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Nu Skin Enterprises Reports Second-Quarter Results

              Nu Skin Enterprises Reports Second-Quarter Results  PR Newswire  PROVO, Utah, Aug. 6, 2014  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 atir.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™ 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:    orisk 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;   orisk of unanticipated delays, complications or other difficulties in     resuming promotional business activities in China;   ouncertainty regarding whether our key indicators will in fact stabilize in     response to our recent resumption of business promotional activities;   orisks related to negative publicity regarding recent media allegations and     subsequent regulatory investigations and fines;   orisk 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;   oany 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;   orisks 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;   orisk of foreign currency fluctuations and the currency translation impact     on the company's business associated with these fluctuations;   ounpredictable economic conditions and events globally;   oregulatory 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;   oadverse publicity related to the company's business, products, industry or     any legal actions or complaints by the company's sales force or others;   oany 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   ocontinued 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  155,705                148,302 expenses 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  33,618                 113,396 taxes 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               305,824                283,809 administrative expenses 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       117,307                196,167 income taxes 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   (42,284)           (46,228) loss   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,  % Increase                                              2013            (Decrease)                                Sales                Sales             Sales                    Actives              Actives              Actives                                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              120,000     7,450    114,000     7,120    5.3%     4.6% Asia/Pacific 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       76.0%           83.4% reported    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   24,524            ─ SICAD II  Less: Tax effect of adjustments     (24,723)          ─ Net income excluding tax effected          $     69,308  $      adjustments                                                  74,435 Net income as a percent of revenue         10.7%             11.1% excluding adjustments Net income as a percent of revenue as      3.0%              11.1% reported 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.  Website: http://www.nuskin.com Contact: Investors -- Scott Pond (801) 345-2657, spond@nuskin.com, Media -- Kara Schneck (801) 345-2116, kschneck@nuskin.com  
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