Nu Skin Enterprises Increases 2013 Guidance and Reports Record Fourth-Quarter and 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 INCREASES 2013 GUIDANCE AND REPORTS RECORD FOURTH-QUARTER AND 2012 RESULTS

 

PROVO, Utah — Feb. 6, 2013 — Nu Skin Enterprises, Inc. (NYSE: NUS) today announced record fourth-quarter results with revenue of $588.2 million, a 19 percent improvement over the prior-year period. Revenue was not materially impacted by foreign currency fluctuations. Earnings per share for the quarter were $0.97, a 27 percent year-over-year improvement. Additionally, the company announced that it is increasing its full-year 2013 revenue guidance by $50 million to $2.30 to $2.35 billion. The company expects 2013 earnings per share to be in the range of $3.77 to $3.92 with an anticipated negative foreign currency impact of 3 to 4 percent.

 

The company reported full year 2012 revenue of $2.17 billion, a 24 percent year-over-year improvement. Annual revenue was negatively impacted 1 percent by foreign currency fluctuations. Earnings per share for the year were $3.52, a 48 percent increase over 2011, or 31 percent when excluding charges related to a Japan customs case in the prior year.

 

“We are pleased with our solid fourth-quarter results and believe 2013 will be another record year as we launch a new wave of compelling anti-aging products and project strong performances around the world,” said Truman Hunt, president and chief executive officer. “Our growth in the fourth quarter was driven by particularly strong trends in several key markets including Japan, South Korea and Mainland China where we continue to see tremendous results from our latest ageLOC products. We expect the upcoming launch of our ageLOC weight-management system to drive significant growth in the back-half of the year.”

 

Regional Results

North Asia. Fourth-quarter revenue in North Asia was $250.2 million, compared to $204.3 million for the same period in 2011. The region’s results were negatively impacted approximately 1 percent by foreign currency fluctuations. Japan local-currency revenue improved 26 percent while South Korea experienced local-currency revenue growth of 19 percent. The number of sales leaders in the region was up 14 percent while the number of actives improved 3 percent.

 

Greater China. In Greater China, fourth-quarter revenue increased 28 percent to $141.7 million, compared to $110.6 million in the prior-year period. Foreign currency fluctuations had a positive impact of 3 percent in the region. The sales leader count in the region improved 57 percent, while the number of actives increased 51 percent compared to the prior-year.

 

South Asia/Pacific. Revenue in South Asia/Pacific was $63.5 million, a 3 percent decline compared to the prior year. Sales in the quarter were positively impacted 4 percent by foreign currency fluctuations. The region’s fourth-quarter sales leaders declined 11 percent while actives decreased 1 percent compared to the same period in 2011.

 

Americas. Revenue in the Americas improved 4 percent to $80.1 million, compared to $76.9 million in the prior-year period. Sales in the U.S. increased 18 percent when excluding $12.5 million of convention sales to non-U.S. distributors in the fourth quarter of 2011. The number of sales leaders improved 19 percent while the number of actives decreased 1 percent compared to the prior year.

 

Europe. Revenue in Europe was $52.8 million, a 38 percent improvement over the prior-year period. Results in the region were negatively impacted 6 percent by foreign currency fluctuations. Sales leaders and actives in Europe increased 21 and 9 percent, respectively, compared to the prior year.

 

Operational Performance

The company’s operating margin was 15.1 percent for the quarter, compared to 15.3 percent in the prior year. Operating margin for the year was 15.7 percent compared to 13.4 percent in 2011, or 15.3 percent when excluding charges related to a Japan customs case in the prior year. Gross margin during the quarter was 83.8 percent, consistent with the prior year. Selling expenses, as a percent of revenue, were 45.0 percent in the fourth quarter, representing a 170 basis-point increase. The increase was driven by accelerated sales growth in many 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 23.8 percent, improving 150 basis-points over the prior year. Other income and expenses reflected a gain of $2.9 million.  

 

The company’s income tax rate for the quarter was 35.5 percent compared to 34.9 percent in the prior-year period. The company’s cash and short-term investment position at the end of the quarter was $333.4 million. Dividend payments during the quarter were $11.7 million, and the company repurchased $21.9 million of its outstanding shares. During 2012 the company repurchased approximately $200 million of its outstanding shares.

 

Outlook

“We expect 2013 will be another record year with healthy trends in all of our regions and a record launch of our new ageLOC weight management system, which we plan to introduce through a global limited time offer in the fall,” said Hunt. 

 

“We also recently announced plans to increase our 2013 dividends by 50 percent, which represents a 140 percent increase in dividends over the past three years. With our strong performance and increasing cash flow, we have the financial flexibility to further increase our dividends, repurchase additional shares and continue to invest in important business initiatives to sustain growth,” Hunt concluded.

