Nu Skin Enterprises Reports Record Second-Quarter 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 SECOND-QUARTER RESULTS

Company raises annual sales forecast $90 million

 

PROVO, Utah — Aug. 1, 2013 — Nu Skin Enterprises, Inc. (NYSE: NUS) today announced record second-quarter results with revenue of $682.9 million, a 15 percent increase over the prior-year period. Revenue for the quarter was negatively impacted 3 percent by foreign currency fluctuations. Quarterly earnings per share increased 30 percent to $1.22 from $0.94 in the prior year.

 

“We are extremely pleased with second-quarter results that reflect the strong momentum of the business,” said Truman Hunt, president and chief executive officer. “We are particularly pleased with these results given the record regional ageLOC product launches in the prior-year period. Additionally, we generated continued growth of both our consumer and sales leader base, reflected in 32 percent growth in actives and 23 percent growth in sales leaders. Overall, we saw healthy trends throughout the global business, particularly in the Greater China, North Asia and Americas regions.”

 

“Sales force enthusiasm for the introduction of our ageLOC TR90 weight management system bodes well for a strong second half of the year. We plan to begin the limited-time offer of ageLOC TR90 in September and believe this new product provides an ideal vehicle for us to increase our presence in the growing weight management category.”

Regional Results

 

Greater China. In Greater China, second-quarter revenue increased 35 percent to $269.1 million, compared to $199.7 million in the prior year, which included approximately $100 million in product launch revenue. The region’s results were negatively impacted 3 percent by foreign currency fluctuations. The sales leader count in the region improved 51 percent, while the number of actives increased 121 percent compared to the prior year.

 

North Asia. Second-quarter revenue in North Asia was $196.8 million, compared to $177.7 million for the same period of 2012. The region’s results were negatively impacted 12 percent by foreign currency fluctuations. Japan local-currency revenue improved 5 percent and South Korea generated local-currency revenue growth of 54 percent. The number of sales leaders in the region was up 21 percent while the number of actives improved 15 percent.

 

South Asia/Pacific. Revenue in South Asia/Pacific was $85.9 million, a 13 percent decline compared to the prior year. Revenue in the prior year included approximately $40 million in product launch sales. Results were not notably impacted by foreign currency fluctuations. The region’s second-quarter sales leaders decreased 20 percent while actives increased 16 percent compared to the same period in 2012.

 

Americas. Revenue in the Americas improved 17 percent to $84.3 million, compared to $71.8 million in the prior-year period. The region’s results were negatively impacted 5 percent by foreign currency fluctuations. The number of sales leaders in the region improved 16 percent while the number of actives increased 3 percent compared to the prior year.

 

EMEA. Revenue in the EMEA region was $46.8 million, a 2 percent improvement over the prior-year period. The region’s results were positively impacted 1 percent by foreign currency fluctuations. Sales leaders decreased 3 percent, while actives increased 4 percent compared to the prior year.   

 

Operational Performance

 

The company’s operating margin was 16.8 percent for the quarter, compared to 16.5 percent, while gross margin was 83.7 percent, compared to 83.9 percent in the prior year. Selling expenses, as a percent of revenue, were 45.2 percent in the second quarter. General and administrative expenses, as a percent of revenue, improved to 21.7 percent from 22.3 percent in the prior-year period. Other income (expense) reflected an expense of $1.1 million compared to a $3.4 million expense in the prior year. 

 

The company’s income tax rate for the quarter was 34.4 percent compared to 36.1 percent in the prior-year period. The company’s cash and short-term investment position at the end of the quarter was $411.4 million. Dividend payments were $17.6 million.

 

Outlook

 

“As we look to the back half of the year, we are ramping up for what we expect to be our largest-ever product launch,” said Hunt. “Given the growth momentum of the business, we are again increasing the sales forecast for the remainder of the year. We expect the upcoming launch of ageLOC TR90 and the strength of the business in several key markets will lead to another record year as annual revenue will approach the $3 billion mark,” Hunt concluded.

 

 

“Given the significant growth in our actives, we are raising our annual sales guidance by $90 million to $2.91 to $2.95 billion,” said Ritch Wood, chief financial officer. We now expect earnings per share to be $5.05 to $5.15 and continue to project a negative 5 percent foreign currency impact to annual revenue.”

 

“In the third quarter, we will introduce ageLOC TR90 for a limited time in the Greater China region and much of South Asia in advance of our global convention,” continued Wood. “With these ageLOC TR90 sales, we anticipate third-quarter revenue to be between $790 and $810 million, with a negative currency impact to revenue of 6 to 7 percent. We anticipate earnings per share to be $1.35 to $1.40 for the quarter,” concluded Wood.

 

The company’s management will host a webcast with the investment community on Aug. 1, 2013, 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 Aug. 16, 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, new product introductions and growth in the company’s markets, including mainland China; statements of projections regarding revenue, earnings per share, foreign currency impact 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 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;

·         risks associated with our ability to manage rapid growth, particularly in our greater China region;

·         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 Second Quarters Ended June 30, 2013 and 2012

(in thousands, except per share amounts)

 

 

 

 

 

2013

 

2012

Revenue:

 

 

 

        Greater China

$               269,146

 

$                199,728

        North Asia

                 196,757

 

                  177,695

        South Asia/Pacific

                   85,916

 

                    98,344

        Americas

                   84,289

 

                    71,766

        EMEA

                   46,819

 

                    45,702

 

 

 

 

Total revenue

                 682,927

 

                  593,235

 

 

 

 

Cost of sales

                 111,273

 

                    95,584

 

 

 

 

Gross profit

                 571,654

 

