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November 2013

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Arbonne International

Arbonne International, a skincare and cosmetics company, announced it has established the Arbonne Scientific Advisory Board. The Advisory Board provides additional insight on the development, implementation and assessment of products and informational content for customers, the company and the community.

Christopher ZacharyChristopher Zachary
Michael S. KaminerMichael S. Kaminer
Howard I. MaibachHoward I. Maibach
Laura FortnerLaura Fortner

Christopher Zachary, M.D., is Chair of the Advisory Board. Zachary is Chair and a professor of the Department of Dermatology at the University of California, Irvine. He specializes in skin cancer and reconstructive surgery, aesthetic medicine and laser surgery. Zachary is an academic dermatologist, an educator, and author of several books, chapters and many other publications. He has also won several awards.

New board member Michael S. Kaminer, M.D., is Managing Partner at SkinCare Physicians® in Boston and is an associate clinical professor of dermatology at Yale School of Medicine. Kaminer specializes in facial sculpting, non-invasive treatment of aging and hair transplantation. He is the team dermatologist for the Boston Celtics. Kaminer is the author of more than 100 articles and book chapters and has appeared on television as an expert in cosmetic surgery.

Howard I. Maibach, M.D., is a dermatologist at the Dermatology Clinic at the University of California at San Francisco. Maibach’s specialties include contact and occupational dermatitis, and he is an expert in dermatotoxicology, or skin exposure toxicity. Maibach has been on the editorial board of more than 30 scientific journals and is a member of 19 professional societies.

Laura Fortner, M.D., is an obstetrician/gynecologist and Arbonne Independent Consultant, National Vice President in Navarre, Ohio. Fortner has been practicing medicine for 17 years and is currently a Fellow of the American Medical Society of ObGyns.

Brent BauerBrent Bauer
Nora ZorichNora Zorich
Janellen SmithJanellen Smith

Brent Bauer, M.D., is Director of the Department of Internal Medicine’s Complementary and Integrative Medicine Program at the Mayo Clinic, Rochester, Minn. He is also a professor of medicine at Mayo Medical School, where he has been on staff for 21 years. Bauer is the Medical Editor in Chief of the Mayo Clinic Book of Alternative Medicine.

Nora Zorich, M.D., Ph.D., is an independent pharmaceutical, over the counter drugs and dietary supplement consultant, following her retirement from Procter & Gamble, where she was Vice President of Research and Development. Zorich’s expertise includes women’s health, nutrition, metabolism and biochemistry. She also has leadership experience in regulatory affairs, global clinical development, statistics, microbiology, human safety, global post-market surveillance and biotechnology.

Janellen Smith, M.D., is a professor of dermatology at the University of California, Irvine. Smith specializes in melanoma, skin cancer, contact dermatitis and complex medical dermatology. She is also recognized for her clinical and teaching skills. Smith is currently the program chair for the Pacific Dermatologic Association and will take over as President in 2014. Smith is a Fellow of the American Academy of Dermatology. Her past research includes melanoma and stem cell biology.

Founded in 1980 with headquarters in Irvine, Calif., Arbonne International creates personal-care and wellness products that preserve and enhance the skin, body and mind.

Herbalife Ltd.

Georgios MoulinosGeorgios Moulinos

Global nutrition company Herbalife Ltd. announced that it has appointed former Los Angeles Mayor Antonio Villaraigosa to serve as a Senior Advisor to Chairman and CEO Michael O. Johnson and the company’s board of directors. Villaraigosa will provide counsel on strategic business development and global community outreach.

According to Johnson, Villaraigosa knows Herbalife well and has a “unique understanding of the opportunities” its products and business model can bring to people all over the world.

Villaraigosa served as the 41st Mayor of Los Angeles, from 2005 to 2013. Prior to being elected mayor, he was a member of the California State Assembly, the Democratic leader of the Assembly and the Speaker of the California State Assembly. As a member of the Democratic Party, he also served as a national co-chairman of Hillary Clinton’s presidential campaign, as a member of President Barack Obama’s Transition Economic Advisory Board and as Chairman of the 2012 Democratic National Convention in September 2012.

In other news, Herbalife welcomed Georgios Moulinos, Ph.D., an expert in sports medicine and nutrition, to its Nutrition Advisory Board.

For the past two decades Moulinos has consulted for a variety of sports clubs, including football, basketball, volleyball and handball, as well as the Greek national volleyball team for the 2004 Olympics.

Moulinos is an independent consultant at BCH College for exercise physiology and has served as Special Scientific Staff in volleyball coaching at the National and Kapodistrian University of Athens, Faculty of Physical Education and Sports Science. He was selected by the Greek Ministry of Education as a member of the Administrative Committee of the Harokopio University of Athens in the Faculty of Dietetics-Nutrition. Moulinos is the author of Nutrition for a Better Life and a frequent media contributor on nutrition. He has also conducted extensive studies in geriatric nutrition.

Headquartered in Los Angeles, Herbalife Ltd. is a global nutrition company that sells weight-management, nutritional and personal-care products intended to support a healthy lifestyle. Herbalife products are sold in more than 85 countries to and through a network of independent distributors.

Princess House

Kelly HarteKelly Harte

Princess House announced the appointment of Kelly Harte as Vice President of Sales Strategy & Development.

In her new role, Harte is responsible for developing and leading Princess House’s newly formed department of Sales Strategy & Development. The new department is a result of Princess House’s strategic efforts to expand into new markets and grow and develop its consultant base, while offering products and business opportunities to women across the United States and Puerto Rico.

