restricted Stock Units, or
benefits in lieu of Restricted Stock Units even if Restricted Stock Units have been awarded in the past;
(c) nothing in this Agreement or in the Plan shall confer upon Participant any right to continue in the employment or service of the Employer, the Company or any Subsidiary or be interpreted
as forming or amending an employment or services contract with the Employer, the Company or any Subsidiary and shall not interfere with or restrict any way the ability of the Employer, the Company or any Subsidiary, as applicable, to terminate
Participant’s employment or service relationship, if any;
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(d) all decisions with respect to future grants of Restricted Stock Units or other grants, if any, will be at the sole discretion of the Committee and/or Company;
(e) Participant’s participation in the Plan is voluntary;
(f) the future value of the underlying Shares is unknown, indeterminable and unpredictable;
(g) unless otherwise agreed with the Company, the Restricted Stock Units and the Shares subject to the Restricted Stock Units, and the income and value of same, are not granted as
consideration for, or in connection with, the service Participant may provide as a director of any entity of the Company;
(h) in the event of the termination of Participant’s Continuous Service (as defined above) (for any reason whatsoever, whether or not later to be found invalid or in breach of employment
laws in the jurisdiction where Participant is employed or the terms of Participant’s employment agreement, if any), unless otherwise determined by the Company, Participant’s right to vest in the Restricted Stock Units under the Plan, if any, will
terminate as of the date Participant is no longer actively rendering services and will not be extended by any notice period (e.g., Participant’s period of service would not include any contractual notice
period or any period of “garden leave” or similar period mandated under employment laws in the jurisdiction where Participant is employed or the terms of Participant’s employment agreement, if any); the Committee shall have the exclusive discretion
to determine when Participant is no longer providing Continuous Service for purposes of this Agreement, including whether Participant may still be considered to be providing active service while on a leave of absence;
(i) Restricted Stock Units and the Shares subject to Restricted Stock Units, and the income and value of same, are not part of normal or expected compensation or salary for any purpose, including, but not limited to, calculation of any
severance, resignation, termination, redundancy, dismissal, end-of-service payments, holiday pay, bonuses, long-service awards, leave-related pay, pension or retirement or welfare benefits or similar mandatory payments;
(j) Restricted Stock Units and the Shares subject to Restricted Stock Units, and the income and value of same, are not intended to replace any pension rights or compensation;
(k) Restricted Stock Units are an extraordinary item that does not constitute compensation of any kind for service of any kind rendered to the Company or to the Employer, and Restricted Stock
Units are outside of the scope of Participant’s employment agreement, if any;
(l) no claim or entitlement to compensation or damages shall arise from forfeiture of Restricted Stock Units resulting from termination of
Participant’s Continuous Service (for any reason whatsoever, whether or not later found to be invalid or in breach of employment laws in the jurisdiction where Participant is employed or the terms of Participant’s employment agreement, if any); and
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(m) neither the Company, the Employer nor any Subsidiary of the Company shall be liable for any foreign exchange rate fluctuation between Participant’s
local currency and the United States Dollar that may affect the value of Restricted Stock Units or of any amounts due to Participant pursuant to the settlement of the Restricted Stock Units or the subsequent sale of any Shares acquired upon
settlement.
10. Data Privacy Notice and Consent. Participant hereby explicitly and
unambiguously consents to the collection, use and transfer, in electronic or other form, of Participant’s personal data, as described in this Agreement and any other Restricted Stock Unit grant materials by and among, as applicable, the Employer,
the Company and Subsidiaries for the exclusive purpose of implementing, administering and managing Participant’s participation in the Plan.
Participant understands that the Employer, the Company and Subsidiaries may hold certain personal information about Participant, including, but not limited to, Participant’s name,
home address, email address, telephone number, date of birth, social security number, passport information, social insurance number or other identification number, salary, nationality, job title, any Shares or directorships held in the Company,
details of all Restricted Stock Units or any other entitlement to Shares or other equivalent benefits awarded, canceled, purchased, exercised, vested, unvested or outstanding in Participant’s favor (“Data”), for the exclusive purpose of implementing,
administering and managing the Plan.
Participant understands that Data will be transferred to Fidelity, or such other stock plan service provider as may be selected by the Company in the future, which is assisting
the Company with the implementation, administration and management of the Plan. Participant understands that the recipients of the Data may be located in the United States or elsewhere, and that the recipients’ country (e.g., the United States) may
have different data privacy laws and protections than Participant’s country. Participant understands that if he or she resides outside the United States, he or she may request a list with the names and addresses of any potential recipients of the
Data by contacting his or her local human resources representative. Participant authorizes the Company, Fidelity and any other possible recipients which may assist the Company (presently or in the future) with implementing, administering and
managing the Plan to receive, possess, use, retain and transfer the Data, in electronic or other form, for the purposes of implementing, administering and managing Participant’s participation in the Plan, including any transfer of such Data as may be
required to a broker, escrow agent or other third party with whom the Shares received upon vesting of Restricted Stock Units may be deposited. Participant understands that Data will be held only as long as is necessary to implement, administer and
manage his or her participation in the Plan. Participant understands that if he or she resides outside the United States, he or she may, at any time, view Data, request additional information about the storage and processing of Data, require any
necessary amendments to Data or refuse or withdraw the consents herein, in any case without cost, by contacting in writing his or her local human resources representative. Further, Participant understands that he or she is providing the consents
herein on a purely voluntary basis. If Participant does not consent, or if Participant later seeks to revoke his or her consent, his or her employment status or service with the Employer will not be affected; the only consequence of refusing or
withdrawing Participant’s consent is that the Company may not be able to grant Restricted Stock Units or other equity awards to Participant or administer or maintain such awards. Therefore, Participant understands that refusing or withdrawing his or
her consent may affect Participant’s ability to participate in the Plan. For more information on the consequences of his or her refusal to consent or withdrawal of consent, Participant understands that he or she may contact his or her local human
resources representative.
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Upon request of the Company or the Employer, Participant agrees to provide an executed data privacy form (or any other agreements or consents) that the Company and/or the Employer
may deem necessary to obtain from Participant for the purpose of administering Participant’s participation in the Plan in compliance with the data privacy laws in Participant’s country, either now or in the future. Participant understands and agrees
that he or she will not be able to participate in the Plan if Participant fails to provide any such consent or agreement as requested by the Company and/or the Employer.
11. Miscellaneous Provisions.
11.1 Notices. Any notice required to be given under this Agreement shall be in writing and shall be deemed effective upon personal
delivery or upon deposit in the sender’s local mail, registered or certified, postage prepaid and properly addressed to the party entitled to such notice at the latest address on file or at such other address as such party may designate by ten days
advance written notice under this Section to all other parties to this Agreement.
11.2 Waiver. The failure of the Company in any instance to exercise any rights under this Agreement, including the forfeiture
rights under Section 4, shall not constitute a waiver of any other rights that may subsequently arise under the provisions of this Agreement or any other agreement between the Company and Participant. Participant acknowledges that no waiver by the
Company of any breach of any provision of this Agreement shall operate or be construed as a waiver of any other provision of this Agreement, or of any subsequent breach by Participant or any other Participant, whether of like or different nature.
11.3 Imposition of Other Requirements & Participant Undertaking. The Company reserves the right to impose other requirements
on Participant’s participation in the Plan, on the Restricted Stock Units and on any Shares acquired under the Plan, to the extent the Company determines it is necessary or advisable for legal or administrative reasons. Participant hereby agrees to
take whatever additional action and execute whatever additional documents the Company may deem necessary or advisable in order to carry out the foregoing or one or more of the obligations or restrictions imposed on either Participant or the Shares
pursuant to the provisions of this Agreement.
11.4 Entire Contract. This Agreement and the Plan constitute the entire understanding and agreement of the parties with respect to
the subject matter contained herein. This Agreement is made pursuant to, and incorporates by reference, the provisions of the Plan and shall in all respects be construed in conformity with the terms of the Plan.
11.5 Language. Participant acknowledges that he or she is sufficiently proficient in English, or, alternatively, Participant
acknowledges that he or she will seek appropriate assistance to understand the terms and conditions in this Agreement. Furthermore, if Participant has received this Agreement or any other document related to the Plan translated into a language other
than English and if the meaning of the translated version is different than the English version, the English version will control.
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11.6 Electronic Delivery and Acceptance. The Company may, in its sole discretion, decide to deliver any documents related to
current or future participation in the Plan by electronic means. Participant hereby consents to receive such documents by electronic delivery and agrees to participate in the Plan through an on-line or electronic system established and maintained by
the Company or a third party designated by the Company.
11.7 Successors and Assigns. The provisions of this Agreement shall inure to the benefit of, and be binding upon, the Company and
its successors and assigns and upon Participant, Participant’s permitted assigns and the legal representatives, heirs and legatees of Participant’s estate, whether or not any such person shall have become a party to this Agreement and have agreed in
writing to join herein and be bound by the terms hereof. Participant may not assign this Agreement other than by the laws of descent and distribution.
11.8 Severability. In the event that any provision in this Agreement will be held invalid or unenforceable, such provision will be
severable from, and such invalidity or unenforceability will not be construed to have any effect on, the remaining provisions of this Agreement.
11.9 Governing Law and Choice of Venue. The Restricted Stock Units and the provisions of this Agreement shall be governed by, and
subject to, the laws of the State of Utah, United States, without regard to the conflict of law provisions, as provided in the Plan. For purposes of litigating any dispute that arises under this Agreement or this grant of Restricted Stock Units, the
parties hereby submit to and consent to the jurisdiction of the State of Utah, agree that such litigation shall be conducted in the courts of Utah County, Utah, or the federal courts of the United States for
the District of Utah, where this grant is made and/or to be performed.
11.10 Appendix. Notwithstanding any provisions
in this Agreement, the Restricted Stock Units shall be subject to any special terms and conditions set forth in any Appendix to this Agreement for Participant’s country. Moreover, if Participant relocates to one of the countries included in the
Appendix, the terms and conditions for such country will apply to Participant, to the extent the Company determines that the application of such terms and conditions is necessary or advisable for legal or administrative reasons. The Appendix
constitutes part of this Agreement.
11.11 Insider Trading Restrictions/Market Abuse Laws. Participant acknowledges that, depending on Participant’s country, broker’s
country, or where Shares are listed, Participant may be subject to insider trading and/or market abuse laws which may affect Participant’s ability to accept, acquire, sell or otherwise dispose of Shares, rights to such shares (e.g., Restricted Stock
Units) or rights linked to the value of Shares under the Plan during such times as Participant is considered to have “material nonpublic information” or “inside information” regarding the Company (as defined by the laws or regulations in the relevant
jurisdiction). Local insider trading laws and regulations may prohibit the cancellation or amendment of orders Participant places before Participant possessed inside information. Furthermore, Participant could be prohibited from (i) disclosing
inside information to any third party (other than on a “need to know” basis) and (ii) “tipping” third parties or causing them otherwise to buy or sell securities. Third parties include fellow employees. Any restrictions under these laws or
regulations are separate from and in addition to any restrictions that may be imposed under the Company’s insider trading policy, and the requirements of applicable laws may or may not be consistent with the terms of the Company’s insider trading
policy. Participant acknowledges that it is his or her responsibility to comply with any applicable restrictions, and that Participant should speak to his or her personal advisor on this matter.
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11.12 Exchange Control Tax and Foreign Asset/Account Reporting Requirements.
Participant acknowledges that there may be exchange control, tax, foreign asset and/or account reporting requirements which may affect Participant’s ability to acquire or hold Shares acquired under the Plan or cash received from participating in
the Plan (including from any dividends paid on Shares acquired under the Plan) in a brokerage, bank account or legal entity outside Participant’s country. Participant may be required to report such accounts, balances, assets and/or the related
transactions to the tax or other authorities in his or her country. Participant also may be required to repatriate sale proceeds or other funds received as a result of Participant’s participation in the Plan to his or her country through a
designated bank or broker within a certain time after receipt. Participant acknowledges that it is Participant’s responsibility to be compliant with such regulations and Participant should consult his or her personal legal advisor for any details.
Participant agrees to take any and all actions, and consents to any and all actions taken by the Company or the Employer as may be required to allow the Company or the Employer to comply with local laws, rules and regulations in Participant’s
country of residence (and country of employment, if different). Finally, Participant agrees to take any and all actions as may be required to comply with Participant’s personal legal and tax obligations under local laws, rules and regulations in
Participant’s country of residence (and country of employment, if different).
11.13 Section 409A. The Restricted Stock Units and issuance of Shares thereunder are intended to comply with Code Section 409A and
the U.S. Treasury Regulations relating thereto so as not to subject the Participant to the payment of additional taxes and interest under Code Section 409A or other adverse tax consequences. In furtherance of this intent, the provisions of this
Agreement will be interpreted, operated, and administered in a manner consistent with these intentions. The Committee may modify the terms of this Agreement, the Plan or both, without the consent of the Participant, in the manner that the Committee
may determine to be necessary or advisable in order to comply with Code Section 409A or to mitigate any additional tax, interest and/or penalties or other adverse tax consequences that may apply under Code Section 409A if compliance is not
practical. This Section 11.12 does not create an obligation on the part of the Company to modify the terms of this Agreement or the Plan and does not guarantee that the Restricted Stock Units or the delivery of Shares upon vesting/settlement of the
Restricted Stock Units will not be subject to taxes, interest and penalties or any other adverse tax consequences under Code Section 409A. Nothing in this Agreement shall provide a basis for any person to take any action against the Company or any
of its Subsidiaries based on matters covered by Code Section 409A, including the tax treatment of any amounts paid under this Agreement, and neither the Company nor any of its Subsidiaries will have any liability under any circumstances to the
Participant or any other party if the Restricted Stock Units, the delivery of Shares upon vesting/settlement of the Restricted Stock Units or other payment or tax event hereunder that is intended to be exempt from, or compliant with, Code Section
409A, is not so exempt or compliant or for any action taken by the Committee with respect thereto. Further, settlement of any portion of the Restricted Stock Units that is Deferred Compensation may not be accelerated or postponed except to the
extent permitted by Code Section 409A.
By electronically accepting this Agreement and participating in the Plan, Participant agrees to be bound by the terms and conditions in the Plan and this Agreement, including the Appendix. Within
six months of the Grant Date, if Participant has not electronically accepted this Agreement on Fidelity’s website, or the website of any other stock plan service provider appointed by the Company, and has not otherwise rejected the grant, then this
award shall automatically be deemed accepted, and Participant shall be bound by the terms and conditions in the Plan and this Agreement, including the Appendix.
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APPENDIX
FOR PARTICIPANTS OUTSIDE THE U.S.
NU SKIN ENTERPRISES, INC.
THIRD AMENDED AND RESTATED
2010 OMNIBUS INCENTIVE PLAN
RESTRICTED STOCK UNIT AGREEMENT
Unless otherwise defined herein, the capitalized terms in this Appendix shall have the same defined meaning assigned to them in the Plan and the Agreement.
This Appendix includes special country-specific terms and conditions that apply to Participants in the countries listed below. This Appendix is part of the Agreement. This Appendix also includes information of which
Participant should be aware with respect to his or her participation in the Plan. For example, certain individual exchange control reporting requirements may apply upon vesting of the Restricted Stock Units and/or sale of Shares. The information is
based on the securities, exchange control and other laws in effect in the respective countries as of November 2023 and is provided for informational purposes. Such laws are often complex and change frequently, and results may be different based on
the particular facts and circumstances. As a result, the Company recommends that Participant does not rely on the information noted herein as the only source of information relating to the consequences of Participant’s participation in the Plan
because the information may be out of date at the time the Restricted Stock Units vest or are settled, or Participant sells Shares acquired under the Plan.
In addition, the information is general in nature and may not apply to Participant’s particular situation, and the Company is not in a position to assure Participant of any particular result. Accordingly, Participant
should seek appropriate professional advice as to how the relevant laws in Participant’s country may apply to his or her situation.
Finally, if Participant is a citizen or resident of a country other than the one in which he or she currently is residing and/or working, transfers employment after the Restricted Stock Units are granted to him or her,
or is considered a resident of another country for local law purposes, the terms and conditions and/or notifications contained herein may not be applicable to him or her, and the Company shall, in its discretion, determine to what extent such terms
and conditions contained herein shall apply to him or her.
DATA PRIVACY PROVISIONS APPLICABLE TO GRANTEES IN THE EUROPEAN UNION/EUROPEAN ECONOMIC AREA
The following provision replaces Section 10 of the Agreement:
Data Collection and Usage. Pursuant to applicable data protection laws, Participant is hereby notified that the
Company collects, processes, uses and transfers certain personally-identifiable information about Participant for the exclusive legitimate purpose of granting Restricted Stock Units and implementing, administering and managing Participant’s
participation in the Plan. Specifics of the data processing are described below. For California residents, the categories of personal information, including sensitive personal information, are identifiers, characteristics of protected
classifications under California or federal law, professional or employment related information, social security, driver’s license, state identification card, or passport number, and any personal information that identifies, relates to, describes,
or is capable of being associated with a particular individual. The personal information is not sold or shared for cross-context behavioral advertising. The Company’s Global Privacy Notice is available at
https://www.nuskin.com/content/global-privacy.html.
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Controller, EU Representative and DPO. The Company is the controller responsible for the processing of
Participant’s personal data in connection with the Plan. The Company’s representative in the European Union is NSE Products Europe BV, Da Vincilaan 9, 1930 Zaventem, Belgium, telephone number +32 2 722 70 00. Participant can reach the data
protection officer (“DPO”) of the Company at +1 (801) 345-1000, 75 West Center Street, Provo, Utah 84601.
Personal Data Subject to Processing. The Company collects, processes and uses the following types of personal
data about Participant: Participant’s name, home address and telephone number, email address, date of birth, social insurance, passport number or other identification number, salary, nationality, job title, any Shares or directorships held in the
Company, details of all Restricted Stock Units or any other entitlement to Shares awarded, canceled, settled, vested, unvested or outstanding in Participant’s favor, which the Company receives from Participant or the Employer, as well as
Participant’s hire date, term date, term reason code, status, and Company’s Division (“Personal Data”).
Purposes and Legal Bases of Processing. The Company processes the Personal Data for the purpose of granting
Restricted Stock Units, implementing, administering and managing Participant’s participation in the Plan. The legal basis for the processing of the Personal Data by the Company and the third‑party service providers described below is the necessity
of the data processing for the Company to perform its contractual obligations under the Agreement and generally administering employee equity awards.
Stock Plan Administration Service Providers. The Company transfers Personal Data to Fidelity Stock Plan
Services, LLC and its affiliated companies (collectively, “Fidelity”), an independent stock plan administrator with operations, relevant to the Company, in the United
States, which assists the Company with the implementation, administration and management of the Plan. In the future, the Company may select different service providers and may share Personal Data with such service providers. As a data controller,
the Company’s stock plan administrator will open an account for Participant to receive and trade Shares. Participant will be asked to agree on separate terms and data processing practices with the service provider, which is a condition of
Participant’s ability to participate in the Plan. Participant’s Personal Data will only be accessible by those individuals requiring access to it for purposes of implementing, administering and operating Participant’s participation in the Plan.
Participant understands that Participant may request a list with the names and addresses of any potential recipients of Personal Data by contacting Participant’s local human resources representative.
International Data Transfers. The Company and its service providers, including, without limitation, Fidelity,
operate, relevant to the Company, in the United States, which means that it will be necessary for Personal Data to be transferred to, and processed in, the United States. Participant understands and acknowledges that the United States is not
subject to an unlimited adequacy finding by the European Commission and that Participant’s Personal Data may not have an equivalent level of protection as compared to Participant’s country of residence.
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The legal basis for the processing of the Personal Data by the Company and the third‑party service providers is the necessity of the data processing for the Company to perform its contractual obligations under the
Agreement and generally administering employee equity awards.
Data Retention. The Company will use the Personal Data only as long as necessary to implement, administer and
manage Participant’s participation in the Plan, or as required to comply with legal or regulatory obligations, including tax and securities laws. When the Company no longer needs the Personal Data, the Company will remove it from its systems. If
the Company keeps data longer, it would be to satisfy tax, legal or regulatory obligations and the Company’s legal basis would be relevant laws or regulations.
Data Subject Rights. To the extent provided by law, Participant has the right to (i) inquire whether and what
kind of Personal Data the Company holds about Participant and how it is processed, and to access or request copies of such Personal Data, (ii) request the correction or supplementation of Personal Data that is inaccurate, incomplete or out-of-date
in light of the purposes underlying the processing, or (iii) obtain the erasure of Personal Data no longer necessary for the purposes underlying the processing or processed in non-compliance with applicable legal requirements. In addition,
Participant has, to the extent provided by law, the right to (iv) request the Company to restrict the processing of Personal Data in certain situations where Participant feels its processing is inappropriate, (v) object, in certain circumstances,
to the processing of Personal Data for legitimate interests, and to (vi) request portability of Personal Data that Participant has actively or passively provided to the Company, where the processing of such Personal Data is based on consent or a
contractual agreement with Participant and is carried out by automated means. In case of concerns, Participant also has the right to (vii) lodge a complaint with the competent local data protection authority. To receive additional information
regarding Participant’s rights, raise any other questions regarding the practices described in this Agreement or to exercise his or her rights, Participant should contact his or her local human resources representative.
Contractual Requirement. Participant’s provision of Personal Data and its processing as described above is
required for the performance of the Company’s obligations pursuant to the Plan and a condition to Participant’s ability to participate in the Plan. Participant understands that, as a consequence of Participant’s refusing to provide Personal Data,
the Company may not be able to allow Participant to participate in the Plan, grant Restricted Stock Units to Participant or administer or maintain such Restricted Stock Units. However, Participant’s participation in the Plan and his or her
acceptance of this Agreement are purely voluntary. While Participant will not receive Restricted Stock Units if he or she decides against participating in the Plan or providing Personal Data as described above, Participant’s career and salary will
not be affected in any way. For more information on the consequences of the refusal to provide Personal Data, Participant may contact his or her local human resources representative.
AUSTRALIA
Nature of Plan. The Plan and the Agreement is a plan to which Subdivision 83A-C of the Income Tax Assessment Act 1997 (Cth) (the “Act”) applies (subject to the
conditions in the Act).
Securities Law Information. The offer of the Restricted Stock Units is being made under Division 1A Part 7.12 of the Corporations Act 2001 (Cth). If Participant
offers Shares acquired under the Plan for sale to a person or entity resident in Australia, the offer may be subject to disclosure requirements under Australian law. Participant should obtain legal advice on any disclosure obligations prior to
making any such offer.
15
Exchange Control Information. Exchange control reporting is
required for cash transactions exceeding AUD10,000 and for international fund transfers. If an Australian bank is assisting with the transaction, the bank will file the report on the Participant’s behalf.
BELGIUM
Foreign Asset/Account Reporting Information. Participant is required to report any securities (e.g., Shares acquired
under the Plan) or bank accounts established outside of Belgium on his or her annual tax return. In a separate report, Belgian residents are also required to provide the National Bank of Belgium with the account details of any such foreign
accounts (including the account number, bank name and country in which any such account was opened). This report, as well as additional information on how to complete it, can be found on the website of the National Bank of Belgium, www.nbb.be,
under Kredietcentrales / Centrales des crédits caption. Participant should consult a personal tax advisor with respect to the applicable reporting obligations.
Annual Securities Accounts Tax. An annual securities accounts tax may be payable if the total value of securities held in a Belgian or foreign securities account
(e.g., Shares acquired under the Plan) exceeds a certain threshold on four reference dates within the relevant reporting period (i.e., December 31, March 31, June 30 and September 30). In such case, the tax will be due on the value of the
qualifying securities held in such account. Participant should consult with a personal tax or financial advisor for additional details on Participant’s obligations with respect to the annual securities account tax.
CANADA
Restricted Stock Units Only Payable in Shares. Notwithstanding any discretion in the Plan, the Restricted Stock Units will be settled in Shares only. The grant
of Restricted Stock Units does not provide any right for Participant to receive a cash payment.
Securities Law Information. Participant acknowledges and agrees that he or she will sell Shares acquired through participation in the Plan only outside of Canada
through the facilities of a stock exchange on which the Shares are listed. The Shares are currently listed on the New York Stock Exchange in the United States.
Foreign Asset/Account Reporting Information. Participant is required to report any specified foreign property (including Shares) annually on Form T1135 (Foreign Income Verification Statement) if the total cost of Participant’s specified foreign property exceeds C$100,000 at any time during the year. The form must be
filed by April 30th of the following year. Specified foreign property includes Shares acquired under the Plan and may include Restricted Stock Units. The Restricted Stock Units must be reported‒generally at a nil cost‒if the C$100,000 cost
threshold is exceeded because of other foreign property Participant holds. If Shares are acquired, their cost generally is the adjusted cost base (“ACB”) of the Shares. The ACB would normally equal the fair market value of the Shares at vesting
for Restricted Stock Units, but if Participant owns other shares, this ACB may have to be averaged with the ACB of the other shares. It is Participant’s responsibility to comply with applicable reporting obligations.
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The following provisions apply if Participant is resident in Quebec:
Data Privacy. Participant hereby authorizes the Company, the Employer and their representatives, including any broker(s) designated by the Company to discuss with
and obtain all relevant information from all personnel, professional or not, involved in the administration and operation of the Plan. Participant further authorizes the Company and its Subsidiaries to disclose and discuss the Plan with their
advisors. Participant further authorizes the Company and its Subsidiaries to record such information and to keep such information in the his or her employee file. Participant acknowledges and agree that Participant’s personal information,
including any sensitive personal information, may be transferred or disclosed outside the province of Quebec, including to the U.S. If applicable, Participant also acknowledges and authorizes the Company, the Company’s Subsidiaries, the
administrator of the Plan and any third party brokers/administrators that are assisting the Company with the operation and administration of the Plan to use technology for profiling purposes and to make automated decisions that may have an impact
on Participant or the administration of the Plan.
Translation. Participant understands that they are entitled to receive the Agreement, the Plan and potentially other documents related to the Restricted Stock
Units translated into French, and if so requested, the Company will use its best efforts to provide the French translation as expediently as possible. If Participant does not request a French translation, it is understood that Participant prefers
to receive the documents related to the Plan in the English language and agree that the English documents govern the Restricted Stock Units.
Traduction. Participant comprend qu’il a le droit de recevoir l’accord, le plan et potentiellement d’autres documents liés aux unités
d’actions restreintes traduits en français, et si cela est demandé, la Société fera de son mieux pour fournir la traduction française aussi rapidement que possible. Si Participant ne demande pas de traduction en français, il est entendu qu’il
préfère recevoir les documents relatifs au Plan en langue anglaise et accepte que les documents en anglais régissent les Unités d’actions restreintes.
CHINA
The following provisions apply only to Participants who are subject to exchange control restrictions imposed by the State Administration of Foreign Exchange (“SAFE”), as determined by the Company in its sole
discretion:
Settlement of Restricted Stock Units. This provision supplements Section 1.4 of the Agreement:
The Restricted Stock Units will only vest if and when the Company has completed the registration of the Plan with SAFE and provided such registration remains effective. If the Company is unable to complete the
registration or maintain the registration, the settlement of the Restricted Stock Units may be delayed. Shares issued to Participant under the Plan must be maintained in an account with Fidelity or such other broker as may be designated by the
Company until the Shares are sold through that broker. Due to local regulatory requirements, Participant agrees that the Company may force the sale of any Shares obtained at vesting. The sale may occur immediately upon vesting or within any other
time frame as the Company determines to be necessary or advisable for legal or administrative reasons.
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Furthermore, due to regulatory requirements, Participant acknowledges and agrees that Participant must sell any Shares issued to Participant upon vesting of the Restricted Stock Units as soon as practicable following
the termination of Participant’s Continuous Service and in no event later than six months following the termination of Participant’s Continuous Service, or within any other such time frame as may be required by SAFE. Participant agrees that if
Participant continues to hold any of such Shares after this time, the Shares will be sold by the Company’s designated broker on Participant’s behalf at the instruction of the Company. Therefore, by accepting the Restricted Stock Units, Participant
understands and agrees that the Company is authorized to, and may in its sole discretion, instruct its designated broker to assist with the mandatory sale of Shares (on Participant’s behalf pursuant to this authorization) and that Participant
expressly authorizes the Company’s designated broker to complete the sale of such Shares. Participant acknowledges that the Company’s designated broker is under no obligation to arrange for the sale of the Shares at any particular price. Upon the
sale of the Shares, the proceeds, less any Tax-Related Items and brokerage fees or commissions will be remitted to Participant pursuant to the procedures described in the “Exchange Control Information” section below.
