Segment Analysis for the Third Quarter

For NSP U.S., net sales revenue decreased by 6.3 percent to $35.2 million, compared with $37.6 million in the same quarter a year ago. Operating income decreased by 5.9 percent to $2.3 million, compared to $2.4 million for the same quarter a year ago. The decrease in sales was caused, in part, by changes in our promotional programs, the timing of event qualification periods (contributing to lower sales compared to the same period a year ago), as well as continuing weakness in the U.S. economy. Operating expenses decreased by 6.4 percent.

For NSP International, net sales revenue decreased by 1.1 percent to $32.6 million, compared to $33.0 million in the same quarter a year ago. In local currencies, net sales revenue increased by 2.1 percent, compared to the same quarter a year ago. Net sales revenue benefited from growth in several key markets, as well as the effect of the weakening U.S. dollar overall and its positive impact on consumer demand in many of the markets in which we operate. These improvements, however, were offset by the devaluation of Venezuela's currency in the first quarter of 2010 and its effect on reported net sales for the current quarter. Operating income decreased to $0.8 million, compared to $4.1 million in the same quarter a year ago. The decline was caused by an increase in VAT charges in our Mexico business, increased transfer pricing in most markets, and changes in volume incentive rates.

Among NSP International's markets:
  • Net sales revenue in the Russian markets increased by 8.3 percent to $12.5 million, compared to $11.5 million in the same quarter a year ago.  This improvement was due, in part, to improved Manager and Distributor recruiting efforts, an improving local economy, and a slight weakening of the U.S. dollar in relation to the various currencies in this market, which modestly reduced the price of our products. The strength of our Russian distributor network and leaders, and the launch of new products helped maintain positive momentum in this market.  
  • Net sales revenue in Venezuela decreased 50.0 percent to $1.7 million, compared to $3.4 million in the same quarter a year ago, as the result of the devaluation of the bolivar. In January of this year, the official exchange rate for bolivars changed from 2.15 bolivars per U.S. dollar to 4.30 bolivars per U.S. dollar for all products other than essential goods.

For Synergy Worldwide, net sales revenue increased 22.1 percent to $18.3 million, compared to $15.0 million in the same quarter a year ago. In local currencies, net sales revenue increased 19.1 percent, compared to the same quarter a year ago. Net sales revenue increased due to significant growth in the European, U.S, and Korean markets, as well as the opening of the Vietnam market for Synergy products. These improvements were partially offset by decreases in Japan sales. Operating income was $0.8 million, compared to just above break-even for the same period in the prior year, as a result of strong revenue growth and cost reduction initiatives.