Nu Skin Enterprises Reports Record Third-Quarter 2012 Results

 

FOR IMMEDIATE RELEASE

Contacts:

Investors — Scott Pond (801) 345-2657, spond@nuskin.com
Media — Kara Schneck (801) 345-2116, kschneck@nuskin.com

 

NU SKIN ENTERPRISES REPORTS RECORD THIRD-QUARTER 2012 RESULTS

Company Increases 2012 Guidance

 

PROVO, Utah — Oct. 31, 2012 — Nu Skin Enterprises, Inc. (NYSE: NUS) today announced record third-quarter results with revenue of $526.2 million, a 23 percent improvement over the prior-year period. Revenue was negatively impacted 3 percent from foreign currency fluctuations. Earnings per share for the quarter were $0.87, a 21 percent year-over-year improvement. Additionally, the company announced that it is increasing its full-year 2012 revenue guidance to $2.11 billion, a 21 percent growth rate over 2011.

 

“By continuing to execute on our business strategy, we were able to generate another record quarter, putting us on track to reach a milestone of more than $2 billion in annual revenue in 2012,” said Truman Hunt, president and chief executive officer. “The quarter was highlighted by healthy trends in all of our regions, strong demand for our anti-aging products and growth in our customer base and sales force.

 

“We were particularly pleased with local-currency growth in Japan and South Korea. This growth reflects increased distributor activity in anticipation of the October limited-time-offer of our ageLOC Body Spa and related products. Our South Asia/Pacific and Greater China regions generated solid local-currency growth of 53 and 64 percent, respectively. The Americas and Europe regions also reported healthy gains with approximately 20 percent year-over-year local-currency growth,” continued Hunt.

 

“Building on our momentum, we held successful regional conventions in the United States, Japan and Europe in the month of October. We are encouraged by the sales activity we are experiencing in both emerging and more mature markets and we expect to continue to sustain growth in 2013. We also continue to improve the execution of our product launches, strengthen our future product pipeline, and generate healthy growth throughout the world.”

 

Regional Results

 

North Asia. Third-quarter revenue in North Asia was $184.7 million, compared to $184.3 million for the same period in 2011. The region’s results were negatively impacted approximately 2 percent from foreign currency fluctuations. Japan local-currency revenue improved 1 percent while South Korea experienced local-currency revenue growth of 6 percent. The number of executives in the region was up 2 percent while the number of actives improved 1 percent.

 

Greater China. Third-quarter revenue in Greater China increased 64 percent to $136.6 million, compared to $83.4 million in the prior-year period. Foreign currency fluctuations did not materially impact revenue in the region. Local-currency revenue in Mainland China improved 60 percent over the same quarter in 2011. Third-quarter revenue in Hong Kong and Taiwan included $13.6 million and $7.2 million, respectively, from limited-time offers in the second quarter. The sales leader count in the region improved 51 percent, while the number of actives increased by 38 percent compared to the prior-year. 

 

South Asia/Pacific. Revenue in South Asia/Pacific was $91.1 million, a 47 percent improvement compared to the prior year. Sales in the quarter were negatively impacted 5 percent by foreign currency fluctuations. Limited-time offers generated $29.3 million in revenue during the third quarter. The region’s third-quarter executive count improved 22 percent while the active count increased 14 percent compared to the same period in 2011.

 

Americas. Revenue in the Americas improved 19 percent to $70.5 million, compared to $59.4 million in the prior-year period. The United States posted a 15 percent revenue increase during the quarter. The number of executives improved 14 percent while the number of actives remained approximately even with the prior year.

 

Europe. Revenue in Europe was $43.2 million, a 9 percent improvement over the prior-year period. Results in the region were negatively impacted 14 percent by foreign currency fluctuations. Executives and actives in Europe increased 23 and 12 percent, respectively, compared to the prior year.

 

Operational Performance

 

The company’s operating margin remained strong at 15.7 percent for the quarter, level with the prior year. Gross margin during the quarter was 83.5 percent, consistent with the prior year. Selling expenses, as a percent of revenue, were 44.8 percent in the third quarter, representing a 180 basis-point increase. The increase is driven by accelerated sales growth in many of our markets, due in part to successful product launches and a higher number of sales leaders qualifying for promotional incentives. General and administrative expenses, as a percent of revenue, were 23.1 percent, improving 180 basis-points over the prior year. Other income and expenses reflected a gain of $1.2 million compared to a loss of $6.9 million in the prior year.   

 

The company’s income tax rate for the quarter was 35.2 percent compared to 22.4 percent in the prior-year period. The lower rate in the previous year was primarily attributable to a one-time tax benefit. The company’s cash and short-term investment position at the end of the quarter was $337.7 million. Dividend payments during the quarter were $11.9 million, and the company repurchased $66.3 million of its outstanding shares. The company has repurchased nearly $180 million of its outstanding shares in 2012.

