NU SKIN ENTERPRISES, INC. PROVO, Utah, Oct. 29, 2015 /PRNewswire/ -- Nu Skin Enterprises, Inc. (NYSE: NUS) today announced third-quarter results, with revenue of $571.3 million compared to $638.8 million in the prior-year period. Revenue improved on a sequential basis and was relatively even with the prior year in constant currency, but was negatively impacted 10 percent by foreign currency fluctuations. Revenue in the prior year was positively impacted by $81 million of product launch volume, versus $47 million in the third quarter of 2015. Earnings per share of $0.28 were significantly impacted by several factors, including a $37.9 million charge, or approximately $0.43 per share, to write down inventory in China, foreign currency translation expenses of approximately $0.13 per share, and a higher-than-normal tax rate primarily related to the inventory write down.
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"Our business continued to progress sequentially in each quarter of 2015, with constant-currency revenue improving in the third quarter to be even with the prior year," said Truman Hunt, president and chief executive officer. "We kicked off our current business cycle with a third-quarter introduction of our ageLOC Youth anti-aging supplement in the South Asia/Pacific region. This introduction generated local-currency sales growth of 44 percent, or 22 percent on a reported basis over the prior year, with a 36 percent sequential increase in sales leaders. We expect to see continued trend improvement in the fourth quarter with the introduction of ageLOC Youth in the Americas and our ageLOC Me customized skin care system in the North Asia region.
"While we are excited about our upcoming product introductions and anticipate continued improvements in our global business, the Greater China region underperformed in the quarter," continued Hunt. "Results for the region were impacted by a combination of lower-than-expected sales of our cosmetic oils, and the scale back of product promotions during the quarter that were being used to reduce inventory levels. Economic conditions may have also impacted results. Looking forward, we believe the Greater China business will benefit by focusing sales leaders on the upcoming launch of our ageLOC Me skin care system rather than focusing on discounted product promotions. These factors resulted in a decision to take an inventory write-down charge."
Regional Results
The company's regional revenue results for the three-month periods ended September 30 are presented in the following table.
2015 2014 % Constant
Currency
Change % Change
------ --------
Greater China $188,669 $226,744 (17%) (15%)
North Asia 167,748 205,488 (18%) (6%)
South Asia/Pacific 108,857 88,915 22% 44%
Americas 70,775 76,737 (8%) 2%
EMEA 35,259 40,916 (14%) 4%
------ ------
Total $571,308 $638,800 (11%) ---*
======== ========
*Less than 1% change.
Mainland China revenue declined eight percent in local currency and 10 percent on a reported basis. Taiwan and Hong Kong declined 32 percent and 30 percent, respectively, due primarily to a large product introduction in the prior-year quarter.
The company's regional revenue results for the nine-month periods ended September 30 are presented in the following table.
2015 2014 % Constant
Currency
Change % Change
------ --------
Greater China $576,172 $735,542 (22%) (20%)
North Asia 512,757 596,944 (14%) (4%)
South Asia/Pacific 247,697 241,762 2% 15%
Americas 234,115 246,557 (5%) 9%
EMEA 104,108 139,083 (25%) (8%)
------- -------
Total $1,674,849 $1,959,888 (15%) (7%)
========== ==========
The company's regional actives and sales leaders statistics are presented in the following table.
As of September 30, 2015 As of September 30,
2014 % Increase (Decrease)
------------------------ -------------------- --------------------
Actives Sales Actives Sales Actives Sales
Leaders Leaders Leaders
------- ------- -------
Greater China 211,000 25,044 238,000 24,823 (11%) ---*
North Asia 374,000 18,038 398,000 17,153 (6%) 5%
South Asia/
Pacific 120,000 9,925 121,000 7,881 ---* 26%
Americas 178,000 7,962 186,000 7,244 (4%) 10%
EMEA 110,000 4,120 113,000 4,103 (3%) ---*
------- ----- ------- -----
Total 993,000 65,089 1,056,000 61,204 (6%) 6%
======= ====== ========= ======
*Less than 1%
change.
"Actives" are persons who
purchased products directly from
the company during the previous
three months.
"Sales Leaders" are independent
distributors, and sales employees
and independent marketers in
China, who achieve certain
qualification requirements.
Operational Performance
The company's operating and gross margins were both negatively impacted by the China inventory write-down. Operating margin for the quarter was 7.4 percent, compared to 16.4 percent in the third quarter of 2014. Excluding the impact of the inventory write down, operating margin was 14.1 percent. Gross margin during the quarter was 73.3 percent, versus 82.9 percent in the prior-year period. Selling expenses were 42.1 percent of sales in the third quarter, compared to 41.2 percent in the prior-year period. General and administrative expenses were 23.8 percent of sales compared to 25.3 percent. The company's effective income tax rate for the quarter increased from 35.6 percent in the prior year to 42.1 percent. The higher tax rate was primarily related to the inventory write-down. Cash and current investments at the end of the quarter were $316.7 million and debt was $253.0 million. Dividend payments during the quarter were $20.2 million. Cash flow from operations for the quarter was $82.4 million, and the company repurchased $28.2 million of its outstanding shares.
Outlook
"With the introductions of ageLOC Me and ageLOC Youth, we are beginning a new business cycle that we believe will drive meaningful growth," said Hunt. "Based on the successful third-quarter introduction of ageLOC Youth in South Asia/Pacific, we anticipate positive global momentum from the introduction of these new products to continue in the fourth quarter and throughout 2016.