Exchange Control Information. Participant understands and agrees that, to facilitate compliance with exchange control requirements, Participant will be required
to immediately repatriate to China the cash proceeds from the sale of the Shares issued upon the vesting of the Restricted Stock Units. Participant further understands that, under local law, such repatriation of the cash proceeds will be
effectuated through a special exchange control account established by the Company or its Subsidiary in China, and Participant hereby consents and agrees that the proceeds from the sale of Shares acquired under the Plan may be transferred to such
special account prior to being delivered to Participant. The Company may deliver the proceeds to Participant in U.S. dollars or local currency at the Company’s discretion. If the proceeds are paid in U.S. dollars, Participant understands that he
or she will be required to set up a U.S. dollar bank account in China so that the proceeds may be deposited into this account. If the proceeds are converted to local currency, there may be delays in delivering the proceeds to Participant.
Participant agrees to bear the risk of any currency fluctuation between the time the Shares are sold, either through voluntary sale or through a mandatory sale arranged by the Company, or proceeds are otherwise realized under the Plan and the time
such proceeds are distributed to Participant through the special exchange control account.
Participant further agrees to comply with any other requirements that may be imposed by the Company in the future to facilitate compliance with exchange control requirements in China.
DENMARK
Danish Stock Option Act. Participant acknowledges that they have received an Employer Statement in Danish which sets forth additional terms of the Restricted
Stock Units, to the extent that the Danish Stock Option Act applies to the Restricted Stock Units.
Foreign Asset/Account Reporting Information. Danish residents who establish an account holding Shares or an account holding cash outside Denmark must report the
account to the Danish Tax Administration as part of their annual tax return under the section related to foreign affairs and income. The form which should be used in this respect can be obtained from a local bank. Participant should consult with
Participant’s personal advisor(s) regarding any personal foreign asset/foreign account tax obligations Participant may have in connection with Participant’s participation in the Plan.
18
GERMANY
Exchange Control Information. Cross-border payments in excess of €12,500 must be reported monthly to the German Federal Bank (Bundesbank). If Participant makes
or receives a payment that exceeds €12,500 (including if Participant acquires Shares with a value in excess of this amount under the Plan or sell Shares via a foreign broker, bank or service provider and receive proceeds in excess of this amount)
and/or if the Company withholds or sells Shares with a value in excess of this amount to cover Tax-Related Items, Participant must report the payment and/or the value of the Shares withheld or sold to Bundesbank. Such reports must be filed either
electronically using the “General Statistics Reporting Portal” (Allgemeine Meldeportal Statistik) available via the Bundesbank’s website (www.bundesbank.de) or by such other method as is permitted or
required by Bundesbank. The report must be submitted monthly or within such timing as is permitted or required by Bundesbank.
Foreign Asset/Account Reporting Information. German residents holding Shares must notify their local tax office if the acquisition of Shares under the Plan leads
to a so-called qualified participation at any point during the calendar year. A qualified participation is attained only in the unlikely event (i) Participant owns at least 1% of the Company and the value of the Shares acquired exceeds €150,000, or
(ii) Participant holds Shares exceeding 10% of the total capital of the Company.
HONG KONG
Restricted Stock Units Only Payable in Shares. Notwithstanding any discretion in the Plan, the Restricted Stock Units will be settled in Shares only. The grant
of Restricted Stock Units does not provide any right for Participant to receive a cash payment.
Restriction on Sale of Shares. Shares received under the Plan are accepted as a personal investment. Should any portion of the Restricted Stock Units vest within
six months of the Grant Date, Participant agrees that Participant will not dispose of the Shares acquired at vesting prior to the six-month anniversary of the Grant Date.
Securities Law Information. Warning: The contents of this document have not been reviewed by any regulatory
authority in Hong Kong. Participant is advised to exercise caution in relation to the offer. If Participant is in any doubt about any of the contents of the Agreement, including this Appendix, or the Plan, Participant should obtain independent
professional advice. The Restricted Stock Units and any Shares issued pursuant to the grant do not constitute a public offering of securities under Hong Kong law and are available only to employees of the Company. The Agreement, including this
Appendix, the Plan and other incidental communication materials have not been prepared in accordance with and are not intended to constitute a “prospectus” for a public offering of securities under the applicable securities legislation in Hong
Kong. The Restricted Stock Units and any related documentation are intended only for the personal use of each eligible employee of the Company and may not be distributed to any other person.
HUNGARY
There are no country-specific provisions.
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INDONESIA
Language Consent and Notification. A translation of the documents related to this grant into Bahasa Indonesia can be provided to Participant upon request to
hroperations@nuskin.com. By accepting the grant, Participant (i) confirms having read and understood the documents relating to this grant (i.e., the Plan and the Agreement) which were provided in the
English language, (ii) accepts the terms of those documents accordingly, and (iii) agrees not to challenge the validity of this document based on Law No. 24 of 2009 on National Flag, Language, Coat of Arms and National Anthem or the implementing
Presidential Regulation (when issued).
Language Consent and Notification. Terjemahan dari dokumen-dokumen terkait dengan pemberian ini ke Bahasa Indonesia dapat disediakan untuk anda berdasarkan
permintaan kepada hroperations@nuskin.com. Dengan menerima hibah, anda (i) anda mengkonfirmasi bahwa anda telah membaca dan mengerti isi dokumen yang terkait dengan pemberian ini yang disediakan untuk anda dalam bahasa Inggris, (ii) Anda menerima
syarat dari dokumen-dokumen tersebut, dan (iii) anda setuju bahwa anda tidak akan mengajukan keberatan atas keberlakuan dokumen ini berdasarkan Undang-Undang No. 24 tahun 2009 tentang Bendera, Bahasa dan Lambang Negara serta Lagu Kebangsaan atau
Peraturan Presiden pelaksana (ketika diterbitkan).
Exchange Control Information. If Participant remits proceeds from the sale of Shares or the receipt of any dividends paid on such Shares into Indonesia, the
Indonesian Bank through which the transaction is made will submit a report on the transaction to the Bank of Indonesia for statistical reporting purposes. For transactions of US$10,000 or more, a description of the transaction must be included in
the report. Although the bank through which the transaction is made is required to make the report, Participant must complete a “Transfer Report Form.” The Transfer Report Form should be provided to Participant by the bank through which the
transaction is made.
In addition, Participant must provide the Bank of Indonesia with information on foreign exchange activities via a monthly report submitted online through the Bank of Indonesia’s website. The report is due no later than
the 15th day of the month following the month in which the activity occurred.
Participant should consult with Participant’s personal advisor(s) regarding any personal legal, regulatory or foreign exchange obligations Participant may have in connection with Participant’s participation in the
Plan.
Foreign Asset/Account Reporting Information. Indonesian residents have the obligation to report worldwide assets (including foreign accounts and Shares acquired
under the Plan) in their annual individual income tax return.
JAPAN
Exchange Control Information. If Participant acquires Shares valued at more than ¥100,000,000 in a single transaction, Participant must file a Securities
Acquisition Report with the Ministry of Finance through the Bank of Japan within 20 days of the purchase of the Shares. Participant should consult with Participant’s personal advisor(s) regarding any personal legal, regulatory or foreign exchange
obligations Participant may have in connection with Participant’s participation in the Plan.
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Foreign Asset/Account Reporting Information. Participant will be required to report details of any assets (including any Shares acquired under the Plan) held
outside of Japan as of December 31st of each year, to the extent such assets have a total net fair market value exceeding ¥50,000,000. Such report will be due by
March 15th of the following year. Participant should consult with his or her personal tax advisor as to whether the reporting obligation applies to Participant and
whether Participant will be required to report details of any outstanding Restricted Stock Units or Shares held by Participant in the report.
KOREA
Domestic Broker Requirement for Selling Shares. Korean residents are not permitted to sell foreign securities (including Shares) through non-Korean brokers (such
as Fidelity Stock Plan Services, LLC) or deposit funds resulting from the sale of Shares in an account with an overseas financial institution. If Participant wishes to sell Shares acquired under the Plan, Participant may be required to transfer the
Shares to a domestic investment broker in Korea and to effect the sale through such broker. Participant is solely responsible for engaging the domestic broker in Korea, and non-compliance with the requirement to sell Shares through a domestic
broker can result in significant penalties.
However, on December 29, 2023, the Korean Financial Services Commission issued an advance notice of legislative action that, if adopted as drafted, would allow Korean residents to dispose of overseas-listed securities
without using a Korean-licensed broker and deposit proceeds from the sale with an overseas financial institution. Until the legislation is adopted, the restrictions described above remain applicable to foreign-listed securities, including the Shares
acquired under the Plan. Participant should consult with their personal advisor(s) regarding any personal legal, regulatory or foreign exchange obligations Participant may have in connection with participation in the Plan.
Foreign Asset/Account Reporting Information. Korean residents must declare all foreign financial accounts (e.g., non-Korean bank accounts, brokerage
accounts) to the Korean tax authority and file a report with respect to such accounts in June of the following year if the monthly balance of such accounts exceeds KRW 500 million (or an equivalent amount in foreign currency) on any month-end date
during a calendar year. Participant should consult with Participant’s personal advisor(s) regarding any personal foreign asset/foreign account tax obligations Participant may have in connection with Participant’s participation in the Plan.
MALAYSIA
Director Notification Information. If Participant is a director of a Malaysian Subsidiary, Participant is subject to certain notification requirements under the
Malaysian Companies Act, 1965. Among these requirements is an obligation to notify the Malaysian Subsidiary in writing when Participant receives an interest (e.g., Restricted Stock Units) in the Company or
any related companies. In addition, Participant must notify the Malaysian Subsidiary when Participant sells Shares of the Company or any related company (including when Participant sells Shares acquired under the Plan). These notifications must
be made within fourteen days of acquiring or disposing of any interest in the Company or any related company.
21
Data Privacy Notice and Consent. This provision replaces in its entirety Section 10 of the Agreement:
Participant hereby explicitly and unambiguously consents to the collection, use and transfer, in electronic or other form, of Participant’s personal data, as described in
this Agreement and any other Restricted Stock Unit grant materials by and among, as applicable, the Employer, the Company and Subsidiaries for the exclusive purpose of implementing, administering and managing Participant’s participation in the
Plan.
Participant understands that the Employer, the Company and Subsidiaries may hold certain personal information about Participant, including, but not limited to, Participant’s
name, home address and telephone number, date of birth, social insurance number or other identification number, salary, nationality, job title, any Shares or directorships held in the Company, details of all Restricted Stock Units or any other
entitlement to Shares awarded, canceled, exercised, vested, unvested or outstanding in Participant’s favor, for the exclusive purpose of implementing, administering and managing the Plan (“Data”). The Data is supplied by the Employer and also
by me through information collected in connection with the Agreement and the Plan.
Peserta dengan ini secara eksplisit dan tanpa sebarang keraguan mengizinkan pengumpulan, penggunaan dan pemindahan, dalam bentuk elektronik atau lain-lain, data peribadi
Peserta seperti yang diterangkan dalam Perjanjian dan bahan-bahan geran Unit Saham Terbatas yang lain oleh dan di antara, seperti yang berkenaan, Majikan, Syarikat dan Anak-anak Syarikat untuk tujuan yang eksklusif bagi melaksanakan, mentadbir
dan menguruskan penyertaan Peserta di dalam Pelan.
Peserta memahami bahawa Majikan, Syarikat and Anak-anak Syarikat mungkin memegang maklumat peribadi tertentu tentang Peserta, termasuk, tetapi tidak terhad kepada, nama
Peserta, alamat rumah dan nombor telefon, tarikh lahir, nombor insurans sosial atau nombor pengenalan lain, gaji, kewarganegaraan, jawatan, apa-apa Syer atau jawatan pengarah yang dipegang dalam Syarikat, butir-butir semua Unit Saham Terbatas,
atau apa-apa hak lain atas Syer yang dianugerahkan, dibatalkan, dilaksanakan, terletak hak, tidak diletak hak ataupun yang belum dijelaskan bagi faedah Peserta, untuk tujuan eksklusif bagi melaksanakan, mentadbir dan menguruskan Pelan tersebut
(“Data”). Data tersebut dibekalkan oleh Majikan dan juga oleh saya berkenaan dengan Perjanjian dan Pelan.
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Participant understands that Data will be transferred to Fidelity, or such other stock plan service provider as may be selected by the Company in the future, which is
assisting the Company with the implementation, administration and management of the Plan. Participant understands that the recipients of the Data may be located in the United States or elsewhere, and that the recipients’ country (e.g., the
United States) may have different data privacy laws and protections than Participant’s country. Participant understands that if he or she resides outside the United States, he or she may request a list with the names and addresses of any
potential recipients of the Data by contacting his or her local human resources representative at +60-03-2170-7700. Participant authorizes the Company, Fidelity and any other possible recipients which may assist the Company (presently or in the
future) with implementing, administering and managing the Plan to receive, possess, use, retain and transfer the Data, in electronic or other form, for the purposes of implementing, administering and managing Participant’s participation in the
Plan, including any transfer of such Data as may be required to a broker, escrow agent or other third party with whom the Shares received upon vesting of Restricted Stock Units may be deposited. Participant understands that Data will be held
only as long as is necessary to implement, administer and manage his or her participation in the Plan. Participant understands that if he or she resides outside the United States, he or she may, at any time, view Data, request additional
information about the storage and processing of Data, require any necessary amendments to Data or refuse or withdraw the consents herein, in any case without cost, by contacting in writing his or her local human resources representative.
Further, Participant understands that he or she is providing the consents herein on a purely voluntary basis. If Participant does not consent, or if Participant later seeks to revoke his or her consent, his or her employment status or service
and career with the Employer will not be adversely affected; the only adverse consequence of refusing or withdrawing Participant’s consent is that the Company may not be able to grant Participant Restricted Stock Units or other equity awards or
administer or maintain such awards. Therefore, Participant understands that refusing or withdrawing his or her consent may affect Participant’s ability to participate in the Plan. For more information on the consequences of his or her refusal
to consent or withdrawal of consent, Participant understands that he or she may contact his or her local human resources representative.
Peserta memahami bahawa Data ini akan dipindahkan kepada Fidelity, atau mana-mana pembekal perkhidmatan pelan saham lain sebagaimana yang dipilih oleh Syarikat pada masa
depan, yang membantu Syarikat dengan pelaksanaan, pentadbiran dan pengurusan Pelan. Peserta memahami bahawa penerima-penerima Data mungkin berada di Amerika Syarikat atau mana-mana tempat lain, dan bahawa negara penerima-penerima (contohnya,
Amerika Syarikat) mungkin mempunyai undang-undang privasi data dan perlindungan yang berbeza daripada negara Peserta. Peserta memahami bahawa sekiranya Peserta menetap di luar Amerika Syarikat, Peserta boleh meminta satu senarai yang
mengandungi nama-nama dan alamat-alamat penerima-penerima Data yang berpotensi dengan menghubungi wakil sumber manusia tempatan peserta di +60-03-2170-7700. Peserta memberi kuasa kepada Syarikat, Fidelity dan mana-mana penerima-penerima
kemungkinan lain yang mungkin akan membantu Syarikat (pada masa sekarang atau pada masa depan) dengan melaksanakan, mentadbir dan menguruskan Pelan untuk menerima, memiliki, menggunakan, mengekalkan dan memindahkan Data, dalam bentuk elektronik
atau lain-lain, bagi tujuan-tujuan untuk melaksanakan, mentadbir dan menguruskan penyertaan Peserta di dalam Pelan, termasuk segala pemindahan Data tersebut sebagaimana yang dikehendaki kepada broker, egen eskrow atau pihak ketiga dengan siapa
Saham diterima semasa peletakhakan Unit Saham Terbatas mungkin didepositkan. Peserta memahami bahawa Data hanya akan disimpan selagi ia adalah diperlukan untuk melaksanakan, mentadbir, dan menguruskan penyertaan peserta dalam Pelan. Peserta
memahami bahawa sekiranya peserta menetap di luar Amerika Syarikat, peserta boleh, pada bila-bila masa, melihat Data, meminta maklumat tambahan mengenai penyimpanan dan pemprosesan Data, meminta bahawa pindaan-pindaan dilaksanakan ke atas Data
atau menolak atau menarik balik persetujuan dalam ini, dalam mana-mana kes, tanpa kos, dengan menghubungi secara bertulis wakil sumber manusia tempatan. Selanjutnya, Peserta memahami bahawa peserta memberikan persetujuan di sini secara
sukarela semata-mata. Sekiranya Peserta tidak bersetuju, atau sekiranya Peserta kemudian membatalkan persetujuannya, status pekerjaan atau perkhidmatan dan kerjaya Peserta dengan Majikan tidak akan terjejas; satu-satunya akibat buruk sekiranya
Peserta tidak bersetuju atau menarik balik persetujuan Peserta adalah bahawa Syarikat tidak akan dapat memberikan Unit Saham Terbatas atau anugerah ekuiti lain atau mentadbir atau mengekalkan anugerah-anugerah tersebut kepada Peserta. Oleh itu,
Peserta memahami bahawa keengganan atau penarikan balik persetujuan peserta boleh menjejaskan keupayaan Peserta untuk mengambil bahagian dalam Pelan. Untuk maklumat lebih lanjut mengenai akibat-akibat keengganan Peserta untuk memberikan
keizinan atau penarikan balik keizinan, Peserta memahami bahawa Peserta boleh menghubungi wakil sumber manusia tempatan.
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NETHERLANDS
There are no country-specific provisions.
PHILIPPINES
Securities Law Information. This offering is subject to exemption from the requirements of securities registration with the Philippines Securities and Exchange
Commission, under Section 10.1(k) of the Philippine Securities Regulation Code.
THE SECURITIES BEING OFFERED OR SOLD HAVE NOT BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION UNDER THE SECURITIES REGULATION CODE. ANY FURTHER OFFER OR SALE THEREOF IS SUBJECT TO REGISTRATION REQUIREMENTS
UNDER THE CODE UNLESS SUCH OFFER OR SALE QUALIFIES AS AN EXEMPT TRANSACTION.
For further information on risk factors impacting the Company’s business that may affect the value of the Shares, Participant may refer to the risk factors discussion in the Company’s Annual Report on Form 10-K and
Quarterly Reports on Form 10-Q, which are filed with the U.S. Securities and Exchange Commission and are available online at www.sec.gov, as well as on the Company’s website at http://ir.nuskin.com. In addition, Participant may receive, free of
charge, a copy of the Company’s Annual Report, Quarterly Reports or any other reports, proxy statements or communications distributed to the Company’s stockholders by contacting Investor Relations Department at 75 West Center Street, Provo, Utah
84601.
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Participant acknowledges he or she is permitted to dispose or sell Shares acquired under the Plan provided the offer and resale of such shares takes place outside the Philippines through the facilities of a stock
exchange on which the Shares are listed. The Shares are currently listed on the New York Stock Exchange in the United States of America.
SINGAPORE
Sale Restriction. Participant agrees that any Shares acquired pursuant to the Restricted Stock Units will not be offered
for sale in Singapore prior to the six-month anniversary of the Grant Date, unless such offer or sale is made pursuant to the exemptions under Part XIII Division (1) Subdivision (4) (other than section 280) of the Securities and Futures Act
(Chapter 289, 2006 Ed.) (“SFA”) , or pursuant to, and in accordance with the conditions of, any other applicable provisions of the SFA.
Securities Law Information. The grant of the Restricted Stock Units is made pursuant to the “Qualifying Person” exemption under section 273(1)(f)
of the SFA and is not made to Participant with a view of the Restricted Stock Units being subsequently offered for sale to any other party. The Plan has not been lodged or registered as a prospectus with the Monetary Authority of Singapore and
hence, statutory liability under the SFA in relation to the content of prospectuses will not apply. Participant should note that the Award is subject to section 257 of the SFA and Participant will not be able to make (i) any subsequent sale of the
Shares in Singapore or (ii) any offer of such subsequent sale of the Shares subject to the Award in Singapore, unless such sale or offer is made (a) more than six months after the Grant Date or (b) pursuant to the exemptions under Part XIII
Division (1) Subdivision (4) (other than section 280) of the SFA (Chapter 289, 2006 Ed.) or pursuant to, and in accordance with the conditions of, any other applicable provisions of the SFA.
Director Notification Requirement. Directors, associate directors and shadow directors of a Singapore Subsidiary are subject to certain notification requirements
under the Singapore Companies Act. The directors, associate directors and shadow directors must notify the Singapore Subsidiary in writing of an interest (e.g., Restricted Stock Units, Shares, etc.) in the
Company or any related companies within two business days of (i) its acquisition or disposal, (ii) any change in a previously disclosed interest (e.g., when the Shares are sold), or (iii) becoming a
director, associate director or shadow director.
TAIWAN
Data Privacy Consent. Participant hereby acknowledges that he or she has read and understood the terms regarding collection, processing and transfer of Data
contained in Section 10 of the Agreement and by participating in the Plan, Participant agrees to such terms. In this regard, upon request of the Company or the Employer, Participant agrees to provide an executed data privacy consent form to the
Employer or the Company (or any other agreements or consents that may be required by the Employer or the Company) that the Company and/or the Employer may deem necessary to obtain under the data privacy laws in Participant’s country, either now or
in the future. Participant understands he or she will not be able to participate in the Plan if Participant fails to execute any such consent or agreement.
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Securities Law Information. The Restricted Stock Units and the Shares to be issued pursuant to the Plan are available only to employees of the Company and its
Subsidiaries. The grant of the Restricted Stock Units does not constitute a public offer of securities by a Taiwanese company.
Exchange Control Information. Participant may remit foreign currency (including proceeds from the sale of Shares or the receipt of any dividends paid on such
Shares) into or out of Taiwan up to US$5,000,000 per year without special permission. If the transaction amount is TWD500,000 or more in a single transaction, Participant must submit a Foreign Exchange Transaction Form to the remitting bank and
provide supporting documentation to the satisfaction of the remitting bank.
THAILAND
Exchange Control Information. If Participant receives proceeds from the sale of Shares or cash dividends in relation to the Shares in excess of US$1,000,000 in a
single transaction, Participant must immediately repatriate the funds to Thailand (or utilize such funds offshore for permissible purposes) and convert the funds to Thai Baht within 360 days of repatriation or deposit the funds in an authorized
foreign exchange account in Thailand. Participant is also required to provide details of the transaction (i.e., identification information and purpose of the transaction) to the receiving bank.
If Participant does not repatriate such funds and utilizes them offshore for permissible purposes (i.e., purposes not listed in the negative list prescribed by the Bank of Thailand), Participant must obtain a waiver of
the repatriation requirement from a commercial bank in Thailand by submitting an application and supporting documents evidencing that such funds will be utilized offshore for permissible purposes.
Participant should consult with Participant’s personal advisor(s) regarding any personal legal, regulatory or foreign exchange obligations Participant may have in connection with Participant’s participation in the
Plan.
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SCHEDULE A
DENMARK EMPLOYER STATEMENT
SÆRLIG MEDDELELSE TIL MEDARBEJDERE I DANMARK
ARBEJDSGIVERERKLÆRING
I henhold til § 3, stk. 1, i lov om brug af køberet eller tegningsret mv. i ansættelsesforhold (“Aktieoptionsloven”) er medarbejderen (“Medarbejderen”) berettiget til i en særskilt skriftlig erklæring at modtage
følgende oplysninger vedrørende incitamentsordningen Third Amended and Restated 2010 Omnibus Incentive Plan (“Planen”) hos Nu Skin Enterprises, Inc. (“Selskabet”).
Denne erklæring indeholder kun de oplysninger, der er nævnt i Aktieoptionsloven, mens de øvrige vilkår og betingelser for Medarbejderens tildeling af ” Restricted Stock Units” er nærmere beskrevet i Planen, ”
Restricted Stock Unit Agreement” (“Aftalen”) og det øvrige tildelingsmateriale, som er blevet udleveret. Begreber, der står med stort begyndelsesbogstav i denne Arbejdsgivererklæring, men som ikke er defineret heri, har samme betydning som de
begreber, der er defineret i Planen eller Aftalen.
1. Tidspunkt for tildeling af den vederlagsfri ret til at modtage aktier mod opfyldelse af visse betingelser
Tidspunktet for tildelingen af “Restricted Stock Units” er den dato, hvor Bestyrelsens Vederlagsudvalg (“Udvalget”) godkendte tildelingen.
2. Kriterier og betingelser for tildeling af retten til senere at modtage aktier
Kun Selskabets Medarbejdere, bestyrelsesmedlemmer og konsulenter kan deltage i Planen. Tildeling af ” Restricted Stock Units” i henhold til Planen sker efter Selskabets eget skøn og har til formål at give Selskabet og
dets datterselskaber mulighed for at tiltrække og fastholde udvalgte medarbejdere, som forventes at bidrage til Selskabets success og opnå langsigtede mål til gavn for Selskabets aktionærer. Medarbejderen har ikke nogen ret til eller noget krav på
fremover at få tildelt ” Restricted Stock Units”.
3. Modningstidspunkt eller -periode
Dine “Restricted Stock Units” optjenes over et antal år som fastsat i Aftalen. Dine “Restricted Stock Units”r vil ved optjeningen blive konverteret til et tilsvarende antal ordinære aktier i Selskabet. Optjeningen kan
accelerere under visse andre omstændigheder som beskrevet i Aftalen.
4. Udnyttelseskurs
Der betales ingen udnyttelseskurs ved modning af “Restricted Stock Units” eller udstedelse af aktier til Medarbejderen.
5. Medarbejderens retsstilling i forbindelse med fratræden
Såfremt du fratræder din stilling, vil dine “Restricted Stock Units” blive behandlet i overensstemmelse med ophørsbestemmelserne i Aftalen, der kan opsummeres til følgende: Undtagen i tilfælde af en “Change in Control”
(som beskrevet i Aftalen) hvis dit ansættelsesforhold bringes til ophør, bortfalder dine ikke-optjente “Restricted Stock Units”.
6. Økonomiske aspekter ved at deltage i Planen
Tildelingen af “Restricted Stock Units” har ingen umiddelbare økonomiske konsekvenser for Medarbejderen. Værdien af “Restricted Stock Units” indgår ikke i beregningen af feriepenge, pensionsbidrag eller andre
lovpligtige, vederlagsafhængige ydelser.
Ordinære aktier er finansielle instrumenter. Den fremtidige værdi af de underliggende aktier i forbindelse med “Restricted Stock Units” kendes ikke og kan ikke forudsiges med sikkerhed.
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Exhibit 10.6
NU SKIN ENTERPRISES, INC.
THIRD AMENDED AND RESTATED 2010 OMNIBUS INCENTIVE PLAN
PERFORMANCE RESTRICTED STOCK UNIT AGREEMENT
This Performance Restricted Stock Unit Agreement, Participant’s award information (the “Award Summary”), which can be accessed on the Fidelity website (currently www.fidelity.com) or the website of any other stock
plan administrator selected by the Company in the future, and the Appendix for Participant’s country contained in this agreement, if any, (collectively, this “Agreement”) set forth the terms and conditions of the Performance Restricted Stock Units
granted to Participant under the Third Amended and Restated Nu Skin Enterprises, Inc. 2010 Omnibus Incentive Plan (the “Plan”). In the event of a conflict between (i) the terms and conditions of the Plan; and (ii) the terms and conditions of this
Agreement, the terms and conditions of the Plan shall prevail. Unless otherwise defined herein, the capitalized terms in this Agreement shall have the same defined meaning assigned to them in the Plan.
1. Grant of Performance Restricted Stock Units.
1.1 Grant of Performance Restricted Stock Units. Effective as of the date of grant specified in the Award Summary (the “Grant
Date”), the Company grants to Participant an award of [*]% of the number of Performance Restricted Stock Units specified in the Award Summary (i.e., [*]% of the number of Performance Restricted Stock Units that would vest upon achievement of
[Performance Vesting Provisions], as set forth in Schedule A below). Each Performance Restricted Stock Unit is a bookkeeping entry representing the Company’s unfunded promise to deliver one Share on the terms provided herein and in the Plan.