A senior executive with more than 20 years of experience at another direct seller, Harte most recently served there as Executive Director of Global Sales Development. In that position, one key responsibility was designing, developing and supporting the launch of a new globally branded representative training process across the company’s full portfolio of international markets. She also created and managed development programs for top sales management talent. She was responsible for global sales communications and worked in partnership with brand marketing, legal and corporate responsibility.

Headquartered in Taunton, Mass., and founded in 1963, Princess House is a direct selling and business opportunity company offering exclusive products for cooking, dining and entertaining.

Nature’s Sunshine Products Inc.

Gregory L. ProbertGregory L. Probert

Nature’s Sunshine Products Inc., a natural health and wellness company, announced that Gregory L. Probert has been appointed as CEO and Beth Springer, an executive with extensive experience in strategy and marketing in a consumer-product oriented business, has been appointed as a member of the board of directors. Probert will continue as Chairman of the Board. Willem Mesdag, who has served on the board since 2009 and was previously the Chair of the Audit Committee, will continue as Lead Independent Director.

Probert has led the company as Interim CEO since April 1, 2013. Additionally, he has served as Executive Chairman of the Board since January 2013 and as Executive Vice Chairman of the Board since June 2011. Prior to his election as Executive Vice Chairman, Probert was an independent consultant to the company since 2010. Previously, he was Chairman of the Board and CEO of Penta Water Co.

Springer is currently a board member of Central Garden & Pet Co. and on the Board of Trustees and Co-Chair of the Development Committee of Bryn Mawr College. She held various positions at The Clorox Co. from 1990 to 2011, including Executive Vice President and General Manager; Group Vice President, Chief Strategy and Growth Officer; and Group Vice President and General Manager.

Nature’s Sunshine Products markets and distributes nutritional and personal-care products through a global direct salesforce of more than 340,000 active independent managers, distributors and customers in more than 40 countries.

Nu Skin Enterprises Inc.

Shelly Davis HesterShelly Davis Hester
Jin NamkoongJin Namkoong
Russell GrayRussell Gray

Anti-aging company Nu Skin Enterprises Inc. announced the addition of three scientists to its global research and development team. The new members of the team include Shelly Davis Hester, Ph.D., RD.; Jin Namkoong, Ph.D.; and Russell Gray. They join Nu Skin’s in-house researchers in the company’s ongoing development of innovative skincare and nutritional products.

Shelly Davis Hester joins Nu Skin as a Senior Associate Scientist and will further Nu Skin’s research relating to health and nutrition. Prior to joining Nu Skin, Hester was a Postdoctoral Fellow at the University of Indiana and Purdue University in the Herman B. Wells Center for Pediatric Research. She is a registered dietitian.

Dr. Jin Namkoong brings her knowledge of skin cell biology to Nu Skin, and her expertise in understanding human skin biology will be an integral part of the Nu Skin anti-aging innovation and research. Dr. Namkoong previously worked at Chanel, serving as a scientist in the skin cell biology laboratory for five years. She completed a postdoctoral fellowship in the Johnson & Johnson Skin Research Center.

Russell Gray is a seven-year clinical research veteran and brings his experience of designing, executing and coordinating clinical research to Nu Skin from Premier Research International LLC, where he studied analgesic pharmaceuticals. As a clinical research specialist, Gray will be involved in various clinical studies regarding Nu Skin’s nutritional products. In 2005, Gray received a commendation medal for his service as a nurse in the U.S. Army while he was stationed in Iraq.

Nu Skin Enterprises Inc. demonstrates its tradition of innovation through its comprehensive anti-aging product portfolio, independent business opportunity and corporate social responsibility initiatives. A global direct selling company, Nu Skin operates in 53 markets worldwide.

Univera Inc.

Chi Song WongChi Song Wong

Univera Inc. announced Chi Song Wong has been named General Manager of its affiliated company in Malaysia, Univera Malaysia Sdn. Bhd., in preparation for a 2014 launch of the Malaysian market.

Chi Song Wong brings more than 20 years of experience in the direct selling industry in the Malaysia/Singapore region, holding executive positions in various companies. He speaks Mandarin Chinese, English and Malaysian.

Univera Inc. is a natural products direct seller offering vitality, prosperity and purpose to people around the world. A part of the ECONET family of companies, Univera is fully integrated from farm to family—growing, discovering, developing and manufacturing its products.

WorldVentures

Angel RodriguezAngel Rodriguez

WorldVentures™, a direct seller of vacation club memberships, announced that Angel Rodriguez has been named Chief People Officer.

Rodriguez is a Human Resources executive with more than two decades of experience. Prior to joining WorldVentures, Rodriguez was the senior HR leader for Kellogg’s International and Global Functions, accountable for the people program at Kellogg’s core and emerging international markets.

WorldVentures is a social commerce, peer-to-peer marketing company and a seller of vacation club memberships including DreamTrips™. With a network of more than 110,000 independent representatives in 24 countries, the privately held company is headquartered in Plano, Texas.

Youngevity International Inc.

Patti GardnerPatti Gardner
Brytt ClowardBrytt Cloward

Youngevity International Inc., a global direct marketer of nutritional and lifestyle products and also a vertically integrated producer of gourmet coffees, announced the appointment of Patti Gardner as Vice President of Sales and Brytt Cloward as Vice President of Marketing for Youngevity®.

