SEC Filing | Nu Skin Enterprises

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q

☑	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2022

☐	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: 001-12421

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

Delaware		87-0565309
(State or other jurisdiction of incorporation or organization)		(IRS Employer Identification No.)

	75 West Center Street Provo, Utah 84601
	(Address of principal executive offices, including zip code)

	(801) 345-1000
	(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class		Trading Symbol(s)		Name of each exchange on which registered
Class A Common Stock, $.001 par value		NUS		New York Stock Exchange

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 ☑ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☑ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ☑	Accelerated filer ☐
Non-accelerated filer ☐	Smaller reporting company ☐
	Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☑

As of July 31, 2022, 50,380,606 shares of the registrant’s Class A common stock, $.001 par value per share, were outstanding.

NU SKIN ENTERPRISES, INC.

QUARTERLY REPORT ON FORM 10-Q – SECOND QUARTER 2022

TABLE OF CONTENTS

			Page
Part I.	Financial Information
	Item 1.	Financial Statements (Unaudited):
		Consolidated Balance Sheets	1
		Consolidated Statements of Income	2
		Consolidated Statements of Comprehensive Income	3
		Consolidated Statements of Stockholders’ Equity	4
		Consolidated Statements of Cash Flows	6
		Notes to Consolidated Financial Statements	7
	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	17
	Item 3.	Quantitative and Qualitative Disclosures about Market Risk	25
	Item 4.	Controls and Procedures	25

Part II.	Other Information
	Item 1.	Legal Proceedings	26
	Item 1A.	Risk Factors	26
	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	27
	Item 3.	Defaults Upon Senior Securities	27
	Item 4.	Mine Safety Disclosures	27
	Item 5.	Other Information	27
	Item 6.	Exhibits	28

	Signature		29

In this Quarterly Report on Form 10-Q, references to “dollars” and “$” are to United States (“U.S.”) dollars.

Nu Skin, Pharmanex, and ageLOC are our trademarks. The italicized product names used in this Quarterly Report on Form 10-Q are product names and also, in certain cases, our trademarks.

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PART I. FINANCIAL INFORMATION

ITEM 1.

FINANCIAL STATEMENTS

NU SKIN ENTERPRISES, INC.

Consolidated Balance Sheets (Unaudited)

(U.S. dollars in thousands)

	June 30, 2022			December 31, 2021
ASSETS
Current assets:
Cash and cash equivalents	$	363,923		$	339,593
Current investments		17,877			15,221
Accounts receivable, net		43,694			41,299
Inventories, net		354,211			399,931
Prepaid expenses and other		103,188			76,906
Total current assets		882,893			872,950

Property and equipment, net		443,036			453,674
Operating lease right-of-use assets		118,413			120,973
Goodwill		206,432			206,432
Other intangible assets, net		72,665			76,991
Other assets		177,462			175,460
Total assets	$	1,900,901		$	1,906,480

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	55,013		$	49,993
Accrued expenses		289,130			372,201
Current portion of long-term debt		40,000			107,500
Total current liabilities		384,143			529,694

Operating lease liabilities		90,156			88,759
Long-term debt		387,179			268,781
Other liabilities		98,388			106,474
Total liabilities		959,866			993,708

Commitments and contingencies (Notes 5 and 11)

Stockholders’ equity:
Class A common stock – 500 million shares authorized, $0.001 par value, 90.6 million shares issued		91			91
Additional paid-in capital		606,349			601,703
Treasury stock, at cost – 39.9 million and 40.7 million shares		(1,520,769	)		(1,526,860	)
Accumulated other comprehensive loss		(90,638	)		(73,896	)
Retained earnings		1,946,002			1,911,734
Total stockholders’ equity		941,035			912,772
Total liabilities and stockholders’ equity	$	1,900,901		$	1,906,480

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

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NU SKIN ENTERPRISES, INC.