1.2 Vesting of Performance Restricted Stock Units. The Performance Restricted Stock Units shall be divided into tranches and
vest as described in Schedule A below, except as otherwise provided in this Agreement, including pursuant to Sections 1.3 and 4.
1.3 Termination of Continuous Service. In the event Participant’s Continuous Service (as defined below) is terminated for any
reason prior to the full vesting of the Performance Restricted Stock Units, the Performance Restricted Stock Units granted hereunder shall terminate to the extent they are not vested as of the termination of Participant’s Continuous Service, as
determined in accordance with Section 9(h) below, and Participant shall not have any right to receive any Shares subject to such unvested Performance Restricted Stock Units.
For purposes of this Agreement:
“Continuous Service” means that Participant’s service with the Company or a Subsidiary, whether as an Employee, Director, or Consultant, is not interrupted or terminated. Participant’s Continuous Service shall not
be deemed to have terminated merely because of a change in the capacity in which Participant renders service to the Company or a Subsidiary as an Employee, Consultant, or Director, or a change in the entity for which Participant renders such
service, provided that there is no interruption or termination of Participant’s Continuous Service. For example, a change in status from an Employee of the Company to a Consultant of a Subsidiary or a Director will not constitute an interruption
of Continuous Service. Subject to the requirements of applicable law, the Committee, in its sole discretion, shall determine whether Continuous Service shall be considered interrupted in the case of any leave of absence approved by the Company or
a Subsidiary, including sick leave, military leave or any other personal leave.
1.4 Settlement of Performance Restricted Stock Units. Subject to the terms of the Plan and this Agreement, Performance
Restricted Stock Units shall be settled in Shares, provided that Participant has satisfied any Tax-Related Items pursuant to Section 8 below. Shares will be issued to Participant within 70 days following the vesting of each tranche of Performance
Restricted Stock Units unless subject to the terms of the Company’s deferred compensation plan; provided, however, that if the Participant is subject to taxation in the U.S. (a “U.S. Taxpayer”), the Performance Restricted Stock Units vest pursuant
to Section 1.6 below and the Performance Restricted Stock Units are considered “non-qualified deferred compensation” subject to Section 409A of the Code (“Code Section 409A,” and such compensation, “Deferred Compensation”), the Shares will be
issued in accordance with the following schedule: (i) if the termination event giving rise to the vesting acceleration occurs prior to the Change in Control and the Change in Control constitutes a “change in control event” (within the meaning of
U.S. Treasury Regulation 1.409A-3(i)(5)(i)) (a “409A CIC”), the Shares will be issued on the date of the Change in Control, and if the Change in Control does not constitute a 409A CIC, the Shares will be issued on the date that is six months
following the Participant’s “separation from service” (within the meaning of Code Section 409A) (a “Separation from Service”); (ii) if the termination event giving rise to the vesting acceleration occurs on or following the Change in Control and
the Change in Control constitutes a 409A CIC, then the Shares will be issued within 30 days following the Participant’s Separation from Service, and if the Change in Control is not a 409A CIC, then the Shares will be issued on the date that is six
months following the Participant’s Separation from Service.
Notwithstanding the foregoing, for purposes of complying with Code Section 409A, if the Participant is a U.S. Taxpayer, the Performance Restricted Stock Units are considered Deferred Compensation and the Performance
Restricted Stock Units are to be settled in connection with a termination contemplated under Section 1.6 below, the Company and the Participant shall take all steps necessary (including with regard to any post-termination services by the
Participant) to ensure that a termination contemplated under Section 1.6 constitutes a Separation from Service. In addition, if the Performance Restricted Stock Units are Deferred Compensation, the Performance Restricted Stock Units are settled
upon the Participant’s Separation from Service and the Participant is a “specified employee,” within the meaning of Code Section 409A, on the date the Participant experiences a Separation from Service, then the Shares will be issued on the first
business day of the seventh month following the Participant’s Separation from Service, or, if earlier, on the date of the Participant’s death, to the extent such delayed payment is required in order to avoid a prohibited distribution under Code
Section 409A.
1.5 Stockholder Rights. Unless and until Shares are issued by the Company after the vesting of Performance Restricted Stock
Units, Participant shall have none of the rights or privileges of a shareholder of the Company (including voting, dividend and liquidation rights) with respect to the Shares covered by the Performance Restricted Stock Units.
1.6 Change in Control. Notwithstanding any provision in this Agreement to the contrary, if, within six months prior to and in
connection with a Change in Control or within two years following such Change in Control, Participant’s employment is terminated (i) by the Company and its Subsidiaries without Cause, or (ii) by Participant for Good Reason, the vesting of
outstanding Performance Restricted Stock Units governed by this Agreement shall be accelerated such that the number of Performance Restricted Stock Units specified in the Award Summary (i.e., the number of Performance Restricted Stock Units that
would vest upon achievement of [Performance Vesting Provisions], as set forth in Schedule A) shall be deemed to be vested in full immediately prior to the termination of Participant’s employment.
For purposes of this Agreement:
“Cause” shall mean that Participant has engaged in any one of the following:
(a) a material breach by Participant of the Company’s Employee Covenants Agreement, other employee covenants or any employment agreement, which breach is not cured within any applicable cure
period set forth in the respective document;
(b) any willful violation by Participant of any material law or regulation applicable to the business of the Company or any of its Subsidiaries;
(c) Participant’s conviction of, or a plea of guilty or nolo contendere to, a felony or any willful perpetration of common law fraud (or analogous violation of law in a jurisdiction outside
the United States); or
(d) any other willful misconduct by Participant that is materially injurious to the financial condition or business reputation of, or is otherwise materially injurious to, the Company or any
of its Subsidiaries.
For purposes of the foregoing, in determining whether a “material breach” has occurred, or whether there has been a willful violation of a “material” law or regulation, the standard shall be a breach or violation
that is, or will reasonably likely be, materially injurious to the financial condition or business reputation of, or is, or will reasonably likely be, otherwise materially injurious to, the Company or any of its Subsidiaries.
“Good Reason” shall mean the occurrence any of the following events that result in a material negative change to Participant:
(a) without Participant’s consent, a material reduction in the scope of Participant’s duties and responsibilities or the level of management to which Participant reports;
(b) without Participant’s consent, a reduction in base salary (other than an across-the-board reduction of not more than 10% applicable to all similarly situated employees);
(c) without Participant’s consent, a material reduction in Participant’s benefits in the aggregate (in terms of benefit levels) from those provided to Participant under any employee benefit
plan, program and practice in which Participant participates;
(d) without Participant’s consent, a relocation of Participant’s principal place of employment of more than 50 miles from Participant’s primary residence;
(e) the failure of the Company to have a successor entity specifically assume this Agreement or any employment agreement within 10 business days after a Change in Control; or
(f) a material breach by the Company a successor entity of this Agreement or any employment agreement.
Notwithstanding the foregoing, Good Reason shall only be found to exist if Participant, not later than 90 days after the initial occurrence of an event deemed to give rise to a right to terminate for Good Reason, has
provided 30 days written notice to the Company prior to Participant’s resignation indicating and describing the event resulting in such Good Reason, and the Company does not cure such event (other than the event in clause vi), which shall not be
subject to cure) within 90 days following the receipt of such notice from Participant.
2. Securities Law Compliance. Participant represents that Participant has received and carefully read a
copy of the Prospectus for the Plan, together with the Company’s most recent Annual Report to Stockholders. Participant hereby acknowledges that Participant is aware of the risks associated with the Shares and that there can be no assurance the
price of the Shares will not decrease in the future. Participant hereby acknowledges no representations or statements have been made to Participant concerning the value or potential value of the Shares. Participant acknowledges that Participant
has relied only on information contained in the Prospectus and has received no representations, written or oral, from the Company or its employees, attorneys or agents, other than those contained in the Prospectus or this Agreement. Participant
acknowledges that the Company has made no representations or recommendations, and is not providing any tax, legal or financial advice, regarding Participant’s participation in the Plan, or Participant’s acquisition or sale of the underlying
Shares. Participant is hereby advised to consult with his or her own personal tax, legal and financial advisors regarding his or her participation in the Plan before taking any action related to the Plan.
3. Transfer Restrictions. Participant shall not transfer, assign, sell, encumber, pledge, grant a
security interest in or otherwise dispose of the Performance Restricted Stock Units subject to this Agreement in any manner other than by the laws of descent or distribution. Any such transfer, assignment, sale, encumbrance, pledge, security
interest or disposition shall be void.
4. Forfeiture. If, at any time during Participant’s Continuous Service or at any time during the
12-month period following termination of Participant’s Continuous Service, Participant engages in conduct that constitutes Cause (as defined above), then at the election of the Committee, (a) this Agreement and all unvested Performance Restricted
Stock Units granted hereunder shall terminate, and (b) Participant shall return to the Company for cancellation all Shares held by Participant plus pay the Company the amount of any proceeds received from the sale of any Shares to the extent such
Shares were issued pursuant to Performance Restricted Stock Units granted under this Agreement that vested (i) during the 12-month period immediately preceding the Cause, or (ii) on the date of or at any time after such Cause.
If the Company is required to prepare an Accounting Restatement, as defined in the Nu Skin Enterprises, Inc. Executive Officer Incentive Compensation Recovery Policy (the “Recovery Policy,” which is incorporated
herein by reference), the Recovery Policy shall apply to the fullest extent required by applicable law, rule, regulation, or stock exchange rule or listing standard. In such case or in any other circumstances determined appropriate by the
Committee, the Committee may (1) terminate any Performance Restricted Stock Units granted hereunder or (2) require Participant to return any Shares received upon the vesting of, or reimburse the Company the amount of any payment or benefit received
with respect to, any Performance Restricted Stock Units granted hereunder, to the extent that either (1) the Performance Restricted Stock Units would not have been earned or accrued after giving effect to the Accounting Restatement, as determined
by the Committee or required by the Recovery Policy; or (2) the Company determines such actions are necessary to satisfy a recoupment requirement under the Recovery Policy.
The forfeiture and recoupment provisions of this Section 4 shall be applied by the Committee, at its discretion, to the maximum extent permitted under applicable laws. Further, these provisions are in addition to,
and not in lieu of, any recoupment requirements under the Sarbanes-Oxley Act or under other applicable laws, rules, regulations or stock exchange listing standards, and shall apply notwithstanding anything to the contrary in this Agreement or in
the Plan.
Participant expressly agrees that the Company may take such actions as are necessary or appropriate to effectuate the foregoing provisions of this Section 4 (as applicable to Participant) or applicable law without
further consent or action being required by Participant. For purposes of the foregoing and as a condition to the grant, Participant expressly and explicitly authorizes the Company to issue instructions, on Participant’s behalf, to Fidelity (or any
other stock plan service provider engaged by the Company to administer awards granted under the Plan) to re-convey, transfer or otherwise return any Shares held by Participant and/or other amounts to the Company.
5. Governing Plan Document. This Agreement incorporates by reference all of the terms and conditions of
the Plan, as presently existing and as hereafter amended. Participant expressly acknowledges and agrees that the terms and provisions of this Agreement are subject in all respects to the provisions of the Plan. Participant also expressly:
(a) Acknowledges receipt of the Plan and represents that Participant is familiar with the provisions of the Plan, and that Participant enters into this Agreement subject to all of the
provisions of the Plan;
(b) Recognizes that the Committee has been granted complete authority to administer the Plan in its sole discretion, and agrees to accept all decisions related to the Plan and all
interpretations of the Plan made by the Committee as final and conclusive upon Participant and upon all persons at any time claiming any interest through Participant in the Performance Restricted Stock Units or the Shares subject to this Agreement;
and
(c) Acknowledges and understands that the establishment of the Plan and the existence of this Agreement are not sufficient, in and of themselves, to exempt Participant from the requirements
of Section 16(b) of the Exchange Act and any rules or regulations promulgated thereunder, and that Participant (to the extent Section 16(b) applies to Participant) shall not be exempt from such requirements pursuant to Rule 16b-3 unless and until
Participant shall comply with all applicable requirements of Rule 16b-3, including without limitation, the possible requirement that Participant must not sell or otherwise dispose of any Shares acquired pursuant to Performance Restricted Stock
Units unless and until a period of at least six months shall have elapsed between the Grant Date and the date upon which Participant desires to sell or otherwise dispose of such Shares.
6. Representations and Warranties. As a condition to the receipt of any Shares upon vesting of the
Performance Restricted Stock Units, the Company may require Participant to make any representations and warranties to the Company that legal counsel to the Company may determine to be required or advisable under any applicable law or regulation,
including without limitation, representations and warranties that the Shares are being acquired only for investment and without any present intention or view to sell or distribute any such Shares.
7. Compliance With Law and Regulations. Notwithstanding any other provision of the Plan or this
Agreement, unless there is an available exemption from any registration, qualification or other legal requirement applicable to the Shares, the Company shall not be required to deliver any Shares issuable upon settlement of the Performance
Restricted Stock Units prior to the completion of any registration or qualification of the Shares under any local, state, federal or foreign securities or exchange control law or under rulings or regulations of the U.S. Securities and Exchange
Commission (“SEC”) or of any other governmental regulatory body, or prior to obtaining any approval or other clearance from any local, state, federal or foreign governmental agency, which registration, qualification or approval the Company shall,
in its absolute discretion, deem necessary or advisable. Participant understands that the Company is under no obligation to register or qualify the Shares with the SEC or any state or foreign securities commission or to seek approval or clearance
from any governmental authority for the issuance or sale of the Shares. Further, Participant agrees that the Company shall have unilateral authority to amend the Plan and this Agreement without Participant’s consent to the extent necessary to
comply with securities or other laws applicable to issuance of Shares.
8. Responsibility for Taxes. Participant acknowledges that, regardless of any action taken by the
Company or, if different, Participant’s employer (the “Employer”), the ultimate liability for all income tax, social insurance, payroll tax, fringe benefits tax, payment on account or other tax-related items related to Participant’s participation
in the Plan and legally applicable to Participant or deemed by the Company or the Employer in its discretion to be an appropriate charge to Participant even if legally applicable to the Company or the Employer (“Tax-Related Items”), is and remains
Participant’s responsibility and may exceed the amount, if any, actually withheld by the Company or the Employer. Participant further acknowledges that the Company and the Employer (a) make no representations or undertakings regarding the
treatment of any Tax-Related Items in connection with any aspect of the Performance Restricted Stock Units, including, but not limited to, the grant, vesting or settlement of the Performance Restricted Stock Units, the subsequent sale of any Shares
acquired at settlement and the receipt of any dividends; and (b) do not commit to and are under no obligation to structure the terms of the grant or any aspect of the Performance Restricted Stock Units to reduce or eliminate Participant’s liability
for Tax-Related Items or achieve any particular tax result. Further, if Participant is subject to Tax-Related Items in more than one jurisdiction, Participant acknowledges that the Company and/or the Employer (or former employer, as applicable)
may be required to withhold or account for Tax-Related Items in more than one jurisdiction.
In connection with any relevant taxable or tax withholding event, as applicable, Participant agrees to make adequate arrangements satisfactory to the Company and/or the Employer to satisfy all Tax-Related Items.
Full payment of the Tax-Related Items shall be made by any of the following, or a combination thereof, subject to the Committee’s or Company’s right to eliminate, prior to vesting, any of the following as permissible
payment methods: (i) in cash or cash equivalents (including certified check, bank check or wire transfer of immediately available funds); (ii) by tendering previously acquired Shares (either actually or by attestation) valued at their then-Fair
Market Value; (iii) by withholding Shares otherwise issuable in connection with the vesting of the Performance Restricted Stock Units; (iv) through same-day voluntary or involuntary (on Participant’s behalf pursuant to this authorization) sales
through a broker if permitted by the Company’s Securities Trading Policy; (v) withholding from Participant’s wages or other cash compensation paid to Participant by the Company and/or the Employer; or (vi) any combination of any of the foregoing.
In the absence of Participant’s timely election or in the event Section 16(b) applies to Participant, the Company will withhold in Shares upon the relevant taxable or tax withholding event, as applicable. In the event that such withholding in
Shares is problematic under applicable tax or securities law or has materially adverse accounting consequences, the Participant authorizes and directs the Company and/or the Employer, or their respective agents, at their discretion, to satisfy any
applicable withholding obligation with regard to all Tax-Related Items by one or a combination of the methods above.
Depending on the withholding method, the Company and/or the Employer may withhold or account for Tax-Related Items by considering applicable withholding rates in Participant’s jurisdiction(s) (up to the rate that
will not cause an adverse accounting consequence or cost, including pursuant to ASC Topic 718, as applicable). If the Company and/or the Employer withhold more than the amount necessary to satisfy the liability for Tax-Related Items, Participant
may receive a refund of any over-withheld amount in cash and will have no entitlement to the equivalent Shares or, if not refunded, Participant may be able to seek a refund from the applicable tax authorities. If the Company and/or the Employer
withhold less than the amount necessary to satisfy the liability for Tax-Related Items, Participant may be required to pay additional Tax-Related Items directly to the applicable tax authorities or to the Company and/or the Employer. If the
obligation for Tax-Related Items is satisfied by withholding in Shares, for tax purposes, Participant is deemed to have been issued the full number of Shares subject to the vested Performance Restricted Stock Units, notwithstanding that a number of
the Shares are held back solely for the purpose of paying the Tax-Related Items.
Participant agrees to pay to the Company or the Employer any amount of Tax-Related Items that the Company or the Employer may be required to withhold or account for as a result of Participant’s participation in the
Plan that cannot be satisfied by the means previously described. The Company may refuse to issue or deliver the Shares or the proceeds of the sale of Shares if Participant fails to comply with Participant’s obligations in connection with the
Tax-Related Items.
9. Nature of Grant. In accepting the Performance Restricted Stock Units, Participant acknowledges,
understands and agrees that:
(a) the Plan is established voluntarily by the Company, it is discretionary in nature and may be modified, amended, suspended or terminated by the Company at any time, to the extent
permitted by the Plan;
(b) the grant of Performance Restricted Stock Units is exceptional, voluntary and occasional and does not create any contractual or other right to receive future awards of Performance
Restricted Stock Units, or benefits in lieu of Performance Restricted Stock Units even if Performance Restricted Stock Units have been awarded in the past;
(c) nothing in this Agreement or in the Plan shall confer upon Participant any right to continue in the employment or service of the Employer, the Company or any Subsidiary or be interpreted
as forming or amending an employment or services contract with the Employer, the Company or any Subsidiary and shall not interfere with or restrict any way the ability of the Employer, the Company or any Subsidiary, as applicable, to terminate
Participant’s employment or service relationship, if any;
(d) all decisions with respect to future grants of Performance Restricted Stock Units or other grants, if any, will be at the sole discretion of the Committee and/or Company;
(e) Participant’s participation in the Plan is voluntary;
(f) the future value of the underlying Shares is unknown, indeterminable and unpredictable;
(g) unless otherwise agreed with the Company, the Performance Restricted Stock Units and the Shares subject to the Performance Restricted Stock Units, and the income and value of same, are
not granted as consideration for, or in connection with, the service Participant may provide as a director of any entity of the Company;
(h) in the event of the termination of Participant’s Continuous Service (as defined above) (for any reason whatsoever, whether or not later to be found invalid or in breach of employment
laws in the jurisdiction where Participant is employed or the terms of Participant’s employment agreement, if any), unless otherwise determined by the Company, Participant’s right to vest in the Performance Restricted Stock Units under the Plan, if
any, will terminate as of the date Participant is no longer actively rendering services and will not be extended by any notice period (e.g., Participant’s period of service would not include any contractual notice period or any period of “garden
leave” or similar period mandated under employment laws in the jurisdiction where Participant is employed or the terms of Participant’s employment agreement, if any); the Committee shall have the exclusive discretion to determine when Participant
is no longer providing Continuous Service for purposes of this Agreement, including whether Participant may still be considered to be providing active service while on a leave of absence;
(i) Performance Restricted Stock Units and the Shares subject to Performance Restricted Stock Units, and the income and value of same, are not part of normal or expected compensation or
salary for any purpose, including, but not limited to, calculation of any severance, resignation, termination, redundancy, dismissal, end-of-service payments, holiday pay, bonuses, long-service awards, leave-related pay, pension or retirement or
welfare benefits or similar mandatory payments;
(j) Performance Restricted Stock Units and the Shares subject to Performance Restricted Stock Units, and the income and value of same, are not intended to replace any pension rights or
compensation;
(k) Performance Restricted Stock Units are an extraordinary item that does not constitute compensation of any kind for service of any kind rendered to the Company or to the Employer, and
Performance Restricted Stock Units are outside of the scope of Participant’s employment agreement, if any;
(l) no claim or entitlement to compensation or damages shall arise from forfeiture of Performance Restricted Stock Units resulting from termination of Participant’s Continuous Service (for
any reason whatsoever, whether or not later found to be invalid or in breach of employment laws in the jurisdiction where Participant is employed or the terms of Participant’s employment agreement, if any); and
(m) neither the Company, the Employer nor any Subsidiary of the Company shall be liable for any foreign exchange rate fluctuation between Participant’s local currency and the United States
Dollar that may affect the value of Performance Restricted Stock Units or of any amounts due to Participant pursuant to the settlement of the Performance Restricted Stock Units or the subsequent sale of any Shares acquired upon settlement.
10. Data Privacy Notice and Consent. Participant hereby explicitly and
unambiguously consents to the collection, use and transfer, in electronic or other form, of Participant’s personal data, as described in this Agreement and any other Performance Restricted Stock Unit
grant materials by and among, as applicable, the Employer, the Company and Subsidiaries for the exclusive purpose of implementing, administering and managing Participant’s participation in the Plan.
Participant understands that the Employer, the Company and Subsidiaries may hold certain personal information about Participant, including, but not limited to, Participant’s
name, home address, email address, telephone number, date of birth, social security number, passport information, social insurance number or other identification number, salary, nationality, job title, any Shares or directorships held in the
Company, details of all Performance Restricted Stock Units or any other entitlement to Shares or other equivalent benefits awarded, canceled, purchased, exercised, vested, unvested or outstanding in Participant’s favor (“Data”), for the exclusive
purpose of implementing, administering and managing the Plan.
Participant understands that Data will be transferred to Fidelity, or such other stock plan service provider as may be selected by the Company in the future, which is assisting
the Company with the implementation, administration and management of the Plan. Participant understands that the recipients of the Data may be located in the United States or elsewhere, and that the recipients’ country (e.g., the United States)
may have different data privacy laws and protections than Participant’s country. Participant understands that if he or she resides outside the United States, he or she may request a list with the names and addresses of any potential recipients of
the Data by contacting his or her local human resources representative. Participant authorizes the Company, Fidelity and any other possible recipients which may assist the Company (presently or in the future) with implementing, administering and
managing the Plan to receive, possess, use, retain and transfer the Data, in electronic or other form, for the purposes of implementing, administering and managing Participant’s participation in the Plan, including any transfer of such Data as may
be required to a broker, escrow agent or other third party with whom the Shares received upon vesting of Performance Restricted Stock Units may be deposited. Participant understands that Data will be held only as long as is necessary to implement,
administer and manage his or her participation in the Plan. Participant understands that if he or she resides outside the United States, he or she may, at any time, view Data, request additional information about the storage and processing of
Data, require any necessary amendments to Data or refuse or withdraw the consents herein, in any case without cost, by contacting in writing his or her local human resources representative. Further, Participant understands that he or she is
providing the consents herein on a purely voluntary basis. If Participant does not consent, or if Participant later seeks to revoke his or her consent, his or her employment status or service with the Employer will not be affected; the only
consequence of refusing or withdrawing Participant’s consent is that the Company may not be able to grant Performance Restricted Stock Units or other equity awards to Participant or administer or maintain such awards. Therefore, Participant
understands that refusing or withdrawing his or her consent may affect Participant’s ability to participate in the Plan. For more information on the consequences of his or her refusal to consent or withdrawal of consent, Participant understands
that he or she may contact his or her local human resources representative.
Upon request of the Company or the Employer, Participant agrees to provide an executed data privacy form (or any other agreements or consents) that the Company and/or the
Employer may deem necessary to obtain from Participant for the purpose of administering Participant’s participation in the Plan in compliance with the data privacy laws in Participant’s country, either now or in the future. Participant understands
and agrees that he or she will not be able to participate in the Plan if Participant fails to provide any such consent or agreement as requested by the Company and/or the Employer.
11. Miscellaneous Provisions.
11.1 Notices. Any notice required to be given under this Agreement shall be in writing and shall be deemed effective upon
personal delivery or upon deposit in the sender’s local mail, registered or certified, postage prepaid and properly addressed to the party entitled to such notice at the latest address on file or at such other address as such party may designate by
ten days advance written notice under this Section to all other parties to this Agreement.
11.2 Waiver. The failure of the Company in any instance to exercise any rights under this Agreement, including the forfeiture
rights under Section 4, shall not constitute a waiver of any other rights that may subsequently arise under the provisions of this Agreement or any other agreement between the Company and Participant. Participant acknowledges that no waiver by the
Company of any breach of any provision of this Agreement shall operate or be construed as a waiver of any other provision of this Agreement, or of any subsequent breach by Participant or any other Participant, whether of like or different nature.
11.3 Imposition of Other Requirements & Participant Undertaking. The Company reserves the right to impose other requirements
on Participant’s participation in the Plan, on the Performance Restricted Stock Units and on any Shares acquired under the Plan, to the extent the Company determines it is necessary or advisable for legal or administrative reasons. Participant
hereby agrees to take whatever additional action and execute whatever additional documents the Company may deem necessary or advisable in order to carry out the foregoing or one or more of the obligations or restrictions imposed on either
Participant or the Shares pursuant to the provisions of this Agreement.
11.4 Entire Contract. This Agreement and the Plan constitute the entire understanding and agreement of the parties with respect
to the subject matter contained herein. This Agreement is made pursuant to, and incorporates by reference, the provisions of the Plan and shall in all respects be construed in conformity with the terms of the Plan.
11.5 Language. Participant acknowledges that he or she is sufficiently proficient in English, or, alternatively, Participant
acknowledges that he or she will seek appropriate assistance to understand the terms and conditions in this Agreement. Furthermore, if Participant has received this Agreement or any other document related to the Plan translated into a language
other than English and if the meaning of the translated version is different than the English version, the English version will control.
11.6 Electronic Delivery and Acceptance. The Company may, in its sole discretion, decide to deliver any documents related to
current or future participation in the Plan by electronic means. Participant hereby consents to receive such documents by electronic delivery and agrees to participate in the Plan through an on-line or electronic system established and maintained
by the Company or a third party designated by the Company.
11.7 Successors and Assigns. The provisions of this Agreement shall inure to the benefit of, and be binding upon, the Company
and its successors and assigns and upon Participant, Participant’s permitted assigns and the legal representatives, heirs and legatees of Participant’s estate, whether or not any such person shall have become a party to this Agreement and have
agreed in writing to join herein and be bound by the terms hereof. Participant may not assign this Agreement other than by the laws of descent and distribution.
11.8 Severability. In the event that any provision in this Agreement will be held invalid or unenforceable, such provision will
be severable from, and such invalidity or unenforceability will not be construed to have any effect on, the remaining provisions of this Agreement.
11.9 Governing Law and Choice of Venue. The Performance Restricted Stock Units and the provisions of this Agreement shall be
governed by, and subject to, the laws of the State of Utah, United States, without regard to the conflict of law provisions, as provided in the Plan. For purposes of litigating any dispute that arises under this Agreement or this grant of
Performance Restricted Stock Units, the parties hereby submit to and consent to the jurisdiction of the State of Utah, agree that such litigation shall be conducted in the courts of Utah County, Utah, or the
federal courts of the United States for the District of Utah, where this grant is made and/or to be performed.
11.10 Appendix. Notwithstanding any provisions in this Agreement, the Performance Restricted Stock Units shall be subject to any
special terms and conditions set forth in any Appendix to this Agreement for Participant’s country. Moreover, if Participant relocates to one of the countries included in the Appendix, the terms and conditions for such country will apply to
Participant, to the extent the Company determines that the application of such terms and conditions is necessary or advisable for legal or administrative reasons. The Appendix constitutes part of this Agreement.
