UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2004

	OR

¨	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM TO

Commission File Number: 011-12421

	NU SKIN ENTERPRISES, INC. (Exact name of registrant as specified in its charter)

Delaware (State or other jurisdiction of incorporation or organization)		87-0565309 (IRS Employer Identification Number)
	75 West Center Street Provo, UT 84601 (Address of principal executive offices and zip code) (801) 345-1000 (Registrant's telephone number, including area code)

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 x No ¨

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).
Yes x No ¨

As of November 1, 2004, 69,676,502 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.

NU SKIN ENTERPRISES, INC.

2004 FORM 10-Q QUARTERLY REPORT – THIRD QUARTER

		PAGE
Part I.	Financial Information
	Item 1. Financial Statements:
	Consolidated Balance Sheets	1
	Consolidated Statements of Income	2
	Consolidated Statements of Cash Flows	3
	Notes to Consolidated Financial Statements	4
	Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations	9
	Item 3. Quantitative and Qualitative Disclosures about Market Risk	21
	Item 4. Controls and Procedures	21


Part II.	Other Information
	Item 1. Legal Proceedings	22
	Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	22
	Item 3. Defaults upon Senior Securities	23
	Item 4. Submission of Matters to a Vote of Security Holders	23
	Item 5. Other Information	23
	Item 6. Exhibits	24
	Signature	25

Nu Skin, Pharmanex and Big Planet are trademarks of Nu Skin Enterprises, Inc. or its subsidiaries.

-i-

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

NU SKIN ENTERPRISES, INC.
Consolidated Balance Sheets
(in thousands, except share amounts)

	September 30, 2004		December 31, 2003

ASSETS	(Unaudited)
Current assets
Cash and cash equivalents	$ 123,598		$ 122,568
Accounts receivable	15,880		15,054
Inventories, net	88,433		83,338
Prepaid expenses and other	45,922		60,163

	273,833		281,123

Property and equipment, net	67,793		60,528
Goodwill	111,331		118,768
Other intangible assets, net	62,036		67,572
Other assets	60,946		63,068

Total assets	$ 575,939		$ 591,059



LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable	$ 16,565		$ 18,816
Accrued expenses	94,814		95,068
Current portion of long-term debt	22,596		17,915

	133,975		131,799

Long-term debt	140,637		147,488
Other liabilities	19,983		21,524

Total liabilities	294,595		300,811


Stockholders' equity
Class A common stock - 500,000,000 shares authorized, $.001
par value, 69,748,628 and 70,700,497 shares issued
and outstanding	70		71
Additional paid-in capital	(112,376	)	(68,191	)
Accumulated other comprehensive loss	(66,047	)	(70,849	)
Retained earnings	461,512		431,615
Deferred compensation	(1,815	)	(2,398	)

	281,344		290,248

Total liabilities and stockholders' equity	$ 575,939		$ 591,059

The accompanying notes are an integral part of these consolidated finanical statements.

- -1-

NU SKIN ENTERPRISES, INC.
Consolidated Statements of Income (Unaudited)
(in thousands, except per share amounts)

	Three Months Ended September 30,				Nine Months Ended September 30,
	2004		2003		2004		2003
Revenue	$ 283,313		$ 250,185		$ 831,542		$ 710,537
Cost of sales	47,641		43,697		139,070		130,598


Gross profit	235,672		206,488		692,472		579,939


Operating expenses:
Selling expenses	121,824		105,044		355,804		290,572
General and administrative expenses	80,200		71,395		244,216		213,865
Restructuring and other charges
(Note 12)	—		5,592		—		5,592


Total operating expenses	202,024		182,031		600,020		510,029


Operating income	33,648		24,457		92,452		69,910
Other income (expense), net	(464	)	(433	)	(4,031	)	1,108


Income before provision for income taxes	33,184		24,024		88,421		71,018
Provision for income taxes	12,278		8,889		32,716		26,276


Net income	$ 20,906		$ 15,135		$ 55,705		$ 44,742



Net income per share (Note 3):
Basic	$ .30		$ .19		$ .78		$ .56
Diluted	$ .29		$ .19		$ .76		$ .55

Weighted average common shares
outstanding:
Basic	70,511		80,301		71,081		80,493
Diluted	72,554		81,733		73,089		81,834

The accompanying notes are an integral part of these consolidated finanical statements.