Consolidated Statements of Income (Unaudited)

(U.S. dollars in thousands, except per share amounts)

	Three Months Ended June 30,						Six Months Ended June 30,
	2022			2021			2022			2021
Revenue	$	560,615		$	704,055		$	1,165,514		$	1,381,081
Cost of sales		148,100			171,975			309,599			342,541
Gross profit		412,515			532,080			855,915			1,038,540

Operating expenses:
Selling expenses		219,426			280,589			462,125			556,554
General and administrative expenses		141,562			166,115			290,118			333,697
Total operating expenses		360,988			446,704			752,243			890,251

Operating income		51,527			85,376			103,672			148,289
Other income (expense), net		(8,640	)		(4,012	)		(10,093	)		(2,430	)

Income before provision for income taxes		42,887			81,364			93,579			145,859
Provision for income taxes		8,650			22,026			20,626			39,091

Net income	$	34,237		$	59,338		$	72,953		$	106,768

Net income per share (Note 6):
Basic	$	0.68		$	1.18		$	1.45		$	2.12
Diluted	$	0.67		$	1.15		$	1.43		$	2.06

Weighted-average common shares outstanding (000s):
Basic		50,368			50,115			50,181			50,409
Diluted		50,960			51,557			50,959			51,850

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

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NU SKIN ENTERPRISES, INC.

Consolidated Statements of Comprehensive Income (Unaudited)

(U.S. dollars in thousands)

	Three Months Ended June 30,						Six Months Ended June 30,
	2022			2021			2022			2021
Net income	$	34,237		$	59,338		$	72,953		$	106,768

Other comprehensive (loss) income, net of tax:
Foreign currency translation adjustment, net of taxes of $36 and $3 for the three months ended June 30, 2022 and 2021, respectively, and $29 and $1 for the six months ended June 30, 2022 and 2021, respectively		(22,452	)		3,653			(24,412	)		(6,266	)
Net unrealized gains/(losses) on cash flow hedges, net of taxes of $(436) and $168 for the three months ended June 30, 2022 and 2021, respectively and $(2,179) and $(671) for the six months ended June 30, 2022 and 2021, respectively.		1,578			(610	)		7,892			2,430
Reclassification adjustment for realized losses/(gains) in current earnings on cash flow hedges, net of taxes of $65 and $(8) for the three months ended June 30, 2022 and 2021, respectively and $61 and $(14) for the six months ended June 30, 2022 and 2021, respectively		(236	)		30			(222	)		51
		(21,110	)		3,073			(16,742	)		(3,785	)
Comprehensive income	$	13,127		$	62,411		$	56,211		$	102,983

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

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NU SKIN ENTERPRISES, INC.

Consolidated Statements of Stockholders’ Equity (Unaudited)

(U.S. dollars in thousands)

	For the Three Months Ended June 30, 2022
	Class A Common Stock		Additional Paid-in Capital		Treasury Stock			Accumulated Other Comprehensive Loss			Retained Earnings			Total
Balance at April 1, 2022	$	91	$	599,258	$	(1,526,778	)	$	(69,528	)	$	1,931,157		$	934,200

Net income		—		—		—			—			34,237			34,237
Other comprehensive loss, net of tax		—		—		—			(21,110	)		—			(21,110	)
Repurchase of Class A common stock (Note 6)		—		—		(10,004	)		—			—			(10,004	)
Exercise of employee stock options (0.7 million shares)/vesting of stock awards		—		5,069		16,013			—			—			21,082
Stock-based compensation		—		2,022		—			—			—			2,022
Cash dividends		—		—		—			—			(19,392	)		(19,392	)
Balance at June 30, 2022	$	91	$	606,349	$	(1,520,769	)	$	(90,638	)	$	1,946,002		$	941,035

	For the Three Months Ended June 30, 2021
	Class A Common Stock		Additional Paid-in Capital		Treasury Stock			Accumulated Other Comprehensive Loss			Retained Earnings			Total
Balance at April 1, 2021	$	91	$	579,204	$	(1,505,076	)	$	(71,626	)	$	1,868,881		$	871,474

Net income		—		—		—			—			59,338			59,338
Other comprehensive income, net of tax		—		—		—			3,073			—			3,073
Repurchase of Class A common stock (Note 6)		—		—		(10,004	)		—			—			(10,004	)
Exercise of employee stock options (0.2 million shares)/vesting of stock awards		—		1,192		5,213			—			—			6,405
Stock-based compensation		—		6,580		—			—			—			6,580
Cash dividends		—		—		—			—			(19,040	)		(19,040	)
Balance at June 30, 2021	$	91	$	586,976	$	(1,509,867	)	$	(68,553	)	$	1,909,179		$	917,826

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

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NU SKIN ENTERPRISES, INC.