11.11 Insider Trading Restrictions/Market Abuse Laws. Participant acknowledges that, depending on Participant’s country,
broker’s country, or where Shares are listed, Participant may be subject to insider trading and/or market abuse laws which may affect Participant’s ability to accept, acquire, sell or otherwise dispose of Shares, rights to such shares (e.g.,
Performance Restricted Stock Units) or rights linked to the value of Shares under the Plan during such times as Participant is considered to have “material nonpublic information” or “inside information” regarding the Company (as defined by the laws
or regulations in the relevant jurisdiction). Local insider trading laws and regulations may prohibit the cancellation or amendment of orders Participant places before Participant possessed inside information. Furthermore, Participant could be
prohibited from (i) disclosing inside information to any third party (other than on a “need to know” basis) and (ii) “tipping” third parties or causing them otherwise to buy or sell securities. Third parties include fellow employees. Any
restrictions under these laws or regulations are separate from and in addition to any restrictions that may be imposed under the Company’s insider trading policy, and the requirements of applicable laws may or may not be consistent with the terms
of the Company’s insider trading policy. Participant acknowledges that it is his or her responsibility to comply with any applicable restrictions, and that Participant should speak to his or her personal advisor on this matter.
11.12 Exchange Control Tax and Foreign Asset/Account Reporting
Requirements. Participant acknowledges that there may be exchange control, tax, foreign asset and/or account reporting requirements which may affect Participant’s ability to acquire or hold Shares acquired under the Plan or cash
received from participating in the Plan (including from any dividends paid on Shares acquired under the Plan) in a brokerage, bank account or legal entity outside Participant’s country. Participant may be required to report such accounts,
balances, assets and/or the related transactions to the tax or other authorities in his or her country. Participant also may be required to repatriate sale proceeds or other funds received as a result of Participant’s participation in the Plan
to his or her country through a designated bank or broker within a certain time after receipt. Participant acknowledges that it is Participant’s responsibility to be compliant with such regulations and Participant should consult his or her
personal legal advisor for any details. Participant agrees to take any and all actions, and consents to any and all actions taken by the Company or the Employer as may be required to allow the Company or the Employer to comply with local laws,
rules and regulations in Participant’s country of residence (and country of employment, if different). Finally, Participant agrees to take any and all actions as may be required to comply with Participant’s personal legal and tax obligations
under local laws, rules and regulations in Participant’s country of residence (and country of employment, if different).
11.13 Section 409A. The Performance Restricted Stock Units and issuance of Shares thereunder are intended to comply with Code
Section 409A and the U.S. Treasury Regulations relating thereto so as not to subject the Participant to the payment of additional taxes and interest under Code Section 409A or other adverse tax consequences. In furtherance of this intent, the
provisions of this Agreement will be interpreted, operated, and administered in a manner consistent with these intentions. The Committee may modify the terms of this Agreement, the Plan or both, without the consent of the Participant, in the
manner that the Committee may determine to be necessary or advisable in order to comply with Code Section 409A or to mitigate any additional tax, interest and/or penalties or other adverse tax consequences that may apply under Code Section 409A if
compliance is not practical. This Section 11.12 does not create an obligation on the part of the Company to modify the terms of this Agreement or the Plan and does not guarantee that the Performance Restricted Stock Units or the delivery of Shares
upon vesting/settlement of the Performance Restricted Stock Units will not be subject to taxes, interest and penalties or any other adverse tax consequences under Code Section 409A. Nothing in this Agreement shall provide a basis for any person to
take any action against the Company or any of its Subsidiaries based on matters covered by Code Section 409A, including the tax treatment of any amounts paid under this Agreement, and neither the Company nor any of its Subsidiaries will have any
liability under any circumstances to the Participant or any other party if the Performance Restricted Stock Units, the delivery of Shares upon vesting/settlement of the Performance Restricted Stock Units or other payment or tax event hereunder that
is intended to be exempt from, or compliant with, Code Section 409A, is not so exempt or compliant or for any action taken by the Committee with respect thereto. Further, settlement of any portion of the Performance Restricted Stock Units that is
Deferred Compensation may not be accelerated or postponed except to the extent permitted by Code Section 409A.
By electronically accepting this Agreement and participating in the Plan, Participant agrees to be bound by the terms and conditions in the Plan and this Agreement, including the Appendix. Within
six months of the Grant Date, if Participant has not electronically accepted this Agreement on Fidelity’s website, or the website of any other stock plan service provider appointed by the Company, and has not otherwise rejected the grant, then this
award shall automatically be deemed accepted, and Participant shall be bound by the terms and conditions in the Plan and this Agreement, including the Appendix.
APPENDIX
FOR PARTICIPANTS OUTSIDE THE U.S.
NU SKIN ENTERPRISES, INC.
THIRD AMENDED AND RESTATED 2010 OMNIBUS INCENTIVE PLAN
PERFORMANCE RESTRICTED STOCK UNIT AGREEMENT
Unless otherwise defined herein, the capitalized terms in this Appendix shall have the same defined meaning assigned to them in the Plan and the Agreement.
This Appendix includes special country-specific terms and conditions that apply to Participants in the countries listed below. This Appendix is part of the Agreement. This Appendix also includes information of which
Participant should be aware with respect to his or her participation in the Plan. For example, certain individual exchange control reporting requirements may apply upon vesting of the Performance Restricted Stock Units and/or sale of Shares. The
information is based on the securities, exchange control and other laws in effect in the respective countries as of November 2023 and is provided for informational purposes. Such laws are often complex and change frequently, and results may be
different based on the particular facts and circumstances. As a result, the Company recommends that Participant does not rely on the information noted herein as the only source of information relating to the consequences of Participant’s
participation in the Plan because the information may be out of date at the time the Performance Restricted Stock Units vest or are settled, or Participant sells Shares acquired under the Plan.
In addition, the information is general in nature and may not apply to Participant’s particular situation, and the Company is not in a position to assure Participant of any particular result. Accordingly,
Participant should seek appropriate professional advice as to how the relevant laws in Participant’s country may apply to his or her situation.
Finally, if Participant is a citizen or resident of a country other than the one in which he or she currently is residing and/or working, transfers employment after the Performance Restricted Stock Units are granted
to him or her, or is considered a resident of another country for local law purposes, the terms and conditions and/or notifications contained herein may not be applicable to him or her, and the Company shall, in its discretion, determine to what
extent such terms and conditions contained herein shall apply to him or her.
The following provision replaces Section 10 of the Agreement:
Data Collection and Usage. Pursuant to applicable data protection laws, Participant is hereby notified that the Company collects, processes, uses
and transfers certain personally-identifiable information about Participant for the exclusive legitimate purpose of granting Performance Restricted Stock Units and implementing, administering and managing Participant’s participation in the Plan.
Specifics of the data processing are described below. For California residents, the categories of personal information, including sensitive personal information, are identifiers, characteristics of protected classifications under California or
federal law, professional or employment related information, social security, driver’s license, state identification card, or passport number, and any personal information that identifies, relates to, describes, or is capable of being associated
with a particular individual. The personal information is not sold or shared for cross-context behavioral advertising. The Company’s Global Privacy Notice is available at https://www.nuskin.com/content/global-privacy.html.
Controller, EU Representative and DPO. The Company is the controller responsible for the processing of
Participant’s personal data in connection with the Plan. The Company’s representative in the European Union is NSE Products Europe BV, Da Vincilaan 9, 1930 Zaventem, Belgium, telephone number +32 2 722 70 00. Participant can reach the data
protection officer (“DPO”) of the Company at +1 (801) 345-1000, 75 West Center Street, Provo, Utah 84601.
Personal Data Subject to Processing. The Company collects, processes and uses the following types of personal
data about Participant: Participant’s name, home address and telephone number, email address, date of birth, social insurance, passport number or other identification number, salary, nationality, job title, any Shares or directorships held in the
Company, details of all Performance Restricted Stock Units or any other entitlement to Shares awarded, canceled, settled, vested, unvested or outstanding in Participant’s favor, which the Company receives from Participant or the Employer, as well
as Participant’s hire date, term date, term reason code, status, and Company’s Division (“Personal Data”).
Purposes and Legal Bases of Processing. The Company processes the Personal Data for the purpose of granting
Performance Restricted Stock Units, implementing, administering and managing Participant’s participation in the Plan. The legal basis for the processing of the Personal Data by the Company and the third‑party service providers described below is
the necessity of the data processing for the Company to perform its contractual obligations under the Agreement and generally administering employee equity awards.
Stock Plan Administration Service Providers. The Company transfers Personal Data to Fidelity Stock Plan
Services, LLC and its affiliated companies (collectively, “Fidelity”), an independent stock plan administrator with operations, relevant to the Company, in the United States, which assists the Company with the implementation,
administration and management of the Plan. In the future, the Company may select different service providers and may share Personal Data with such service providers. As a data controller, the Company’s stock plan administrator will open an
account for Participant to receive and trade Shares. Participant will be asked to agree on separate terms and data processing practices with the service provider, which is a condition of Participant’s ability to participate in the Plan.
Participant’s Personal Data will only be accessible by those individuals requiring access to it for purposes of implementing, administering and operating Participant’s participation in the Plan. Participant understands that Participant may
request a list with the names and addresses of any potential recipients of Personal Data by contacting Participant’s local human resources representative.
International Data Transfers. The Company and its service providers, including, without limitation, Fidelity,
operate, relevant to the Company, in the United States, which means that it will be necessary for Personal Data to be transferred to, and processed in, the United States. Participant understands and acknowledges that the United States is not
subject to an unlimited adequacy finding by the European Commission and that Participant’s Personal Data may not have an equivalent level of protection as compared to Participant’s country of residence.
The legal basis for the processing of the Personal Data by the Company and the third‑party service providers is the necessity of the data processing for the Company to perform its contractual obligations under the
Agreement and generally administering employee equity awards.
Data Retention. The Company will use the Personal Data only as long as necessary to implement, administer and
manage Participant’s participation in the Plan, or as required to comply with legal or regulatory obligations, including tax and securities laws. When the Company no longer needs the Personal Data, the Company will remove it from its systems.
If the Company keeps data longer, it would be to satisfy tax, legal or regulatory obligations and the Company’s legal basis would be relevant laws or regulations.
Data Subject Rights. To the extent provided by law, Participant has the right to (i) inquire whether and what
kind of Personal Data the Company holds about Participant and how it is processed, and to access or request copies of such Personal Data, (ii) request the correction or supplementation of Personal Data that is inaccurate, incomplete or
out-of-date in light of the purposes underlying the processing, or (iii) obtain the erasure of Personal Data no longer necessary for the purposes underlying the processing or processed in non-compliance with applicable legal requirements. In
addition, Participant has, to the extent provided by law, the right to (iv) request the Company to restrict the processing of Personal Data in certain situations where Participant feels its processing is inappropriate, (v) object, in certain
circumstances, to the processing of Personal Data for legitimate interests, and to (vi) request portability of Personal Data that Participant has actively or passively provided to the Company, where the processing of such Personal Data is based
on consent or a contractual agreement with Participant and is carried out by automated means. In case of concerns, Participant also has the right to (vii) lodge a complaint with the competent local data protection authority. To receive
additional information regarding Participant’s rights, raise any other questions regarding the practices described in this Agreement or to exercise his or her rights, Participant should contact his or her local human resources representative.
Contractual Requirement. Participant’s provision of Personal Data and its processing as described above is
required for the performance of the Company’s obligations pursuant to the Plan and a condition to Participant’s ability to participate in the Plan. Participant understands that, as a consequence of Participant’s refusing to provide Personal
Data, the Company may not be able to allow Participant to participate in the Plan, grant Performance Restricted Stock Units to Participant or administer or maintain such Performance Restricted Stock Units. However, Participant’s participation in
the Plan and his or her acceptance of this Agreement are purely voluntary. While Participant will not receive Performance Restricted Stock Units if he or she decides against participating in the Plan or providing Personal Data as described
above, Participant’s career and salary will not be affected in any way. For more information on the consequences of the refusal to provide Personal Data, Participant may contact his or her local human resources representative.
AUSTRALIA
Nature of Plan. The Plan and the Agreement is a plan to which Subdivision 83A-C of the Income Tax Assessment Act 1997 (Cth) (the “Act”) applies (subject to the
conditions in the Act).
Securities Law Information. The offer of the Performance Restricted Stock Units is being made under Division 1A Part 7.12 of the Corporations Act 2001 (Cth).
If Participant offers Shares acquired under the Plan for sale to a person or entity resident in Australia, the offer may be subject to disclosure requirements under Australian law. Participant should obtain legal advice on any disclosure
obligations prior to making any such offer.
Exchange Control Information. Exchange control reporting is
required for cash transactions exceeding AUD10,000 and for international fund transfers. If an Australian bank is assisting with the transaction, the bank will file the report on the Participant’s behalf.
BELGIUM
Foreign Asset/Account Reporting Information. Participant is required to report any securities (e.g., Shares acquired
under the Plan) or bank accounts established outside of Belgium on his or her annual tax return. In a separate report, Belgian residents are also required to provide the National Bank of Belgium with the
account details of any such foreign accounts (including the account number, bank name and country in which any such account was opened). This report, as well as additional information on how to complete it, can be found on the website of the
National Bank of Belgium, www.nbb.be, under Kredietcentrales / Centrales des crédits caption. Participant should consult a personal tax advisor with respect to the applicable reporting obligations.
Annual Securities Accounts Tax. An annual securities accounts tax may be payable if the total value of securities held in a Belgian or foreign securities
account (e.g., Shares acquired under the Plan) exceeds a certain threshold on four reference dates within the relevant reporting period (i.e., December 31, March 31, June 30 and September 30). In such case, the tax will be due on the value of
the qualifying securities held in such account. Participant should consult with a personal tax or financial advisor for additional details on Participant’s obligations with respect to the annual securities account tax.
CANADA
Performance Restricted Stock Units Only Payable in Shares. Notwithstanding any discretion in the Plan, the Performance Restricted Stock Units will be settled in
Shares only. The grant of Performance Restricted Stock Units does not provide any right for Participant to receive a cash payment.
Securities Law Information. Participant acknowledges and agrees that he or she will sell Shares acquired through participation in the Plan only outside of
Canada through the facilities of a stock exchange on which the Shares are listed. The Shares are currently listed on the New York Stock Exchange in the United States.
Foreign Asset/Account Reporting Information. Participant is required to report any specified foreign property
(including Shares) annually on Form T1135 (Foreign Income Verification Statement) if the total cost of Participant’s specified foreign property exceeds C$100,000 at any time during the year. The form must be filed by April 30th of the following
year. Specified foreign property includes Shares acquired under the Plan and may include Performance Restricted Stock Units. The Performance Restricted Stock Units must be reported‒generally at a nil cost‒if the C$100,000 cost threshold is
exceeded because of other foreign property Participant holds. If Shares are acquired, their cost generally is the adjusted cost base (“ACB”) of the Shares. The ACB would normally equal the fair market value of the Shares at vesting for
Performance Restricted Stock Units, but if Participant owns other shares, this ACB may have to be averaged with the ACB of the other shares. It is Participant’s responsibility to comply with applicable reporting obligations.
The following provisions apply if Participant is resident in Quebec:
Data Privacy. Participant hereby authorizes the Company, the Employer and their representatives, including any broker(s) designated by the Company to discuss
with and obtain all relevant information from all personnel, professional or not, involved in the administration and operation of the Plan. Participant further authorizes the Company and its Subsidiaries to disclose and discuss the Plan with
their advisors. Participant further authorizes the Company and its Subsidiaries to record such information and to keep such information in the his or her employee file. Participant acknowledges and agree that Participant’s personal information,
including any sensitive personal information, may be transferred or disclosed outside the province of Quebec, including to the U.S. If applicable, Participant also acknowledges and authorizes the Company, the Company’s Subsidiaries, the
administrator of the Plan and any third party brokers/administrators that are assisting the Company with the operation and administration of the Plan to use technology for profiling purposes and to make automated decisions that may have an impact
on Participant or the administration of the Plan.
Translation. Participant understands that they are entitled to receive the Agreement, the Plan and potentially other documents related to the Performance
Restricted Stock Units translated into French, and if so requested, the Company will use its best efforts to provide the French translation as expediently as possible. If Participant does not request a French translation, it is understood that
Participant prefers to receive the documents related to the Plan in the English language and agree that the English documents govern the Performance Restricted Stock Units.
Traduction. Participant comprend qu’il a le droit de recevoir l’accord, le plan et potentiellement d’autres documents liés aux unités
d’actions restreintes traduits en français, et si cela est demandé, la Société fera de son mieux pour fournir la traduction française aussi rapidement que possible. Si Participant ne demande pas de traduction en français, il est entendu qu’il
préfère recevoir les documents relatifs au Plan en langue anglaise et accepte que les documents en anglais régissent les Unités d’actions restreintes.
CHINA
The following provisions apply only to Participants who are subject to exchange control restrictions imposed by the State Administration of Foreign Exchange (“SAFE”), as determined by the Company in its sole
discretion:
Settlement of Performance Restricted Stock Units. This provision supplements Section 1.4 of the Agreement:
The Performance Restricted Stock Units will only vest if and when the Company has completed the registration of the Plan with SAFE and provided such registration remains effective. If the Company is unable to
complete the registration or maintain the registration, the settlement of the Performance Restricted Stock Units may be delayed. Shares issued to Participant under the Plan must be maintained in an account with Fidelity or such other broker as may
be designated by the Company until the Shares are sold through that broker. Due to local regulatory requirements, Participant agrees that the Company may force the sale of any Shares obtained at vesting. The sale may occur immediately upon
vesting or within any other time frame as the Company determines to be necessary or advisable for legal or administrative reasons.
Furthermore, due to regulatory requirements, Participant acknowledges and agrees that Participant must sell any Shares issued to Participant upon vesting of the Performance Restricted Stock Units as soon as
practicable following the termination of Participant’s Continuous Service and in no event later than six months following the termination of Participant’s Continuous Service, or within any other such time frame as may be required by SAFE.
Participant agrees that if Participant continues to hold any of such Shares after this time, the Shares will be sold by the Company’s designated broker on Participant’s behalf at the instruction of the Company. Therefore, by accepting the
Performance Restricted Stock Units, Participant understands and agrees that the Company is authorized to, and may in its sole discretion, instruct its designated broker to assist with the mandatory sale of Shares (on Participant’s behalf pursuant
to this authorization) and that Participant expressly authorizes the Company’s designated broker to complete the sale of such Shares. Participant acknowledges that the Company’s designated broker is under no obligation to arrange for the sale of
the Shares at any particular price. Upon the sale of the Shares, the proceeds, less any Tax-Related Items and brokerage fees or commissions will be remitted to Participant pursuant to the procedures described in the “Exchange Control Information”
section below.
Exchange Control Information. Participant understands and agrees that, to facilitate compliance with exchange control requirements, Participant will be required
to immediately repatriate to China the cash proceeds from the sale of the Shares issued upon the vesting of the Performance Restricted Stock Units. Participant further understands that, under local law, such repatriation of the cash proceeds will
be effectuated through a special exchange control account established by the Company or its Subsidiary in China, and Participant hereby consents and agrees that the proceeds from the sale of Shares acquired under the Plan may be transferred to
such special account prior to being delivered to Participant. The Company may deliver the proceeds to Participant in U.S. dollars or local currency at the Company’s discretion. If the proceeds are paid in U.S. dollars, Participant understands
that he or she will be required to set up a U.S. dollar bank account in China so that the proceeds may be deposited into this account. If the proceeds are converted to local currency, there may be delays in delivering the proceeds to
Participant. Participant agrees to bear the risk of any currency fluctuation between the time the Shares are sold, either through voluntary sale or through a mandatory sale arranged by the Company, or proceeds are otherwise realized under the
Plan and the time such proceeds are distributed to Participant through the special exchange control account.
Participant further agrees to comply with any other requirements that may be imposed by the Company in the future to facilitate compliance with exchange control requirements in China.
DENMARK
Danish Stock Option Act. Participant acknowledges that they have received an Employer Statement in Danish which sets forth additional terms of the Performance
Restricted Stock Units, to the extent that the Danish Stock Option Act applies to the Performance Restricted Stock Units.
Foreign Asset/Account Reporting Information. Danish residents who establish an account holding Shares or an account holding cash outside Denmark must report the
account to the Danish Tax Administration as part of their annual tax return under the section related to foreign affairs and income. The form which should be used in this respect can be obtained from a local bank. Participant should consult
with Participant’s personal advisor(s) regarding any personal foreign asset/foreign account tax obligations Participant may have in connection with Participant’s participation in the Plan.
GERMANY
Exchange Control Information. Cross-border payments in excess of €12,500 must be reported monthly to the German Federal Bank (Bundesbank). If Participant makes
or receives a payment that exceeds €12,500 (including if Participant acquires Shares with a value in excess of this amount under the Plan or sell Shares via a foreign broker, bank or service provider and receive proceeds in excess of this amount)
and/or if the Company withholds or sells Shares with a value in excess of this amount to cover Tax-Related Items, Participant must report the payment and/or the value of the Shares withheld or sold to Bundesbank. Such reports must be filed either
electronically using the “General Statistics Reporting Portal” (Allgemeine Meldeportal Statistik) available via the Bundesbank’s website (www.bundesbank.de) or by such other method as is permitted or
required by Bundesbank. The report must be submitted monthly or within such timing as is permitted or required by Bundesbank.
Foreign Asset/Account Reporting Information. German residents holding Shares must notify their local tax office if the acquisition of Shares under the Plan
leads to a so-called qualified participation at any point during the calendar year. A qualified participation is attained only in the unlikely event (i) Participant owns at least 1% of the Company and the value of the Shares acquired exceeds
€150,000, or (ii) Participant holds Shares exceeding 10% of the total capital of the Company.
HONG KONG
Performance Restricted Stock Units Only Payable in Shares. Notwithstanding any discretion in the Plan, the Performance Restricted Stock Units will be settled in
Shares only. The grant of Performance Restricted Stock Units does not provide any right for Participant to receive a cash payment.
Restriction on Sale of Shares. Shares received under the Plan are accepted as a personal investment. Should any portion of the Performance Restricted Stock
Units vest within six months of the Grant Date, Participant agrees that Participant will not dispose of the Shares acquired at vesting prior to the six-month anniversary of the Grant Date.
Securities Law Information. Warning: The contents of this document have not been reviewed by any regulatory authority in
Hong Kong. Participant is advised to exercise caution in relation to the offer. If Participant is in any doubt about any of the contents of the Agreement, including this Appendix, or the Plan, Participant should obtain independent professional
advice. The Performance Restricted Stock Units and any Shares issued pursuant to the grant do not constitute a public offering of securities under Hong Kong law and are available only to employees of the Company. The Agreement, including this
Appendix, the Plan and other incidental communication materials have not been prepared in accordance with and are not intended to constitute a “prospectus” for a public offering of securities under the applicable securities legislation in Hong
Kong. The Performance Restricted Stock Units and any related documentation are intended only for the personal use of each eligible employee of the Company and may not be distributed to any other person.
HUNGARY
There are no country-specific provisions.
INDONESIA
Language Consent and Notification. A translation of the documents related to this grant into Bahasa Indonesia can be provided to Participant upon request to
hroperations@nuskin.com. By accepting the grant, Participant (i) confirms having read and understood the documents relating to this grant (i.e., the Plan and the Agreement) which were provided in the
English language, (ii) accepts the terms of those documents accordingly, and (iii) agrees not to challenge the validity of this document based on Law No. 24 of 2009 on National Flag, Language, Coat of Arms and National Anthem or the implementing
Presidential Regulation (when issued).
Language Consent and Notification. Terjemahan dari dokumen-dokumen terkait dengan pemberian ini ke Bahasa Indonesia dapat disediakan untuk anda berdasarkan
permintaan kepada hroperations@nuskin.com. Dengan menerima hibah, anda (i) anda mengkonfirmasi bahwa anda telah membaca dan mengerti isi dokumen yang terkait dengan pemberian ini yang disediakan untuk anda dalam bahasa Inggris, (ii) Anda
menerima syarat dari dokumen-dokumen tersebut, dan (iii) anda setuju bahwa anda tidak akan mengajukan keberatan atas keberlakuan dokumen ini berdasarkan Undang-Undang No. 24 tahun 2009 tentang Bendera, Bahasa dan Lambang Negara serta Lagu
Kebangsaan atau Peraturan Presiden pelaksana (ketika diterbitkan).
Exchange Control Information. If Participant remits proceeds from the sale of Shares or the receipt of any dividends paid on such Shares into Indonesia, the
Indonesian Bank through which the transaction is made will submit a report on the transaction to the Bank of Indonesia for statistical reporting purposes. For transactions of US$10,000 or more, a description of the transaction must be included
in the report. Although the bank through which the transaction is made is required to make the report, Participant must complete a “Transfer Report Form.” The Transfer Report Form should be provided to Participant by the bank through which the
transaction is made.
In addition, Participant must provide the Bank of Indonesia with information on foreign exchange activities via a monthly report submitted online through the Bank of Indonesia’s website. The report is due no later
than the 15th day of the month following the month in which the activity occurred.
Participant should consult with Participant’s personal advisor(s) regarding any personal legal, regulatory or foreign exchange obligations Participant may have in connection with Participant’s participation in the
Plan.
Foreign Asset/Account Reporting Information. Indonesian residents have the obligation to report worldwide assets (including foreign accounts and Shares acquired
under the Plan) in their annual individual income tax return.
JAPAN
Exchange Control Information. If Participant acquires Shares valued at more than ¥100,000,000 in a single transaction, Participant must file a Securities
Acquisition Report with the Ministry of Finance through the Bank of Japan within 20 days of the purchase of the Shares. Participant should consult with Participant’s personal advisor(s) regarding any personal legal, regulatory or foreign exchange
obligations Participant may have in connection with Participant’s participation in the Plan.
Foreign Asset/Account Reporting Information. Participant will be required to report details of any assets (including any Shares acquired under the Plan) held
outside of Japan as of December 31st of each year, to the extent such assets have a total net fair market value exceeding ¥50,000,000. Such report will be due by March 15th of the following year. Participant should
consult with his or her personal tax advisor as to whether the reporting obligation applies to Participant and whether Participant will be required to report details of any outstanding Performance Restricted Stock Units or Shares held by
Participant in the report.
KOREA
Domestic Broker Requirement for Selling Shares. Korean residents are not permitted to sell foreign securities (including Shares) through non-Korean brokers
(such as Fidelity Stock Plan Services, LLC) or deposit funds resulting from the sale of Shares in an account with an overseas financial institution. If Participant wishes to sell Shares acquired under the Plan, Participant may be required to
transfer the Shares to a domestic investment broker in Korea and to effect the sale through such broker. Participant is solely responsible for engaging the domestic broker in Korea, and non-compliance with the requirement to sell Shares through a
domestic broker can result in significant penalties.
However, on December 29, 2023, the Korean Financial Services Commission issued an advance notice of legislative action that, if adopted as drafted, would allow Korean residents to dispose of overseas-listed
securities without using a Korean-licensed broker and deposit proceeds from the sale with an overseas financial institution. Until the legislation is adopted, the restrictions described above remain applicable to foreign-listed securities,
including the Shares acquired under the Plan. Participant should consult with their personal advisor(s) regarding any personal legal, regulatory or foreign exchange obligations Participant may have in connection with participation in the Plan.
Foreign Asset/Account Reporting Information. Korean residents must declare all foreign financial accounts (e.g., non-Korean bank accounts, brokerage accounts)
to the Korean tax authority and file a report with respect to such accounts in June of the following year if the monthly balance of such accounts exceeds KRW 500 million (or an equivalent amount in foreign currency) on any month-end date during a
calendar year. Participant should consult with Participant’s personal advisor(s) regarding any personal foreign asset/foreign account tax obligations Participant may have in connection with Participant’s participation in the Plan.
MALAYSIA
Director Notification Information. If Participant is a director of a Malaysian Subsidiary, Participant is subject to certain notification requirements under the
Malaysian Companies Act, 1965. Among these requirements is an obligation to notify the Malaysian Subsidiary in writing when Participant receives an interest (e.g., Performance Restricted Stock Units) in
the Company or any related companies. In addition, Participant must notify the Malaysian Subsidiary when Participant sells Shares of the Company or any related company (including when Participant sells Shares acquired under the Plan). These
notifications must be made within fourteen days of acquiring or disposing of any interest in the Company or any related company.