"Our balance sheet is strong, with a solid net-cash position. We are generating healthy cash flow and plan to use it to improve shareholder value, as demonstrated by today's announcement of an increase in the company's stock repurchase authorization to $500 million," concluded Hunt.
"We project fourth-quarter revenue of $570 to $590 million, which anticipates a negative foreign currency impact of 10 to 11 percent," said Ritch Wood, chief financial officer. "We also anticipate fourth-quarter earnings per share of $0.70 to $0.73. We look forward to discussing our 2016 business plans with shareholders at our investor day on December 4, 2015 in New York," concluded Wood.
The Nu Skin management team will host a conference call with the investment community on Oct. 29, at 5 p.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 Nov. 16, 2015.
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 ageLOC(®) line of products including ageLOC(®) Tru Face(®) Essence Ultra firming serum, the ageLOC(®) TR90(®) 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, growth, initiatives, new product introductions, and sales force; projections regarding revenue, earnings per share, foreign currency fluctuations, uses of cash and other financial items; 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:
-- 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;
-- risk of foreign currency fluctuations and the currency translation
impact on the company's business associated with these fluctuations;
-- risk that direct selling laws and regulations in any of our markets,
including the United States and China, may be modified, interpreted or
enforced in a manner that results in negative changes to our business
model or negatively impacts our revenue, sales force or business,
including through the interruption of sales activities, loss of
licenses, imposition of fines, or any other adverse actions or events;
-- 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;
-- 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;
-- unpredictable economic conditions and events globally;
-- 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 Third Quarters Ended September 30, 2015 and 2014
(in thousands, except per share amounts)
2015 2014
---- ----
Revenue $571,308 $638,800
Cost of sales 152,755 109,275
------- -------
Gross profit 418,553 529,525
------- -------
Operating expenses:
Selling expenses 240,260 263,203
General and administrative
expenses 135,752 161,366
------- -------
Total operating expenses 376,012 424,569
------- -------
Operating income 42,541 104,956
Other income, net (14,428) 1,073
------- -----
Income before provision
for income taxes 28,113 106,029
Provision for income taxes 11,846 37,721
------ ------
Net income $16,267 $68,308
======= =======
Net income per share:
Basic $0.28 $1.15
Diluted $0.28 $1.12
Weighted average common shares outstanding:
Basic 57,725 59,249
Diluted 58,663 60,777
NU SKIN ENTERPRISES, INC.
Consolidated Statements of Income (Unaudited)
For the Nine-Month Periods Ended September 30, 2015 and 2014
(in thousands, except per share amounts)
2015 2014
---- ----
Revenue $1,674,849 $1,959,888
Cost of sales 368,073 371,929
------- -------
Gross profit 1,306,776 1,587,959
--------- ---------
Operating expenses:
Selling expenses 713,714 859,879
General and
administrative expenses 410,074 467,190
------- -------
Total operating expenses 1,123,788 1,327,069
--------- ---------
Operating income 182,988 260,890
Other (expense), net (29,454) (37,554)
------- -------
Income before provision
for income taxes 153,534 223,336
Provision for income
taxes 56,328 80,667
------ ------
Net income $97,206 $142,669
======= ========
Net income per share:
Basic $1.66 $2.42
Diluted $1.63 $2.34
Weighted average common shares outstanding:
Basic 58,403 59,058
Diluted 59,565 61,010
NU SKIN ENTERPRISES, INC.
Consolidated Balance Sheets (Unaudited)
(in thousands)
September 30, 2015 December 31, 2014
------------------ -----------------
ASSETS
Current assets:
Cash and cash equivalents $305,808 $288,415
Current investments 10,883 11,793
Accounts receivable 35,682 35,834
Inventories, net 260,464 338,491
Prepaid expenses and other 164,046 160,134
------- -------
776,883 834,667
Property and equipment,
net 459,644 464,783
Goodwill 112,446 112,446
Other intangible assets,
net 68,862 75,062
Other assets 135,623 127,476
------- -------
Total assets $1,553,458 $1,614,434
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $35,718 $34,712
Accrued expenses 308,600 300,847
Current portion of long-
term debt 66,743 82,770
------ ------
411,061 418,329
Long-term debt 186,222 164,567
Other liabilities 95,657 89,100
------ ------
Total liabilities 692,940 671,996
------- -------
Stockholders' equity:
Class A common stock 91 91
Additional paid-in
capital 415,026 414,394
Treasury stock, at cost (959,504) (862,608)
Accumulated other
comprehensive loss (73,000) (51,521)
Retained earnings 1,477,905 1,442,082
--------- ---------
860,518 942,438
------- -------
Total liabilities and
stockholders' equity $1,553,458 $1,614,434
========== ==========
NU SKIN ENTERPRISES, INC.
Reconciliation of Operating Income to
Operating Income Excluding Write-down of China Inventory
(in thousands)
Quarter Ended
September 30,
-------------
2015 2014
---- ----
Revenue as reported $571,308 $638,800
======== ========
Operating income as
reported $42,541 $104,956
Write-down of China
inventory 37,900 -
------ ---
Operating income
excluding write-
down of China
inventory $80,441 $104,956
======= ========
Operating income as a
percent of revenue
excluding write-
down of China
inventory
14.1% 16.4%
Operating income as a
percent of revenue
as reported 7.4% 16.4%
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SOURCE Nu Skin Enterprises, Inc.