Consolidated Statements of Stockholders’ Equity (Unaudited)

(U.S. dollars in thousands)

	For the Six Months Ended June 30, 2022
	Class A Common Stock		Additional Paid-in Capital			Treasury Stock			Accumulated Other Comprehensive Loss			Retained Earnings			Total
Balance at January 1, 2022	$	91	$	601,703		$	(1,526,860	)	$	(73,896	)	$	1,911,734		$	912,772

Net income		—		—			—			—			72,953			72,953
Other comprehensive loss, net of tax		—		—			—			(16,742	)		—			(16,742	)
Repurchase of Class A common stock (Note 6)		—		—			(20,010	)		—			—			(20,010	)
Exercise of employee stock options (1.1 million shares)/vesting of stock awards		—		(1,503	)		26,101			—			—			24,598
Stock-based compensation		—		6,149			—			—			—			6,149
Cash dividends		—		—			—			—			(38,685	)		(38,685	)
Balance at June 30, 2022	$	91	$	606,349		$	(1,520,769	)	$	(90,638	)	$	1,946,002		$	941,035

	For the Six Months Ended June 30, 2021
	Class A Common Stock		Additional Paid-in Capital			Treasury Stock			Accumulated Other Comprehensive Loss			Retained Earnings			Total
Balance at January 1, 2021	$	91	$	579,801		$	(1,461,593	)	$	(64,768	)	$	1,840,740		$	894,271

Net income		—		—			—			—			106,768			106,768
Other comprehensive loss, net of tax		—		—			—			(3,785	)		—			(3,785	)
Repurchase of Class A common stock (Note 6)		—		—			(60,410	)		—			—			(60,410	)
Exercise of employee stock options (0.5 million shares)/vesting of stock awards		—		(6,208	)		12,136			—			—			5,928
Stock-based compensation		—		13,383			—			—			—			13,383
Cash dividends		—		—			—			—			(38,329	)		(38,329	)
Balance at June 30, 2021	$	91	$	586,976		$	(1,509,867	)	$	(68,553	)	$	1,909,179		$	917,826

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

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NU SKIN ENTERPRISES, INC.

Consolidated Statements of Cash Flows (Unaudited)

(U.S. dollars in thousands)

	Six Months Ended June 30,
	2022			2021
Cash flows from operating activities:
Net income	$	72,953		$	106,768
Adjustments to reconcile net income to cash flows from operating activities:
Depreciation and amortization		35,764			37,925
Non-cash lease expense		21,978			26,879
Stock-based compensation		6,149			13,383
Foreign currency losses		4,769			2,415
Loss on disposal of assets		212			2,189
Deferred taxes		4,369			3,007
Changes in operating assets and liabilities:
Accounts receivable, net		(6,926	)		(2,789	)
Inventories, net		32,213			(80,224	)
Prepaid expenses and other		(17,527	)		(33,061	)
Other assets		4,461			(19,897	)
Accounts payable		10,246			(4,930	)
Accrued expenses		(97,413	)		(55,429	)
Other liabilities		(17,152	)		5,623
Net cash provided by operating activities		54,096			1,859

Cash flows from investing activities:
Purchases of property and equipment		(19,818	)		(36,849	)
Proceeds on investment sales		5,290			7,550
Purchases of investments		(13,955	)		(6,973	)
Acquisitions, net of cash acquired		—			(18,963	)
Net cash used in investing activities		(28,483	)		(55,235	)

Cash flows from financing activities:
Exercise of employee stock options and taxes paid related to the net shares settlement of stock awards		24,598			5,928
Payment of cash dividends		(38,685	)		(38,329	)
Repurchases of shares of common stock		(20,010	)		(60,410	)
Finance lease principal payments		(927	)		(956	)
Payment of debt issuance costs		(5,077	)		—
Payments of debt		(407,500	)		(25,000	)
Proceeds from debt		460,000			130,000
Net cash used in financing activities		12,399			11,233

Effect of exchange rate changes on cash		(13,682	)		(5,781	)

Net increase (decrease) in cash and cash equivalents		24,330			(47,924	)

Cash and cash equivalents, beginning of period		339,593			402,683

Cash and cash equivalents, end of period	$	363,923		$	354,759

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

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NU SKIN ENTERPRISES, INC.