Data Privacy Notice and Consent. This provision replaces in its entirety Section 10 of the Agreement:
Participant hereby explicitly and unambiguously consents to the collection, use and transfer, in electronic or other form, of Participant’s personal data, as described in
this Agreement and any other Performance Restricted Stock Unit grant materials by and among, as applicable, the Employer, the Company and Subsidiaries for the exclusive purpose of implementing, administering and managing Participant’s
participation in the Plan.
Participant understands that the Employer, the Company and Subsidiaries may hold certain personal information about Participant, including, but not limited to, Participant’s
name, home address and telephone number, date of birth, social insurance number or other identification number, salary, nationality, job title, any Shares or directorships held in the Company, details of all Performance Restricted Stock Units
or any other entitlement to Shares awarded, canceled, exercised, vested, unvested or outstanding in Participant’s favor, for the exclusive purpose of implementing, administering and managing the Plan (“Data”). The Data is supplied by the
Employer and also by me through information collected in connection with the Agreement and the Plan.
Peserta dengan ini secara eksplisit dan tanpa sebarang keraguan mengizinkan pengumpulan, penggunaan dan pemindahan, dalam bentuk elektronik atau lain-lain, data peribadi
Peserta seperti yang diterangkan dalam Perjanjian dan bahan-bahan geran Unit Saham Terbatas yang lain oleh dan di antara, seperti yang berkenaan, Majikan, Syarikat dan Anak-anak Syarikat untuk tujuan yang eksklusif bagi melaksanakan, mentadbir
dan menguruskan penyertaan Peserta di dalam Pelan.
Peserta memahami bahawa Majikan, Syarikat and Anak-anak Syarikat mungkin memegang maklumat peribadi tertentu tentang Peserta, termasuk, tetapi tidak terhad kepada, nama
Peserta, alamat rumah dan nombor telefon, tarikh lahir, nombor insurans sosial atau nombor pengenalan lain, gaji, kewarganegaraan, jawatan, apa-apa Syer atau jawatan pengarah yang dipegang dalam Syarikat, butir-butir semua Unit Saham Terbatas,
atau apa-apa hak lain atas Syer yang dianugerahkan, dibatalkan, dilaksanakan, terletak hak, tidak diletak hak ataupun yang belum dijelaskan bagi faedah Peserta, untuk tujuan eksklusif bagi melaksanakan, mentadbir dan menguruskan Pelan tersebut
(“Data”). Data tersebut dibekalkan oleh Majikan dan juga oleh saya berkenaan dengan Perjanjian dan Pelan.
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Participant understands that Data will be transferred to Fidelity, or such other stock plan service provider as may be selected by the Company in the future, which is
assisting the Company with the implementation, administration and management of the Plan. Participant understands that the recipients of the Data may be located in the United States or elsewhere, and that the recipients’ country (e.g., the
United States) may have different data privacy laws and protections than Participant’s country. Participant understands that if he or she resides outside the United States, he or she may request a list with the names and addresses of any
potential recipients of the Data by contacting his or her local human resources representative at +60-03-2170-7700. Participant authorizes the Company, Fidelity and any other possible recipients which may assist the Company (presently or in the
future) with implementing, administering and managing the Plan to receive, possess, use, retain and transfer the Data, in electronic or other form, for the purposes of implementing, administering and managing Participant’s participation in the
Plan, including any transfer of such Data as may be required to a broker, escrow agent or other third party with whom the Shares received upon vesting of Performance Restricted Stock Units may be deposited. Participant understands that Data will
be held only as long as is necessary to implement, administer and manage his or her participation in the Plan. Participant understands that if he or she resides outside the United States, he or she may, at any time, view Data, request additional
information about the storage and processing of Data, require any necessary amendments to Data or refuse or withdraw the consents herein, in any case without cost, by contacting in writing his or her local human resources representative.
Further, Participant understands that he or she is providing the consents herein on a purely voluntary basis. If Participant does not consent, or if Participant later seeks to revoke his or her consent, his or her employment status or service
and career with the Employer will not be adversely affected; the only adverse consequence of refusing or withdrawing Participant’s consent is that the Company may not be able to grant Participant Performance Restricted Stock Units or other equity
awards or administer or maintain such awards. Therefore, Participant understands that refusing or withdrawing his or her consent may affect Participant’s ability to participate in the Plan. For more information on the consequences of his or her
refusal to consent or withdrawal of consent, Participant understands that he or she may contact his or her local human resources representative.
Peserta memahami bahawa Data ini akan dipindahkan kepada Fidelity, atau mana-mana pembekal perkhidmatan pelan saham lain sebagaimana yang dipilih oleh Syarikat pada masa
depan, yang membantu Syarikat dengan pelaksanaan, pentadbiran dan pengurusan Pelan. Peserta memahami bahawa penerima-penerima Data mungkin berada di Amerika Syarikat atau mana-mana tempat lain, dan bahawa negara penerima-penerima (contohnya,
Amerika Syarikat) mungkin mempunyai undang-undang privasi data dan perlindungan yang berbeza daripada negara Peserta. Peserta memahami bahawa sekiranya Peserta menetap di luar Amerika Syarikat, Peserta boleh meminta satu senarai yang mengandungi
nama-nama dan alamat-alamat penerima-penerima Data yang berpotensi dengan menghubungi wakil sumber manusia tempatan peserta di +60-03-2170-7700. Peserta memberi kuasa kepada Syarikat, Fidelity dan mana-mana penerima-penerima kemungkinan lain
yang mungkin akan membantu Syarikat (pada masa sekarang atau pada masa depan) dengan melaksanakan, mentadbir dan menguruskan Pelan untuk menerima, memiliki, menggunakan, mengekalkan dan memindahkan Data, dalam bentuk elektronik atau lain-lain,
bagi tujuan-tujuan untuk melaksanakan, mentadbir dan menguruskan penyertaan Peserta di dalam Pelan, termasuk segala pemindahan Data tersebut sebagaimana yang dikehendaki kepada broker, egen eskrow atau pihak ketiga dengan siapa Saham diterima
semasa peletakhakan Unit Saham Terbatas mungkin didepositkan. Peserta memahami bahawa Data hanya akan disimpan selagi ia adalah diperlukan untuk melaksanakan, mentadbir, dan menguruskan penyertaan peserta dalam Pelan. Peserta memahami bahawa
sekiranya peserta menetap di luar Amerika Syarikat, peserta boleh, pada bila-bila masa, melihat Data, meminta maklumat tambahan mengenai penyimpanan dan pemprosesan Data, meminta bahawa pindaan-pindaan dilaksanakan ke atas Data atau menolak atau
menarik balik persetujuan dalam ini, dalam mana-mana kes, tanpa kos, dengan menghubungi secara bertulis wakil sumber manusia tempatan. Selanjutnya, Peserta memahami bahawa peserta memberikan persetujuan di sini secara sukarela semata-mata.
Sekiranya Peserta tidak bersetuju, atau sekiranya Peserta kemudian membatalkan persetujuannya, status pekerjaan atau perkhidmatan dan kerjaya Peserta dengan Majikan tidak akan terjejas; satu-satunya akibat buruk sekiranya Peserta tidak bersetuju
atau menarik balik persetujuan Peserta adalah bahawa Syarikat tidak akan dapat memberikan Unit Saham Terbatas atau anugerah ekuiti lain atau mentadbir atau mengekalkan anugerah-anugerah tersebut kepada Peserta. Oleh itu, Peserta memahami bahawa
keengganan atau penarikan balik persetujuan peserta boleh menjejaskan keupayaan Peserta untuk mengambil bahagian dalam Pelan. Untuk maklumat lebih lanjut mengenai akibat-akibat keengganan Peserta untuk memberikan keizinan atau penarikan balik
keizinan, Peserta memahami bahawa Peserta boleh menghubungi wakil sumber manusia tempatan.
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NETHERLANDS
There are no country-specific provisions.
PHILIPPINES
Securities Law Information. This offering is subject to exemption from the requirements of securities registration with the Philippines Securities and Exchange
Commission, under Section 10.1(k) of the Philippine Securities Regulation Code.
THE SECURITIES BEING OFFERED OR SOLD HAVE NOT BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION UNDER THE SECURITIES REGULATION CODE. ANY FURTHER OFFER OR SALE THEREOF IS SUBJECT TO REGISTRATION
REQUIREMENTS UNDER THE CODE UNLESS SUCH OFFER OR SALE QUALIFIES AS AN EXEMPT TRANSACTION.
For further information on risk factors impacting the Company’s business that may affect the value of the Shares, Participant may refer to the risk factors discussion in the Company’s Annual Report on Form 10-K and
Quarterly Reports on Form 10-Q, which are filed with the U.S. Securities and Exchange Commission and are available online at www.sec.gov, as well as on the Company’s website at http://ir.nuskin.com. In addition, Participant may receive, free of
charge, a copy of the Company’s Annual Report, Quarterly Reports or any other reports, proxy statements or communications distributed to the Company’s stockholders by contacting Investor Relations Department at 75 West Center Street, Provo, Utah
84601.
Participant acknowledges he or she is permitted to dispose or sell Shares acquired under the Plan provided the offer and resale of such shares takes place outside the Philippines through the facilities of a stock
exchange on which the Shares are listed. The Shares are currently listed on the New York Stock Exchange in the United States of America.
SINGAPORE
Sale Restriction. Participant agrees that any Shares acquired pursuant to the Performance Restricted Stock Units will not be offered for sale in
Singapore prior to the six-month anniversary of the Grant Date, unless such offer or sale is made pursuant to the exemptions under Part XIII Division (1) Subdivision (4) (other than section 280) of the Securities and Futures Act (Chapter 289,
2006 Ed.) (“SFA”), or pursuant to, and in accordance with the conditions of, any other applicable provisions of the SFA.
Securities Law Information. The grant of the Performance Restricted Stock Units is made pursuant to the “Qualifying Person” exemption under section 273(1)(f) of
the SFA and is not made to Participant with a view of the Performance Restricted Stock Units being subsequently offered for sale to any other party. The Plan has not been lodged or registered as a prospectus with the Monetary Authority of
Singapore and hence, statutory liability under the SFA in relation to the content of prospectuses will not apply. Participant should note that the Award is subject to section 257 of the SFA and Participant will not be able to make (i) any
subsequent sale of the Shares in Singapore or (ii) any offer of such subsequent sale of the Shares subject to the Award in Singapore, unless such sale or offer is made (a) more than six months after the Grant Date or (b) pursuant to the
exemptions under Part XIII Division (1) Subdivision (4) (other than section 280) of the SFA (Chapter 289, 2006 Ed.) or pursuant to, and in accordance with the conditions of, any other applicable provisions of the SFA.
Director Notification Requirement. Directors, associate directors and shadow directors of a Singapore Subsidiary are subject to certain notification
requirements under the Singapore Companies Act. The directors, associate directors and shadow directors must notify the Singapore Subsidiary in writing of an interest (e.g., Performance Restricted Stock
Units, Shares, etc.) in the Company or any related companies within two business days of (i) its acquisition or disposal, (ii) any change in a previously disclosed interest (e.g., when the Shares are
sold), or (iii) becoming a director, associate director or shadow director.
TAIWAN
Data Privacy Consent. Participant hereby acknowledges that he or she has read and understood the terms regarding
collection, processing and transfer of Data contained in Section 10 of the Agreement and by participating in the Plan, Participant agrees to such terms. In this regard, upon request of the Company or the Employer, Participant agrees to provide
an executed data privacy consent form to the Employer or the Company (or any other agreements or consents that may be required by the Employer or the Company) that the Company and/or the Employer may deem necessary to obtain under the data
privacy laws in Participant’s country, either now or in the future. Participant understands he or she will not be able to participate in the Plan if Participant fails to execute any such consent or agreement.
Securities Law Information. The Performance Restricted Stock Units and the Shares to be issued pursuant to the Plan are available only to employees of the
Company and its Subsidiaries. The grant of the Performance Restricted Stock Units does not constitute a public offer of securities by a Taiwanese company.
Exchange Control Information. Participant may remit foreign currency (including proceeds from the sale of Shares or the receipt of any dividends paid on such
Shares) into or out of Taiwan up to US$5,000,000 per year without special permission. If the transaction amount is TWD500,000 or more in a single transaction, Participant must submit a Foreign Exchange Transaction Form to the remitting bank and
provide supporting documentation to the satisfaction of the remitting bank.
THAILAND
Exchange Control Information. If Participant receives proceeds from the sale of Shares or cash dividends in relation to the Shares in excess of US$1,000,000 in
a single transaction, Participant must immediately repatriate the funds to Thailand (or utilize such funds offshore for permissible purposes) and convert the funds to Thai Baht within 360 days of repatriation or deposit the funds in an
authorized foreign exchange account in Thailand. Participant is also required to provide details of the transaction (i.e., identification information and purpose of the transaction) to the receiving bank.
If Participant does not repatriate such funds and utilizes them offshore for permissible purposes (i.e., purposes not listed in the negative list prescribed by the Bank of Thailand), Participant must obtain a waiver
of the repatriation requirement from a commercial bank in Thailand by submitting an application and supporting documents evidencing that such funds will be utilized offshore for permissible purposes.
Participant should consult with Participant’s personal advisor(s) regarding any personal legal, regulatory or foreign exchange obligations Participant may have in connection with Participant’s participation in the
Plan.
The Performance Restricted Stock Units shall be divided into [*] equal tranches. The percentage of each respective tranche that shall vest shall be determined as described below. Such percentage of each tranche
shall vest on [*].
[Performance Vesting Provisions]
SCHEDULE B
DENMARK EMPLOYER STATEMENT
SÆRLIG MEDDELELSE TIL MEDARBEJDERE I DANMARK
ARBEJDSGIVERERKLÆRING
I henhold til § 3, stk. 1, i lov om brug af køberet eller tegningsret mv. i ansættelsesforhold (“Aktieoptionsloven”) er medarbejderen (“Medarbejderen”) berettiget til i en særskilt skriftlig erklæring at modtage
følgende oplysninger vedrørende incitamentsordningen Third Amended and Restated 2010 Omnibus Incentive Plan (“Planen”) hos Nu Skin Enterprises, Inc. (“Selskabet”).
Denne erklæring indeholder kun de oplysninger, der er nævnt i Aktieoptionsloven, mens de øvrige vilkår og betingelser for Medarbejderens tildeling af ” Performance Restricted Stock Units” er nærmere beskrevet i
Planen, “Performance Restricted Stock Unit Agreement” (“Aftalen”) og det øvrige tildelingsmateriale, som er blevet udleveret. Begreber, der står med stort begyndelsesbogstav i denne Arbejdsgivererklæring, men som ikke er defineret heri, har
samme betydning som de begreber, der er defineret i Planen eller Aftalen.
1. Tidspunkt for tildeling af den vederlagsfri ret til at modtage aktier mod opfyldelse af visse betingelser
Tidspunktet for tildelingen af “Performance Restricted Stock Units” er den dato, hvor Bestyrelsens Vederlagsudvalg (“Udvalget”) godkendte tildelingen.
2. Kriterier og betingelser for tildeling af retten til senere at modtage aktier
Kun Selskabets Medarbejdere, bestyrelsesmedlemmer og konsulenter kan deltage i Planen. Tildeling af ” Performance Restricted Stock Units” i henhold til Planen sker efter Selskabets eget skøn og har til formål at
give Selskabet og dets datterselskaber mulighed for at tiltrække og fastholde udvalgte medarbejdere, som forventes at bidrage til Selskabets success og opnå langsigtede mål til gavn for Selskabets aktionærer. Medarbejderen har ikke nogen ret til
eller noget krav på fremover at få tildelt “Performance Restricted Stock Units”.
3. Modningstidspunkt eller -periode
Dine “Performance Restricted Stock Units” optjenes over et antal år som fastsat i Aftalen. Dine “Performance Restricted Stock Units”r vil ved optjeningen blive konverteret til et tilsvarende antal ordinære aktier i
Selskabet. Optjeningen kan accelerere under visse andre omstændigheder som beskrevet i Aftalen.
4. Udnyttelseskurs
Der betales ingen udnyttelseskurs ved modning af “Performance Restricted Stock Units” eller udstedelse af aktier til Medarbejderen.
5. Medarbejderens retsstilling i forbindelse med fratræden
Såfremt du fratræder din stilling, vil dine “Performance Restricted Stock Units” blive behandlet i overensstemmelse med ophørsbestemmelserne i Aftalen, der kan opsummeres til følgende: Undtagen i tilfælde af en
“Change in Control” (som beskrevet i Aftalen) hvis dit ansættelsesforhold bringes til ophør, bortfalder dine ikke-optjente “Performance Restricted Stock Units”.
6. Økonomiske aspekter ved at deltage i Planen
Tildelingen af “Performance Restricted Stock Units” har ingen umiddelbare økonomiske konsekvenser for Medarbejderen. Værdien af “Performance Restricted Stock Units” indgår ikke i beregningen af feriepenge,
pensionsbidrag eller andre lovpligtige, vederlagsafhængige ydelser.
Ordinære aktier er finansielle instrumenter. Den fremtidige værdi af de underliggende aktier i forbindelse med “Performance Restricted Stock Units” kendes ikke og kan ikke forudsiges med sikkerhed.
Exhibit 10.13
NU SKIN ENTERPRISES, INC.
EXECUTIVE SEVERANCE POLICY
Amended and Restated Effective as of January 4, 2023
TABLE OF CONTENTS
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PAGE
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SECTION 1.
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DEFINITIONS
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1
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SECTION 2.
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TERM OF POLICY
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5
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SECTION 3.
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TERMINATION BY COMPANY WITHOUT CAUSE OR BY EXECUTIVE FOR GOOD REASON
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5
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SECTION 4.
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TERMINATION BY REASON OF DEATH OR DISABILITY
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7
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SECTION 5.
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TERMINATION BY THE COMPANY FOR CAUSE
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7
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SECTION 6.
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VOLUNTARY TERMINATION WITHOUT GOOD REASON; RETIREMENT
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SECTION 7.
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SEPARATION AND RELEASE AGREEMENT
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8
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SECTION 8.
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RESTRICTIVE COVENANTS
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SECTION 9.
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COMPLIANCE WITH SECTION 409A
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SECTION 10.
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WITHHOLDING TAXES
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9
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SECTION 11.
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PARACHUTE PAYMENTS
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SECTION 12.
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ADMINISTRATION
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10
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SECTION 13.
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AMENDMENT AND TERMINATION
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10
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SECTION 14.
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OTHER PROVISIONS
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11
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| EXHIBIT A |
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| EXHIBIT B |
NU SKIN ENTERPRISES, INC.
EXECUTIVE SEVERANCE POLICY
This Nu Skin Enterprises, Inc. Executive Severance Policy (“Policy”) has been adopted by the Executive Compensation Committee (“Committee”) of the Board of Directors of the
Company to apply to selected Executives of the Company. Eligible Executives will be eligible for coverage under the Policy for the payment of severance benefits upon termination of employment under certain circumstances, subject to the
conditions set forth below. This Policy shall be effective as of the Effective Date as provided herein.
This Policy supersedes any prior plan, policy, agreement or practice involving the payment of severance benefits to eligible Executives. While the Policy is in effect, any severance benefits
provided to an eligible Executive must be paid pursuant to this Policy or pursuant to another express written agreement between Company and the eligible Executive entered into after the effective date of this Policy.
| Section 1. |
Definitions.
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As used herein, the following terms shall have the following respective meanings:
1.1 “Accrued Rights” shall have the meaning given in Section 3.3 hereof.
1.2 “Affiliate” shall mean an entity that directly or indirectly controls, is controlled by, or is under common control with Nu Skin Enterprises, Inc.
1.3 “Annual Target Bonus” means the aggregate Bonuses that Executive is eligible to earn for the incentive period(s) in the fiscal year in which Executive’s Date of Termination
occurs, assuming attainment of such corporate targets at the “target level” (100% performance level) and disregarding any individual performance targets and regardless of whether any such Bonus has already been paid, as shall be established by
the Committee for such fiscal year. For the avoidance of doubt, the Annual Target Bonus shall be determined assuming satisfaction of the aforementioned corporate targets, irrespective of whether such targets are actually achieved and whether
any Bonus for a period in the fiscal year has already been paid.
1.4 “Bonus” means the cash incentive bonuses payable to Executive under the Third Amended and Restated Nu Skin Enterprises, Inc. 2010 Omnibus Incentive Plan (as may be amended
from time to time), or such other or successor bonus program in which Executive participates from time to time.
1.5 “Base Salary” means the annual base salary in effect for the payroll period during which Executive’s employment is terminated. Bonuses, incentive pay and any taxable or
nontaxable fringe benefits or payments are not included in the calculation of Base Salary. Base Salary shall be determined before any deferrals to any qualified or nonqualified plans of the Company and before any reduction in salary that would
constitute Good Reason.
1.6 “Cause” means, subject to the conditions below, that Executive has engaged in any one of the following: (i) a material breach of this Policy, including but not limited to
a breach of Section 8 of this Policy, or the Company’s Employee Covenants Agreement attached hereto as Exhibit B; (ii) any willful violation by Executive of any material law or regulation applicable to the business of the Company or
any of its Affiliates; (iii) Executive’s conviction of, or a plea of guilty or nolo contendere to, a felony or any willful perpetration of common law fraud; or (iv) any other willful misconduct by Executive that is materially injurious to the
financial condition or business reputation of, or is otherwise materially injurious to, the Company or any of its Affiliates. For purposes of the foregoing, in determining whether a “material breach” has occurred, or whether there has been a
willful violation of a “material” law or regulation, the standard shall be a breach or violation that is, or will reasonably likely be, materially injurious to the financial condition or business reputation of, or is, or will reasonably
likely be, otherwise materially injurious to, the Company or any of its Affiliates, as determined by the Committee in its sole discretion.
1.7 “Change in Control” means the consummation of any of the following transactions effecting a change in ownership or control of the Company:
(i) During any 24-month period, individuals who, as of the beginning of such period, constitute the Board of Directors of the Company (the “Incumbent Directors”) cease for
any reason to constitute at least a majority of the Board of Directors of the Company, provided that any person becoming a director subsequent to the beginning of such period whose election or nomination for election was approved by a vote of
at least a majority of the Incumbent Directors then on the Board of Directors of the Company (either by a specific vote or by approval of the proxy statement of the Company in which such person is named as a nominee for director, without
written objection to such nomination) shall be an Incumbent Director; provided, however, that no individual initially elected or nominated as a director of the Company as a result of an actual or threatened election contest with respect to
directors or as a result of any other actual or threatened solicitation of proxies by or on behalf of any person other than the Board of Directors of the Company shall be deemed to be an Incumbent Director;
(ii) Any “person” (as such term is defined in the Securities Exchange Act of 1934, as amended (the “Exchange Act”) and as used in Sections 13(d)(3) and 14(d)(2) of the
Exchange Act) is or becomes a “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company representing 50% or more of the combined voting power of the Company’s then outstanding
securities eligible to vote for the election of the Board of Directors of the Company (“Company Voting Securities”); provided, however, that the event described in this paragraph (ii) shall not be deemed to be a Change in Control by
virtue of any of the following acquisitions: (A) by the Company or any subsidiary, (B) by any employee benefit plan (or related trust) sponsored or maintained by the Company or any subsidiary, (C) by any underwriter temporarily holding
securities pursuant to an offering of such securities, (D) pursuant to a Non-Qualifying Transaction, as defined in paragraph (iii), or (E) by any person of Company Voting Securities from the Company, if a majority of the Incumbent Directors
approves in advance the acquisition of beneficial ownership of 50% or more of Company Voting Securities by such person;
2
(iii) The consummation of a merger, consolidation, statutory share exchange or similar form of corporate transaction involving the Company or any of its subsidiaries that requires the
approval of the Company’s stockholders, whether for such transaction or the issuance of securities in the transaction (a “Business Combination”), unless immediately following such Business Combination: (A) more than 50% of the total
voting power of (x) the corporation resulting from such Business Combination (the “Surviving Corporation”), or (y) if applicable, the ultimate parent corporation that directly or indirectly has beneficial ownership of at least 90% of
the voting securities eligible to elect directors of the Surviving Corporation (the “Parent Corporation”), is represented by Company Voting Securities that were outstanding immediately prior to such Business Combination (or, if
applicable, is represented by shares into which such Company Voting Securities were converted pursuant to such Business Combination), and such voting power among the holders thereof is in substantially the same proportion as the voting power
of such Company Voting Securities among the holders thereof immediately prior to the Business Combination, (B) no person (other than any employee benefit plan (or related trust) sponsored or maintained by the Surviving Corporation or the
Parent Corporation), is or becomes the beneficial owner, directly or indirectly, of 50% or more of the total voting power of the outstanding voting securities eligible to elect directors of the Parent Corporation (or, if there is no Parent
Corporation, the Surviving Corporation) and (C) at least a majority of the members of the board of directors of the Parent Corporation (or, if there is no Parent Corporation, the Surviving Corporation) following the consummation of the
Business Combination were Incumbent Directors at the time of the Board of Directors of the Company’s approval of the execution of the initial agreement providing for such Business Combination (any Business Combination which satisfies all of
the criteria specified in (A), (B) and (C) above shall be deemed to be a “Non‑Qualifying Transaction”); or
(iv) The stockholders of the Company approve a plan of complete liquidation or dissolution of the Company or the consummation of a sale of all or substantially all of the Company’s
assets.
1.8 “Company” means Nu Skin Enterprises, Inc., a Delaware corporation.
1.9 “Code” means the Internal Revenue Code of 1986, as amended.
1.10 “Committee” means the Compensation and Human Capital Committee of the Board of Directors of the Company.
1.11 “Date of Termination” means the effective date of the relevant Executive’s termination.
1.12 “Disability” means a physical or mental impairment which, the Committee determines, after consideration and implementation of reasonable accommodations, precludes the
Executive from performing Executive’s essential job functions for a period longer than 3 consecutive months or a total of 120 days in any 12-month period.
1.13 “Effective Date” means, with respect to this amendment and restatement of the Policy, January 4, 2023, or such later date as determined by the Committee with respect to an
Executive. The original Effective Date of the Policy was March 8, 2018.
1.14 “Executive” means the executive employees of the Company who are eligible to participate in the Policy as set forth in Schedule A to this Policy, as it may be amended from
time to time. Schedule A may be amended at any time to add additional executive employees or to remove executive employees from eligibility to participate in this Policy as Executives.
3
1.15 “Good Reason” means Executive’s voluntary resignation for any of the following events that result in a material negative change to Executive: (i) without Executive’s
consent, a material reduction in the scope of Executive’s duties and responsibilities or the level of management to which Executive reports; (ii) without Executive’s consent, a reduction in Base Salary (other than an across-the-board
reduction of not more than 10% applicable to all senior executive officers); (iii) without Executive’s consent, a material reduction in Executive’s benefits in the aggregate (in terms of benefit levels, other than an across-the-board
reduction) from those provided to Executive under any employee benefit plan, program and practice in which only the Executives (and no other employees of the Company) participate, provided that such material reduction occurs within six months
immediately prior to or following the consummation of a Change in Control; (iv) without Executive’s consent, a relocation of Executive’s principal place of employment of more than 50 miles, (v) a material breach of any provision of this
Policy by the Company, or (vi) the failure of the Company to have a successor entity specifically assume this Policy within 10 business days after the Change in Control. Notwithstanding the foregoing, Good Reason shall only be found to exist
if Executive, not later than 90 days after the initial occurrence of an event deemed to give rise to a right to terminate for Good Reason, has provided 30 days written notice to the Company prior to Executive’s resignation indicating and
describing the event resulting in such Good Reason, and the Company does not cure such event (other than the event in clause (vi), which shall not be subject to cure) within 90 days following the receipt of such notice from Executive.
1.16 “Policy” means this Nu Skin Enterprises, Inc. Executive Severance Policy.
1.17 “Pro Rata Earned Bonus” means the pro-rata portion of the Executive’s earned bonus, if any, for each outstanding bonus cycle as of the date on which termination of employment
occurs, based upon attainment of such corporate targets, and disregarding any individual performance targets, as shall be established by the Committee for such bonus cycle (determined by multiplying the amount of the actual earned bonus that
would be payable for the bonus cycle by a fraction, the numerator of which is the number of days during the bonus cycle that the Executive is employed by the Company and the denominator of which is the full number of days in the bonus cycle);
provided, however, Executive shall not be entitled to a Pro Rata Earned Bonus for an annual bonus cycle if Executive’s termination date is earlier than March 31 of the year of termination.