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NU SKIN ENTERPRISES, INC.
Consolidated Statements of Cash Flows (Unaudited)
(in thousands)

	Nine Months Ended September 30, 2004		Nine Months Ended September 30, 2003

Cash flows from operating activities:
Net income	$ 55,705		$ 44,742
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization	20,418		16,543
Amortization of deferred compensation	583		520
Loss on sale of assets	—		525
Changes in operating assets and liabilities:
Accounts receivable	(826	)	1,725
Inventories, net	(5,095	)	1,247
Prepaid expenses and other	12,105		5,384
Other assets	(1,417	)	(3,368	)
Accounts payable	(2,251	)	50
Accrued expenses	11,985		(8,929	)
Other liabilities	1,104		4,010


Net cash provided by operating activities	92,311		62,449


Cash flows from investing activities:
Purchase of property and equipment	(21,919	)	(13,181	)


Net cash used in investing activities	(21,919	)	(13,181	)


Cash flows from financing activities:
Exercise of distributor and employee stock options	15,411		1,184
Payments of cash dividends	(17,058	)	(16,917	)
Repurchase of shares of common stock	(71,007	)	(8,419	)


Net cash used in financing activities	(72,654	)	(24,152	)


Effect of exchange rate changes on cash	3,292		(1,022	)


Net increase in cash and cash equivalents	1,030		24,094

Cash and cash equivalents, beginning of period	122,568		120,341


Cash and cash equivalents, end of period	$ 123,598		$ 144,435

The accompanying notes are an integral part of these consolidated finanical statements.

- -3-

NU SKIN ENTERPRISES, INC.
Notes to Consolidated Financial Statements

1. THE COMPANY

Nu Skin Enterprises, Inc. (the “Company”) is a leading, global, direct selling company that develops and distributes premium-quality, innovative personal care products and nutritional supplements that are sold worldwide under the Nu Skin and Pharmanex brands. The Company also markets technology products and services under the Big Planet brand. The Company reports revenue from five geographic regions: North Asia, which consists of Japan and South Korea; Greater China, which consists of Mainland China, Hong Kong and Taiwan; North America, which consists of the United States and Canada; South Asia/Pacific, which consists of Australia, Brunei, Malaysia, New Zealand, the Philippines, Singapore and Thailand; and Other Markets, which consists of Brazil, Europe, Guatemala and Mexico (the Company’s subsidiaries operating in these countries are collectively referred to as the “Subsidiaries”).

The accompanying unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. The unaudited consolidated financial statements include the accounts of the Company and the Subsidiaries. All significant intercompany accounts and transactions are eliminated in consolidation. In the opinion of management, the accompanying unaudited consolidated financial statements contain all adjustments, consisting of normal recurring adjustments, considered necessary for a fair statement of the Company’s financial information as of September 30, 2004, and for the three- and nine-month periods ended September 30, 2004 and 2003. The results of operations of any interim period are not necessarily indicative of the results of operations to be expected for the fiscal year. For further information, refer to the consolidated financial statements and accompanying footnotes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2003.