Notes to Consolidated Financial Statements

1.	The Company

Nu Skin Enterprises, Inc. (the “Company”) is a holding company, with Nu Skin, being the primary operating unit. Nu Skin develops and distributes premium-quality, innovative beauty and wellness products that are sold worldwide under the Nu Skin, Pharmanex and ageLOC brands and a small number of other products and services. The Company reports revenue from nine segments, consisting of its seven geographic Nu Skin segments—Americas, which includes Canada, Latin America and the United States; Mainland China; Southeast Asia/Pacific, which includes Australia, Indonesia, Malaysia, New Zealand, the Philippines, Singapore, Thailand and Vietnam; South Korea; Japan; Europe, Middle East and Africa (“EMEA”), which includes markets in Europe as well as Israel and South Africa; and Hong Kong/Taiwan, which also includes Macau—and two Rhyz Investments segments—Manufacturing, which includes manufacturing and packaging subsidiaries it has acquired; and Rhyz other, which includes other investments by its Rhyz strategic investment arm (the Company’s subsidiaries operating within each segment are collectively referred to as the “Subsidiaries”).

2.	Summary of Significant Accounting Policies

The accompanying unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“US GAAP”) 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 US GAAP for complete financial statements. The unaudited consolidated financial statements include the accounts of the Company and its 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 June 30, 2022, and for the three-and six-month periods ended June 30, 2022 and 2021. The results of operations of any interim period are not necessarily indicative of the results of operations to be expected for the fiscal year. The consolidated balance sheet as of December 31, 2021 has been prepared using information from the audited financial statements at that date. 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, 2021.

Reclassifications

Certain prior period amounts have been reclassified to conform to the current presentation. The Company reclassified $2.7 million and $4.9 million of events and other miscellaneous selling costs from the general and administration expenses line to the selling expenses line on the consolidated statement of income for the second quarter and first half of 2021, respectively. The Company believes these costs are better reflected in selling expenses. The reclassification had no impact on operating income for the second quarter or first half of 2021.

Accounting Pronouncements

In March 2020, the Financial Accounting Standards Board (“FASB”) issued, ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting, which provides optional guidance for a limited time to ease the potential burden in accounting for the effects of reference rate reform on financial reporting. The guidance provides optional expedients and exceptions for applying US GAAP to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met. ASU 2020-04 applies only to contracts and hedging relationships that reference the London Interbank Offered Rate (“LIBOR”) or another reference rate expected to be discontinued due to reference rate reform. The expedients and exceptions provided by the amendments do not apply to contract modifications made and hedging relationships entered into or evaluated after December 31, 2022. The amendments in ASU 2020-04 are elective and are effective upon issuance for all entities. The Company had previously elected to apply the hedge accounting expedients related to probability and the assessments of effectiveness for future LIBOR-indexed cash flows to assume that the index upon which future hedged transactions will be based matches the index on the corresponding derivatives. In the second quarter of 2022, the Company elected the hedge accounting expedient that allows an update to the hedged risk in active hedging relationships without de-designation as the Company’s debt transitioned to Secured Overnight Financing Rate (“SOFR”). Application of these expedients preserves the presentation of derivatives consistent with past presentation. The Company continues to evaluate the impact of the guidance and may apply other elections as applicable as additional changes in the market occur.

Inventory

Inventories consist of the following (U.S. dollars in thousands):

	June 30, 2022		December 31, 2021
Raw materials	$	152,777	$	179,891
Finished goods		201,434		220,040
Total Inventory, net	$	354,211	$	399,931

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Revenue Recognition

Contract Liabilities – Customer Loyalty Programs

Contract liabilities, recorded as deferred revenue within the accrued expenses line in the consolidated balance sheets, include loyalty point program deferrals with certain customers which are accounted for as a reduction in the transaction price and are generally recognized as points are redeemed for additional products.