1.18 “Termination” and “Terminate(s),” whether capitalized or not in this Policy, describes when an Executive is no longer employed by, and has no outstanding offer of
employment (including an offer that Executive has received and rejected) from, the Company or any Affiliate. In addition, the following shall not be treated as a termination that entitles Executive to rights and benefits under this Policy:
(i) an Executive’s termination of employment in connection with any merger, acquisition, sale or other disposition of the stock or assets of the Company or an Affiliate, if such Executive is offered or provided a position with a successor
entity (including either the purchaser or any subsidiary or affiliate of the purchaser); or (ii) any instance where an Executive is employed by the Company or an Affiliate and either (A) such entity ceases to be an Affiliate in connection
with any merger, acquisition, sale or other disposition of such entity, or (B) substantially all of such entity’s assets are sold. For the avoidance of doubt, this paragraph is not intended to override Executive’s “Good Reason” rights under
this Policy; if Executive would otherwise have Good Reason to terminate his or her employment as a result of the occurrence of any event described in (i) or (ii) above, Executive may still qualify for a “termination for Good Reason” under
this Policy.
4
| Section 2. |
Term of Policy.
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The term of this Policy shall begin on the Effective Date and shall continue in effect until modified or terminated by the Company pursuant to Section 13 hereof.
| Section 3. |
Termination by Company without Cause or by Executive for Good Reason.
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If the Company terminates Executive’s employment during the term of the Policy without Cause, or if Executive terminates his or her employment during the term of the Policy for Good Reason,
then, subject to Sections 7 and 8 below, Executive shall be entitled to the following rights and benefits under this Section 3:
3.1 Lump Sum Payment. Executive shall be entitled to either the lump sum payment described in Section 3.1(i) or the lump sum payment described in Section 3.2(ii).
(i) Termination without Cause or for Good Reason in Connection with Change in Control.
In the event that the Company terminates the employment of Executive during the term of the Policy without Cause or Executive terminates his or her employment during the term of the Policy
for Good Reason, and the applicable Date of Termination occurs (A) within six months prior to and in connection with a Change in Control (as determined by the Committee), or (B) within two years following such Change in Control, then the
Company will pay Executive a lump sum payment equal to the product of: (I) the sum of (A) Executive’s Base Salary as of the Date of Termination plus (B) the Annual Target Bonus; and (II) the Multiplier specified in Schedule A.
The lump sum amount described above in this Section 3.1(i) shall be paid in a lump sum payment within 30 days of the Date of Termination, but in no event earlier than the date the
Separation and Release Agreement described in Section 7 becomes effective, or later than March 15th of the year following the year in which the Date of Termination occurs. In addition, the Company shall pay Executive the Pro Rata Earned
Bonus. The Pro Rata Earned Bonus shall be paid to Executive at the same time as bonuses are paid to other executive officers of the Company for each outstanding bonus period that is considered part of the Pro Rata Earned Bonus, but in no
event earlier than the date the Separation and Release Agreement described in Section 7 becomes effective, or later than March 15th of the year following the year in which the Date of Termination occurs.
(ii) Other Termination without Cause or for Good Reason.
If the Company terminates Executive’s employment during the term of the Policy without Cause, or if Executive terminates his or her employment during the term of the Policy for Good Reason,
and Executive is not eligible for payment pursuant to Section 3.1(i), then the Company will pay Executive a lump sum payment equal to the product of: (A) Executive’s Base Salary as of the Date of Termination and (B) the Multiplier specified
in Schedule A.
5
The lump sum payment described above in this Section 3.1(ii) shall be paid in a lump sum payment within 30 days after the Date of Termination, but in no event earlier than the date the
Separation and Release Agreement described in Section 7 becomes effective, or later than March 15th of the year following the year in which the Date of Termination occurs. In addition, the Company shall pay Executive the Pro Rata Earned
Bonus. The Pro Rata Earned Bonus shall be paid to Executive at the same time as bonuses are paid to other executive officers of the Company for each outstanding bonus period that is considered part of the Pro Rata Earned Bonus, but in no
event earlier than the date the Separation and Release Agreement described in Section 7 becomes effective, or later than March 15th of the year following the year in which the Date of Termination occurs.
For the avoidance of doubt, Executive shall not be eligible for payment pursuant to this Section 3.1(ii) if Executive is eligible for payment pursuant to Section 3.1(i).
3.2 COBRA Payment. Executive shall be eligible for continuation of coverage for Executive and Executive’s eligible dependents under the Company’s group health plan(s) as
required under COBRA, at Executive’s sole expense at the applicable COBRA rate for such plan(s), subject to the following: the Company shall pay to Executive a lump sum payment equal to the aggregate employer and employee cost of 12 months
of health care continuation coverage under the Company’s medical, dental, prescription drug and vision care group health plans as in effect from time to time. The lump sum payment contemplated under this Section 3.2 shall be paid to
Executive as soon as administratively practicable following the Date of Termination, but in no event earlier than the date the Separation and Release Agreement described in Section 7 becomes effective, or later than March 15th of the year
following the year in which the Date of Termination occurs.
3.3 Accrued Rights. As soon as administratively practicable following the Date of Termination, or as otherwise provided below, the Company will pay or provide Executive
with (i) all accrued but unpaid base salary through the Date of Termination, (ii) any previously awarded but unpaid Bonus for a completed bonus cycle prior to the Date of Termination, payable at the time such Bonuses regularly are paid,
(iii) any unreimbursed business expenses that are reimbursable under the Company’s business expense policy, (iv) all rights and benefits under the employee benefit plans of the Company in which Executive is then participating, payable at
the times set forth in such plans, and (v) any other payments as may be required under applicable law (collectively, the “Accrued Rights”).
3.4 Treatment of Equity Awards. The vesting and exercise of any equity awards that may be held by Executive as of the Date of Termination shall be determined in accordance
with the applicable equity incentive plan and grant documentation for that Executive.
3.5 No Additional Rights. Except as provided in this Section 3, Executive’s participation under any benefit plan, program, policy or arrangement sponsored or maintained by
the Company shall cease and be terminated on the Date of Termination. Without limiting the generality of the foregoing, Executive’s eligibility for and active participation in any tax qualified retirement or pension plans maintained by the
Company will end as of the Date of Termination and Executive will earn no additional benefits under those plans after that date. Executive shall be treated as a terminated employee for purposes of all such benefit plans and programs
effective as of the Date of Termination, and shall receive all payments and benefits due under such plans and programs in accordance with the terms and conditions thereof.
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| Section 4. |
Termination by Reason of Death or Disability.
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In the event that the employment of Executive is terminated during the term of the Policy by reason of Executive’s death or Disability, then, subject to Sections 7 and 8 below, Executive
shall be entitled to the following rights and benefits under this Section 4:
4.1 Salary Continuation (Disability Only). In the event that the employment of Executive is terminated during the term of the Policy by reason of Executive’s Disability, the
Company will pay Executive salary continuation at an annual rate equal to Executive’s then-current Base Salary until the earlier of (i) the date Executive is eligible for disability payments under the Company’s group disability policies (as
determined by the Company) or (ii) 90 days following the Date of Termination by reason of Disability. Salary continuation under this Section 4.1 shall be paid in equal bi-monthly installments in accordance with the Company’s customary
payroll practices.
4.2 Bonus. The Company will pay the Pro Rata Earned Bonus, which shall be paid on the date that Bonuses are normally paid, but in no event earlier than the date the
Separation and Release Agreement described in Section 7 becomes effective, or later than March 15th of the year following the year in which the Date of Termination occurs.
4.3 Accrued Rights. As soon as administratively practicable following the Date of Termination, the Company will pay or provide Executive with the Accrued Rights.
4.4 Treatment of Equity Awards. The vesting and exercise of any equity awards that may be held by Executive as of the Date of Termination shall be determined in accordance
with the applicable equity incentive plan and grant documentation for that Executive.
| Section 5. |
Termination by the Company for Cause.
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The Company may terminate Executive’s employment for any reason and at any time, with or without Cause. In the event that the Company terminates the employment of Executive during the term
of the Policy for Cause, the Company will pay or provide Executive with the Accrued Rights and no other benefits.
| Section 6. |
Voluntary Termination without Good Reason; Retirement.
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Executive shall not be entitled to any payments or benefits under this Policy (other than Accrued Rights) by reason of Executive’s voluntary termination of employment from the Company
without Good Reason. This Policy shall have no effect on the rights and benefits to which an Executive may be entitled upon retirement under (without limitation) any retirement or savings plan of the Company, nor under any of the Company’s
equity incentive or cash incentive plans (including applicable award agreements), non-qualified deferred compensation plans, key employee death plans, and other health and miscellaneous benefit plans, each of which shall be governed
exclusively by the terms of such plans and agreements, as applicable.
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| Section 7. |
Separation and Release Agreement.
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To the extent permitted under applicable law, as a condition precedent to receiving any payments and benefits as provided under this Policy, Executive must execute a general release of
claims (the “Separation and Release Agreement”), substantially in the form attached as Exhibit A hereto, and such Separation and Release Agreement must become irrevocable, by the 60th day following the Date of Termination. If
Executive fails to execute and deliver the Separation and Release Agreement, or revokes the Separation and Release Agreement, Executive shall not be entitled to receive any payments or benefits described herein (other than Accrued Rights).
For purposes of this Policy, the Separation and Release Agreement shall be considered to have been executed by Executive if it is signed by Executive’s legal representative in the case of legal incompetence or on behalf of Executive’s
estate in the case of Executive’s death.
| Section 8. |
Restrictive Covenants.
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8.1 Employee Covenants Agreement. In consideration of, and as a condition of, Executive’s continued employment by the Company and the additional rights and benefits provided
to Executive by this Policy, Executive will agree to and execute the Employee Covenants Agreement substantially in the form attached as Exhibit B hereto and such other forms that the Committee may approve from time to time.
8.2 Transfer of Duties. Upon termination of employment, Executive must cooperate with the orderly transfer of his or her duties as requested by the Company.
8.3 Return of Property. Upon termination of employment, Executive must return all Company property by a date specified by the Company.
| Section 9. |
Compliance with Section 409A.
|
9.1 Notwithstanding any other provision of this Policy to the contrary, the parties agree that this Policy is intended to comply with or be exempt from Code Section 409A and the
regulations and guidance promulgated thereunder (collectively “Section 409A”), and all provisions of this Policy shall be construed and interpreted in a manner consistent with the requirements for avoiding taxes or penalties under
Section 409A. The Company and Executive intend that, to the maximum extent possible, any amounts paid pursuant to this Policy shall qualify as a short-term deferral pursuant to Section 409A or as separation pay exempt from Section 409A. In
no event will the Company or its affiliates be liable for any additional tax, interest or penalties that may be imposed on Executive under Section 409A or any damages for failing to comply with Section 409A.
9.2 Notwithstanding any other provision of this Policy to the contrary, to the extent that any payment under this Policy constitutes “nonqualified deferred compensation” under Section
409A, the following shall apply to the extent Section 409A is applicable to such payment:
(i) Any payable that is triggered upon the Executive’s termination of employment shall be paid only if such termination of employment constitutes a “separation from service” under
Section 409A.
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(ii) All in-kind benefits, expenses or other reimbursements paid pursuant to this Policy that are taxable income to Executive shall be paid no later than the end of the calendar
year next following the calendar year in which Executive incurs such expense. With regard to any provision herein that provides for reimbursement of costs and expenses or in-kind benefits, except as permitted by Section 409A, (a) the
right to reimbursement or in-kind benefits shall not be subject to liquidation or exchange for another benefit, (b) the amount of expenses eligible for reimbursement, or in-kind benefits, provided during any taxable year shall not affect
the expenses eligible for reimbursement, or in-kind benefits to be provided, in any other taxable year; and (c) such payments shall be made on or before the last day of Executive’s taxable year following the taxable year in which the
expense occurred.
(iii) In the event that Executive is deemed on the date of termination to be a “specified employee” as defined in Section 409A, then with regard to any payment or the provision of
any benefit that is subject to Section 409A and is payable on account of a separation from service (as defined in Section 409A), such payment or benefit shall be delayed until the earlier of (a) the first business day of the seventh
calendar month following such termination of employment, or (b) Executive’s death. Any payments delayed by reason of the prior sentence shall be paid in a single lump sum, without interest thereon, on the date indicated by the previous
sentence and any remaining payments due under this Policy shall be paid as otherwise provided herein.
9.3 For purposes of Section 409A, Executive’s right to receive any installment payments under this Policy (whether severance payments, reimbursements or otherwise) shall be treated
as a right to receive a series of separate payments and, accordingly, each installment payment hereunder shall at all times be considered a separate and distinct payment.
9.4 To the extent required to avoid the imposition of additional taxes and penalties under Section 409A, amounts payable under this Policy on termination of employment will not be
paid until Executive experiences a separation from service within the meaning of Section 409A as specified above.
9.5 Notwithstanding any provision of this Policy to the contrary, in no event shall the timing of Executive’s execution of the Separation and Release Agreement, directly or
indirectly, result in Executive designating the calendar year of payment, and if a payment pursuant to this Policy that is subject to execution of the Separation and Release Agreement could be made in more than one taxable year, based on
timing of the execution of the Separation and Release Agreement, payment shall be made in the later taxable year.
| Section 10. |
Withholding Taxes.
|
All compensation payable pursuant to this Policy shall be subject to all applicable federal, state and local tax withholding.
9
| Section 11. |
Parachute Payments.
|
Notwithstanding anything in this Policy to the contrary, in the event the Company determines that any payment or distribution in the nature of compensation (within the meaning of Code
Section 280G(b)(2)) to or for the benefit of Executive, whether paid or payable pursuant to this Policy or otherwise would be subject to the excise tax imposed by Code Section 4999, then Executive shall be entitled to receive (i) the
greatest amount so that no portion the payments shall be an excess parachute payment (the “Limited Amount”), or (ii) if the amount of payments otherwise paid or provided (without regard to clause (i)) reduced by all taxes
applicable thereto (including, for the avoidance of doubt, the excise tax imposed by Code Section 4999) would be greater than the Limited Amount reduced by all taxes applicable thereto, then the amount of payments shall be the amount
otherwise payable. Any reductions described in the preceding sentence shall be done in the manner that is least economically disadvantageous to Executive. Where the decision to cut back between two amounts is economically equivalent, but
the amounts are payable at different times, the amounts will be reduced on a pro rata basis.
| Section 12. |
Administration.
|
The Committee is responsible for the administration of this Policy and shall have all powers and duties necessary to fulfill its responsibilities. The Committee shall have full power and
discretion to interpret the Policy and related documents, to resolve ambiguities, inconsistencies and omissions, to determine any question of fact, and to determine the rights and benefits, if any, of any Executive or other employee, in
accordance with the provisions of the Policy. The Committee shall also have the authority to waive any restrictions with respect to participation in the Policy or the maturity of benefits under the Policy for any specific Executive where,
in the opinion of the Committee, it is reasonable to do so and does not prejudice the rights of the particular Executive under the Policy and it does not cause the Executive to be subject to adverse tax treatment under Section 409A. The
Committee’s decision with respect to any matter shall be final and binding on all parties concerned. The Committee may, from time to time, by action of its appropriate officers, delegate to designated persons, committees, or entities the
right to exercise any of its powers or the obligation to carry out its duties under the Policy.
| Section 13. |
Amendment and Termination.
|
The Company reserves the right to amend or terminate this Policy at any time and in any manner, subject to the following: (i) no amendment or termination of this Policy made during the
period beginning six months prior to a Change in Control and continuing until the second anniversary of the Change in Control, shall become effective until the second anniversary of a Change in Control, provided that the Company shall
have the ability to make any amendment required under applicable law (including without limitation any amendments necessary to comply with Section 409A) at any time; (ii) if any modification of this Policy decreases the benefits available
to an Executive through this Policy (such modification, an “Adverse Change”), the Company shall give written notice to the impacted Executive of the Adverse Change; and (iii) the Adverse Change shall not be effective with respect
to the Executive any sooner than one year from the date on which the notice described in (ii) above was provided to the impacted Executive. Notwithstanding the foregoing, (x) no amendment or termination of the Policy shall affect the
rights of an Executive whose Date of Termination has occurred prior to the date of such amendment or termination of the Policy and who remains entitled to severance payments or benefits under this Policy, and (y) the requirements
described in (ii) and (iii) above, with respect to an Executive impacted by an Adverse Change, may be waived in writing by the Executive.
10
| Section 14. |
Other Provisions.
|
14.1 Acknowledgment. Executive acknowledges that this Policy does not constitute a contract of employment or impose on the Company any obligation to retain Executive as an
employee and that this Policy does not prevent Executive from terminating employment at any time.
14.2 Non-Duplication of Benefits. The benefits under this Policy are not intended to duplicate any other benefits provided by the Company in connection with the
termination of an employee’s employment, such as wage replacement benefits, pay-in-lieu-of-notice, severance pay, or similar benefits under any other benefit plans, severance programs, employment contracts, or applicable federal or state
laws, such as the WARN Acts. Should such other benefits be payable, the benefits under this Policy will be reduced accordingly or, alternatively, benefits previously paid under this Policy will be treated as having been paid to satisfy
such other benefit obligations. In either case, the Company will determine how to apply this provision and may override other provisions in this Policy in doing so.
14.3 Construction. This Policy shall be governed and enforced in accordance with the laws of the State of Utah, and any litigation between the parties relating to this
Policy shall be conducted in the courts of Utah County.
14.4 Severability. If any provision of this Policy, or the application of such provision to any person or in any circumstance, is found by a court of competent jurisdiction
to be unenforceable for any reason, such provision may be modified or severed from this Policy to the extent necessary to make such provision unenforceable against such person or in such circumstance. Neither the unenforceability of such
provision nor the modification or severance of such provision will affect (i) the enforceability of any other provision of this Policy or (ii) the enforceability of such provision against any person or in any circumstance other than those
against or in which such provision is found to be unenforceable.
14.5 Records. The records of the Company with respect to the determination of eligibility, employment history, Accrued Rights, Base Salary, Bonus, and any and all other
relevant matters shall be conclusive for all purposes of this Policy.
14.6 Entire Agreement. The Company and Executive understand and agree that this Policy shall constitute the entire understanding between them regarding the subject matter
contained herein, and that all prior understandings regarding these matters are hereby superseded and replaced, unless specifically provided otherwise in this Policy.
11
SCHEDULE A
Executives (updated 7/24/2023)
|
Name and Title of Executive
|
Multiplier for
Section 3.1(i)
|
Multiplier for
Section 3.1(ii)
|
|
|
• Ryan Napierski, President and Chief Executive Officer
|
2
|
1.5
|
|
|
• Connie Tang, Executive Vice President and Chief Global Growth and Customer Experience Officer
• James Thomas, Executive Vice President and Chief Financial Officer
• Chayce Clark, Executive Vice President and General Counsel
• Joseph Chang, Executive Vice President and Chief Scientific Officer
• Steven Hatchett, Executive Vice President and Chief Product Officer
|
1.5
|
1.25
|
EXHIBIT A
SEPARATION AND RELEASE AGREEMENT
This Separation and Release Agreement (this “Agreement”) is entered by and between Nu Skin Enterprises, Inc. (“Company”) and ___________, an individual (“Employee”). Company and Employee are sometimes hereinafter
referred to as “party” or “parties.” This Agreement shall become effective on the eighth calendar day after execution by Employee (hereafter, the “Effective Date”).
RECITALS
| A. |
Employee’s employment with Company terminated on or about _________ (the “Employment Termination Date”).
|
| B. |
Company and Employee mutually agree it is in the best interests of both to enter a mutual understanding and compromise of all claims and disputes, if any, between them.
|
AGREEMENT
In consideration of the mutual promises and covenants set forth herein, and for other good and valuable consideration, the receipt, adequacy, and legal sufficiency of which are hereby acknowledged, the parties hereby mutually agree as
follows:
1. Payment to Employee. The Company agrees to make certain payments (the “Severance Payment”) to Employee as set forth in the Nu Skin Enterprises, Inc. Executive Severance Policy (the “Executive Severance Policy”). Except
as expressly set forth in this Agreement or in the Sole Agreements, as defined in Section 5, Employee shall not be entitled to any further compensation or benefits from the Company.
The Severance Payment will be paid to Employee in accordance with the Executive Severance Policy after the expiration of the revocation period specified in Section 3, if the Agreement has been signed by Employee, Employee has not revoked the
Agreement, and Employee has complied with the other terms of this Agreement.
Should Employee receive COBRA payments, Employee understands and agrees that he or she has the sole responsibility to elect COBRA coverage, comply with the requirements of COBRA, and to make all monthly premiums
in the manner required by the COBRA administrator.
2. Release of Claims. In consideration for the Severance Payment, Employee, on Employee’s behalf and for each and all of Employee’s agents, representatives, successors, assigns, attorneys, heirs and beneficiaries, and
others claiming through or under Employee, (collectively, the “Releasors”) hereby unconditionally and irrevocably releases, acquits, absolves and forever discharges Company and each and all of Company’s respective predecessors, successors,
former, current, and future assigns, affiliates, divisions, subsidiaries and parent corporations (collectively, the “Nu Skin Companies”) and each and all of the Nu Skin Companies’ owners, stockholders, agents, directors, officers, employees,
attorneys and representatives of and from any and all suits, debts, liens, contracts, agreements, promises, liabilities, claims, demands, damages, losses, interest, costs, expenses, or attorneys’ fees, whether known or unknown, fixed or
contingent, in law or in equity, which any of the Releasors have, had, or may claim to have, from the beginning of time through Employee’s execution of this Agreement, including without limitation, any claims, charges, demands, lawsuits,
obligations, or causes of action based on, arising from, or relating to Employee’s employment or the termination thereof, including, without limitation, any claims, charges, demands, grievances, and/or causes of action under:
A-1
| (a) |
Title VII of the Civil Rights Acts of 1964 and 1991, as amended, which prohibit discrimination on the basis of race, color, sex, religion, or national origin;
|
| (b) |
Section 1981 of the Civil Rights Act of 1866, which prohibits discrimination on the basis of race;
|
| (c) |
The Employee Retirement Income Security Act as of the Effective Date of this Agreement;
|
| (d) |
The Worker Adjustment and Retraining Notification Act, whether such claim exists at or before Employee’s execution of this Agreement, or arises in the future after Employee’s execution of this Agreement as a result of Employee’s
termination being aggregated with the terminations of other employees;
|
|
(e)
|
The Family and Medical Leave Act;
|
|
(f)
|
The Americans with Disabilities Act;
|
|
(g)
|
The Age Discrimination in Employment Act of 1967, as amended (the “ADEA”);
|
|
(h)
|
The Utah Antidiscrimination Act;
|
|
(i)
|
any state or federal laws against discrimination;
|
| (j) |
any claims for compensation of any type whatsoever, including but not limited to claims for salary, wages, bonuses, commissions, incentive compensation, vacation, sick pay, or severance;
|
| (k) |
any other foreign, federal, state, or local statute or common law relating to employment; and
|
|
(l)
|
any claim for attorneys’ fees or other costs or expenses.
|
The foregoing release also includes, without limitation, the release of any claims for wrongful discharge, breach of express or implied contract, employment-related torts, personal injury (whether physical or mental), or any claims in any
way related to Employee’s employment with or separation from Company. Employee acknowledges and agrees that Employee has not been discriminated or retaliated against in any manner prohibited by law during Employee’s employment with Company or
with regard to Employee’s separation from Company. Nothing in this Agreement shall be construed in any way to waive, limit, or hinder Employee’s rights with respect to long term disability insurance coverage.
3. Acknowledgement and Waiver and Release of Rights under the ADEA. Employee expressly acknowledges that Employee is waiving and releasing any rights Employee may have under the ADEA and that this waiver and release is
knowing and voluntary. Employee and Company agree that this waiver and release does not apply to any rights or claims that may arise under the ADEA after this Agreement is executed. Employee acknowledges that the consideration given for this
waiver and release is in addition to anything of value to which Employee was already entitled. Employee further acknowledges that Employee has been advised by this writing that:
| (a) |
Employee should consult with Employee’s own attorney prior to executing this Agreement;
|
| (b) |
Employee has at least 45 calendar days from the Employment Termination Date within which to consider this Agreement, although Employee may accept the terms of this Agreement at any time within those 45 days provided the acceptance
occurs after the Employment Termination Date;
|
A-2
| (c) |
If Employee signs this Agreement before 45 days have passed, Employee acknowledges and agrees that Employee has signed this Agreement knowingly and voluntarily, without coercion to do so by Company;
|
| (d) |
Employee and Company agree that immaterial or material changes to this Agreement do not restart the running of the 45-day period;
|
|
(e)
|
Employee has 7 days following Employee’s signing of this Agreement to revoke it; and
|
| (f) |
This Agreement is effective and enforceable on the eighth calendar day after the date it is signed by Employee. This Agreement may be revoked by Employee by providing written notice of revocation to Company at any time during the
seven-day period following the date Employee executes this Agreement. Any such revocation must be sent to Employment Counsel, Legal Department, Nu Skin Enterprises, Inc., 75 West Center Street, Provo, UT 84601, and must be received
within the seven calendar days. Employee understands that Employee has no right to the consideration specified in this Agreement if Employee revokes this Agreement and Employee further understands that if any consideration is provided
to Employee prior to Employee’s revocation, Employee must promptly return any such consideration to Company.
|
4. Release to Use Image, Name, Voice, and Likeness. Employee hereby grants Company and its agents, licensees and assigns a perpetual, non-revocable, and non-exclusive right to use, distribute, and/or display, throughout
the world in any form now known or later developed, Employee’s name, image, likeness, title, picture, portrait, appearance, words, voice, biographical information, and/or actions (the “Personal Information”), by incorporating it into any form
of commercial, informational, educational, advertising, and/or promotional material (the “Works”), even if such Works are created after the termination of Employee’s employment, so long as such Personal Information was obtained during
Employee’s employment with Company. Employee expressly consents to Company’s use of the Personal Information to create Works that express or imply that Employee approves, endorses, have endorsed, or will endorse the specific subject matter of
the Works. Company may use the Personal Information for any purpose, in its sole discretion, except that Company will not use the Personal Information for any criminal or illegal purpose.
Employee agrees to indemnify and defend Company, its agents, employees, licensees and assigns from any and all claims or causes of action that Employee, or any third party, may have now or in the future, arising out of the use, distribution,
or display of the Personal Information.
Employee agrees that Company is and shall be the exclusive owner of all right, title, and interest, including copyright, in the Works. Employee agrees that, except as set forth in this Agreement, Employee will not be entitled to
compensation of any kind for the use of the Personal Information and/or the Works.
5. Sole Agreements. This Agreement, the Executive Severance Policy, any Employee Covenants Agreement, and the agreements, if any, related to Company’s deferred compensation plan, 401(k) plan, and incentive compensation
plans (collectively, the “Sole Agreements”), constitute the entire and sole agreements between Employee and Company and/or any other of the Nu Skin Companies. No other promises or agreements have been made to Employee other than those contained
in the Sole Agreements. Employee and Company acknowledge that they have read this Agreement carefully, fully understand the meaning of the terms of this Agreement and are signing this Agreement knowingly and voluntarily. This Agreement may not
be amended or modified except by an instrument in writing signed by all parties hereto.
A-3
6. Resignation From Other Positions. Employee hereby resigns from any and all positions Employee holds as director, trustee, officer, or manager with Nu Skin Enterprises, Inc., The Force For Good Foundation, and any
affiliate entity of Nu Skin Enterprises, Inc., effective as of the Employment Termination Date. [This section may be omitted if it is inapplicable.]