2. STOCK–BASED COMPENSATION

The Company measures compensation expense for its stock-based employee compensation plans. Statement of Financial Accounting Standards (“SFAS”) No. 123, Accounting for Stock-Based Compensation, encourages, but does not require, companies to record compensation cost for stock-based employee compensation plans based on the fair market value of options granted. The Company has chosen to account for stock-based compensation granted to employees using the intrinsic value method prescribed in Accounting Principles Board (“APB”) Opinion No. 25, Accounting for Stock Issued to Employees, and related interpretations. Accordingly, because the grant price equals the market price on the date of grant for options issued by the Company, no compensation expense is recognized for stock options issued to employees. However, stock-based compensation granted to non-employees, such as the Company’s independent distributors and consultants, is accounted for in accordance with SFAS No. 123. SFAS No. 148, Accounting for Stock-Based Compensation – Transition and Disclosure, which amended SFAS No. 123 requires more prominent and frequent disclosures about the effects of stock-based compensation, which have been provided herein. Had compensation cost for the Company’s stock options been recognized based upon the estimated fair value on the grant date under the fair value methodology prescribed by SFAS No. 123, as amended by SFAS No. 148, the Company’s net earnings and earnings per share would have been as follows (in thousands, except per share amounts):

-4-

NU SKIN ENTERPRISES, INC.
Notes to Consolidated Financial Statements

	Three Months Ended September 30,				Nine Months Ended September 30,
	2004		2003		2004		2003
Net income, as reported	$ 20,906		$ 15,135		$ 55,705		$ 44,742
Deduct: Total stock-based employee
compensation expense determined
under fair value based method for all
awards, net of related tax effects	(1,390	)	(1,189	)	(4,087	)	(3,917	)


Pro forma net income	$ 19,516		$ 13,946		$ 51,618		$ 40,825



Earnings per share:
Basic - as reported	$ 0.30		$ 0.19		$ 0.78		$ 0.56
Basic - pro forma	$ 0.28		$ 0.17		$ 0.73		$ 0.51

Diluted - as reported	$ 0.29		$ 0.19		$ 0.76		$ 0.55
Diluted - pro forma	$ 0.27		$ 0.17		$ 0.71		$ 0.50

3. 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. For the three- and nine-month periods ended September 30, 2004, 0.6 million options were excluded from the calculation of diluted earnings per share because they were anti-dilutive. For the three- and nine-month periods ended September 30, 2003, other stock options totaling 4.1 million and 4.2 million, respectively, were excluded from the calculation of diluted earnings per share because they were anti-dilutive. Earnings per share in 2004 were positively impacted by the repurchase of 10.8 million shares of the Company’s Class A common stock in October 2003 and the repurchase of 3.1 million shares of the Company’s Class A common stock in July 2004.

4. DIVIDENDS PER SHARE

In July 2004, the board of directors declared a quarterly cash dividend of $0.08 per share for the Company’s Class A common stock. This quarterly cash dividend of approximately $5.6 million was paid on September 22, 2004, to stockholders of record on September 3, 2004. Quarterly cash dividends for the nine-month period ended September 30, 2004 totaled $17.1 million. The board of directors has also recently declared a quarterly cash dividend of $0.08 per share for the Company’s Class A common stock to be paid in December 2004.

5. DERIVATIVE FINANCIAL INSTRUMENTS

At September 30, 2004 and December 31, 2003, the Company held forward contracts designated as foreign currency cash flow hedges with notional amounts totaling approximately $83.6 million and $64.3 million, respectively, to hedge foreign-currency-denominated intercompany transactions. All such contracts were denominated in Japanese yen. As of September 30, 2004 and December 31, 2003, $0.2 million of net unrealized gains and $3.9 million of net unrealized losses, net of related taxes, respectively, were recorded in accumulated other comprehensive loss. The contracts held at September 30, 2004 have maturities through June 2005 and accordingly, all unrealized gains and losses on foreign currency cash flow hedges included in accumulated other comprehensive loss will be recognized in current earnings over the next 12

-5-

NU SKIN ENTERPRISES, INC.
Notes to Consolidated Financial Statements

months. The Company recognized pre-tax net losses on foreign currency cash flow hedges of $0.5 million and $4.8 million for the three- and nine-month periods ended September 30, 2004, respectively, and recognized pre-tax net losses of $0.9 million and $3.7 million for the three- and nine-month periods ended September 30, 2003, respectively, which were recorded primarily as an offset to revenue in Japan.