Gardner has been in the direct selling industry for more than 25 years and has previously served as Director of Sales and President of another direct seller. Prior to that, Gardner co-founded a startup party plan company that offered storytelling aids to families and educators. She will bring experience in leadership training, team building, business-building strategies, compensation plans and incentive programs to Youngevity.

Cloward has a diverse background in market research, data analysis and strategic decision-making with more than a decade of direct selling industry experience. He had worked as a consultant in the industry before helping found another direct seller and will bring this leadership expertise to Youngevity, working to strengthen marketing campaigns and advance the company’s growth strategy.

Youngevity International Inc. is a multidimensional company that offers a wide range of consumer products and services, primarily through person-to-person selling relationships. The company was formed after the merger of Youngevity Essential Life Sciences and Javalution Coffee Company in the summer of 2011.

The Inseparable Nature of Infrastructure and Infraculture

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Photo above: Scentsy’s new headquarters in Meridian, Idaho.

About a year ago I had a conversation with the founder of a new direct selling company. We discussed the treacherous road that must be traveled to establish a successful and enduring company in our channel. We discussed the difference between the companies that have grown and died quickly, grown and then faded away, and those that have grown, contracted and grown again. We observed that just as many companies fail because they lose touch with their salesforce as those that lack necessary business acumen.

How often have we seen promising young companies “professionalize” their people and processes only to lose what made them attractive to their distributors? On the other hand, we witness others go out of business because they can’t find financing, control their supply chain, comply with basic regulation or manage the egos of founders and employees. Inside boardrooms and executive teams, forces that promote measured results, efficiency and strong financials compete with ones that promote engagement, passion and strong culture. Too often one is sacrificed for the other: Engagement, passion and culture are difficult for MBAs to measure, and discussing IRR, ROI and EOQ as they relate to giveaways at a distributor event is enough to send the sales team running. MBAs get infrastructure; direct sellers get infraculture. Great companies bring infrastructure and infraculture together.

Great companies bring infrastructure and infraculture together.

Scentsy aspires to be a great company that brings value to the world. Our story is far from finished—and greatness is still an aspiration—but our journey provides insight into the establishment of infrastructure and infraculture.

In 2004, when we launched our direct selling opportunity in an ocean shipping container (our first home office), we had very little infrastructure. We had no money, no credit and no chance of an investor. We had no catalog, no software and no experience. We did have a great product and a few passionate consultants. Little by little, party after party, we made money and could invest in sales materials, software and facilities, but we held firmly to our humble beginning. It allowed us to co-write the Scentsy story with our growing number of consultants and their customers. Collectively, we created the underpinnings of a cultural sense of place, or infraculture. The values of simplicity, authenticity and generosity started to define not only our products and processes but also our people. It was easy for consultants to invite others to join them in their business because they participated in creating the culture in significant ways.

Heidi and Orville Thompson, Co-Owners of Scentsy Inc.Heidi and Orville Thompson, Co-Owners of Scentsy Inc.

Early on, Heidi and I did what we could to support them. Rules weren’t very important; fairness wasn’t much of an issue. If someone needed our help, we gave it if we could. If we were traveling, we’d stop in at a team meeting or call people up to go to dinner. We held events and training calls whenever we could. The consultants themselves rallied around each other, supported one another, cooperated wherever possible and tried to live as best they could according to our motto of contribute more than you take. Who wouldn’t want to be a part of that? Recruiting boomed and sales kept pace with recruiting. We had the proverbial tiger by the tail.

But behind the scenes we were struggling to keep up. From the beginning of 2007 through 2012 we hired, on average, one new employee every business day. Our facility needs grew from a 6,000-square-foot, flex-space office/warehouse to nearly 1 million square feet in three states and two countries. Our technology struggled to handle the explosion of data. Our customization requests burdened our vendor’s ability to support other clients. Sales development efforts were met with accusations of favoritism when we couldn’t reach everyone equally.

In late 2009 our weak infrastructure caught up to us. A software deployment went bad, our call center broke down as consultants tried to get answers their websites weren’t providing, and the lack of good data from previous years contributed to shortages of product and massive backorders. Just as our consultants’ hard work was paying off for them, we let them down. Instead of celebrating a successful selling season, we were answering questions about when orders would ship and spending all our efforts supporting home office employees who were working around the clock to make things right. In short, our lack of infrastructure was undermining our hard-won infraculture.

Beginning in 2010 the forces inside our executive team advocating for capacity, efficiency and financial stability began to dominate. We poured massive energy into infrastructure, technology, facilities, systems and programs that expanded the opportunities for our consultants. We launched new countries, new brands and new programs. New facilities were opened on a regular basis, and we were performing as a well-run business. Shipping worked like clockwork, system uptime was extremely high, backorders were virtually nonexistent and call-center metrics were enviable. Orders were up, recruiting was up, costs were down, and all was good.

But somewhere along the way the old stories seemed to lose their luster. The infraculture that held together our early leaders seemed distant to the Facebook generation of direct sellers that were filling our ranks. Cooperation that came easily when everyone was on a personal basis turned to competition as consultants turned each other in for policy violations and leaders tried to outdo each other with bigger team meetings, recognition awards or monthly team incentives. Our story, once told in person in informal situations, was now told by tens of thousands of people we hadn’t yet met. The mechanism of sending an announcement to more than 100,000 consultants in different countries speaking different languages slowed the process and squeezed out the fun and informality we were known for.