7. Non-Disclosure. Employee agrees that Employee will not, without the prior written consent of Company, directly or indirectly, disclose, reveal or communicate, or cause or allow to be disclosed, revealed or communicated
to any unauthorized person, confidential matters, material non-public information, proprietary information or trade secrets, including without limitation, formulae, operating procedures, processes, intellectual property information, plans
concerning acquisitions, products or technologies, customer or supplier relationships, distributor lists, secret developments, and products and inventions held or maintained by any of the Nu Skin Companies. Employee further agrees not to
utilize any such confidential or proprietary information or trade secrets for Employee’s benefit or the benefit of others, including, without limitation, others in direct or indirect competition with any of the Nu Skin Companies. The
obligations set forth in this Section shall be in addition to any other confidentiality obligations that Employee may have in any of the Sole Agreements, and Employee agrees that Employee’s obligations under any of the Sole Agreements continue
after the termination of Employee’s employment. The parties expressly acknowledge that Employee obtained experience and skills during Employee’s employment, and this covenant is not intended to restrict Employee’s ability to use or leverage
that knowledge or experience, but rather only to prevent Employee from using the above-described information or trade secrets of any of the Nu Skin Companies. Notwithstanding the foregoing, Employee will be immune from liability under state
and federal trade secret law for disclosure of a trade secret: (a) made in confidence to a government official or attorney solely for the purpose of reporting or investigating a suspected violation of law; or (b) in a complaint or other
document filed in a lawsuit or other proceeding, as long as such filing is made under seal; or (c) to an attorney representing Employee in a claim for retaliation for reporting a suspected violation of law.
8. Return of Company Equipment. Employee represents and covenants that Employee has returned to Company all confidential information, computers, laptops, cell phones, and all other equipment or materials owned by any of
the Nu Skin Companies in the possession of Employee that Company has not explicitly allowed Employee to keep.
9. No Lawsuits. Employee affirms that Employee has not filed any lawsuit, claim or charge against the Nu Skin Companies with any court, administrative or government agency and covenants not to file or allow to be filed on
Employee’s behalf any lawsuit against Company or any of the other Nu Skin Companies regarding the claims released in Sections 2 and 3 above. Employee acknowledges that Employee is not releasing any right that cannot be waived under law, and
Employee understands that this Agreement does not preclude Employee from filing an administrative charge or claim with the Equal Employment Opportunity Commission (“EEOC”), the National Labor Relations Board, the Occupational Safety and Health
Administration, the Securities and Exchange Commission, or any other federal, state, or local governmental agency or commission (each a “Government Agency”). Employee acknowledges that the Agreement does not limit Employee’s right to receive an
award for any information provided to any Government Agency. Nevertheless, Employee agrees that Employee shall not seek, accept, or be entitled to any monetary damages, whether for Employee individually or as a member of a class or group,
arising from any claim waived herein, including but not limited to any claim or action before the EEOC or a state anti-discrimination or human rights agency filed by Employee or on Employee’s behalf, and Employee hereby waives Employee’s right
to recover any such monetary relief. Employee further understands that this Agreement does not limit Employee’s ability to communicate with any Government Agency or otherwise participate in any investigation or proceeding that may be covered
by any Government Agency, including providing documents or other information, without notice to Company.
A-4
10. No Admission of Liability. This Agreement is a negotiated settlement of all claims, charges, demands, lawsuits, obligations and causes of action, if any, between the parties. This Agreement does not constitute an
admission by Company, and Company specifically denies that Company has violated any contract, law, or regulation or that it has discriminated against Employee or otherwise infringed upon Employee’s rights and privileges or committed any other
wrongful act.
11. Confidentiality. Employee agrees that this Agreement and its terms shall be kept confidential and shall not be disclosed to any person or entity who is not a party hereto. Notwithstanding the foregoing, Employee may
disclose this Agreement and its terms (a) with Company’s prior written consent; (b) to Employee’s immediate family; (c) as necessary to Employee’s attorneys, accountants, auditors, tax and financial advisors provided that Employee obtains from
the receiving party an agreement to maintain the confidentiality of this Agreement and its terms; (d) in response to a validly issued subpoena or other legal process if reasonable notice is provided to Company before any disclosure to allow
Company to seek a protective order or other legal process to limit or preclude such disclosure; or (e) in connection with a legal proceeding seeking enforcement of this Agreement. If Employee violates or breaches this Agreement, this Agreement
shall remain in full force and effect and Company will be entitled to recover from Employee the monies paid pursuant to Section 1 above, reasonable attorneys’ fees and any other remedy available to Company pursuant to this Agreement or
otherwise.
12. Non-Disparagement. Employee agrees that Employee will not at any time make any written or oral statements disparaging any of the Nu Skin Companies or any of the Nu Skin Companies’ officers, directors, employees,
distributors, customers or products. Nothing in this Agreement shall in any way limit Employee from: (a) fully cooperating with any governmental investigation or inquiry or from responding fully and truthfully to any questions or information
requests made by any government agency or entity in connection with such government investigation or inquiry, or from testifying truthfully or otherwise responding to legal process; or (b) from exercising protected rights, or reporting possible
violations of law or regulation to any governmental agency or entity, including but not limited to the United States Department of Justice, the Securities and Exchange Commission, and any other agency, or making other disclosures that are
protected under the whistleblower provisions of law or regulation.
13. Severability. The provisions of this Agreement are severable. Should any provision hereof be voidable or unenforceable under applicable law, such voidable, or unenforceable provision shall not affect the validity of any
other clause or provision, which shall remain in full force and effect, and it is the intention and agreement of the parties that all terms and conditions herein be enforced to the fullest extent permitted by law.
14. Choice of Law, Jurisdiction and Venue. The validity of this Agreement and the interpretation and performance of its terms shall be governed by the substantive and procedural laws of the State of Utah. Each party
expressly submits and consents to exclusive personal jurisdiction and venue in the courts of Utah County, State of Utah or in Federal District Court for the District of Utah.
A-5
15. Titles and Headings. Titles and headings of the paragraphs and sections of this Agreement are for convenience of reference only and shall not affect the construction of any provision of this Agreement.
16. Counterparts; Electronic Signatures. This Agreement may be executed in one or more counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same
instrument. Any facsimile or electronic signature to this Agreement of a party transmitted by a party or its legal counsel and any email copy of a party’s signature to this Agreement emailed by a party or its legal counsel shall be deemed an
original and binding signature of this Agreement by such party.
17. Interpretation. This Agreement was drafted with the full participation of all parties. Accordingly, if there is an ambiguity in this Agreement, it should not be resolved against any particular party, but rather should be
resolved by a fair reading of what the Agreement was intended by the parties to provide.
18. Opportunity to Read and Understand the Agreement. Employee acknowledges that Employee has read this Agreement carefully, fully understands the meaning of the terms of this Agreement, and is signing this Agreement
knowingly and voluntarily.
19. Amendments. This Agreement may not be amended or modified except by an instrument in writing signed by all parties hereto.
THIS AGREEMENT IS INTENDED TO RELEASE ALL RELEASABLE CLAIMS RELATED TO EMPLOYEE’S EMPLOYMENT. THUS, EMPLOYEE MUST NOT SIGN THIS AGREEMENT BEFORE THE EMPLOYMENT TERMINATION DATE. IF EMPLOYEE
SIGNS THIS AGREEMENT BEFORE THE LAST DAY OF EMPLOYEE’S EMPLOYMENT, IT WILL NOT BE VALID AND EMPLOYEE WILL NOT BE ENTITLED TO THE SEVERANCE PAYMENT.
|
NU SKIN ENTERPRISES, INC.
|
|||
|
BY:
|
|||
|
EMPLOYEE:
|
A-6
EXHIBIT B
EMPLOYEE COVENANTS AGREEMENT
|
“Employee”
|
(PRINT NAME)
Nu Skin Enterprises, Inc. and its affiliated companies (collectively “Company”) operate in the highly competitive direct selling marketplace competing for product market share as well as recruitment and retention of independent
distributors. The success of Company depends on maintaining a competitive edge in this industry through the introduction of innovative products and attracting and retaining distributors. Accordingly, as a condition of and in consideration of
employment or continued employment with Company, Company and Employee hereby acknowledge and agree as follows.
| 1. |
Conflict of Interest: During employment with Company, Employee shall not have any personal interest that is
incompatible with the loyalty and responsibility Employee owes to Company. Employee must discharge Employee’s responsibility solely on the basis of what is in the best interest of Company and independent of personal considerations or
relationships. Employee shall maintain impartial relationships with vendors, suppliers and distributors. Should Employee have any questions regarding this matter, Employee should consult with Employee’s director or supervisor or with
the Human Resources Department (“HR”). If any actual or potential conflict of interest arises, the Employee must notify Employee’s director or supervisor and HR as promptly as possible after such conflict of interest arises, and seek
an appropriate waiver or resolution of such conflict of interest. Although it is difficult to identify every activity that might give rise to a conflict of interest, the following provisions address some examples of conflicts of
interest:
|
1.1 Related Party Transactions. Employee shall not have a direct or indirect ownership or financial interest in vendors or suppliers of Company or in any person or
entity doing or seeking to do business with Company. Employee shall also not have a direct or indirect financial or other interest in any transaction involving the Company. In the event such a conflict arises, Employee must notify Employee’s
director or supervisor and HR, and Company may not do business with such vendor or supplier, or enter into any such transaction, unless it has been approved (a) in accordance with Company’s policy with respect to related party transactions; or,
if such policy does not apply, (b) by Employee’s manager.
1.2 Other Employment. Employee shall not be employed by, or perform services of any kind, whether compensated or not, for any person or entity doing or seeking to
do business with Company. Employee shall not be employed by, or perform services of any kind, whether compensated or not, for any person or entity that competes with Company. Employee shall not allow employment by, or performance of services
for, any other person or entity to detract from Employee’s job performance; use Company’s time, resources, or personnel in connection therewith; or expend such long hours in connection therewith as to adversely affect Employee’s physical or
mental effectiveness. Further, neither Employee’s spouse, nor any member of Employee’s household, shall be employed by another direct sales or multilevel marketing company without the prior written consent of Company.
B-1
1.3 Distributorships. While employed by Company and for a period of three months after termination of an
employment relationship with Company for any reason, Employee shall not have a direct or indirect ownership or financial interest in a Company distributorship or similar account. Additionally, during the course of employment, neither
Employee’s spouse, nor any member of Employee’s household, shall have a direct or indirect ownership or financial interest in, or otherwise be affiliated with, a Company distributorship without the prior written consent of Company. Further,
neither Employee’s spouse, nor any member of Employee’s household, shall have a direct or indirect ownership or financial interest in, or otherwise be affiliated with, another direct sales or multilevel marketing distributorship without the
prior written consent of Company. Any pre-existing ownership, financial interests, or employment covered in these subparagraphs must be disclosed to Company at the time of the execution of this Agreement.
| 2. |
Inventions:
|
| 2.1 |
Attached hereto as Exhibit A is a list describing all inventions, original works of authorship, developments, improvements, and trade secrets which were conceived, developed, reduced to practice, or created by Employee prior to
Employee’s employment with Company, which belong to Employee, and which are not assigned to Company hereunder (collectively referred to as “Prior Inventions”). If nothing is listed on Exhibit A, or if no such list is attached, Employee
represents that there are no such Prior Inventions. If, in the course of Employee’s employment with Company, Employee incorporates into a Company product, process, service, or other work a Prior Invention owned by Employee or in which
Employee has an interest, Employee hereby grants to Company and Company shall have a nonexclusive, royalty-free, irrevocable, perpetual, worldwide license to make, have made, modify, use, sell, offer to sell, copy, reproduce,
distribute, make derivative works of and publicly display or perform such Prior Invention as part of or in connection with such product, process, service, or other work and to practice any method related thereto and to sublicense the
foregoing rights.
|
B-2
| 2.2 |
Employee agrees to promptly make full written disclosure to Company, will hold in trust for the sole right and benefit of Company, and hereby assigns to Company, or its designee, all of Employee’s right, title, and interest in and to
any and all inventions, original works of authorship, developments, improvements, concepts, processes, designs, discoveries, ideas, technology advances, unique solutions to business problems, trademarks, or trade secrets, whether or not
patentable, and whether or not registrable under copyright or other federal or state laws, which Employee may solely or jointly conceive, develop, create, or reduce to practice, or cause to be conceived, developed, created or reduced to
practice, and which also satisfy any one of the following: (i) was within the scope of Employee’s employment; (ii) was on Company’s time; (iii) was with the aid, assistance, or use of any of Company’s property, equipment, facilities,
supplies, resources, or intellectual property; (iv) was the result of any work, services, or duties performed by Employee for Company; (v) was related to Company’s industry or trade; and/or (vi) was related to the current or
demonstrably anticipated business, research, or development of Company (collectively referred to as “Inventions”).
|
| 2.3 |
Employee further acknowledges that all original works of authorship that are made by Employee (solely or jointly with others) within the scope of and during the period of employment with Company and that are protectable by copyright
are “works made for hire,” as that term is defined in the United States Copyright Act.
|
| 2.4 |
Employee understands and agrees that the decision whether or not to commercialize or market any Inventions developed by Employee solely or jointly with others is within Company’s sole discretion and for Company’s sole benefit and
that no royalty will be due to Employee as a result of Company’s efforts to commercialize or market any such Invention.
|
| 2.5 |
Employee agrees to keep and maintain adequate and current written records of all Inventions made by Employee (solely or jointly with others) during the term of employment with Company. The records will be in the form of notes,
sketches, drawings, and any other format that may be specified by Company. The records will be available to and remain the sole property of Company at all times.
|
| 2.6 |
Employee agrees to assist Company, or its designee, at Company’s expense, in every proper way to secure, obtain, maintain, reissue, defend, and enforce Company’s rights in the Inventions and any copyrights, patents, trademarks, trade
secrets, mask work rights or any other intellectual property rights whatsoever relating thereto in any and all countries, including the disclosure to Company of all pertinent information and data with respect thereto, the execution of
all applications, specifications, oaths, assignments, and all other instruments that Company shall deem necessary in order to apply for, obtain, maintain, reissue, defend, and enforce such rights (including, but not limited to,
improvements, renewals, extensions, continuations, divisions or continuations in part thereof) and in order to assign and convey to Company, its successors, assigns, and nominees the sole and exclusive right, title, and interest in and
to such Inventions, and any copyrights, patents, trademarks, trade secrets, mask work rights or any other intellectual property rights whatsoever relating thereto. Employee further agrees that Employee’s obligation to execute or cause
to be executed, when it is in Employee’s power to do so, any such instrument or papers shall continue after the termination of this Agreement. If Company is unable because of Employee’s mental or physical incapacity or for any other
reason to secure Employee’s signature to apply for or to pursue any application for any United States or foreign patents or copyright registrations covering Inventions or original works of authorship assigned to Company as above, or
execute any of the other above instruments or papers, then Employee hereby irrevocably designates and appoints Company and its duly authorized officers and agents as Employee’s agent and attorney in fact, to act for and in Employee’s
behalf and stead to execute and file any such applications and to do all other lawfully permitted acts to further the prosecution, maintenance, reissue, defense, enforcement, and issuance of letters patent or copyright registrations
thereon with the same legal force and effect as if executed by Employee.
|
B-3
| 3. |
Non-Disclosure and Assignment:
|
| 3.1 |
Employee acknowledges that during the term of employment with Company, Employee will have access or be exposed to, or learn or develop, Confidential Information. Employee understands that “Confidential Information” means any Company
information, data, or physical property that relates to the actual or anticipated business or research and development of Company, Company proprietary information, technical data, trade secrets, or know-how, including, but not limited
to: research; formulas; business plans; strategic plans; product and marketing plans; sales compensation plans; sales methods; financial information; vendor information (both actual and potential), including, without limitation, vendor
lists, and vendor contact, volume, and pricing information; supplier information (both actual and potential), including, without limitation, supplier lists, and supplier contact, volume, and pricing information; distributor information
(both actual and potential), including, but not limited to; distributor lists, and distributor contact information, volume, sales, ability, performance, compensation, downline, upline, and personally identifiable information; employee
information (both actual and potential), including, but not limited to, employee lists, and employee contact information, experience, qualification, ability, performance, compensation, and personally identifiable information; markets;
market development strategies; sales strategies; strategies for the acquisition, retention, acquisition, and growth of distributors; software and computer programs; specifications; reports; designs; drawings; prototypes; procedures;
inventions; operations; procedures; manufacturing techniques, engineering processes; technology; unpublished patent applications and invention disclosures; production planning information; sales and purchasing quantities, prices, or
quotations; budget plans; contracts; risk analysis; correspondence with distributors, suppliers, and vendors; and other business information disclosed to me by Company, directly or indirectly, that is proprietary, confidential, or
secret, whether in digital, hard copy, verbal, visual, tangible, intangible, or other form.
|
B-4
| 3.2 |
During and after Employee’s employment, Employee shall hold the Confidential Information and/or Inventions in strictest confidence and shall protect them with utmost care. Employee shall not disclose, copy, remove from Company’s
premises, or permit any person to disclose or copy any of the Confidential Information and/or Inventions, and Employee shall not use any of the Confidential Information and/or Inventions, except for the exclusive benefit of Company and
only as necessary to perform Employee’s duties as an employee of Company.
|
| 3.3 |
During employment with Company, Employee shall not improperly use or disclose any confidential or proprietary information or trade secrets of any former or concurrent employer or previously obtained from or provided by any other
person or entity. On signing this Agreement, Employee shall disclose to Company the existence of agreements Employee has with prior employers or such other persons or entities, and shall comply with the terms of all such agreements with
respect to confidential or proprietary information or trade secrets. Employee agrees and represents that Employee’s employment with Company does not cause Employee to be in breach of any contract or agreement with any former or
concurrent employer.
|
| 3.4 |
Employee recognizes that Company has received and in the future will receive from third parties their confidential or proprietary information subject to a duty on Company’s part to maintain the confidentiality of such information and
to use it only for certain limited purposes. Employee agrees to hold all such confidential or proprietary information in the strictest confidence and to not use or disclose it except as necessary in carrying out Employee’s work for
Company consistent with Company’s agreement with such third party.
|
| 3.5 |
This Agreement will not be interpreted to prevent the use or disclosure of information that: (a) is required by law to be disclosed, but only to the extent that such disclosure is legally required, (b) becomes a part of the public
knowledge other than by a breach of an obligation of confidentiality, or (c) is rightfully received from a third party not obligated to hold such information confidential. The Federal Defend Trade Secrets Act provides immunity to
individuals under any federal or state trade secret law for the disclosure of a trade secret that is made: (i) in confidence to a federal, state, or local government official, either directly or indirectly, or to an attorney solely for
the purpose of reporting or investigating a suspected violation of law; or (ii) in a complaint or other document filed in a lawsuit or other proceedings, if such filing is made under seal. An individual who files a lawsuit for
retaliation by an employer for reporting a suspected violation of law may disclose the trade secret to the attorney of the individual and use the trade secret information in the court proceeding, if the individual files any document
containing the trade secret under seal and does not disclose the trade secret, except pursuant to court order. If Employee brings suit against Company in connection with Employee’s employment relationship with Company, Employee may
disclose Confidential Information to Employee’s attorney and use the Confidential Information in the court proceeding, if Employee files any document containing Confidential Information under seal and does not disclose the Confidential
Information, except pursuant to court order. Other than as described or addressed in this subparagraph, or as outlined in Paragraph 17 below, Employee must advise Company prior to disclosure of Confidential Information to be
communicated pursuant to law so that Company may obtain a protective order as necessary to protect its confidentiality interests.
|
B-5
| 4. |
Future Inventions: Employee recognizes that inventions, original works of authorship, developments,
improvements, and trade secrets that relate to Employee’s activities while working for Company, and which are conceived, developed, reduced to practice, or created by Employee, whether alone or with others, within one year after
termination of Employee’s employment (“future inventions”), may constitute Inventions as that term is defined above. Accordingly, Employee agrees that Company’s rights and Employee’s obligations with respect to Inventions apply to
future inventions, unless and until Employee has established the contrary.
|
| 5. |
Ethical Standards: Employee agrees to maintain the highest ethical and legal standards in Employee’s conduct, to
be scrupulously honest and straightforward in all of Employee’s dealings, and to avoid all situations which might create the appearance or perception of unethical or illegal conduct.
|
| 6. |
Product Resale: As an employee of Company, Employee may receive Company products and materials either at no
charge or at a discount as specified from time to time by Company in its sole discretion. Employee agrees that the products and materials received shall be used strictly in accordance with the applicable policies of Company and shall
not be sold, distributed, or transferred in any manner that would violate such policies.
|
| 7. |
Gratuities: Employee shall neither seek nor retain gifts, gratuities, entertainment, or other forms of
compensation, benefit, or persuasion from suppliers, distributors, vendors, or their representatives except in compliance with Company policy.
|
| 8. |
Non-Solicitation: Employee shall not in any way, directly or indirectly, on Employee’s own behalf or on behalf
of others, either alone or with, assisting, or through others, at any time during employment or within one year after either a voluntary or involuntary employment termination: (a) solicit, divert, take away, or interfere with
Company’s distributors, employees, suppliers, or vendors, including, without limitation, inducing, facilitating, recruiting, or encouraging Company’s distributors, employees, suppliers, or vendors to terminate or alter their
relationship with Company or to do business with any person or entity that competes with Company, regardless of whether or not Employee initiates any such contact; or (b) attempt to do any of the foregoing.
|
B-6
| 9. |
Non-Disparagement: Subject to Paragraph 17 below, Employee shall not in any way, directly or indirectly, at any
time during employment or after either voluntary or involuntary employment termination, disparage Company, Company products, Company employees, or Company distributors, including, without limitation, the business, reputation,
practices, or conduct of any of the foregoing.
|
| 10. |
Non-Competition: In exchange for the benefits of continued employment by Company, Employee shall not, without
the prior written consent of Company: (i) serve in any capacity whatsoever, including, but not limited to, as a partner, joint venturer, employee, distributor, consultant, principal, officer, director, manager, member, affiliate,
representative, agent, associate, contractor, inventor, advisor, licensor, licensee, promoter, or investor for; (ii) directly or indirectly, own, purchase, organize or take preparatory steps for the organization of; or (iii) build,
design, finance, acquire, lease, operate, manage, control, invest in, participate in, work or consult for or otherwise join or participate in or affiliate with or provide service to any direct selling or multilevel marketing company
or entity, including, without limitation, any direct or indirect affiliate or subsidiary of such company or entity, that competes with the business of Company whether for market share of products or for independent distributors;
provided, however, Employee may own publicly traded securities of a company whose securities are publicly traded on a national securities exchange that is registered with the Securities and Exchange Commission if Employee’s ownership
interest is less than 1% of the total outstanding securities of such company. The foregoing covenant shall cover Employee’s activities in every part of the Territory. “Territory” shall mean: (i) all states of the United States of
America; and (ii) any other countries in which Company maintains non-trivial operations or facilities, provides goods or services, has customers or distributors, or otherwise conducts business during the time of employment. Employee
shall not engage in activities that may require or inevitably require disclosure of Confidential Information. The restrictions set forth in this paragraph shall remain in effect during Employee’s employment with Company.
|
| 11. |
Release to Use Image, Name, Voice, and Likeness:
|
| 11.1 |
Employee hereby grants Company and its agents, licensees and assigns a perpetual, non-revocable, and non-exclusive right to use, distribute, and/or display, throughout the world in any form now known or later developed, Employee’s
name, image, likeness, title, picture, portrait, appearance, words, voice, biographical information, and/or actions (the “Personal Information”), by incorporating it into any form of commercial, informational, educational, advertising,
and/or promotional material (the “Works”), even if such Works are created after the termination of Employee’s employment, so long as such Personal Information was obtained during Employee’s employment with Company. Employee expressly
consents to Company’s use of the Personal Information to create Works that express or imply that Employee approves, endorses, have endorsed, or will endorse the specific subject matter of the Works. Company may use the Personal
Information for any purpose, in its sole discretion, except that Company will not use the Personal Information for any criminal or illegal purpose.
|
B-7
| 11.2 |
Employee agrees to indemnify and defend Company, its agents, employees, licensees and assigns from any and all claims or causes of action that Employee, or any third party, may have now or in the future, arising out of the use,
distribution, or display of the Personal Information.
|
| 11.3 |
Employee agrees that Company is and shall be the exclusive owner of all right, title, and interest, including copyright, in the Works. Employee agrees that Employee will not be entitled to compensation of any kind for the use of the
Personal Information and/or the Works unless otherwise agreed to in writing.
|
| 12. |
Acknowledgement: Employee acknowledges that Employee’s fulfillment of the
obligations contained in this Agreement, including, but not limited to, Employee’s confidentiality, non-solicitation, non-disparagement, and non-competition covenants in Paragraphs 3 and 8-10 above, are fair and reasonable,
are necessary to protect the Company’s Confidential Information and, consequently, to preserve the value and goodwill of the Company, and should be construed to apply to the fullest extent
possible by applicable laws. Employee further acknowledges the time, geographic, and scope limitations of these obligations are reasonable, and that Employee will not be precluded from gainful
employment if obligated not to compete with Company during the period and within the Territory as described in this Agreement. Employee has carefully read this Agreement, has consulted with independent legal counsel to the
extent Employee deems appropriate, and has given careful consideration to the restraints imposed by the Agreement. Employee acknowledges that the terms of this Agreement are enforceable regardless of the manner in which Employee’s
employment is terminated, whether voluntary or involuntary. In the event that Employee is to be employed as an attorney for a competitive business, Company and Employee acknowledge that Paragraph 10 is not intended to restrict the
right of Employee to practice law in violation of any applicable rules of professional conduct.
|
| 13. |
Separate Covenants: Employee’s confidentiality, non-solicitation, non-disparagement, and non-competition
covenants in Paragraphs 3 and 8-10 above shall be construed as a series of separate covenants, one for each city, county, and state of any geographic area in the Territory. Except for geographic coverage, each such separate covenant
shall be deemed identical in terms to the covenants contained above. If, in any judicial or arbitral proceeding, a court or arbitrator refuses to enforce any of such separate covenants (or any part thereof), then such unenforceable
covenant (or such part) shall be revised, or if revision is not permitted it shall be eliminated from this Agreement, to the extent necessary to permit the remaining separate covenants (or portions thereof) to be enforced. In the
event that the provisions of Paragraphs 3 and 8-10 above are deemed to exceed the time, geographic, or scope limitations permitted by applicable law, then such provisions shall be reformed to the maximum time, geographic, or scope
limitations, as the case may be, then permitted by such law. In the event that the applicable court or arbitrator does not exercise the power granted to it in the prior sentence, Employee and Company agree to replace such invalid or
unenforceable term or provision with a valid and enforceable term or provision that will achieve, to the extent possible, the economic, business, and other purposes of such invalid or unenforceable term.
|
B-8
| 14. |
Return of Equipment and Information upon Termination: On Company’s request at any time, and in any event on the
termination of employment for any reason, Employee shall promptly deliver to Company (and will not keep in Employee’s possession, in hard copy or digital form, or recreate, copy, or deliver to anyone else) any and all Confidential
Information and Inventions, including, but not limited to, any distributor, supplier, and vendor contact information and notes or summaries thereof. Employee will also deliver to the Company (and will not keep in Employee’s
possession, in hard copy or digital form, or recreate, copy, or deliver to anyone else) any and all devices, assets, equipment, property, passwords, documents, records, data, notes, reports, proposals, lists, correspondence, formulae,
specifications, drawings, or any other items or materials whatsoever (or any copies or reproductions of any of the aforementioned items), developed by Employee pursuant to Employee’s employment with Company or otherwise belonging to
Company. Employee understands and agrees that compliance with this paragraph may require that data be removed from Employee’s personal computer equipment and electronic storage devices of any kind, and Employee agrees to give the
qualified personnel of Company or its contractors access to such computer equipment or devices for that purpose.
