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December 01, 2009

Financial News

Direct Selling:  A Model for the Times Industry Overview

by Douglas M. Lane


Third Quarter Results

Medifast Inc.

Medifast Inc. (MED—NYSE) announced that for the third-quarter ended Sept. 30, 2009, Medifast reported revenue of $45.0 million, a 65 percent increase over the $27.3 million reported in the third quarter of 2008. The company reported net income of $3.4 million, or 23 cents per fully diluted share, compared with $1.5 million, or 11 cents per fully diluted share in the third quarter of 2008, a diluted EPS increase of 109 percent.

For the nine months ended Sept. 30, 2009, Medifast reported revenue of $119.4 million, an increase of 49 percent from the $80.0 million reported for the nine months ended Sept. 30, 2008. The company reported net income of $8.9 million, or 60 cents per fully diluted share, for the nine-month period, versus $4.5 million, or 32 cents per fully diluted share, in 2008.

Revenues in the direct sales segment, Take Shape for Life, increased 105 percent to $27.9 million compared with $13.6 million in the same quarter of 2008. The number of active health coaches increased during the third quarter to approximately 5,800, compared with 3,200 during the period a year ago, an increase of 81 percent and up from 4,650 at the end of the second quarter of 2009. The net increase of 1,150 health coaches during the quarter is a record for the company and should lead to continued strong growth in the segment.

Medifast is the leading easy-to-use, clinically proven portion-controlled weight-loss program. The company sells its products and programs via four unique distribution channels: the Web and national call centers, the Take Shape For Life direct selling division, national network of physicians, and medically supervised Medifast Weight Control Centers.

Herbalife Ltd.

Herbalife Ltd. (HLF—NYSE) reported third-quarter 2009 net sales of $600.2 million, a decrease of 0.3 percent compared to the same period of 2008. Excluding the impact from currency fluctuations, local currency year-over-year net sales were 7.5 percent higher than third-quarter 2008 results. For the quarter ended Sept. 30, 2009, the company reported net income of $57.9 million, or 91 cents per diluted share, compared to $58.1 million, or 89 cents per diluted share in the third quarter of 2008. Adjusted net income was $54.1 million, or 85 cents in adjusted diluted earnings per share, reflecting a decrease of 6.9 percent and 4.5 percent, respectively, compared to the same period in 2008. During the third quarter of 2009, the company added 48,040 new sales leaders, which is 8.7 percent lower than the same period in 2008.

For the nine months ended Sept. 30, 2009, the company produced cash flow from operations of $227.3 million, paid dividends of $36.7 million, invested $42.1 million in capital expenditures, repurchased $32.5 million in common stock and paid approximately $10.0 million for certain acquired manufacturing assets.

Herbalife is a global network marketing company that sells weight-management, nutritional supplements and personal-care products intended to support a healthy lifestyle. Herbalife products are sold in 70 countries through a network of more than 1.9 million independent distributors.

Relìv International Inc.

Relìv International Inc. (RELV—Nasdaq) reported third-quarter net sales of $20.9 million vs. $23.9 million in the same quarter of 2008. Net income was $324,000 vs. $536,000 in the 2008 third quarter, and earnings per diluted share were 3 cents compared to 4 cents in the same quarter last year.

Relìv also announced that it is reducing its dividend from 5 cents per share to 2 cents per share. For 2009, Relìv’s annual dividend will be 7 cents rather than 10 cents per share.

For the first nine months of 2009, net sales totaled $64.7 million, down about 15 percent compared to the same period last year. U.S. sales decreased approximately 13 percent, while sales outside of the United States were down about 27 percent. Excluding foreign currency fluctuations, foreign sales were down 13.5 percent.

Net income for the first three quarters of this year equaled $1.7 million, compared to $2.6 million for the first three quarters of 2008. Diluted earnings per share for the period equaled 13 cents, down from diluted earnings per share of 17 cents for the first nine months of last year.

Relìv International Inc., based in Chesterfield, Mo., is a developer, manufacturer and marketer of a proprietary line of nutritional supplements. Relìv sells its products through an international network marketing system of approximately 68,680 independent distributors.

Nu Skin Enterprises Inc.

Nu Skin Enterprises Inc. (NUS—NYSE) announced record third-quarter revenue of $334.2 million, an 8 percent improvement over the prior-year period. Revenue in the period benefited 1 percent from foreign currency fluctuations. Earnings per share for the quarter were 40 cents, a 54 percent improvement over the same quarter of 2008. Earnings per share, excluding restructuring charges of 1 cent, were 41 cents, a 58 percent improvement over the prior-year period.