The balance of deferred revenue related to contract liabilities as of June 30, 2022 and December 31, 2021 was $18.4 million and $22.0 million, respectively. The contract liabilities impact to revenue for the three-month periods ended June 30, 2022, and 2021 was an increase of $2.4 million and a decrease of $4.0 million, respectively. The impact to revenue for the six-month periods ended June 30, 2022, and 2021 was an increase of $3.6 million and a decrease of $5.6 million, respectively.

Goodwill

The Company’s reporting units for goodwill are its operating segments, which are also its reportable segments.

The following table presents goodwill allocated to the Company’s reportable segments for the periods ended June 30, 2022 and December 31, 2021 (U.S. dollars in thousands):

	June 30, 2022		December 31, 2021
Nu Skin
Americas	$	9,449	$	9,449
Mainland China		32,179		32,179
Southeast Asia/Pacific		18,537		18,537
South Korea		29,261		29,261
Japan		16,019		16,019
EMEA		2,875		2,875
Hong Kong/Taiwan		6,634		6,634
Rhyz Investments
Manufacturing		78,875		78,875
Rhyz Other		12,603		12,603
Total	$	206,432	$	206,432

Debt

2018 Credit Agreement

On April 18, 2018, the Company entered into a Credit Agreement (the “2018 Credit Agreement”) with several financial institutions as lenders and Bank of America, N.A., as administrative agent. The 2018 Credit Agreement provided for a $400 million term loan facility and a $350 million revolving credit facility, each with a term of five years. Both facilities bore interest at the LIBOR, plus a margin based on the consolidated leverage ratio. The term loan facility amortized in quarterly installments in amounts resulting in an annual amortization of 5.0% during the first and second years, 7.5% during the third and fourth years and 10.0% during the fifth year after the closing date of the 2018 Credit Agreement, with the remainder payable at final maturity. The 2018 Credit Agreement required the Company to maintain a consolidated leverage ratio not exceeding 2.25 to 1.00 and a consolidated interest coverage ratio of no less than 3.00 to 1.00.

Credit Agreement

On June 14, 2022, the Company entered into an Amended and Restated Credit Agreement (the “Credit Agreement”) with several financial institutions as lenders and Bank of America, N.A., as administrative agent, which amended and restated the 2018 Credit Agreement. The Credit Agreement provides for a $400 million term loan facility and a $500 million revolving credit facility, each with a term of five years. Both facilities bear interest at the SOFR, plus a margin based on the Company’s consolidated leverage ratio. Commitment fees payable under the Credit Agreement are also based on the consolidated leverage ratio as defined in the Credit Agreement and range from 0.175% to 0.30% on the unused portion of the total lender commitments then in effect. The term loan facility amortizes in quarterly installments in amounts resulting in an annual amortization of 2.5% during the first year and 5.0% during the second, third, fourth and fifth years after the closing date of the Credit Agreement, with the remainder payable at final maturity. The Credit Agreement is guaranteed by certain of the Company's domestic subsidiaries and collateralized by assets of such subsidiaries, including a pledge of 65% of the capital stock of certain foreign subsidiaries. The Credit Agreement requires the Company to maintain a consolidated leverage ratio not exceeding 2.75 to 1.00 and a consolidated interest coverage ratio of no less than 3.00 to 1.00. As of June 30, 2022, the Company was in compliance with all covenants under the Credit Agreement.

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The following table summarizes the Company’s debt facilities as of June 30, 2022 and December 31, 2021:

Facility or Arrangement

Original

Principal Amount

Balance as of

June 30, 2022 ⁽¹⁾⁽²⁾

Balance as of

December 31, 2021⁽¹⁾⁽²⁾

Interest Rate

Repayment Terms

2018 Credit Agreement term loan facility

400.0 million

—

307.5 million

Variable 30 day: 2.80%

Principal amount was paid in full during June 2022.

2018 Credit Agreement revolving credit facility

—

70.0 million

Variable 30 day: 2.72%

Principal amount was paid in full during June 2022 and credit line was closed.