6. REPURCHASE OF COMMON STOCK

During the three- and nine-month periods ended September 30, 2004, the Company did not repurchase any shares of its Class A common stock under its open market repurchase plan. During the three- and nine-month periods ended September 30, 2003, the Company repurchased approximately 17,000 and 811,000 shares of Class A common stock under the plan for approximately $0.2 million and $8.4 million, respectively. On July 27, 2004, the Company provided notice of exercise of an option to purchase 3.1 million shares of Class A common stock from members of its original stockholder group. The Company purchased the 3.1 million shares on July 30, 2004 for an aggregate purchase price of approximately $71.0 million, or $22.62 per share. The option was obtained by the Company as part of a recapitalization transaction completed in October 2003. These stockholders also sold 1.5 million shares to third-party investors. The Company filed a registration statement with respect to the shares sold to the third-party investors.

7. COMPREHENSIVE INCOME

The components of comprehensive income, net of related tax, for the three- and nine-month periods ended September 30, 2004 and 2003, were as follows (in thousands):

	Three Months Ended September 30,			Nine Months Ended September 30,
	2004	2003		2004	2003
Net income	$ 20,906	$ 15,135		$ 55,705	$ 44,742
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustments	1,525	(3,129	)	776	(1,975	)
Net unrealized gains (losses) on foreign
currency cash flow hedges	985	(3,373	)	992	(1,796	)
Net losses reclassified into current
earnings	316	621		3,034	2,231


Comprehensive income	$ 23,732	$ 9,254		$ 60,507	$ 43,202

8. SEGMENT INFORMATION

The Company operates in a single reportable operating segment by selling products to a global network of independent distributors that operates in a seamless manner from market to market except for its operations in Mainland China. In Mainland China the Company utilizes an employed sales force to sell its products through fixed retail locations. The Company’s largest expense (selling expenses) is the world-wide commissions and Mainland China sales employee expenses paid on product sales. The Company manages its business primarily by managing its global sales force. The Company does not use profitability reports on a regional or divisional basis for making business decisions. However, the Company does recognize revenue in five geographic regions: North Asia, Greater China, North America, South Asia/Pacific, and Other Markets. Revenue generated in each of these regions is set forth below (in thousands):

-6-

NU SKIN ENTERPRISES, INC.
Notes to Consolidated Financial Statements

	Three Months Ended September 30,		Nine Months Ended September 30,
	2004	2003	2004	2003
Region:
North Asia	$ 156,448	$ 157,847	$ 466,048	$ 442,623
Greater China	60,303	34,783	167,045	91,857
North America	36,123	30,127	109,731	95,646
South Asia/Pacific	20,729	19,207	60,816	55,137
Other Markets	9,710	8,221	27,902	25,274

Totals	$ 283,313	$ 250,185	$ 831,542	$ 710,537

Certain reclassifications have been made to the prior year amounts to conform to the current year presentation. These reclassifications match the hedging gains and losses associated with the Japanese yen to the North Asia region, which were previously classified under the North America region.

Additional information as to the Company’s operations in its most significant geographical areas is set forth below (in thousands):

	2004	2003	2004	2003
Revenue:	Three Months Ended September 30,		Nine Months Ended September 30,
Japan	$ 140,588	$ 142,641	$ 418,297	$ 399,483
United States	33,603	27,760	102,187

FORM 10-Q

NU SKIN ENTERPRISES, INC.

2004 FORM 10-Q QUARTERLY REPORT – THIRD QUARTER

TABLE OF CONTENTS

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

1. THE COMPANY

2. STOCK–BASED COMPENSATION

3. NET INCOME PER SHARE

4. DIVIDENDS PER SHARE

5. DERIVATIVE FINANCIAL INSTRUMENTS

6. REPURCHASE OF COMMON STOCK

7. COMPREHENSIVE INCOME

8. SEGMENT INFORMATION