 

Outlook

 

 “Based on the strength of our business and the growth of our global sales force, we are raising our expectations for the fourth quarter and full year,” said Ritch Wood, chief financial officer. “We expect fourth quarter revenue to be in the $520 million to $530 million range, which increases our annual revenue guidance to $2.10 billion to $2.11 billion. Fourth quarter revenue guidance anticipates a 2 percent negative impact from foreign currency fluctuations. We expect earnings per share to be $0.78 to $0.82 for the fourth quarter, and $3.33 to $3.37 for the year.”

 

“We continue to invest in a number of initiatives that we believe will sustain business growth, including our anti-aging product pipeline, sales force development, as well as focus on emerging markets,” said Hunt. “We look forward to sharing the details of our future plans with shareholders on November 14th at our annual analyst and investor day, where we will also provide our 2013 financial guidance and an update regarding our accelerated timeline to hit our $4.00 per share earnings target.”

The company’s management will host a webcast with the investment community on Oct. 31, 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 Nu Skin Enterprises’ website, http://ir.nuskin.com. An archive of the webcast will be available at this same URL through Nov. 23, 2012. 

 

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® suite of products including the ageLOC® R2 nutritional supplement, ageLOC® Galvanic Spa System and ageLOC® Galvanic Body Spa™, as well as the ageLOC® Transformation daily skin care system. A global direct selling company, Nu Skin operates in 53 markets worldwide and has more than 900,000 active distributors and preferred customers. Nu Skin is traded on the New York Stock Exchange under the symbol “NUS.” More information is available at http://www.nuskin.com.

 

Please note: This presentation contains forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934 that represent the company's current expectations and beliefs. In some cases, you can identify these statements by forward-looking words such as "believe," "expect," "anticipate," "estimate," "intend," "plan," "targets," "likely," "will," "would," "could," "may," "might," the negative of these terms and other comparable terminology. Forward-looking statements include, but are not limited to, statements relating to: (i) management's positive outlook for the company; (ii) management's expectations regarding the company's initiatives, strategies and new products; and (iii) management's projections regarding revenue, earnings per share and the impact of foreign currency fluctuations. 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: (a) any failure of current or planned initiatives or products to generate interest among distributors and customers and generate sponsoring and selling activities on a sustained basis; (b) challenging economic conditions globally; (c) risk of foreign currency fluctuations and the currency translation impact on the company's business associated with these fluctuations; (d) risks associated with general inquiries and complaints to consumer protection agencies in Japan regarding the activities of some distributors; (e) regulatory risks associated with the company's products, which could inhibit the company's ability to import or continue selling a product in a market if it is determined to be a medical device; (f) continued regulatory scrutiny and investigations in Mainland China, which have from time to time in the past, and could in the future, negatively impact the company's business, including the interruption of sales activities in stores, loss of licenses, and the imposition of fines; (g) adverse publicity related to the company's business, products, industry or any legal actions or complaints by distributors or others; (h) 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 (i) 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, 2012 and 2011

(in thousands, except per share amounts)

 

 

 

 

 

2012

 

2011

Revenue:

 

 

 

        North Asia

$                184,743

 

$                184,322

        Greater China

                  136,633

 

                    83,367

        South Asia/Pacific

                    91,124

 

                    61,819

        Americas

                    70,479

 

                    59,407

        Europe

                    43,203

 

                    39,501

Total revenue

                  526,182

 

                  428,416

 

 

 

 

Cost of sales

                    86,768

 

                    70,631

 

 

 

 

Gross profit

                  439,414

 

                  357,785

 

 

 

 

Operating expenses:

 

 

 

        Selling expenses

                  235,701

 

                  184,203

        General and administrative expenses

                  121,346

 

                  106,369

Total operating expenses

                  357,047

 

                  290,572

 

 

 

 

Operating income

                    82,367

 

                    67,213

 

 

 

 

Other income (expense), net

                      1,239

 

                     (6,879)

Income before provision for income taxes

                    83,606

 

                    60,334

Provision for income taxes

                    29,430

 

                    13,536

 

 

 

 

Net income

$                  54,176

 

$                  46,798

 

 

 

 

Net income per share:

 

 

 

        Basic

$                      0.91

 

$                      0.75

        Diluted

$                      0.87

 

$                      0.72

 

 

 

 

Weighted average common shares outstanding:

 

 

 

        Basic

                   59,780

 

                   62,285

        Diluted

                   62,060

 

                   64,708

 

 

 

 

               





NU SKIN ENTERPRISES, INC.