Credit Agreement term loan facility

400.0 million

—

Variable 30 day: 3.11%

21% of the principal amount is payable in increasing quarterly installments over a five-year period that begins on September 30, 2022, with the remainder payable at the end of the five-year term.

Credit Agreement revolving credit facility

30.0 million

—

Variable 30 day: 3.11%

Revolving line of credit expires June 14, 2027.

(1)	As of June 30, 2022 and December 31, 2021, the current portion of the Company’s debt (i.e. becoming due in the next 12 months) included $10.0 million and $37.5 million, respectively, of the balance of its term loan under the Credit Agreement and 2018 Credit Agreement.

(2)	The carrying value of the debt reflects the amounts stated in the above table, less debt issuance costs of $2.8 million and $1.2 million as of June 30, 2022 and December 31, 2021, respectively, related to the Credit Agreement and 2018 Credit Agreement, which are not reflected in this table.

Leases

As of June 30, 2022, the weighted average remaining lease term was 8.2 and 3.3 years for operating and finance leases, respectively. As of June 30, 2022, the weighted average discount rate was 3.6% and 3.8% for operating and finance leases, respectively.

The components of lease expense were as follows (U.S. dollars in thousands):

	Three Months Ended June 30,					Six Months Ended June 30,
	2022		2021			2022		2021
Operating lease expense
Operating lease cost	$	10,261	$	12,400		$	20,700	$	25,215
Variable lease cost		1,494		1,656			2,651		3,024
Short-term lease cost		67		238			97		577
Sublease income		—		(1,828	)		—		(3,812	)
Finance lease expense
Amortization of right-of-use assets		546		606			1,102		1,217
Interest on lease liabilities		59		83			125		171
Total lease expense	$	12,427	$	13,155		$	24,675	$	26,392

Supplemental cash flow information related to leases was as follows (U.S. dollars in thousands):

	Six Months Ended June 30,
	2022		2021
Operating cash outflow from operating leases	$	19,895	$	27,470
Operating cash outflow from finance leases	$	128	$	173
Financing cash outflow from finance leases	$	927	$	956
Right-of-use assets obtained in exchange for operating lease obligations	$	25,793	$	13,729
Right-of-use assets obtained in exchange for finance lease obligations	$	—	$	59

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Maturities of lease liabilities were as follows (U.S. dollars in thousands):

Year Ending December 31	Operating Leases		Finance Leases
2022	$	18,364	$	997
2023		26,495		1,926
2024		19,945		1,823
2025		14,381		1,296
2026		8,387		261
Thereafter		49,038		—
Total		136,610		6,303
Less: Finance charges		17,990		393
Total principal liability	$	118,620	$	5,910

The Company has additional lease liabilities of $0.3 million which have not yet commenced as of June 30, 2022, and as such, have not been recognized on the consolidated balance sheets.

6.	Capital Stock

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-month periods ended June 30, 2022 and 2021, stock options of 0.1 million and 0.1 million, respectively, and for the six-month periods ended June 30, 2022 and 2021, stock options of 0.1 million and 0.1 million, respectively, were excluded from the calculation of diluted earnings per share because they were anti-dilutive.

Dividends

In February and May 2022, the Company’s board of directors declared quarterly cash dividends of $0.385 per share. These quarterly cash dividends of $19.3 million and $19.4 million were paid on March 9, 2022 and June 8, 2022, respectively, to stockholders of record on February 28, 2022 and May 27, 2022, respectively. In August 2022, the Company’s board of directors declared a quarterly cash dividend of $0.385 per share to be paid on September 7, 2022 to stockholders of record on August 26, 2022.

Repurchase of common stock

During the three-month periods ended June 30, 2022 and 2021, the Company repurchased 0.2 million and 0.2 million shares of its Class A common stock under its stock repurchase plan for $10.0 million and $10.0 million, respectively. During the six-month periods ended June 30, 2022 and 2021, the Company repurchased 0.4 million shares and 1.2 million shares of its Class A common stock under its stock repurchase plan for $20.0 million and $60.4 million, respectively. As of June 30, 2022, $225.4 million was available for repurchases under the Company’s stock repurchase plan.

