NU SKIN ENTERPRISES, INC. PROVO, Utah, Aug. 6, 2014 /PRNewswire/ -- Nu Skin Enterprises, Inc. (NYSE: NUS) today announced second-quarter revenue of $650.0 million, a 3 percent decline over the prior-year period. Revenue was negatively impacted 2 percent by foreign currency fluctuations. Earnings per share for the quarter were $0.32, versus $1.22 in the prior-year period and were impacted by (i) a $50 million write-down of Mainland China inventory; and (ii) a $25 million charge due to a transition to the SICAD II exchange rate in Venezuela, which also increased the company's effective tax rate for the quarter to 42.0 percent. Excluding these items, earnings per share would have been $1.13 per share for the second quarter.
"Our business performed in-line with our guidance for the quarter, with the exception of the China LTO, which occurred shortly after resuming our promotional efforts and did not meet our expectations," said Truman Hunt, president and chief executive officer. "We are pleased, however, that we have seen key indicators in China stabilize since we began accepting new sales leader applications in May after a three-month voluntary cessation. Moreover, we recently received a new direct selling license for Wenzhou, China, expanding our direct selling footprint in this important market.
"We will continue to innovate in the dynamic anti-aging product category to drive growth in consumer demand as well as interest in Nu Skin's business opportunity. We are encouraged with our product development pipeline with important new offerings in both skin care and nutrition next year, which we believe will lead to renewed global growth in 2015 and drive enhanced value for our shareholders."
The company recently determined to amend its quarterly report on Form 10-Q and restate its consolidated financial statements for the quarter ended March 31, 2014 to include a $21 million charge to Other Income (Expense) to reflect a hyper-inflationary adjustment for Venezuela, and $7 million of income related to a tax rebate for the company's China headquarters. These changes, net of tax, negatively impacted net income for the three-month period ended March 31, 2014 by approximately $9.4 million, but had no effect on cash flow. The company's consolidated statements of income for the six-month period ended June 30, 2014 reflect this correction of first-quarter results.
Regional Results
Greater China. In Greater China, second-quarter revenue declined 12 percent to $229.9 million, compared to $261.2 million in the prior-year period. The region's results were negatively impacted 1 percent by foreign currency fluctuations. The sales leader count in the region declined 14 percent, while the number of actives declined 32 percent compared to the prior year.
North Asia. Second-quarter revenue in North Asia increased 1 percent to $196.0 million, compared to $194.8 million for the same period in 2013. The region's results were positively impacted 4 percent by foreign currency fluctuations. South Korea generated local-currency revenue growth of 12 percent while Japan local-currency revenue declined 18 percent. The number of sales leaders in the region declined 1 percent while the number of actives improved 1 percent.
Americas. Revenue in the Americas improved 8 percent to $89.9 million, compared to $83.4 million in the prior-year period. The region's results were negatively impacted 11 percent by foreign currency fluctuations, primarily driven by Venezuela. The number of sales leaders in the region improved 10 percent and the number of actives improved 7 percent compared to the prior year.
South Asia/Pacific. Revenue in South Asia/Pacific was $81.7 million, a 5 percent decline compared to the prior year. The region's results were negatively impacted 7 percent by foreign currency fluctuations. The region's second-quarter sales leaders and actives both improved 5 percent compared to the same period in 2013.
EMEA. Revenue in the EMEA region was $52.6 million, a 14 percent improvement over the prior-year period. The region's results were negatively impacted 1 percent by foreign currency fluctuations. Sales leaders were flat with the prior year while actives decreased 2 percent compared to the prior year.
Operational Performance
The company's operating margin was 8.4 percent for the quarter, compared to 17.1 percent in the second quarter of 2013. Gross margin during the quarter was 76.0 percent, versus 83.4 percent in the prior-year period. Operating and gross margins were negatively impacted due to the China inventory charge. Selling expenses, as a percent of revenue, were 43.6 percent in the second quarter, compared to 44.3 percent in the prior year. General and administrative expenses, as a percent of revenue, were 24.0 percent, compared to 22.1 percent in the prior-year period. Other income (expense) reflected a loss of $21.1 million, compared to a loss of $1.2 million in the prior year, due primarily to the charge related to the company's adoption of the SICAD II exchange rate for Venezuela.