Scentsy wickless candle warmerScentsy wickless candle warmer Velata fondueVelata fondue Scentsy Layers bath and body careScentsy Layers bath and body care

We started to realize that infraculture and infrastructure were a lot like software and hardware. I remember the days when Intel would come out with a new processor that held so much promise. Microsoft would follow with upgrades to Windows and Office. Then graphic and gaming software would soon push the limits of the new hardware. Software waited on better hardware. Better hardware inspired new software. This process repeated itself over and over in the ’90s and 2000s. Underlying it all is the fact that the best software in the world will not work on bad hardware, and powerful hardware is worthless without good software. Both are inextricably linked. The same can be said for the infrastructure and infraculture of a business.

Grace Adele fashion bagsGrace Adele fashion bags

Infraculture is the underpinnings of a cultural sense of place.

At Scentsy, success took away the luxury of being a small company with an invincible infraculture. At the same time, investments in infrastructure have allowed us to better confront the forces that undermine our infraculture. Better workspace enhances cooperation, better technology improves training, recognition and incentives, and better research and development improves product offerings. A company’s infraculture may be strong, but if it lacks the infrastructure to spread that infraculture, it will not grow. Underlying the enthusiasm of every consultant of a sizable company is the question, “How long will this last?” When the taglines Exclusive Product, Ground-Floor Opportunity, and Fastest-Growing no longer apply, only businesses with a strong infrastructure can compete.

This month we are moving into our newest, and hopefully last, home office. The six-story office tower is the centerpiece of our 80-acre campus, Scentsy Commons. Construction has been a labor of love for Heidi and me. We met weekly with architects and contractors, deciding everything from what pavers to use on the sidewalk to where departments would sit, to what color of tile we should put in the bathroom. In the design and layout we incorporated the values of simplicity, authenticity, and generosity. We worked hard to physically represent the ethos of the Scentsy Family.

We often wondered if this was the best use of our time and money. Before moving in, we used the building to host our SuperStar Director Summit—the annual meeting of our top sales leaders. We heard over and over that they felt like they were coming home. This was their place. Scentsy Commons and the infrastructure it represents is the physical sense of place to match the Scentsy Family cultural sense of place they helped establish. It is a physical representation of our commitment to the aspirations and values that have driven our company since the days of the ocean container. For us, it is the bringing together of infrastructure and infraculture.

A company’s infrastructure allows it to execute functional plans, drive efficiency and measure productivity. A company’s infraculture allows it to inspire greatness, drive passion and enhance satisfaction. Just as hardware and software compete for resources and develop around the weakness of the other—yet are interdependent—infrastructure and infraculture are inseparable. Companies that aspire to be great must develop both.

Orville ThompsonOrville Thompson is CEO and Co-Owner of Scentsy Inc. Its family of brands includes Scentsy Fragrance, Velata fondue and Grace Adele fashion accessories. He is also Chairman of the U.S. DSA Board of Directors.

Financial News, November 2013

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Primerica Inc.

Primerica Inc. (PRI—NYSE), the largest independent financial services marketing company in North America, announced financial results for the quarter ended June 30, 2013. Total revenues were $312.3 million in the second quarter of 2013 and net income was $43.5 million, or 74 cents per diluted share.

In the second quarter of 2013 operating revenues increased by 4 percent to $308.8 million, compared with $296.2 million in the second quarter of 2012—driven by strong Investment and Savings Products performance and growth in Term Life net premium, partially offset by lower net investment income. Net operating income was $41.4 million in the second quarter of 2013, compared with $45.5 million in the prior year period, while net operating income of 71 cents per diluted share remained consistent with the second quarter of 2012, partially due to the retirement of $155 million of Primerica common stock and warrants. Net operating income was negatively impacted by higher expenses related to the move to the company’s new headquarters as well as legal fees and expenses. Net income return on stockholders’ equity (ROE) was strong at 14.2 percent (14.6 percent on a net operating income and adjusted stockholders’ equity [ROAE] basis) for the quarter ended June 30, 2013.

As of June 30, 2013, investments and cash totaled $1.88 billion, compared with $2.12 billion as of March 31, 2013.

In other company news, the board of directors approved payment of a quarterly dividend of 11 cents per share for the second quarter of 2013. The dividend was payable on Sept. 10, 2013, to stockholders of record as of Aug. 23, 2013.

Youngevity International Inc.

Youngevity International Inc. (YGYI—OTCQX), a global direct marketer of nutritional and lifestyle products and also a vertically integrated producer of fine coffees, reported its financial results for the second quarter and first six months of 2013.

Fiscal 2013 Second Quarter Results

For the second fiscal quarter ended June 30, 2013, Youngevity International’s revenue increased 8.9 percent to $20.9 million, compared to $19.2 million for the same period in fiscal 2012.

Youngevity International’s gross profit for the second fiscal quarter ended June 30, 2013, increased approximately 15.5 percent to $12.7 million, compared to $11.0 million recorded in the same period last year.

The company reported second fiscal quarter 2013 net income of $662,000, compared to a net loss of ($36,000) for the quarter ended June 30, 2012.

As of June 30, 2013, the company’s cash and cash equivalents were $3.6 million and working capital was $2.5 million, compared to cash and cash equivalents of $3.0 million and a working capital of $1.4 million as of Dec. 31, 2012.

Fiscal 2013 First Six Months Results

For the six months ended June 30, 2013, the company reported net revenue of $41.7 million, compared to $35.2 million for the same period in fiscal 2012, an 18.5 percent increase. Gross profit for the second quarter of fiscal year 2013 increased 25.5 percent to $25.1 million, compared to $20.0 million in the prior year period.