7.	Fair Value and Equity Investments

Fair Value

The carrying value of financial instruments including cash and cash equivalents, accounts receivable and accounts payable approximates fair values due to the short-term nature of these instruments. The carrying value of debt approximates fair value due to the variable 30-day interest rate. Fair value estimates are made at a specific point in time, based on relevant market information.

The FASB Codification defines fair value as the price that would be received to sell an asset or paid to transfer a liability in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants at the measurement date. On a quarterly basis, the Company measures at fair value certain financial assets, including cash equivalents. Accounting standards specify a hierarchy of valuation techniques based on whether the inputs to those valuation techniques are observable or unobservable. Observable inputs reflect data obtained from independent sources, while unobservable inputs reflect the Company’s market assumptions. These two types of inputs have created the following fair-value hierarchy:

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Level 1 – quoted prices in active markets for identical assets or liabilities;

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Level 2 – inputs, other than the quoted prices in active markets, that are observable either directly or indirectly; and

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Level 3 – unobservable inputs based on the Company’s own assumptions.

Accounting standards permit companies, at their option, to measure certain financial instruments and other eligible items at fair value. The Company has elected not to apply the fair value option to existing eligible items beyond what is required by US GAAP.

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The following tables present the fair value hierarchy for those assets and liabilities measured at fair value on a recurring basis (U.S. dollars in thousands):

	Fair Value at June 30, 2022
	Level 1		Level 2		Level 3			Total
Financial assets (liabilities):
Cash equivalents and current investments	$	111,099	$	—	$	—		$	111,099
Derivative financial instruments asset		—		16,376		—			16,376
Life insurance contracts		—		—		40,201			40,201
Contingent consideration		—		—		(8,591	)		(8,591	)
Total	$	111,099	$	16,376	$	31,610		$	159,085

	Fair Value at December 31, 2021
	Level 1		Level 2		Level 3			Total
Financial assets (liabilities):
Cash equivalents and current investments	$	66,477	$	—	$	—		$	66,477
Derivative financial instruments asset		—		6,590		—			6,590
Life insurance contracts		—		—		49,851			49,851
Contingent consideration		—		—		(10,341	)		(10,341	)
Total	$	66,477	$	6,590	$	39,510		$	112,577

The following table provides a summary of changes in fair value of the Company’s Level 3 life insurance contracts (U.S. dollars in thousands):

	2022			2021
Beginning balance at January 1	$	49,851		$	45,453
Actual return on plan assets		(9,650	)		3,608
Purchases and issuances		—			7,016
Sales and settlements		—			(7,016	)
Transfers into Level 3		—			—
Ending balance at June 30	$	40,201		$	49,061

Life insurance contracts: Accounting Standards Codification (“ASC”) 820 preserves practicability exceptions to fair value measurements provided by other applicable provisions of U.S. GAAP. The guidance in ASC 715-30-35-60 allows a reporting entity, as a practical expedient, to use cash surrender value or conversion value as an expedient for fair value when it is present. Accordingly, the Company determines the fair value of its life insurance contracts as the cash-surrender value of life insurance policies held in its Rabbi Trust.

The following table provides a summary of changes in fair value of the Company’s Level 3 contingent consideration (U.S. dollars in thousands):

	2022			2021
Beginning balance at January 1	$	(10,341	)	$	(3,125	)
Additions from acquisitions		—			(8,702	)
Changes in fair value of contingent consideration		1,750			(203	)
Ending balance at June 30	$	(8,591	)	$	(12,030	)

Contingent consideration: Contingent consideration represents the obligations incurred in connection with acquisitions. The estimate of fair value of the contingent consideration obligations requires subjective assumptions to be made regarding the future business results, discount rates, discount periods and probabilities assigned to various potential business result scenarios and was determined using probability assessments with respect to the likelihood of reaching various targets or of achieving certain milestones. The fair value measurement is based on significant inputs unobservable in the market and thus represents a Level 3 measurement. Changes in current expectations of progress could change the probability of achieving the targets within the measurement periods and result in an increase or decrease in the fair value of the contingent consideration obligation.