 

“Based on the strength of our business and the growth of our global sales force, we are raising our expectations for 2013,” said Ritch Wood, chief financial officer. “We expect first-quarter 2013 revenue to be $500 to $510 million, and are increasing our annual revenue guidance to $2.30 to $2.35 billion. First-quarter revenue guidance anticipates a 3 percent negative impact from foreign currency and annual guidance anticipates a negative 3 to 4 percent negative foreign currency impact. We expect earnings per share to be $0.75 to $0.77 for the first quarter, and $3.77 to $3.92 for the year.”

 

The company’s management will host a webcast with the investment community on Feb. 6, 2013, at noon EST. 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 Feb. 22, 2013.  

 

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 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, particularly the “Outlook” section, 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 introductions; statements of projections regarding revenue, earnings per share, foreign currency impact, the amount and timing of future dividend payments 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:

 

  • the actual declaration and payment of the planned dividends by the Board of Directors is subject to any changes in the company’s net earnings, financial condition, cash requirements, future prospects or other factors deemed relevant by the company’s board of directors that could cause the Board of Directors to reduce or discontinue the payment of currently planned quarterly dividends;
  • 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;
  • risks related to accurately predicting, delivering or maintaining sufficient quantities of products to support our planned initiatives or launch strategies, including possible ingredient supply limitations;
  • challenging economic conditions globally;
  • risk of foreign currency fluctuations and the currency translation impact on the company's business associated with these fluctuations;
  • risks associated with general inquiries and complaints to consumer protection agencies in Japan regarding the activities of some distributors;
  • 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;
  • 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;
  • adverse publicity related to the company's business, products, industry or any legal actions or complaints by distributors 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 Fourth Quarters Ended December 31, 2012 and 2011

(in thousands, except per share amounts)

 

 

 

 

 

2012

 

2011

Revenue:

 

 

 

        North Asia

$                250,195

 

$                204,312

        Greater China

                  141,668

 

                  110,555

        South Asia/Pacific

                    63,451

 

                    65,235

        Americas

                    80,147

 

                    76,893

        Europe

                    52,784

 

                    38,309

Total revenue

                  588,245

 

                  495,304

 

 

 

 

Cost of sales

                    95,044

 

                    80,171



 


Gross profit

                  493,201

 

                  415,133

 

 

 

 

Operating expenses:

 

 

 

        Selling expenses

                  264,620

 

                  214,603

        General and administrative expenses

                  139,679

 

                  124,954

Total operating expenses

                  404,299

 

                  339,557

 

 

 

 

Operating income

                    88,902

 

                    75,576

 

 

 

 

Other income (expense), net

                      2,893

 

                         455

Income before provision for income taxes

                    91,795

 

                    76,031

Provision for income taxes

                    32,562

 

                    26,508



 


Net income

$                  59,233


$                  49,523

 

 

 

 

Net income per share:

 

 

 

        Basic

$                      1.01

 

$                      0.80

        Diluted

$                      0.97

 

$                      0.76

 

 

 

 

Weighted average common shares outstanding:

 

 

 

        Basic

                    58,620

 

                    62,268

        Diluted

                    60,893

 

                    64,876

 

 

 

 

 

 

               

 

 





NU SKIN ENTERPRISES, INC.

Consolidated Statements of Income (Unaudited)

For the Years Ended December 31, 2012 and 2011

(in thousands, except per share amounts)

 

 

 

 

 

2012

 

2011

Revenue:

 

 

 

        North Asia

$               794,833

 

$               751,165

        Greater China

                 570,640

 

                 341,919

        South Asia/Pacific

                 330,240

 

                 236,212

        Americas

                 288,732

 

                 251,984

        Europe

                 185,219


                 162,711

 


 


Total revenue

              2,169,664

 

              1,743,991

 

 

 

 

Cost of sales

                 353,152

 

                 322,624


 

 

 

Gross profit

              1,816,512

 

              1,421,367

 

 

 

 

Operating expenses:

 

 

 

        Selling expenses

                 970,219

 

                 751,448

        General and administrative expenses

                 505,449

 

                 436,177

Total operating expenses

              1,475,668

 

              1,187,625

 

 

 

 

Operating income

                 340,844

 

                 233,742

 

 

 

 

Other income (expense), net

                     4,398

 

                    (6,973)

Income before provision for income taxes

                 345,242

 

                 226,769

Provision for income taxes

                 123,597

 

                   73,439


 

 

 

Net income

$               221,645

 

$               153,330

 

 

 

 

Net income per share:

 

 

 

        Basic

$                     3.66

 

$                     2.47

        Diluted

$                     3.52

 

$                     2.38

 

 

 

 

Weighted average common shares outstanding:

 

 

 

        Basic

                   60,600

 

                   62,066

        Diluted

                   63,025

 

                   64,546

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

NU SKIN ENTERPRISES, INC.