The company's effective income tax rate for the quarter was 42.0 percent, compared to 34.4 percent in the prior-year period due to the Venezuela foreign currency charge. Cash and current investments at the end of the quarter were $233.7 million. Dividend payments during the quarter were $20.4 million.
Outlook
"In the second half of 2013, we generated approximately $560 million of sales volume from the LTO launch of our TR90 weight management system," said Hunt. "This significant sales event, combined with the temporary cessation of marketing activities in China in the first half of this year, will raise difficult comparisons in the second half of 2014. However, now that some China marketing activities have resumed, we are pleased to be seeing stabilizing trends in China. We believe we have a strong foundation upon which we can continue to build our business," concluded Hunt.
"We anticipate that third-quarter revenue will be in the $620 million to $640 million range with earnings per share of $0.90 to $0.95," said Ritch Wood, chief financial officer. "We anticipate our fourth-quarter revenue to be in the $650 million to $675 million range with earnings per share of $1.00 to $1.05."
The Nu Skin management team will host a conference call with the investment community on Aug. 6, 2014, at 11 a.m. (EDT). Those wishing to access the webcast, as well as the financial information presented during the call, can visit the Investor Relations page on the company's website at ir.nuskin.com. A replay of the webcast will be available at the same URL through Aug. 15, 2014.
About Nu Skin Enterprises, Inc.
Nu Skin Enterprises, Inc. demonstrates its tradition of innovation through its comprehensive anti-aging product portfolio, independent business opportunity and corporate social responsibility initiatives. The company's scientific leadership in both skin care and nutrition has established Nu Skin as a premier anti-aging company. The company's anti-aging products feature the new ageLOC line of products including the ageLOC(®) TR90(TM) weight management and body shaping system, ageLOC(®) R(2) nutritional supplement, and ageLOC(®) Transformation daily skin care system. A global direct selling company, Nu Skin operates in 53 markets worldwide and is traded on the New York Stock Exchange under the symbol 'NUS'. More information is available at http://www.nuskin.com.
Please Note: This press release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended that represent the company's current expectations and beliefs. All statements other than statements of historical fact are "forward-looking statements" for purposes of federal and state securities laws and include, but are not limited to, statements of management's expectations regarding the company's performance, initiatives, strategies and new product development; statements of projections regarding revenue, earnings per share and other financial items; statements of management's expectations and beliefs regarding China and other markets; statements of belief; and statements of assumptions underlying any of the foregoing. In some cases, you can identify these statements by forward-looking words such as "believe," "expect," "project," "anticipate," "estimate," "intend," "plan," "targets," "likely," "will," "would," "could," "may," "might," the negative of these words and other similar words.
