Full Press Release Details
Investors - Scott Pond (801) 345-2657, spond@nuskin.com
Media - Kara Schneck (801) 345-2116, kschneck@nuskin.com
NU SKIN ENTERPRISES REPORTS THIRD-QUARTER RESULTS
PROVO, Utah - Nov. 5, 2014 - Nu Skin Enterprises, Inc. (NYSE: NUS) today announced third-quarter results with revenue of $638.8 million, the top end of the company's prior guidance and a 30 percent decline from the prior-year period. Comparable revenue in the third quarter of 2013 included $203 million in sales from the company's limited-time introduction of its ageLOC TR90 weight management system. Revenue for the third quarter of 2014 was negatively impacted three percent by foreign currency fluctuations. Earnings per share for the quarter were $1.12, ahead of expectations, versus $1.80 in the prior-year period.
"We made significant progress during the third quarter," said Truman Hunt, president and chief executive officer. "We believe our business in China is stabilizing as we are seeing improving trends in the early sales leader pipeline, we strengthened our capital structure and balance sheet flexibility, we are making good progress in our product development efforts, and we generated positive operating cash flow. We have also seen continued enthusiasm among our sales force at recent sales leader conventions in our South Asia/Pacific, Greater China and Americas regions.
"Our sales results are heavily impacted by our product launch schedule. Last year's second-half launch, which generated approximately $550 million in sales, provides a difficult year-over-year comparison. However, excluding product launch sales, the core business has stabilized and is trending positively sequentially. The dynamics of the core business reinforce our confidence in the long-term prospects for Nu Skin and our ability to renew local-currency growth in 2015."
Nu Skin Enterprises, Inc.
Greater China. In Greater China, third-quarter revenue declined 50 percent to $226.7 million when compared to the prior-year period, which included $153.6 million of limited-time offer (LTO) sales, compared to $59.3 million of LTO sales in the third quarter of 2014. The region's results were not impacted by foreign currency fluctuations. The sales leader count in the region declined 57 percent, while the number of actives declined 43 percent compared to the prior-year period. This decline is primarily a result of the company's temporary, self-imposed restriction on sales leader recruitment earlier this year. Results for the region reflect third-quarter sales in Mainland China down 1 percent versus the second quarter of 2014.
North Asia. Third-quarter revenue in North Asia increased 2 percent to $205.5 million, compared to $202.4 million for the same period in 2013. The region's results were positively impacted 2 percent by foreign currency fluctuations. South Korea generated local-currency revenue growth of 6 percent while Japan local-currency revenue declined 9 percent. The number of sales leaders in the region declined 5 percent and the number of actives declined 7 percent.
South Asia/Pacific. Revenue in South Asia/Pacific was $88.9 million, a 30 percent decline compared to the prior-year period, which included $45.7 million in LTO sales. The region's results were negatively impacted 1 percent by foreign currency fluctuations. The region's third-quarter sales leaders and actives declined 15 and 3 percent, respectively, compared to the same period in 2013.
Americas. Currency fluctations in the Americas region offset 19 percent local-currency growth, with reported revenue in the Americas declining 10 percent to $76.7 million, compared to $84.8 million in the prior-year period. The currency impact was primarily driven by the devaluation of currency in Venezuela. The number of sales leaders in the region declined 3 percent and the number of actives improved 4 percent compared to the prior-year period.
Nu Skin Enterprises, Inc.
EMEA. Revenue in the EMEA region was $40.9 million, an 8 percent decline from the prior-year period. The region's results were negatively impacted 1 percent by foreign currency fluctuations. Sales leaders declined 6 percent, and actives declined 7 percent, compared to the prior-year period.
Operational Performance
The company's operating margin was 16.4 percent for the quarter, compared to 18.5 percent in the third quarter of 2013. Gross margin during the quarter was 82.9 percent, versus 84.6 percent in the prior-year period. Selling expenses decreased to 41.2 percent in the third quarter, compared to 48.2 percent in the prior-year period, primarily due to higher-than-normal selling expenses in connection with last year's LTO. General and administrative expenses increased to 25.3 percent of sales, compared to 17.9 percent in the prior-year period, due primarily to the high LTO revenue in the prior-year period. The company's effective income tax rate for the quarter was 35.6 percent, compared to 34.3 percent in the prior-year period. Cash and current investments at the end of the quarter were $207.2 million and debt was $188.7 million. Dividend payments during the quarter were $20.5 million. The company recently completed a refinancing of its debt facilities, improving the company's financial flexibility. Cash flow from operations for the quarter was $33.6 million, including the effect of a tax payment of $49.2 million related to 2013 income.