Consolidated Balance Sheets (Unaudited)

As of December 31, 2012 and 2011

(in thousands)

 

 

 

 

 

2012


2011

ASSETS

 

 

 

Current assets:

 

 

 

        Cash and cash equivalents

$                320,025

 

$                272,974

        Current investments

                    13,378

 

                    17,727

        Accounts receivable

                    36,850

 

                    31,615

        Inventories, net

                  135,874

 

                  112,111

        Prepaid expenses and other

                    93,276

 

                    95,660


                  599,403

 

                  530,087

 

 

 

 

Property and equipment, net

                  229,787

 

                  149,505

Goodwill

                  112,446

 

                  112,446

Other intangible assets, net

                    92,518

 

                    83,333

Other assets

                  118,753

 

                  115,585

                Total assets

$             1,152,907


$                990,956

 


 


LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

Current liabilities:

 

 

 

        Accounts payable

$                  47,882     

 

$                  32,181     

        Accrued expenses

                  233,202

 

                  180,382

        Current portion of long-term debt

                    39,019

 

                    28,608

 

                  320,103           

 

                  241,171           


 

 

 

Long-term debt

                  154,963

 

                  107,944

Other liabilities

                    87,229

 

                    67,605

        Total liabilities

                  562,295

 

                  416,720

 

 

 

 

Stockholders’ equity:

 

 

 

        Class A common stock

                           91        

 

                           91        

        Additional paid-in capital

                  317,293

 

                  292,240

       Treasury stock, at cost

                 (714,853)

 

                 (522,162)

        Accumulated other comprehensive loss

                   (51,822)

 

                   (62,565)

        Retained earnings

               1,039,903

 

                  866,632

 

                  590,612

 

                  574,236

                Total liabilities and stockholders’ equity

$             1,152,907


$                990,956

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

NU SKIN ENTERPRISES, INC.

Actives/Sales Leaders Statistics

 


As of December 31, 2012


As of December 31, 2011


% Increase (Decrease)



Actives


Sales Leaders


Actives


Sales Leaders


Actives


Sales Leaders

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

North Asia

 

        349,000

 

          17,395

 

        338,000

 

          15,293

 

  3.3%

 

13.7%

 

Greater China

 

        216,000

 

          18,527

 

        143,000

 

          11,808

 

51.0%

 

56.9%

 

South Asia/Pacific

 

          98,000

 

            4,988

 

          99,000

 

            5,619

 

  (1.0%)

 

(11.2%)

 

Americas

 

        164,000

 

            6,352

 

        166,000

 

            5,356

 

  (1.2%)

 

18.6%

 

Europe

 

        119,000

 

            4,528

 

        109,000

 

            3,740

 

  9.2%

 

 21.1%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total

 

        946,000

 

          51,790

 

        855,000

 

          41,816

 

10.6%

 

23.9%

 

                             

 

 

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

 

“Sales Leaders” include our independent distributors who have completed and who maintain specified sales requirements. “Sales Leaders” also include our qualified sales employees and contractual sales promoters in China.

 

 

 

 

 

NU SKIN ENTERPRISES, INC.

Reconciliation of Operating Income as Reported to

Operating Income Excluding Japan Customs Expense

(in thousands)

 

 

 

 

 

 

 


Year Ended December 31,

 

 


2012


2011

 


 


 


 

Revenue as reported

 

$     2,169,664


$       1,743,991

 

 

 


 


 

Operating income as reported

 

$        340,844

 

$         233,742

 

 

 

 

 

 

 

        Japan customs expense

 

                     ─

 

             32,754

 

 

 

 

 

 

 

Operating income excluding Japan customs expense

 

$        340,844

 

$         266,496

 

 

 

               

 

               

 

Operating income as a percent of revenue as reported

 

              15.7%

 

              13.4%

 

 

 

 

 

 

 

Operating income as a percent of revenue excluding Japan

        customs expense        

 

 

              15.7%

 

 

              15.3%

 

                     

 

 

 

 

 

 

 

 

NU SKIN ENTERPRISES, INC.

Reconciliation of Diluted Earnings Per Share as Reported to

Diluted Earnings Per Share Excluding Japan Customs Expense

(in thousands)

 

 

 

 

 

 

 


Year Ended December 31,

 

 


2012


2011

 


 


 


 

Net income as reported

 

$        221,645

 

$       153,330

 

 

 


 


 

        Japan customs expense

 

                    ─

 

           32,754

 

 

 

 

 

 

 

        Tax effect of Japan customs expense

 

                    ─

 

          (12,276)

 

 

 

 

 

 

 

Net income excluding Japan customs expense

 

$       221,645

 

$       173,808

 

 

 

 

 

 

 

Diluted earnings per share as reported

 

$             3.52

 

$             2.38

 

 

 

 

 

 

 

Diluted earnings per share, excluding Japan customs expense

 

$             3.52

 

$             2.69

 

                     

 

 

 

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