Net income for the second quarter of fiscal year 2013 was $1.7 million, compared to a net loss of $887,000 reported in the same period in fiscal 2012.

EBITDA was $3.9 million for the six months ended June 30, 2013, compared to $732,000 in the same period for the prior year.

Crius Energy Trust

Crius Energy Trust (KWH-UN.TO—TORONTO) announced its financial results for the three-month period ended June 30, 2013. The Trust commenced operations on Nov. 13, 2012, with the acquisition of a 26.8 percent ownership interest in Crius Energy LLC by the Trust’s wholly owned subsidiary. All figures in U.S. dollars unless otherwise noted.

Revenue for the quarter ending June 30, 2013, was $113.9 million and was driven by robust customer growth in the first half of the year and higher retail rates.

Gross margin for the period was $27.6 million, representing 24.2 percent of revenue. Monthly gross margins were 24.3 percent in April, 26.9 percent in May and 22.1 percent in June.

Adjusted EBITDA for the period was $10.1 million, or 8.9 percent of revenue. Adjusted EBITDA was negatively impacted by an estimated $0.9 million due to lower-than-normal electricity volumes in June, $0.9 million as a result of customer rate increases not implemented as part of the transition of billing systems in April 2013, and $1.9 million related to nonrecurring expenses stemming from the investment in the integration of pre-IPO legacy IT platforms.

The company’s balance sheet improved in the period with total cash availability increasing to $32.1 million. The total cash availability consists of $18.5 million in cash, no long-term debt and availability of $13.6 million under the company’s working capital facility.

The company’s Viridian Energy brand added more than 35,000 customers and 3,800 independent contractors to its network marketing channel. Management sees the higher-usage, higher-retention Viridian marketing channel as a key source of long-term revenue growth that will help support distributions in the future.

LifeVantage Corp.

LifeVantage Corp. (LFVN—NASDAQ), a science-based network marketing company, reported financial results for the fiscal 2013 fourth quarter and the full year ended June 30, 2013.

Fiscal 2013 Fourth Quarter Results

For the fourth fiscal quarter ended June 30, 2013, the company reported net revenue of $51.5 million, compared with $44.6 million for the same period in fiscal 2012, an increase of 15.5 percent. Revenue for the quarter was negatively impacted 7.3 percent by foreign currency fluctuation.

Gross profit for the fourth fiscal quarter ended June 30, 2013, increased to $44.2 million, compared to $38.2 million for the same period last year, delivering a gross margin of 85.8 percent, compared with 85.6 percent in the prior year period.

Operating income for the fourth fiscal quarter of 2013 was $0.2 million, compared to $7.3 million in the same period last year. Operating income for the fourth fiscal quarter of 2013 includes a $1.7 million expense associated with the retirement of Dr. Joe McCord, the company’s former Chief Science Officer, and a $1.6 million expense associated with the launch of the company’s MyLifeVenture program. Operating margin in the fourth fiscal quarter of 2013 was 0.5 percent, compared to 16.5 percent in the prior year period.

Net loss for the fourth quarter of fiscal year 2013 was $0.2 million, or zero cents per diluted share. This compares to net income in the fourth quarter of fiscal year 2012 of $4.8 million, or 4 cents per diluted share.

Fiscal 2013 Full Year Results

For the full year ended June 30, 2013, the company reported net revenue of $208.2 million, compared to $126.2 million in fiscal year 2012, a 65.0 percent increase. Revenue for the full year was negatively impacted 5.0 percent by foreign currency fluctuation.

Operating income in fiscal year 2013 was $12.1 million, which includes the impact of $5.0 million of net product-recall related costs as well as the aforementioned expenses related to the retirement of the company’s Chief Science Officer and the launch of MyLifeVenture. This compares to operating income of $21.5 million in the prior year.

Net income for fiscal year 2013 was $7.6 million, or 6 cents per diluted share, which includes the impact of net recall-related-costs and the aforementioned operating expenses incurred in the fourth quarter, compared to $12.5 million, or 11 cents per diluted share, in fiscal year 2012.

Excluding product recall costs, non-GAAP gross profit, operating income, net income and diluted earnings per share for the full fiscal year ended June 30, 2013, were $176.3 million or 84.7 percent, $17.1 million or 8.2 percent, $11.0 million and 9 cents, respectively.

The company’s cash and cash equivalents at June 30, 2013, were $26.3 million, compared to $24.6 million at the end of fiscal year 2012. The company generated $10.7 million in cash flow from operations in the full fiscal year 2013.

During fiscal year 2013, the company authorized two separate $5 million stock repurchase programs pursuant to which the company repurchased a total of approximately 3 million shares for $7.1 million. The remaining $2.9 million of authorized share repurchases, or approximately 1.1 million shares, were completed during the first quarter of fiscal 2014.

LifeVantage commenced its modified Dutch auction tender offer Sept. 24, 2013. Through the tender offer, the company offered to purchase up to $40 million of its common stock at a price per share not less than $2.45 and not greater than $2.80. The tender offer expired on Oct. 25, 2013.

The company expects to enter into a new credit facility to fund the share purchases in the tender offer. The tender offer will be subject to the completion of the new credit facility and other customary conditions that are described in the tender offer materials.

D.A. Davidson & Co. will be the dealer manager for the tender offer. Georgeson Inc. will serve as information agent for the tender offer, and Computershare will serve as depository for the tender offer.