"We are in a transition period as we set the stage to renew local-currency growth in 2015," said Hunt. "We remain focused on rekindling growth in China, preparing for new product launches in 2015, and driving enhanced value for our shareholders.
"During the third quarter, we started to increase the number of promotional meetings in China and, as a result, our early sales leader pipeline is improving. We are optimistic about our product pipeline and will provide additional detail regarding our new products at our annual Investor Day on Dec. 12. In addition, our recent debt refinancing provides the company with much greater flexibility to return value to shareholders," concluded Hunt.
Nu Skin Enterprises, Inc.
"The strength of the U.S. dollar will reduce our fourth-quarter results," said Ritch Wood, chief financial officer. "We anticipate the impact from currency on fourth-quarter revenue will be about $50 million when compared to currency rates in the prior-year period and about $30 million sequentially. Additionally, while we anticipate core business trend improvement, we estimate $20 million of LTO sales in the fourth quarter versus $350 million of LTO sales in the fourth quarter of 2013, and $80 million of LTO sales in the third quarter of 2014.
"Given these factors, we anticipate fourth-quarter revenue of $590 million to $610 million, with earnings per share of $0.72 to $0.77. Earnings per share for the fourth quarter will be negatively impacted $0.08 by a pre-payment fee in connection with the refinancing of our debt," concluded Wood.
The Nu Skin management team will host a conference call with the investment community on Nov. 5, 2014, at 11 a.m. (EST). 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. 21, 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 ageLOC Tru Face Essence Ultra firming serum, the ageLOC TR90 weight management and body shaping system, ageLOC R2 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.
Nu Skin Enterprises, Inc.
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, growth, strategies, sales force and new product development; statements regarding shareholder value and projections regarding revenue, earnings per share, foreign currency fluctuations 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:
Nu Skin Enterprises, Inc.
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.
| NU SKIN ENTERPRISES, INC. | ||||||||
| Consolidated Statements of Income (Unaudited) | ||||||||
| For the Third Quarters Ended September 30, 2014 and 2013 | ||||||||
| (in thousands, except per share amounts) | ||||||||
| 2014 | 2013 | |||||||
| Revenue: | ||||||||
| Greater China | $ | 226,744 | $ | 449,558 | ||||
| North Asia | 205,488 | 202,390 | ||||||
| South Asia/Pacific | 88,915 | 126,972 | ||||||
| Americas | 76,737 | 84,813 | ||||||
| EMEA | 40,916 | 44,566 | ||||||
| Total revenue | 638,800 | 908,299 | ||||||
| Cost of sales | 109,275 | 139,816 | ||||||
| Gross profit | 529,525 | 768,483 | ||||||
| Operating expenses: | ||||||||
| Selling expenses | 263,203 | 437,662 | ||||||
| General and administrative expenses | 161,366 | 162,546 | ||||||
| Total operating expenses | 424,569 | 600,208 | ||||||
| Operating income | 104,956 | 168,275 | ||||||
| Other income, net | 1,073 | 504 | ||||||
| Income before provision for income taxes | 106,029 | 168,779 | ||||||
| Provision for income taxes | 37,721 | 57,879 | ||||||
| Net income | $ | 68,308 | $ | 110,900 | ||||
| Net income per share: | ||||||||
| Basic | $ | 1.15 | $ | 1.89 | ||||
| Diluted | $ | 1.12 | $ | 1.80 | ||||
| Weighted average common shares outstanding: | ||||||||
| Basic | 59,249 | 58,661 | ||||||
| Diluted | 60,777 | 61,508 |
Nu Skin Enterprises, Inc.
