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## Overview 

Revenue in 2004  increased 15 % to $ 1 , 137 . 9  million from $ 986 . 5  million in 2003 . Excluding the impact of changes in foreign currency exchange rates, we would have experienced a revenue increase of 11 % for 2004  compared to 2003 . The revenue increase in 2004  was a result of significant revenue growth in China, as well as solid revenue growth in the United States, Taiwan and Hong Kong. During 2004  we continued to see the positive impact of our BioPhotonic Scanner and monthly product subscription programs. We continued to expand our use of the BioPhotonic Scanner in the United States and initiated lease programs in other key markets including Japan in November 2004 . Subscription orders repre- sented 29 % of our revenue in 2004  compared to 24 % in the prior year. We believe that these programs are strengthening our recurring revenue base and are improving customer retention rates, as well as helping our distributor leaders build their sales organizations. Revenue growth in 2004  was negatively impacted by a decline in local currency revenue in Japan. 

These factors also contributed to a $ 0 . 22  increase in earnings per share in 2004  compared to 2003 . Earnings per share for 2003  included the impact of a $ 0 . 04  per share, one-time restructuring charge. The growth in earnings per share was also positively impacted by the repurchase of 10 . 8  million and 3 . 1  million shares of our Class A common stock in October 2003  and July 2004 , respectively. 

## Revenue 

North Asia. The following table sets forth revenue for the North Asia region and its principal markets: 

<img src='content_image/94286.jpg'>

Excluding the impact of changes in foreign currency exchange rates, revenue in North Asia decreased 1 % in 2004 compared to 2003 . In local currency, revenue in Japan decreased 3 %. Revenue in Japan during 2004  was negatively im- pacted by the absence of a compelling growth driver for our distributors during most of the year as a result of regulatory uncertainty associated with the BioPhotonic Scanner that prevented us from introducing it until November 2004 . Revenue was also negatively impacted by: 

• key distributor leaders spending time in other markets pending the launch of the BioPhotonic Scanner; 

• stock outages resulting from product quality and regulatory challenges we faced during 2004 , including BSE (or mad cow disease) issues in the first quarter, which required us to convert many of our dietary supplements for sale in Japan from bovine-based capsules to tablets and non-bovine based capsules; and 

• competitive pressures. 

We began leasing BioPhotonic Scanners to our distributor leaders in Japan in November 2004 , and we plan to increase the number of BioPhotonic Scanners available for lease in this market throughout the upcoming year. We have also made recent changes to our distributor incentives which are designed to help promote growth in the number of executive dis- tributors. These initiatives helped us post improved results in the fourth quarter, with local currency revenue down only 2 % on a year-over-year basis compared to an 8 % decline in the third quarter, and solid sequential growth of 7 % in execu- tive distributors. 

In South Korea, our local currency revenue grew 7 % in 2004  compared to 2003  primarily as a result of continued growth in our active distributors. We believe that strong initiatives and distributor support contributed to the growth in this market despite the difficult regulatory and economic conditions in South Korea that we expect will continue to nega- tively impact this market in 2005 . 