Natural Health Trends Corp.

Natural Health Trends Corp. (NHTC—OTC.BB), a direct selling company that markets premium quality personal-care, wellness and “quality of life” products under the NHT Global brand, announced financial results for the quarter and six months ended June 30, 2013.

Total revenues for the second quarter were $10.6 million, compared to $11.0 million in the second quarter last year, and up sequentially from the $8.7 million in the first quarter. This was the second consecutive quarterly increase in revenues.

Operating income was $948,000, an increase of 7 percent, compared to $889,000 last year. Net income was $904,000, or 8 cents per diluted share, compared to $846,000, or 8 cents per diluted share, last year.

Cash and cash equivalents increased to $6.7 million as of June 30, 2013, from $4.2 million at Dec. 31, 2012. Net working capital turned positive for the first time since early 2007.

RBC Life Sciences Inc.

RBC Life Sciences Inc. (RBCL—OTC.BB), a provider of proprietary nutritional supplements, reported consolidated net sales of $6.7 million for the second quarter of 2013, a 2 percent increase over the second quarter of 2012.

For the second quarter of 2013, the company reported a net loss of $147,000, or 1 cent per share, compared to net earnings of $320,000, or 1 cent per share, for the same quarter last year. Gross profit was $3.0 million, compared to $3.5 million the previous year. According to RBC Life Sciences CEO Clinton H. Howard, net sales of Nutritional Products have been positive, increasing 8 percent for the second quarter of 2013, compared to the previous year.

Net sales were $12.4 million for the six months ended June 30, 2013, a 2 percent decrease over the same period in 2012. The company reported a net loss of $155,000, or 1 cent per share, compared to net earnings of $247,000, or 1 cent per share for the comparable period in 2012. Gross profit was $5.9 million compared to $6.6 million the previous year.

Educational Development Corp.

Educational Development Corp. (EDUC—NASDAQ) announced their quarterly cash dividend.

The board of directors has authorized an 8 cents per share cash dividend. The dividend was payable on Sept. 20, 2013, to shareholders of record Sept. 13, 2013.

Educational Development Corp. sells children’s books, including Usborne Books and the Kane/Miller line of international children’s titles, through a multi-level sales organization of independent consultants, through 5,000 retail stores and over the Internet.

Direct Selling News has accumulated this information from public sources, including press releases and SEC filings. The information is presumed accurate and reliable. However, it is not an endorsement of any investment opportunity. Proper and considerable due diligence should be completed before making any investment.

The Technological Disruption of Direct Sales

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Whether you like it or not, technology is playing a big part in our lives. It’s infiltrating and impacting our business practices, purchasing behavior and expectations. As a direct sales executive you need to be constantly asking yourself how you can stay ahead of this overwhelming movement. We’ve reached a stage in business where it’s no longer possible to ignore technology or steadfastly stick to old-fashioned ways of working. Technology innovation is here to stay, and those who don’t prepare to embrace it are only preparing to fail.

This trend is clear to see even in our everyday buying behaviors. Purchasing behavior continues to evolve, and it’s rare for buying decisions to be made without prior online research taking place first. These newly evolved savvy-shoppers are ultimately your potential customers, so in order to keep up with the fast-paced nature of online activities and stay aligned to human behaviors you need to be using technology to your advantage. According to the U.S. Census Bureau, it’s been estimated that the U.S. retail e-commerce sales for the fourth quarter of 2012 was $59.5 billion, an increase of 4.4 percent from the third quarter of 2012. Not only is that a significant figure in itself, but the steep increase indicates further, on a broad scale, where the sales industry is headed.

I regularly come across direct selling professionals missing a trick with technology due to their fear of the unknown and reluctance to adopt potentially beneficial and innovative technology. The typical concerns expressed are understandable and include: “Technology is advancing so quickly, how do I stay on top of it?”; “How do I know I’m on the right track?”; “How do I realize the benefits?”; “What’s the ROI?”—all valid questions. However, there is another, and I believe more positive and engaging, way of looking at the future.

Technology disruption should be embraced. In the realm of direct selling, executives should be looking at their existing tools and practices with a view to using technology as a solution—one that can improve efficiency as well as productivity. Regarding technology adoption as a supporting tool that enhances the way you do your job tends to induce much less anxiety around the subject.

Training is a vital part of successful direct selling in the corporate world, and this is a particular area where technology can help executives thrive. A vast amount of money is spent on training courses to immerse executives in proven sales training methodologies, but what happens next? How often do you honestly believe workbooks are referred to as a reminder of successful processes? To achieve real ROI on training, technology needs to be incorporated at every step. Embedding technology within Customer Relationship Management (CRM) systems that are used every day is the only surefire way to make certain that knowledge is reinforced and therefore retained. If a sales methodology is integrated into genuinely user-friendly systems, then workflow is streamlined and productivity increases. Such integrations remove the need for excess research and admin by collating all the relevant material and presenting it in a way that works for executives out in their territories.

Developing a digital strategy to sit comfortably within existing practices works on a number of levels, not least to ease the anxiety associated with technology adoption.

Developing a digital strategy to sit comfortably within existing practices works on a number of levels, not least to ease the anxiety associated with technology adoption. Tangible results and the ability to track success and failure is gold dust in selling. Knowledge about what’s working, and what’s not, can dramatically impact a bottom line, which at the end of the day is what we’re all working toward. Technology can be seamlessly embedded into CRM systems to make this information readily available, which is vital to gauge the ROI from training. This is one of the many reasons why I’m so passionate that technology is not something to shy away from—but something to be welcomed with enthusiasm.