Consolidated Statements of Income (Unaudited)

For the Nine-Month Periods Ended September 30, 2012 and 2011

(in thousands, except per share amounts)

 

 

 

 

 

2012

 

2011

Revenue:

 

 

 

        North Asia

$               544,638

 

$               546,853

        Greater China

                 428,972

 

                 231,364

        South Asia/Pacific

                 266,789

 

                 170,977

        Americas

                 208,585

 

                 175,091

        Europe

                 132,435

 

                 124,402

Total revenue

              1,581,419

 

              1,248,687

 

 

 

 

Cost of sales

                 258,108

 

                 242,453(1)

 

 

 

 

Gross profit

              1,323,311

 

              1,006,234

 

 

 

 

Operating expenses:

 

 

 

        Selling expenses

                 705,599

 

                 536,845

        General and administrative expenses

                 365,770

 

                 311,223

Total operating expenses

              1,071,369

 

                 848,068

 

 

 

 

Operating income

                 251,942

 

                 158,166

 

 

 

 

Other income (expense), net

                     1,505

 

                    (7,428)

Income before provision for income taxes

                 253,447

 

                 150,738

Provision for income taxes

                   91,035

 

                   46,931

 

 

 

 

Net income

$               162,412

 

$               103,807

 

 

 

 

Net income per share:

 

 

 

        Basic

$                     2.65

 

$                     1.67

        Diluted

$                     2.55

 

$                     1.61

 

 

 

 

Weighted average common shares outstanding:

 

 

 

        Basic

                   61,265

 

                   61,998

        Diluted

                   63,742

 

                   64,408

 

 

 

 

(1) Includes $32.8 million related to an adverse decision in the Japan customs litigation.

NU SKIN ENTERPRISES, INC.

Consolidated Balance Sheets (Unaudited)

(in thousands)

 

 

 

 

 

September 30, 2012

 

December 31, 2011

ASSETS

 

 

 

Current assets:

 

 

 

        Cash and cash equivalents

$                321,929

 

$                272,974

        Current investments

                    15,804

 

                    17,727

        Accounts receivable

                    42,293

 

                    31,615

        Inventories, net

                  137,052

 

                  112,111

        Prepaid expenses and other

                    88,001

 

                    95,660

 

                  605,079

 

                  530,087

 

 

 

 

Property and equipment, net

                  194,609

 

                  149,505

Goodwill

                  112,446

 

                  112,446

Other intangible assets, net

                    76,920

 

                    83,333

Other assets

                  126,669

 

                  115,585

                Total assets

$             1,115,723

 

$                990,956

 

 

 

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

Current liabilities:

 

 

 

        Accounts payable

$                  41,181     

 

$                  32,181     

        Accrued expenses

                  230,507

 

                  180,382

        Current portion of long-term debt

                    28,926

 

                    28,608 

 

                  300,614           

 

                  241,171           

 

 

 

 

Long-term debt

                  182,752

 

                  107,944

Other liabilities

                    81,966

 

                    67,605

        Total liabilities

                  565,332

 

                  416,720

 

 

 

 

Stockholders’ equity:

 

 

 

        Class A common stock

                           91        

 

                           91        

        Additional paid-in capital

                  310,868

 

                  292,240

       Treasury stock, at cost

                 (694,529)

 

                 (522,162)

        Retained earnings

                  992,418

 

                  866,632

        Accumulated other comprehensive loss

                   (58,457)

 

                   (62,565)

 

                  550,391

 

                  574,236

                Total liabilities and stockholders’ equity

$             1,115,723

 

$                990,956

NU SKIN ENTERPRISES, INC.

Distributor/Preferred Customer Growth by Market

 

 

As of September 30, 2012

 

As of September 30, 2011

 

% Increase (Decrease)

 

 

  Active

 

Executive

 

  Active

 

Executive

 

    Active

 

Executive

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

North Asia

 

336,000

 

15,603

 

333,000

 

15,303

 

  0.9%

 

  2.0%

 

Greater China

 

188,000

 

16,269

 

136,000

 

10,801

 

38.2%

 

50.6%

 

South Asia/Pacific

 

105,000

 

5,880

 

92,000

 

4,809

 

14.1%

 

22.3%

 

Americas

 

166,000

 

5,831

 

166,000

 

5,106

 

 

14.2%

 

Europe

 

118,000

 

4,581

 

106,000

 

3,732

 

11.3%

 

22.7%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total

 

913,000

 

48,164

 

833,000

 

39,751

 

  9.6%

 

21.2%

 
                             

“Actives” include our independent distributors and preferred customers who have purchased products for resale or personal consumption during the previous three months.

“Executive Distributors” include our independent distributors, who have completed and maintain certain qualification requirements, and our qualified sales employees and contractual sales promoters in China.

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