49 NU SKIN ENTERPRISES CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY The accompanying notes are an integral part of these consolidated financial statements. Preferred Class A Class B Additional Accumulated Other Retained Deferred Total Stockholders’ (U.S. dollars in thousands, except share amounts) Stock Common Stock Common Stock  Paid-in Capital Comprehensive Income Earnings Compensation Equity Balance at January 1, 1998 $ 2 $ 12 $ 70 $ 115,053 $ (28,578) $ 17,788 $ (9,455) $ 94,892 Net income — — — — — 103,917 — 103,917 Foreign currency translation adjustments — — — — (15,026) — — (15,026) Total comprehensive income 88,891 Repurchase of 917,000 shares of Class A common stock (Note 13) — — — (10,549) — — — (10,549) Amortization of deferred compensation — — — — — — 3,626 3,626 Issuance of notes payable to stockholders — — — — — (24,413) — (24,413) Purchase of acquired entities and termination of S corporation status 1 — — (22,144) — 60,772 — 38,629 Purchase of Pharmanex (Note 4) — 4 — 78,710 — — (859) 77,855 Exercise of distributor and employee stock options — — — 1,961 — — — 1,961 Conversion of preferred stock (Note 3) (3) 3 — — — — — — Conversion of shares from Class B to Class A — 15 (15) — — — — — Contingent payments to stockholders (Note 7) — — — (16,250) — — — (16,250) Balance at December 31, 1998 — 34 55 146,781 (43,604) 158,064 (6,688) 254,642 Net income — — — — — 86,694 — 86,694 Foreign currency translation adjustments — — — — (4,616) — — (4,616) Total comprehensive income 82,078 Repurchase of 1,985,000 shares of Class A common stock (Note 13) — (2) — (26,860) — — — (26,862) Amortization of deferred compensation — — — — — — 3,692 3,692 Termination of Nu Skin USA license fee (Note 5) — — — (6,444) — — (650) (7,094) Issuance of employee stock awards and options — — — 3,252 — — (3,252) — Exercise of distributor and employee stock options — — — 2,923 — — — 2,923 Balance at December 31, 1999 — 32 55 119,652 (48,220) 244,758 (6,898) 309,379 Net income — — — — — 61,700 — 61,700 Foreign currency translation adjustments — — — — 2,873 — — 2,873 Total comprehensive income 64,573 Repurchase of 1,893,000 shares of Class A common stock (Note 13) — (1) (1) (12,763) — — — (12,765) Amortization of deferred compensation — — — — — — 5,252 5,252 Exercise of distributor and employee stock options — — — 294 — — — 294 Forfeiture of employee stock awards and options — — — (899) — — 899 — Balance at December 31, 2000 $ — $ 31 $ 54 $ 106,284 $ (45,347) $ 306,458 $ (747) $ 366,733 December 31, December 31, December 31, (U.S. dollars in thousands) Year ended 1998 1999  2000 Cash flows from operating activities: Net income $ 103,917 $ 86,694 $ 61,700 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 15,768 29,515 32,350 Amortization of deferred compensation 3,626 3,692 5,252 Amortization of inventory step-up 21,600 — — Write-off of in-process research and development 13,600 — — Income applicable to minority interest 3,081 — — Changes in operating assets and liabilities: Accounts receivable (900) (3,776) (31) Related parties receivable 1,215 (4,441) 3,248 Inventories, net (3,556) (2,133) 3,736 Prepaid expenses and other (7,248) 1,033 7,875 Other assets, net (4,100) (57,169) (21,400) Accounts payable (8,767) 4,068 (6,848) Accrued expenses and other liabilities (8,973) (40,868) (40,492) Related parties payable (10,703) 448 (6,039) Other liabilities — 13,236 4,037 Net cash provided by operating activities 118,560 30,299 43,388 Cash flows from investing activities: Purchase of property and equipment (18,320) (29,719) (23,030) Purchase of Pharmanex, net of cash acquired (Note 4) (28,750) — — Purchase of Big Planet, net of cash acquired (Note 6) — (13,571) — Payments for lease deposits (633) (2,206) (195) Receipt of refundable lease deposits 1,650 1,508 255 Net cash used in investing activities (46,053) (43,988) (22,970) Cash flows from financing activities: Payments on long-term debt (41,634) (14,545) (142,821) Termination of Nu Skin USA license fee (Note 5) — (10,000) — Payment to stockholders under the NSI Acquisition — (25,000) — Proceeds from long-term debt 181,538 — 90,000 Repurchase of shares of common stock (10,549) (26,862) (12,765) Exercise of distributor and employee stock options 1,961 2,923 294 Payment to stockholders for notes payable (Note 7) (180,000) — — Net cash used in financing activities (48,684) (73,484) (65,292) Effect of exchange rate changes on cash (9,296) 8,508 (1,292) Net increase (decrease) in cash and cash equivalents 14,527 (78,665) (46,166) Cash and cash equivalents, beginning of period 174,300 188,827 110,162 Cash and cash equivalents, end of period $ 188,827 $ 110,162 $ 63,996 The accompanying notes are an integral part of these consolidated financial statements. CONSOLIDATED STATEMENTS OF CASH FLOWS NU SKIN ENTERPRISES  50