|
| 15. |
Remedies and Enforcement of Restrictive Covenants: Employee acknowledges that: (a) compliance with the
provisions of the restrictive covenants contained in this Agreement is necessary to protect the business and goodwill of Company; and (b) a breach of such provisions will result in irreparable and continuing harm to Company, for which
money damages will not provide adequate relief. Consequently, Employee agrees that, in the event Employee breaches or threatens to breach any of such provisions, Company shall be entitled to temporary, preliminary, and/or permanent
injunctive relief to prevent the threatened harm or the continuation of harm. Employee agrees that Company does not need to post a bond to obtain an injunction and waives Employee’s right to require such a bond. The seeking and/or
obtaining of such injunctive relief shall be without prejudice to, and are in addition to, Company’s right to seek any other remedies available to Company for such breach or threatened breach, including the recovery of damages from
Employee, and remedies available under federal and state laws, including, but not limited to, the Federal Defend Trade Secrets Act, and the parties agree that all remedies are cumulative. It is further recognized and agreed that the
provisions of Paragraphs 3, 8, 9, or 10 of this Agreement and [Paragraphs 3 and 5] of the Addendum are for the purpose of restricting Employee’s activities to the extent necessary for the protection of the legitimate business
interests of Company and that Employee agrees that said provisions do not and will not preclude Employee from engaging in activities sufficient for the purposes of earning a living. Unless prohibited by law, Employee also agrees that
any breach by Employee of the provisions of Paragraphs 3, 8, 9, or 10 of this Agreement and [Paragraphs 3 and 5] of the Addendum during employment by Company shall be grounds for forfeiture of any accrued bonuses or commissions as
liquidated damages, which shall be in addition to and not exclusive of any and all other rights and remedies Company may have against Employee.
|
B-9
| 16. |
Attorney’s Fees: If any party to this Agreement breaches any of the terms of this Agreement, then that party
shall pay to the non-defaulting party all of the non-defaulting party’s costs and expenses, including reasonable attorney’s fees, incurred by that party in enforcing the terms of this Agreement.
|
| 17. |
Protected Activity. Nothing in this Agreement is intended, or should be interpreted, to restrict, impede, or
otherwise limit the rights of all employees to report possible violations of law or regulation to any governmental agency or entity tasked with enforcing such laws and regulations, including but not limited to the United States
Department of Justice, the Securities and Exchange Commission, the Equal Employment Opportunity Commission, the Department of Labor, Congress, and any agency Inspector General, or to participate in an investigation by any such
agencies or entities; nor is this Agreement intended to limit employees’ rights to discuss among themselves or others wages, benefits, and other terms and conditions of employment or workplace matters of mutual concern, as protected
by the National Labor Relations Act or other law. Employee is not required to notify Company of his or her intention to file such a report or participate in such an investigation prior to contacting the agency or entity.
|
| 18. |
Severability: If any provision, paragraph, or subparagraph of this Agreement is adjudged by any court or
administrative agency to be void or unenforceable in whole or in part, this adjudication shall not affect the validity of the remainder of the Agreement, including any other provision, paragraph, or subparagraph. Each provision,
paragraph, and subparagraph of this Agreement is severable from every other provision, paragraph, and subparagraph and constitutes a separate and distinct covenant.
|
| 19. |
Governing Law and Forum: This Agreement shall be governed and enforced in accordance with the laws of the State
of Utah, excepting its choice of law rules, and any litigation between the parties relating to this Agreement shall be conducted in the state or federal courts in or for Utah County in the State of Utah.
|
| 20. |
Employment At Will: Employee understands that employment with Company is at-will, meaning that employment with
Company is completely voluntary and for an indefinite term and that either Employee or Company is free to terminate the employment relationship at any time, with or without cause or advance notice. Employee further understands that
any representation to the contrary is unauthorized and not valid unless obtained in writing and approved by the Company’s board of directors.
|
B-10
| 21. |
Employment Subject to Company’s Policies and Procedures: The parties acknowledge and agree that Company has
established, and may establish, various workplace policies and procedures, which Company may modify in its sole discretion from time to time. Employee acknowledges such policies and procedures, and agrees to abide by such policies
and procedures, as they may be implemented or modified from time to time.
|
| 22. |
Entire Agreement: Company and Employee understand and agree that this Agreement shall constitute the entire
agreement between them regarding the subject matter contained herein, and that all prior understandings or agreements regarding these matters are hereby superseded and replaced, including, without limitation, any written agreements
previously signed by the parties. Any amendment or addendum to, or modification or supplementation of, this Agreement must be in writing signed by the parties hereto and stating the intent of the parties to amend or modify this
Agreement.
|
| 23. |
Survivability of Obligations: This Agreement sets forth several obligations which continue after the termination
of Employee’s employment with Company, including, without limitation, those obligations set forth in Paragraphs 1, 2, 3, 4, 6, 8, 9, 11 and 12, and the parties specifically acknowledge and agree that such obligations shall survive the
termination of Employee’s employment for any reason.
|
THIS AGREEMENT HAS BEEN READ, UNDERSTOOD, AND FREELY ACCEPTED BY:
|
Dated:
|
||||
|
Employee
|
||||
B-11
EXHIBIT A
LIST OF PRIOR INVENTIONS
|
Title
|
Date
|
Identifying Number or Brief Description
|
_____ No inventions or improvements
_____ Additional Sheets Attached
|
Signature of Employee:
|
|
Print Name of Employee:
|
|
Date:
|
B-12
ADDENDUM TO EMPLOYEE COVENANTS AGREEMENT
FOR KEY EMPLOYEES
Company and Employee entered an Employee Covenants Agreement dated ______________. (“Employee Covenants Agreement”). As a condition of and in consideration of employment or continued employment with Company,
Company and Employee hereby acknowledge and agree to modify and/or supplement the terms of the Employee Covenants Agreement as follows:
| 1. |
Terms of Employee Covenants Agreement: Company and Employee agree that the defined terms in the Employee
Covenants Agreement shall have the same meaning in this Addendum. Company and Employee further agree that all terms of the Employee Covenants Agreement remain in full force and effect, except as modified herein. To the extent of a
conflict between terms of the Employee Covenants Agreement and this Addendum, the applicable portion or portions of this Addendum shall control.
|
| 2. |
Conflict of Interest: All references in Paragraph 1 and subparagraphs 1.1 through 1.3 of the Employee Covenants
Agreement to Employee’s “director,” “supervisor,” and “HR” shall be replaced with Company’s General Counsel. For example, and without limiting the provisions of that Paragraph and subparagraphs, Employee shall direct questions
concerning conflicts of interest to, report actual or potential conflicts of interest to, seek an appropriate waiver or resolution of such conflict of interest from, and provide any required notifications or disclosures to, Company’s
General Counsel. The General Counsel shall direct questions concerning conflicts of interest to, report actual or potential conflicts of interest to, seek an appropriate waiver or resolution of
such conflict of interest from, and provide any required notifications or disclosures to, the Chair of the Compensation and Human Capital Committee.
|
| 3. |
Non-Competition: Employee agrees that the restrictions in Paragraph 10 of the Employee Covenants Agreement shall
remain in effect during a period of one year following termination of Employee’s employment for any reason. In the event of any breach or violation of
these restrictions prior to or during this one-year period, or a good faith allegation by Company of Employee’s breach or violation of these restrictions, this one-year period shall be extended until such breach or violation of these
restrictions, or dispute related to an allegation by Company that Employee has breached or violated these restrictions, has been duly cured or resolved, as applicable.
|
| 4. |
Other Employment: Subject to the limitations in the Employee Covenants Agreement and this Addendum, should
Employee obtain other employment or service as a director during Employee’s employment with Company, or within one year immediately following Employee’s termination for any reason, Employee shall provide written notice to the
Company’s General Counsel of the name and address of the new employer, the position Employee expects to hold, and a general description of Employee’s expected duties and responsibilities, at least three days prior to starting such
employment or service. Employee shall also provide a copy of the Employee Covenants Agreement and this Addendum to the new employer.
|
B-13
| 5. |
[Non-Endorsement: Employee shall not in any way, directly or indirectly, at any time during employment or within one year after either a voluntary or involuntary employment termination,
endorse any sales compensation plan of another person or entity that competes with Company or any products of Company, promote or speak on behalf of any person or entity whose products compete with those of Company, or allow Employee’s
name or likeness to be used in any way to promote any person, entity, or product that competes with Company or any products of Company.][Paragraph to be included for employees as deemed appropriate by
the Company]
|
| 6. |
Acknowledgment: In addition to the acknowledgment of Paragraph 12 of the Agreement, Employee further
acknowledges that Employee’s position and work activities with the Company are “key” and vital to the on-going success of Company’s operation in each product category and in the Territory. In addition, Employee acknowledges that
Employee’s employment or involvement with any other direct selling or multilevel marketing company in particular would create the impression that Employee has left Company for a “better opportunity,” which could damage Company by this
perception in the minds of Company’s employees, distributors, or other persons. Therefore, Employee acknowledges that Employee’s non-competition covenant in this Addendum is fair and reasonable, is necessary
to protect the Company’s Confidential Information and, consequently, to preserve the value and goodwill of the Company, and should be construed to apply to the fullest extent possible by applicable laws. Employee further acknowledges the time, geographic, and scope limitations of this obligation are reasonable, and that Employee will not be precluded from gainful employment if obligated not to compete with
Company during the period and within the Territory as described in the Agreement and this Addendum. Employee has carefully read this Addendum, has consulted with independent legal counsel to the extent Employee deems
appropriate, and has given careful consideration to the restraints imposed by this Addendum. Employee acknowledges that the terms of this Addendum are enforceable regardless of the manner in which Employee’s employment is terminated,
whether voluntary or involuntary. In the event that Employee is to be employed as an attorney for a competitive business, Company and Employee acknowledge that this Addendum is not intended to restrict the right of Employee to
practice law in violation of any applicable rules of professional conduct.
|
THIS ADDENDUM TO EMPLOYEE COVENANTS AGREEMENT FOR KEY EMPLOYEES HAS BEEN READ, UNDERSTOOD, AND FREELY ACCEPTED BY:
|
Dated:
|
||||
|
Employee
|
B-14
EXHIBIT 21.1
SUBSIDIARIES OF THE REGISTRANT
Beauty Biosciences LLC , a Texas limited liability company
Big Planet, Inc., a Delaware corporation
Corner Canyon Canada, Inc., an Ontario corporation
Corner Canyon Manufacturing, Inc., a Utah corporation
Elevate Nutraceuticals LLC, a Utah limited liability company
Grōv Technologies, LLC, a Utah limited liability company
Grow Solutions Tech LLC, a Utah limited liability company
Guangdong Xingchuang Daily-Use & Health Products Co. Ltd., a Chinese company
Ingredient Innovations International Company, a Delaware corporation
Innuvate Health Sciences LLC, a Utah limited liability company
LifeDNA, Inc., a Delaware corporation
L&W Holdings, Inc., a Utah corporation
MyFavoriteThings, Inc., a Delaware corporation
NOX Technologies, Inc., a Delaware corporation
NSE Asia Products, Pte. Ltd., a Singapore corporation
NSE Investments, Inc., a Delaware corporation
NSE Products Europe BV, a Belgium private limited liability company
NSE Products, Inc., a Delaware corporation
NSEMC, Inc., a Delaware corporation
NSJ Ltd., a Japan corporation
Nu Berry, LLC, a Utah limited liability company
Nu Skin (China) Daily-Use & Health Products Co., Ltd., a Chinese company
Nu Skin (Malaysia) Sdn. Bhd., a Malaysia corporation
Nu Skin Argentina, Inc., a Utah corporation
Nu Skin Asia Holdings, Pte. Ltd., a Singapore corporation
Nu Skin Asia Investment, Inc., a Delaware corporation
Nu Skin Beauty and Wellness Co. Ltd., a Chinese company
Nu Skin Brazil, Ltda., a Brazil limited liability company
Nu Skin Canada, Inc., a Utah corporation
Nu Skin Colombia, Inc., a Delaware corporation
Nu Skin Czech Republic, s.r.o., a Czech Republic limited liability company
Nu Skin Eastern Europe Kft., a Hungary limited liability company
Nu Skin El Salvador, S.A. de C.V., an El Salvador corporation
Nu Skin Enterprises (Thailand) Limited, a Delaware corporation
Nu Skin Enterprises (Thailand) Limited, a Thailand corporation
Nu Skin Enterprises Australia, Inc., a Utah corporation
Nu Skin Enterprises Chile Ltda., a Chile limited liability company
Nu Skin Enterprises de Venezuela, C.A., a Venezuela corporation
Nu Skin Enterprises Hong Kong, LLC, a Delaware limited liability company
Nu Skin Enterprises New Zealand, Inc., a Utah corporation
Nu Skin Enterprises Philippines, LLC, a Delaware limited liability company
Nu Skin Enterprises Poland Sp. z o.o., a Poland limited liability company
Nu Skin Enterprises Singapore Pte. Ltd., a Singapore corporation
Nu Skin Enterprises South Africa (Proprietary) Limited, a South Africa proprietary limited company
Nu Skin Enterprises SRL, a Romania limited liability company
Nu Skin Enterprises Ukraine, LLC, a Ukraine limited liability company
Nu Skin Enterprises United States, Inc., a Delaware corporation
Nu Skin France, SRL, a France limited liability company
Nu Skin Germany, GmbH, a Germany limited liability company
Nu Skin Honduras, S.A., a Honduras corporation
Nu Skin International Management Group, Inc., a Utah corporation
Nu Skin International, Inc., a Utah corporation
Nu Skin Islandi ehf., an Iceland private limited liability company
Nu Skin Israel, Inc., a Delaware corporation
Nu Skin Italy, Srl, an Italy limited liability company
Nu Skin Japan Company, Limited, a Japan corporation
Nu Skin Korea Ltd., a Korea corporation
Nu Skin Malaysia Holdings Sdn. Bhd., a Malaysia corporation
Nu Skin Mexico, S.A. de C.V., a Mexico corporation
Nu Skin Netherlands, B.V., a Netherlands private limited liability company
Nu Skin New Caledonia EURL, a France limited company
Nu Skin Norway AS, a Norway private limited liability company
Nu Skin Peru S.A.C., a Peru company
Nu Skin Scandinavia A/S, a Denmark stock-based corporation
Nu Skin Services Costa Rica S.A., a Costa Rica corporation
Nu Skin Slovakia s.r.o., a Slovak Republic limited liability company
Nu Skin Taiwan, LLC, a Utah limited liability company
Nu Skin United Kingdom Ltd, a United Kingdom private company
NuSkin Belgium, NV, a Belgium limited liability company
NuSkin Pharmanex (B) Sdn. Bhd, a Brunei corporation
Pharmanex (Huzhou) Health Products Co., Ltd., a Chinese company
Pharmanex Electronic-Optical Technology (Shanghai) Co., Ltd., a Chinese company
Pharmanex, LLC, a Delaware limited liability company
PT. Nu Skin Distribution Indonesia, an Indonesia corporation
PT. Nusa Selaras Indonesia, an Indonesia corporation
RHYZ Analytical, Inc., a Utah corporation
Shanghai NU Town E-commerce Co. Ltd., a Chinese company
Shanghai Nuskin Chuangxing Daily-Use & Health Product Co. Ltd., a Chinese company
Treviso, LLC, a Utah limited liability company
Vertical Eden LLC, a Utah limited liability company
Exhibit 23.1
We hereby consent to the incorporation by reference in the Registration Statements on Form S-8 (Nos. 333-130304,
333-167690, 333-190508, 333-211617, 333-238908 and 333-252976) of Nu Skin Enterprises, Inc. of our report dated February 14, 2024 relating to the financial statements and the
effectiveness of internal control over financial reporting, which appears in this Form 10-K.
Salt Lake City, Utah
February 14, 2024
EXHIBIT 31.1
SECTION 302 CERTIFICATION OF CHIEF EXECUTIVE OFFICER
I, Ryan. S. Napierski, certify that:
|
1.
|
I have reviewed this annual report on Form 10-K of Nu Skin Enterprises, Inc.;
|
| 2. |
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by this report;
|
| 3. |
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of
the registrant as of, and for, the periods presented in this report;
|
| 4. |
The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal
control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
| (a) |
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including
its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
| (b) |
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, 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;
|
| (c) |
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of
the period covered by this report based on such evaluation; and
|
| (d) |
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the
case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
|
| 5. |
The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the
registrant’s board of directors (or persons performing the equivalent functions):
|
| (a) |
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record,
process, summarize and report financial information; and
|
| (b) |
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
|
|
Date: February 14, 2024
|
/s/ Ryan. S. Napierski
|
|
|
Ryan. S. Napierski
|
||
|
Chief Executive Officer
|
EXHIBIT 31.2
SECTION 302 CERTIFICATION OF CHIEF FINANCIAL OFFICER
I, James D. Thomas, certify that:
| 1. |
I have reviewed this annual report on Form 10-K of Nu Skin Enterprises, Inc.;
|
| 2. |
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by this report;
|
| 3. |
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of
the registrant as of, and for, the periods presented in this report;
|
| 4. |
The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal
control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
| (a) |
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including
its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
| (b) |
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, 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;
|
| (c) |
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of
the period covered by this report based on such evaluation; and
|
| (d) |
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the
case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
|
| 5. |
The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the
registrant’s board of directors (or persons performing the equivalent functions):
|
| (a) |
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record,
process, summarize and report financial information; and
|
| (b) |
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
|
|
Date: February 14, 2024
|
/s/ James D. Thomas
|
|
|
James D. Thomas
|
||
|
Chief Financial Officer
|
EXHIBIT 32.1
SECTION 906 CERTIFICATION OF CHIEF EXECUTIVE OFFICER
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the annual report of Nu Skin Enterprises, Inc. (the “Company”) on Form 10-K for the period ended December 31, 2023 (the “Report”), I, Ryan. S. Napierski,
Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. §1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge:
| 1. |
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
|
| 2. |
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
|
|
Date: February 14, 2024
|
/s/ Ryan. S. Napierski
|
|
|
Ryan. S. Napierski
|
||
|
Chief Executive Officer
|
EXHIBIT 32.2
SECTION 906 CERTIFICATION OF CHIEF FINANCIAL OFFICER
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the annual report of Nu Skin Enterprises, Inc. (the “Company”) on Form 10-K for the period ended December 31, 2023 (the “Report”), I, James D. Thomas, Chief Financial Officer of the Company, certify,
pursuant to 18 U.S.C. §1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge:
| 1. |
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
|
| 2. |
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
|
|
Date: February 14, 2024
|
/s/ James D. Thomas
|
|
|
James D. Thomas
|
||
|
Chief Financial Officer
|
Exhibit 97.1
NU SKIN ENTERPRISES, INC.
Executive Officer Incentive Compensation Recovery Policy
(Adopted November 9, 2023)
A. Purpose
The Compensation and Human Capital Committee (the “Committee”) of the Board of Directors (the “Board”) of Nu Skin Enterprises, Inc., a Delaware corporation (the “Company”), has adopted this policy (this “Policy”) to
require the recovery of certain executive compensation in the event that the Company is required to prepare an Accounting Restatement. This Policy is designed to comply with Section 10D of the Securities Exchange Act of 1934, as amended (the “Exchange
Act”), Rule 10D-1 thereunder, and Section 303A.14 of the New York Stock Exchange (the “NYSE”) Listed Company Manual (“Section 303A.14”) and will be interpreted and applied accordingly.
B. Administration
This Policy will be administered by the Committee. The Committee is authorized to interpret and construe this Policy and to make all determinations necessary, appropriate, or advisable for the administration of this Policy. Any determinations
made by the Committee will be final and binding on all affected individuals. Any members of the Committee, and any other members of the Board who assist in the administration of this Policy, shall not be personally liable for any action,
determination or interpretation made with respect to this Policy and shall be fully indemnified by the Company to the fullest extent under applicable law and Company policy with respect to any such action, determination or interpretation. The
foregoing sentence shall not limit any other rights to indemnification of the members of the Board under applicable law or Company policy.
C. Covered Executives
This Policy applies to the Company’s current and former “officers” as determined pursuant to Rule 16a‑1(f) promulgated under the Exchange Act and including “executive officers” identified under Item 401(b) of Regulation S-K (“Executive
Officers,” and together with any former Executive Officer, the “Covered Executives”).
D. Recoupment upon an Accounting Restatement
In the event that the Company is required to prepare an Accounting Restatement, the Company will recover reasonably promptly all Erroneously Awarded Compensation from each Covered Executive, unless the
Committee determines that such recovery is Impracticable.
For purposes of the foregoing and all other provisions of this Policy:
| 1. |
“Accounting Restatement” means an accounting restatement of any of the Company’s financial statements due to the Company’s material noncompliance with any financial reporting requirement under
the securities laws, including any required accounting restatement to correct an error in previously issued financial statements that is material to the previously issued financial statements, or to correct an error that is not material
to previously issued financial statements, but would result in a material misstatement if the error were corrected in the current period or left uncorrected in the current period, within the meaning of Rule 10D-1 and Section 303A.14.
|
| 2. |
“Covered Incentive Compensation” means Incentive Compensation that is Received on or after October 2, 2023 by a person: (i) after beginning service as an Executive Officer, (ii) who served as an Executive Officer at any time
during the performance period for that Incentive Compensation, (iii) while the Company has a class of securities listed on a national securities exchange or a national securities association, and (iv) during the three completed fiscal years
immediately preceding the date that the Company is required to prepare the Accounting Restatement (or such longer period as required under Section 303A.14 in the event the Company changes its fiscal year). The date that the Company is
required to prepare the Accounting Restatement will be the earlier of (x) the date the Board concluded or reasonably should have concluded that the Accounting Restatement is required and (y) the date a court, regulator or other authorized
body directs the Company to prepare the Accounting Restatement.
|
| 3. |
“Erroneously Awarded Compensation” means the amount of Covered Incentive Compensation that was Received by each Covered Executive in excess of the Covered Incentive Compensation that would have been Received by the Covered
Executive had such Covered Incentive Compensation been determined based on the restated Financial Reporting Measure following an Accounting Restatement, computed without regard to taxes paid. For this purpose, if the amount of Covered
Incentive Compensation that is Received by a Covered Executive was based on the Company’s stock price or total shareholder return and is not subject to mathematical recalculation directly from the Accounting Restatement, the amount to be
recovered as Erroneously Awarded Compensation shall be based on a reasonable estimate of the effect of the Accounting Restatement on the Financial Reporting Measure upon which the Covered Incentive Compensation was Received. The Company’s
Corporate Secretary shall, on behalf of the Committee, obtain and maintain all documentation of the determination of any such reasonable estimate and provide such documentation to the NYSE when required.
|
| 4. |
“Financial Reporting Measure” means (i) any measure that is determined and presented in accordance with the accounting principles used in preparing the Company’s financial statements and any measure that is derived wholly or in
part from any such measure, and (ii) the Company’s stock price and the total shareholder return of the Company. A measure, however, need not be presented within the financial statements or included in a filing with the U.S. Securities and
Exchange Commission (“SEC”) to constitute a Financial Reporting Measure.
|
| 5. |
“Impracticable” means that (i) the direct expense paid to a third party to assist in enforcing the Policy would exceed the amount to be recovered, (ii) recovery would violate an applicable home country law adopted prior to
November 28, 2022, or (iii) recovery would likely cause an otherwise tax-qualified, broad-based retirement plan of the Company to fail to meet the requirements of 26 U.S.C. 401(a)(13) or 26 U.S.C. 411(a) and regulations thereunder. Before concluding that it would be impracticable to recover any Erroneously Awarded Compensation based on the expense of enforcement, the Company shall make a reasonable attempt to recover such
Erroneously Awarded Compensation, and the Company’s Corporate Secretary, on behalf of the Committee, shall document such reasonable attempt(s) to recover and provide that documentation to the NYSE when required. Before concluding that it
would be impracticable to recover any amount of Erroneously Awarded Compensation based on violation of law, the Committee shall engage legal counsel experienced and qualified to practice law in the applicable jurisdiction (if such counsel
is acceptable to the NYSE) to render an opinion that recovery would result in a violation of law and shall provide such opinion to the NYSE. The Company shall provide funding for the fees and expenses of such legal counsel as approved by
the Committee.
|
| 6. |
“Incentive Compensation” means any compensation that is granted, earned, or vested based wholly or in part upon the attainment of a Financial Reporting Measure. For the avoidance of doubt, Incentive Compensation shall also be
deemed to include any amounts which were determined based on (or were otherwise calculated by reference to) Incentive Compensation (including, without limitation, any amounts under any long-term
disability, life insurance or supplemental retirement plan or any notional account that is based on Incentive Compensation, as well as any earnings accrued thereon).
|
| 7. |
“Received”: Incentive Compensation is deemed “received” in the Company’s fiscal period during which the Financial Reporting Measure specified in such Incentive Compensation is attained.
|
Recoupment of Erroneously Awarded Compensation pursuant to this Policy is made on a “no fault” basis, without regard to whether any misconduct occurred or whether any Covered Executive has responsibility for the noncompliance that resulted in
the Accounting Restatement.
E. Method of Recoupment
The Committee will determine, in its sole discretion, the method for recouping Erroneously Awarded Compensation hereunder, which may include, without limitation, any of the following, to the extent permitted by applicable law:
| 1. |
Requiring reimbursement of cash Incentive Compensation previously paid;
|
| 2. |
Seeking recovery of any gain or value realized on or since the vesting, exercise, settlement, sale, transfer, or other disposition of any equity-based awards;
|
| 3. |
Offsetting the recouped amount from any compensation otherwise owed by the Company to the Covered Executive (including, without limitation, any severance otherwise payable by the Company to the Covered Executive);
|
| 4. |
Making a deduction from the Covered Executive’s salary;
|
| 5. |
Requiring the Covered Executive to transfer back to the Company any shares he or she received pursuant to an equity award;
|
| 6. |
Cancelling, or reducing the number of shares subject to, or the value of, outstanding vested or unvested equity awards; and/or
|
| 7. |
Taking any other remedial and recovery action permitted by law, as determined by the Committee.
|
The Committee will consider Section 409A of the U.S. Internal Revenue Code of 1986, as amended, prior to offsetting recouped amounts against future payments of deferred compensation.
F. No Indemnification or Insurance
Neither the Company nor any of its subsidiaries or affiliates shall indemnify any Covered Executive against the loss of any Erroneously Awarded Compensation. Further, neither the Company nor any of its subsidiaries or affiliates shall pay or
reimburse any Covered Executive for any insurance policy entered into by a Covered Executive that provides for full or partial coverage of any recoupment obligation under this Policy.
G. Amendment; Termination
The Board or the Committee may amend this Policy from time to time in its discretion in any manner consistent with applicable law and regulation. The Board or Committee may terminate this Policy at any time when the Company does not have a
class of securities listed on a national securities exchange or a national securities association.
H. Other Recoupment Rights
The Board intends that this Policy will be applied to the fullest extent of the law. Any right of recoupment under this Policy is in addition to, and not in lieu of, any other remedies or rights of recoupment that may be available to the
Company pursuant to the terms of the Company’s code of conduct, any similar policy or recoupment provision in any employment agreement, equity award agreement, bonus plan, or similar agreement or plan and any other legal remedies available to the
Company (collectively, “Other Recoupment Provisions”). Further, the provisions of this Policy are in addition to (and not in lieu of) any rights to repayment the Company may have under Section 304 of the Sarbanes-Oxley Act of 2002 and other
applicable laws. However, there shall be no duplication of recovery under this Policy, Other Recoupment Provisions, or the Sarbanes-Oxley Act.
I. Successors
This Policy shall be binding and enforceable against all Covered Executives and their beneficiaries, heirs, executors, administrators, or other legal representatives.
J. Disclosure
The circumstances of any recoupment pursuant to this Policy will be publicly disclosed where required by Rule 10D-1, Item 402 of Regulation S-K and Section 303A.14. In accordance with Rule 10D-1, the Policy shall be filed with the SEC as an
exhibit to the Company’s Form 10-K, as provided in Item 601(b) of Regulation S-K.
K. Change of Listing
In the event that the Company lists its securities on any national securities exchange or national securities association other than the NYSE, all references to “NYSE” in this Policy shall mean each national securities exchange or national
securities association upon which the Company has a class of securities then listed and “Section 303A.14” shall mean the rule(s) relating to recovery of erroneously awarded compensation under the listing rules of such other applicable exchange or
association.
L. Acknowledgement
Each Executive Officer will be required to sign a statement, in a form to be approved by the Committee, acknowledging receipt of this Policy and agreeing to comply with it. This Policy will be binding on all Covered
Executives regardless of whether such acknowledgement is executed.
M. Governing Law and Venue
This Policy and all determinations made and actions taken hereunder, to the extent not otherwise governed by the laws of the United States, shall be governed by the laws of the State of Utah, United States of America, without reference to
principles of conflict of laws, and construed accordingly. The jurisdiction and venue for any disputes arising under, or any actions brought to enforce (or otherwise relating to), the Policy will be exclusively in the courts of Utah County, Utah or
the federal courts of the United States for the District of Utah (should federal jurisdiction exist).