Gary WhiteGary White, CEO of U.K.-based White Springs, has 10 years of experience in delivering technology to businesses. With a background in accountancy, sales and software implementation for global organizations, White is passionate about the use of technology to drive sales transformations and regularly speaks on the topic. White Springs is a technology provider that transforms training from an event into a continuous learning process. It enables sales training companies to maximize the benefits of their intellectual property by offering clients the ability to use the training methods within their existing Customer Relationship Management (CRM) systems.

The High Ethical Standards of Our Industry

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Click here to order the November 2013 issue in which this article appeared.

DSA

Editor’s Note: Participants in and proponents of the direct selling channel of distribution have been, in our opinion, wrongfully labeled as “unethical.” While we cannot control the behavior of everyone who engages in business, we firmly believe that the legitimate companies in our channel operate with a very high degree of ethics.

Published here is our industry standard for ethical behavior, as written by the U.S. Direct Selling Association and held to by many companies in our channel. Those who are members of the DSA commit by their membership to uphold these standards. We proudly stand behind these statements. This paper on ethics as well as many other resources can be found at www.directsellingfacts.com.

Ethics and Values

Members of the Direct Selling Association are working in tandem to provide and require adherence to ethical standards and guidance. The direct selling community has high standards that, in many cases, exceed legal requirements.

Member companies work to protect, secure and educate individual direct sellers, consumers and the general public in accordance with applicable standards within the DSA Code of Ethics.

  • The direct selling industry is dedicated to consumer protection and has enacted policies to safeguard the industry, consumers and individual direct sellers from nefarious activity.

  • Direct sellers invest heavily in educating consumers on best practices and the substantial differences between legitimate direct selling companies and pyramid schemes.

  • Member companies of the Direct Selling Association (DSA) pledge to adhere to a code of conduct that requires business to be conducted with transparency and consumer protection at the core.

  • The Code of Ethics is enforced by an independent code administrator who is not a member of the DSA staff nor affiliated with any member company. The code administrator is responsible for accepting, investigating and prescribing a remedy for complaints filed against a member company.

  • Most direct selling companies require sellers to hold little or no inventory, and all members of the DSA must have a robust buyback policy to protect against inventory loading.

Additional industry protections that have been created include:

  • Inventory buyback – DSA members pledge to repurchase inventory from salespeople who decide to leave the business. Any inventory purchased in the 12 months previous to the salesperson’s departure will be repurchased for at least 90 percent of what was originally paid. Thus, there is no risk of being left with large amounts of inventory in the event the seller is not satisfied with his or her experience.

  • No large upfront fees – In most cases becoming a direct seller costs no more than the price of a startup kit, which can range from just a few dollars to several hundred dollars depending on the company and the contents of the kit. In all cases, the cost of the kit should be reasonable based on what you get in return (product samples, catalogs, training materials, etc.).

  • Compensation based on sales – Sellers are compensated primarily for the sales of real products—not for recruitment.

  • No unsubstantiated earnings claims – There are no claims of large profits without time, commitment and effort. Earnings are primarily based on the sale of products and services.

In the June 2013 Board Meeting, the DSA board of directors adopted a new definition of direct selling for official use by the association and its member companies:

Direct selling is a business model that offers entrepreneurial opportunities to individuals as independent contractors to market and/or sell products and services, typically outside of a fixed retail establishment, through one-to-one selling, in-home product demonstrations or online. Compensation is ultimately based on sales and may be earned based on personal sales and/or the sales of others in their sales organizations.

Direct sellers may be called distributors, representatives, consultants or various other titles. They may participate in various ways, including selling the products themselves or through their sales organizations, referring customers to the company and purchasing products and services for personal use.

14-Year-Old Builds $250 Million Origami Owl Business

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Origami Owl

Many teens dream of acquiring their first car. Some go out and work to make it happen. Few launch a $250 million business along the way.

Seventeen-year-old Bella Weems is one of the latter. At age 14, the Arizona native took her parents’ advice and began raising money through her own business. She sold her signature jewelry pieces—now called Living Lockets—through friends, house parties, boutiques, shows and any other opportunity that presented itself. With the help of Weems’ family members, the growing enterprise became custom jewelry company Origami Owl.

Founded in 2010, Origami Owl signed on independent “designers” in 2011, reporting annual sales of about $280,000. The next year, the company generated 86 times that amount. Today, over 25,000 Origami Owl designers are hosting Jewelry Bar parties across the country.

Weems’ support team includes her mother Chrissy, the company’s CEO, and two uncles and an aunt who have taken on roles in the company. Somewhere along her remarkable journey, Weems also acquired a license and a white Jeep named Alice.

Read the full story from the UK’s Daily Mail.

DSA of Canada Appoints New President

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DSA Canada

The Board of Directors of the Direct Sellers Association (DSA) of Canada has announced that Ken Mulhall will serve as Association President upon Ross Creber’s retirement at the end of 2013.

“We’re very excited to welcome Ken on board,” said DSA Chair, Angela Abdallah of Amway Canada Corporation. “His experience and background are the perfect fit for this very important role.”

Ken MulhallKen Mulhall

Mulhall’s extensive experience includes roles as President and CEO of the Canadian Jewellers Association (CJA) and Senior Vice President of the Canadian Association for Pharmacy Distribution Management (CAPDM).