                  497,651

 

 

 

 

Operating expenses:

 

 

 

        Selling expenses

                 308,769

 

                  267,363

        General and administrative expenses

                 148,302

 

                  132,376

Total operating expenses

                 457,071

 

                  399,739

 

 

 

 

Operating income

                 114,583

 

                    97,912

 

 

 

 

Other income (expense), net

                    (1,187)

 

                     (3,369)

Income before provision for income taxes

                 113,396

 

                    94,543

Provision for income taxes

                   38,961

 

                    34,136

 

 

 

 

Net income

$                 74,435

 

$                  60,407

 

 

 

 

Net income per share:

 

 

 

        Basic

$                     1.27

 

$                      0.98

        Diluted

$                     1.22

 

$                      0.94

 

 

 

 

Weighted average common shares outstanding:

 

 

 

        Basic

                   58,620

 

                    61,706

        Diluted

                   61,121

 

                    64,230

 

 

 





NU SKIN ENTERPRISES, INC.

Consolidated Statements of Income (Unaudited)

For the Six Month Periods Ended June 30, 2013 and 2012

(in thousands, except per share amounts)

 

 

 

 

 

2013

 

2012

Revenue:

 

 

 

        Greater China

$               444,852

 

$               292,339

        North Asia

                 384,950

 

                 359,895

        South Asia/Pacific

                 153,158

 

                 175,665

        Americas

                 160,830

 

                 138,106

        EMEA

                   89,231

 

                   89,232

 

 

 

 

Total revenue

              1,233,021

 

              1,055,237

 

 

 

 

Cost of sales

                 201,318

 

                 171,340

 

 

 

 

Gross profit

              1,031,703

 

                 883,897

 

 

 

 

Operating expenses:

 

 

 

        Selling expenses

                 550,652

 

                 469,898

        General and administrative expenses

                 283,809

 

                 244,424

Total operating expenses

                 834,461

 

                 714,322

 

 

 

 

Operating income

                 197,242

 

                 169,575

 

 

 

 

Other income (expense), net

                    (1,075)

 

                        266

Income before provision for income taxes

                 196,167

 

                 169,841

Provision for income taxes

                   67,450

 

                   61,605

 

 

 

 

Net income

$               128,717

 

$               108,236

 

 

 

 

Net income per share:

 

 

 

        Basic

$                     2.20

 

$                     1.75

        Diluted

$                     2.11

 

$                     1.67

 

 

 

 

Weighted average common shares outstanding:

 

 

 

        Basic

                   58,487

 

                   62,016

        Diluted

                   60,882

 

                   64,773

 

 

 

NU SKIN ENTERPRISES, INC.

Consolidated Balance Sheets (Unaudited)

(in thousands)

 

 

 

 

 

June 30, 2013

 

December 31, 2012

ASSETS

 

 

 

Current assets:

 

 

 

        Cash and cash equivalents

$                402,678

 

$                320,025

        Current investments

                      8,754

 

                    13,378

        Accounts receivable

                    59,043

 

                    36,850

        Inventories, net

                  178,183

 

                  135,874

        Prepaid expenses and other

                  117,138

 

                    93,276

 

                  765,796

 

                  599,403

 

 

 

 

Property and equipment, net

                  304,619

 

                  229,787

Goodwill

                  112,446

 

                  112,446

Other intangible assets, net

                    87,644

 

                    92,518

Other assets

                  122,202

 

                  118,753

                Total assets

$             1,392,707

 

$             1,152,907

 

 

 

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

Current liabilities:

 

 

 

        Accounts payable

$                  48,954     

 

$                  47,882     

        Accrued expenses

                  355,215

 

                  233,202

        Current portion of long-term debt

                    69,461 

 

                    39,019 

 

                  473,630           

 

                  320,103           

 

 

 

 

Long-term debt

                  128,664

 

                  154,963

Other liabilities

                    98,326

 

                    87,229

                Total liabilities

                  700,620

 

                  562,295

 

 

 

 

Stockholders’ equity:

 

 

 

        Class A common stock

                           91        

 

                           91        

        Additional paid-in capital

                  332,588

 

                  317,293

       Treasury stock, at cost

                 (718,800)

 

                 (714,853)

        Accumulated other comprehensive loss

                   (55,272)

 

                   (51,822)

        Retained earnings

               1,133,480

 

               1,039,903

 

                  692,087

 

                  590,612

                Total liabilities and stockholders’ equity

$             1,392,707

 

$             1,152,907

 

 

 

 

 

 

 

 

 

 

 

NU SKIN ENTERPRISES, INC.

Actives/Sales Leaders Statistics

 

 

As of June 30, 2013

 

As of June 30, 2012

 

% Increase (Decrease)

 

 

Actives

 

Sales Leaders

 

Actives

 

Sales Leaders

 

Actives

 

Sales Leaders

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Greater China

 

       376,000

 

          30,455

 

       170,000

 

          20,182

 

121.2%

 

50.9%

 

North Asia

 

       389,000

 

          17,372

 

       337,000

 

          14,370

 

  15.4%

 

20.9%

 

South Asia/Pacific

 

       114,000

 

            7,120

 

         99,000

 

            8,856

 

  15.2%

 

(19.6%)

 

Americas

 

       176,000

 

            6,954

 

       170,000

 

            5,994

 

    3.5%

 

16.0%

 

EMEA

 

       124,000

 

            4,484

 

       119,000

 

            4,626

 

    4.2%

 

  (3.1%)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total

 

    1,179,000

 

          66,385

 

       895,000 54,421

 

          54,028

 

  31.7%

 

22.9%

 

                             

 

 

 

“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.

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