| NU SKIN ENTERPRISES, INC. | ||||||||
| Consolidated Statements of Income (Unaudited) | ||||||||
| For the Nine-Month Periods Ended September 30, 2014 and 2013 | ||||||||
| (in thousands, except per share amounts) | ||||||||
| 2014 | 2013 | |||||||
| Revenue: | ||||||||
| Greater China | $ | 735,542 | $ | 881,621 | ||||
| North Asia | 596,944 | 583,112 | ||||||
| South Asia/Pacific | 241,762 | 279,511 | ||||||
| Americas | 246,557 | 243,938 | ||||||
| EMEA | 139,083 | 132,750 | ||||||
| Total revenue | 1,959,888 | 2,120,932 | ||||||
| Cost of sales | 371,929 | 341,134 | ||||||
| Gross profit | 1,587,959 | 1,779,798 | ||||||
| Operating expenses: | ||||||||
| Selling expenses | 859,879 | 967,926 | ||||||
| General and administrative expenses | 467,190 | 446,355 | ||||||
| Total operating expenses | 1,327,069 | 1,414,281 | ||||||
| Operating income | 260,890 | 365,517 | ||||||
| Other (expense), net | (37,554 | ) | (571 | ) | ||||
| Income before provision for income taxes | 223,336 | 364,946 | ||||||
| Provision for income taxes | 80,667 | 125,329 | ||||||
| Net income | $ | 142,669 | $ | 239,617 | ||||
| Net income per share: | ||||||||
| Basic | $ | 2.42 | $ | 4.09 | ||||
| Diluted | $ | 2.34 | $ | 3.91 | ||||
| Weighted average common shares outstanding: | ||||||||
| Basic | 59,058 | 58,544 | ||||||
| Diluted | 61,010 | 61,234 |
Nu Skin Enterprises, Inc.
| NU SKIN ENTERPRISES, INC. | ||||||||
| Consolidated Balance Sheets (Unaudited) | ||||||||
| (in thousands) | ||||||||
| September 30, 2014 | December 31, 2013 | |||||||
| ASSETS | ||||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | 194,944 | $ | 525,153 | ||||
| Current investments | 12,227 | 21,974 | ||||||
| Accounts receivable | 40,612 | 68,652 | ||||||
| Inventories, net | 369,107 | 339,669 | ||||||
| Prepaid expenses and other | 188,532 | 162,886 | ||||||
| 805,422 | 1,118,334 | |||||||
| Property and equipment, net | 440,352 | 396,042 | ||||||
| Goodwill | 112,446 | 112,446 | ||||||
| Other intangible assets, net | 77,234 | 83,168 | ||||||
| Other assets | 137,795 | 111,072 | ||||||
| Total assets | $ | 1,573,249 | $ | 1,821,062 | ||||
| LIABILITIES AND STOCKHOLDERS' EQUITY | ||||||||
| Current liabilities: | ||||||||
| Accounts payable | $ | 28,275 | $ | 82,684 | ||||
| Accrued expenses | 328,973 | 626,284 | ||||||
| Current portion of long-term debt | 92,926 | 67,824 | ||||||
| 450,174 | 776,792 | |||||||
| Long-term debt | 95,783 | 113,852 | ||||||
| Other liabilities | 87,885 | 71,799 | ||||||
| Total liabilities | 633,842 | 962,443 | ||||||
| Stockholders' equity: | ||||||||
| Class A common stock | 91 | 91 | ||||||
| Additional paid-in capital | 412,177 | 397,383 | ||||||
| Treasury stock, at cost | (843,878 | ) | (826,904 | ) | ||||
| Accumulated other comprehensive loss | (44,964 | ) | (46,228 | ) | ||||
| Retained earnings | 1,415,981 | 1,334,277 | ||||||
| 939,407 | 858,619 | |||||||
| Total liabilities and stockholders' equity | $ | 1,573,249 | $ | 1,821,062 |
Nu Skin Enterprises, Inc.
| NU SKIN ENTERPRISES, INC. Actives/Sales Leaders Statistics | |||||||||||||
| As of September 30, 2014 | As of September 30, 2013 | % Increase (Decrease) | |||||||||||
| Actives | Sales Leaders | Actives | Sales Leaders | Actives | Sales Leaders | ||||||||
| Greater China | 238,000 | 24,823 | 418,000 | 57,780 | (43.1%) | (57.0%) | |||||||
| North Asia | 398,000 | 17,153 | 430,000 | 17,994 | (7.4%) | (4.7%) | |||||||
| South Asia/Pacific | 121,000 | 7,881 | 125,000 | 9,280 | (3.2%) | (15.1%) | |||||||
| Americas | 186,000 | 7,244 | 179,000 | 7,461 | 3.9% | (2.9%) | |||||||
| EMEA | 113,000 | 4,103 | 121,000 | 4,375 | (6.6%) | (6.2%) | |||||||
| Total | 1,056,000 | 61,204 | 1,273,000 | 96,890 | (17.0%) | (36.8%) |
"Actives" are persons who purchased products directly from the company during the previous three months.
"Sales Leaders" include our independent distributors who have completed and who maintain specified sales requirements, and our sales employees and contractual sales promoters in Mainland China, who have completed certain qualification requirements.