The forward-looking statements and related assumptions involve risks and uncertainties that could cause actual results and outcomes to differ materially from any forward-looking statements or views expressed herein. These risks and uncertainties include, but are not limited to, the following:
-- risk that continuing media and regulatory scrutiny and investigations in
China, and any actions taken by the company or by regulators, could
cause unanticipated delays or make it more difficult to forecast results
for the third and fourth quarter, and could negatively impact the
company's revenue, sales force and business in this market, including
the interruption of sales activities, loss of licenses, and the
imposition of fines, and any other adverse actions or events;
-- risk of unanticipated delays, complications or other difficulties in
resuming promotional business activities in China;
-- uncertainty regarding whether our key indicators will in fact stabilize
in response to our recent resumption of business promotional activities;
-- risks related to negative publicity regarding recent media allegations
and subsequent regulatory investigations and fines;
-- risk that direct selling regulations in China may be modified,
interpreted or enforced in a manner that results in negative changes to
our business model or the imposition of a range of potential penalties;
-- any failure of current or planned initiatives or products to generate
interest among our sales force and customers and generate sponsoring and
selling activities on a sustained basis;
-- risks related to accurately predicting, delivering or maintaining
sufficient quantities of products to support our planned initiatives or
launch strategies, and increased risk of inventory write-offs if we over
forecast demand for a product or change our planned initiatives or
launch strategies;
-- risk of foreign currency fluctuations and the currency translation
impact on the company's business associated with these fluctuations;
-- unpredictable economic conditions and events globally;
-- regulatory risks associated with the company's products, which could
require the company to modify its claims or inhibit the company's
ability to import or continue selling a product in a market if it is
determined to be a medical device or if it is unable to register the
product in a timely manner under applicable regulatory requirements;
-- adverse publicity related to the company's business, products, industry
or any legal actions or complaints by the company's sales force or
others;
-- any prospective or retrospective increases in duties on the company's
products imported into the company's markets outside of the United
States and any adverse results of tax audits or unfavorable changes to
tax laws in the company's various markets; and
-- continued competitive pressures in the company's markets.
The company's financial performance and the forward-looking statements contained herein are further qualified by a detailed discussion of associated risks set forth in the documents filed by the company with the Securities and Exchange Commission. The forward-looking statements set forth the company's beliefs as of the date that such information was first provided and the company assumes no duty to update the forward-looking statements contained in this release to reflect any change except as required by law.
NU SKIN ENTERPRISES, INC.
Consolidated Statements of Income (Unaudited)
For the Second Quarters Ended June 30, 2014 and 2013
(in thousands, except per share amounts)
2014 2013
---- ----
Revenue:
Greater China $229,869 $261,241
North Asia 195,995 194,812
Americas 89,911 83,433
South Asia/Pacific 81,653 85,582
EMEA 52,599 46,260
------ ------
Total revenue 650,027 671,328
Cost of sales 156,010 111,273
------- -------
Gross profit 494,017 560,055
------- -------
Operating expenses:
Selling expenses 283,575 297,170
General and administrative
expenses 155,705 148,302
------- -------
Total operating expenses 439,280 445,472
------- -------
Operating income 54,737 114,583
Other income (expense), net (21,119) (1,187)
------- ------
Income before provision for income
taxes 33,618 113,396
Provision for income taxes 14,111 38,961
------ ------
Net income $19,507 $74,435
======= =======
Net income per share:
Basic $0.33 $1.27
Diluted $0.32 $1.22
Weighted average common shares outstanding:
Basic 59,052 58,620
Diluted 61,118 61,121
NU SKIN ENTERPRISES, INC.
Consolidated Statements of Income (Unaudited)
For the Six Month Periods Ended June 30, 2014 and 2013
(in thousands, except per share amounts)
2014 2013
---- ----
Revenue:
Greater China $508,798 $432,063
North Asia 391,456 380,722
Americas 169,820 159,125
South Asia/Pacific 152,847 152,539
EMEA 98,167 88,184
------ ------
Total revenue 1,321,088 1,212,633
Cost of sales 262,654 201,318
------- -------
Gross profit 1,058,434 1,011,315
--------- ---------
Operating expenses:
Selling expenses 596,676 530,264
General and administrative
expenses 305,824 283,809
------- -------
Total operating expenses 902,500 814,073
------- -------
Operating income 155,934 197,242
Other income (expense), net (38,627) (1,075)
------- ------
Income before provision for income
taxes 117,307 196,167
Provision for income taxes 42,946 67,450
------ ------
Net income $74,361 $128,717
======= ========
Net income per share:
Basic $1.26 $2.20
Diluted $1.22 $2.11
Weighted average common shares outstanding:
Basic 58,961 58,487
Diluted 61,177 60,882
NU SKIN ENTERPRISES, INC.