Established in 1954, the Direct Sellers Association serves as a self-regulating entity within the industry. By upholding fair standards and business practices, the association empowers member companies to serve the 900,000 Canadian entrepreneurs engaged in direct selling.

Read the full announcement from the DSA of Canada.

Little Trove Promotes Fair Trade through Direct Sales

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When former solicitor Ramona Hirschi founded Little Trove in late 2011, she wanted to launch a business focused on improving the lives of producers as well as consumers. Time spent in her native Malaysia and other parts of the world had shown Hirschi that many goods manufactured around the globe undergo substantial mark-ups, with revenue often distributed disproportionately between the retailer and producer.

UK-based Little Trove actively addresses that disparity in earnings by offering a variety of products—ranging from food and fashion to kitchen and cleaning—certified by the Fairtrade Foundation, from suppliers registered with either the World Fair Trade Organisation (WFTO) or the British Association for Fair Trade Shops (BAFTS). Little Trove’s ethical policy addresses standards such as fair wages and statutory rights for workers, child labor restrictions, fair pricing, and sourcing from less popular trading countries.

At its inception, Little Trove sold products exclusively online. Six months into the new venture, the company was looking to enhance the customer experience with in-person sales. Hirschi saw direct selling as an opportunity to integrate a personal approach, while maximizing return and minimizing risk to the fledgling company. In the course of its first year, Little Trove has trebled its turnover—with around 75 percent of profits now generated through direct selling.

Read more on Hirschi’s fair trade party plan company.

Online Shopping Services Take a Personal Approach

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The personal shopping industry is experiencing a “huge growth spurt,” as Zayna Mosam notes in a recent story for The Baltimore Sun. Mosam is Vice President of Marketing at the Association of Image Consultants International, whose members largely provide personal shopping services. As the industry’s demand grows, companies are expanding to online services in an effort to reach more consumers.

One such company is New York fashion startup Keaton Row, a direct seller that recently raised $1.6 million in its second round of seed funding. Keaton Row pioneered a business strategy that places the one-on-one relationship between stylist and client 100 percent online. The company recruits and vets fashion-savvy individuals from across the country to join its team of stylists. Because stylist commissions come out of Keaton Row’s partnership with retailers, the company provides personal styling services to its 10,000 registered clients free of charge.
 
Personal shopping services like Keaton Row particularly appeal to a demographic that has the financial means to shop higher-end pieces, but scarce time to curate looks for themselves. Faced with an abundance of retail options, individuals value services that narrow the focus to looks tailored to their tastes and personality. Keaton Row’s online, direct selling business essentially democratizes the model, extending opportunity to anyone looking to style or be styled.

Read more on the growth of online personal shopping services.

Sip and Tell: Winemakers Market through Home Parties

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Home parties and wine make a fine pairing, at least to producers like Boisset Family Estates, which recently began distributing its vintages through Boisset Wine Living Ambassadors.

Direct selling presents an attractive distribution model to small, boutique wineries that produce a fraction of the cases supplied by larger mass-market brands. These small producers build their sales primarily through relationships within the wine community.

Boisset joins companies like WineShop At Home and The Traveling Vineyard in turning the relational aspect of the business into opportunity for wine enthusiasts. WIV Wein International, based in Germany, describes itself as an “ambassador for the culture of wine” and currently ranks as the No. 25 direct selling company in the world.

Technology has not only enabled winemakers to simplify inventory and shipping processes, but also connect directly to consumers through digital tools. Direct sales is one way producers are leveraging this shift to bypass a middleman distributor and deliver their product to consumers.

Read more on how technology is connecting winemakers to wine drinkers.

Thirty-One Founder on Navigating Rapid Growth

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Cindy Monroe
Cindy Monroe		 Thirty-One Gifts

Cindy Monroe, Founder and CEO of Thirty-One Gifts, recently spoke to Upstart Business Journal about the 10-year-old company’s explosive growth, as well as some of the lessons that success has taught. Sales at Thirty-One surged from $100 million in 2010 to $718 million in 2012, positioning it as the No. 18 direct selling company in the world.

Thirty-One has experienced the highs and lows that accompany rapid growth within any company. Building a thriving salesforce of nearly 130,000 meant, at one point, imposing a six-month halt on new consultant sign-ups to ensure the company’s infrastructure could support the demand. Monroe shares some key practices that have enabled her to maintain her bearings and lead her team along the way:

  • Selling the right product.
  • Being a relationship business.
  • Focusing on company culture.
  • Evolving as a CEO.

Read the full story from Upstart Business Journal.

Tupperware CEO Talks Product, Parties on CBS

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Tupperware

Tupperware Brands CEO Rick Goings recently sat down with the team of “CBS This Morning” to discuss the multibillion-dollar company. With operations in 100 markets worldwide, Tupperware is actively adapting and refining its strategy to meet the demands of diverse markets.

Tupperware generates 90 percent of its sales in international markets, where Goings says the focus often shifts from price to quality. Rather than competing with discount food storage brands, the company provides quality products that facilitate easy, efficient food prep. “We have had to contemporize the product line. … We moved to hi-tech products that really are effective for busy working women,” said Goings.

Goings points out that, despite evolving methods of communication, women continue to value the personal connection at the core of the business. As the company responds to the needs of consumers, they tell their friends. “We’ve changed what we offer to women today, and she’s jumped on it,” said Goings.

Click through to view the full “CBS This Morning” video.