Nu Skin Enterprises Inc. is a global direct selling company operating in 47 markets throughout Asia, the Americas and Europe. The company markets premium-quality personal-care products under the Nu Skin® brand, science-based nutritional supplements under the Pharmanex® brand, and technology-based products and services under the Big Planet® brand.

USANA Health Sciences

USANA Health Sciences Inc. (USNA—NASDAQ) announced that net sales for the third quarter of 2009 improved to $110.8 million, compared with $107.2 million in the third quarter of the prior year, an increase of 3.3 percent. The year-over-year increase was due to an overall increase in product sales, driven primarily by an 8.2 percent increase in the number of active associates. Net earnings for the third quarter were $7.9 million, or 51 cents per diluted share, compared with $8.1 million or 50 cents per diluted share in the third quarter of the prior year.

For the nine months ended Oct. 3, 2009, net sales increased by 0.7 percent to $320.2 million, compared with $318.0 million for the first nine months of the prior year. Net earnings for the first nine months of 2009 were $23.3 million, or $1.51 per diluted share, compared with net earnings of $25.5 million, or $1.56 per diluted share for the first nine months of the prior year.

USANA develops and manufactures high-quality nutritional, personal-care and weight-management products that are sold directly to preferred customers and associates worldwide.

Tupperware Brands Corp.

Tupperware Brands Corporation (TUP—NYSE) reported third-quarter 2009 sales increased in local currency by 9 percent versus 2008, before a negative impact from foreign exchange rates of 9 percent. Net sales for the quarter ended Sept. 26, 2009, was $514 million, up from $513 million for the same quarter of 2008. Net income for the 13 weeks ended Sept. 26, 2009, was $32.3 million, up from $27.5 million for the same quarter last year. Diluted GAAP earnings per share of 50 cents for the third quarter of 2009, which was up 7 cents versus last year, included net negative 4 cents from items impacting comparability in both years and negative 11 cents versus 2008 from weaker foreign currencies.

Tupperware Brands Corporation is a portfolio of global direct selling companies, selling premium innovative products across multiple brands and categories through an independent salesforce of 2.3 million.

Pre-Paid Legal Services Inc.

Pre-Paid Legal Services Inc. (PPD—NYSE) announced net income for the third quarter of 2009 decreased 25 percent to $10.8 million from $14.4 million for the prior year’s third quarter. Diluted earnings per share decreased 20 percent to 99 cents per share from $1.23 per share for the prior year’s comparable quarter due to a decrease in net income of 25 percent, partially offset by a 7 percent decrease in the weighted average outstanding shares. Membership fees in the third quarter of 2009 decreased 4 percent to $105.4 million from $109.3 million for the same period last year.

Pre-Paid Legal Services® Inc. offers legal service benefits plans provided through a network of more than 50 independent law firms across the United States and Canada.

Avon Products Inc.

Avon Products Inc. (AVP—NYSE) reported third-quarter 2009 total revenue of $2.6 billion, 4 percent lower than that of 2008’s third quarter, but up 7 percent on a local-currency basis as foreign exchange pressured growth by 11 percentage points. Beauty sales in the third quarter of 2009 were 3 percent lower versus the prior-year period but increased 8 percent on a local-currency basis. Active representatives grew 10 percent, with growth in all regions.

Net income in the third quarter of 2009 was $156 million, or 36 cents per share, compared with $223 million, or 52 cents per share, in the year-ago quarter.

Avon, the company for women, is a leading global beauty company, with more than $10 billion in annual revenue. As the world’s largest direct seller, Avon markets to women in more than 100 countries through more than 5.8 million independent Avon sales representatives.

Mannatech Inc.

Mannatech Inc. (MTEX—NASDAQ) reported a net loss of $9.2 million or 35 cents per diluted share for the third quarter ending Sept. 30, 2009, compared to a net loss of $0.4 million or 2 cents per diluted share for the third quarter of 2008.

Third-quarter net sales for 2009 were $71.3 million, a decrease of 8.6 percent, compared to $78.0 million in the third quarter of 2008. Year-to-date sales for the nine months ended Sept. 30, 2009, were $219.6 million, down 14.3 percent from $256.2 million for the same period in 2008. The company reported a net loss for the nine-month period of $19.5 million, compared to last year’s nine-month net loss of $13.2 million. Total independent associate and member count based on a 12-month trailing period was approximately 534,000 as of Sept. 30, 2009, as compared to 540,000 for the same date last year.

Mannatech Inc. is a global wellness-solutions provider of innovative, high-quality, proprietary dietary supplements, skincare products, and weight and fitness products sold through independent associates and members worldwide.