Consolidated Balance Sheets (Unaudited)
(in thousands)
June 30, 2014 December 31, 2013
------------- -----------------
ASSETS
Current assets:
Cash and cash equivalents $219,501 $525,153
Current investments 14,227 21,974
Accounts receivable 41,712 68,652
Inventories, net 389,650 339,669
Prepaid expenses and other 180,957 162,886
------- -------
846,047 1,118,334
Property and equipment, net 429,332 396,042
Goodwill 112,446 112,446
Other intangible assets,
net 79,258 83,168
Other assets 136,531 111,072
------- -------
Total assets $1,603,614 $1,821,062
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $35,836 $82,684
Accrued expenses 383,012 626,284
Current portion of long-
term debt 99,828 67,824
------ ------
518,676 776,792
Long-term debt 111,621 113,852
Other liabilities 81,559 71,799
------ ------
Total liabilities 711,856 962,443
------- -------
Stockholders' equity:
Class A common stock 91 91
Additional paid-in capital 410,440 397,383
Treasury stock, at cost (844,615) (826,904)
Accumulated other
comprehensive loss (42,284) (46,228)
Retained earnings 1,368,126 1,334,277
--------- ---------
891,758 858,619
------- -------
Total liabilities and
stockholders' equity $1,603,614 $1,821,062
========== ==========
NU SKIN ENTERPRISES, INC.
Actives/Sales Leaders Statistics
As of June 30, 2014 As of June 30, 2013 % Increase (Decrease)
------------------- ------------------- --------------------
Actives Sales Actives Sales Actives Sales
Leaders Leaders Leaders
------- ------- -------
Greater China 256,000 26,192 376,000 30,455 (31.9%) (14.0%)
North Asia 393,000 17,186 389,000 17,372 1.0% (1.1%)
Americas 189,000 7,627 176,000 6,954 7.4% 9.7%
South Asia/Pacific 120,000 7,450 114,000 7,120 5.3% 4.6%
EMEA 121,000 4,468 124,000 4,484 (2.4%) *
------- ----- ------- -----
Total 1,079,000 62,923 1,179,000 66,385 (8.5%) (5.2%)
========= ====== ========= ======
*Less than 1%
"Actives" are persons who
purchased products directly from
the company during the previous
three months.
"Sales Leaders" are persons who
have completed and who maintain
specified sales requirements.
Sales Leaders include our
independent distributors who
have completed and who maintain
specified sales requirements,
and our sales employees and
contractual sales promoters in
China, who have completed
certain qualification
requirements.
NU SKIN ENTERPRISES, INC.
Reconciliation of Gross Profit as Reported to Gross Profit
Excluding Write-down of China Inventory
(in thousands)
Quarter Ended
June 30,
--------
2014 2013
---- ----
Revenue as reported $650,027 $671,328
Cost of sales 156,010 111,273
------- -------
Gross profit as reported 494,017 560,055
Write-down of China inventory 50,000 -
------ ---
Gross profit excluding write-down of China inventory $544,017 $560,055
======== ========
Gross profit as a percent of revenue excluding write-down
of
China inventory 83.7% 83.4%
Gross profit as a percent of revenue as reported 76.0% 83.4%
NU SKIN ENTERPRISES, INC.
Reconciliation of Net Income as Reported to Net Income Excluding
Write-down of China Inventory and Venezuela Currency Adjustment to SICAD II
(in thousands, except per share amounts)
Quarter Ended
June 30,
--------
2014 2013
---- ----
Net income as reported $19,507 $74,435
Write-down of China inventory 50,000 -
Venezuela currency adjustment to SICAD II 24,524 -
Less: Tax effect of adjustments (24,723) -
------- ---
Net income excluding tax effected adjustments $69,308 $74,435
======= =======
Net income as a percent of revenue excluding adjustments 10.7% 11.1%
Net income as a percent of revenue as reported 3.0% 11.1%
Diluted net income per share excluding adjustments $1.13 $1.22
Diluted net income per share as reported $0.32 $1.22
SOURCE Nu Skin Enterprises, Inc.
