Nu Skin Enterprises Reports Record Third-Quarter Results and Raises 2013 Guidance

 

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 RESULTS

AND RAISES 2013 GUIDANCE

 

PROVO, Utah — Oct. 22, 2013 — Nu Skin Enterprises, Inc. (NYSE: NUS) today announced record third-quarter results with revenue of $927.6 million, a 76 percent increase over the prior-year period. Revenue was negatively impacted 3 percent by foreign currency fluctuations. Earnings per share for the quarter were $1.80, a 107 percent year-over-year improvement.

 

Additionally, the company announced that it is significantly increasing its full-year 2013 revenue guidance to $3.18 billion to $3.21 billion. The new guidance includes a projected negative currency impact of 4 percent for the year. The company now expects 2013 earnings to be $5.77 to $5.82 per share.

 

“We are extremely pleased with our third-quarter results,” said Truman Hunt, president and chief executive officer. “The momentum we have established in the first half of the year has accelerated as we posted gains throughout the world, with particularly impressive results in the Greater China and South Asia/Pacific regions, as well as South Korea.  

 

“We are delighted to see such a tremendous response to the initial introduction of our ageLOC TR90 weight management system. We began the limited-time-offer of the TR90 system in September, starting in the Greater China and South Asia/Pacific regions and generated approximately $205 million in limited-time-offer sales in the quarter. We expect this momentum to continue through the fourth quarter as the rest of our regions participate in this global limited-time offer.”

 

Regional Results

Greater China. In Greater China, third-quarter revenue increased 240 percent to $464.6 million, compared to $136.6 million in the prior-year period. The region’s results were positively impacted 9 percent by foreign currency fluctuations. Regional revenue included $157.9 million from limited-time-offer (LTO) sales in the third quarter, while the prior year included $20.8 million in LTO revenue. The sales leader count in the region improved 255 percent, while the number of actives increased 123 percent compared to the prior year.

 

North Asia. Third-quarter revenue in North Asia increased 11 percent to $204.7 million, compared to $184.7 million for the same period in 2012. The region’s results were negatively impacted 12 percent by foreign currency fluctuations. Japan local-currency revenue declined 3 percent while South Korea generated local-currency revenue growth of 71 percent. The number of sales leaders in the region was up 15 percent and the number of actives improved 28 percent.

 

South Asia/Pacific. Revenue in South Asia/Pacific was $127.5 million, a 40 percent improvement compared to the prior year. The region’s results included $45.9 million from LTO sales in the third quarter, while the prior-year included $29.3 million in LTO revenue. The region’s results were negatively impacted 6 percent by foreign currency fluctuations. The region’s third-quarter sales leader count improved 58 percent and actives increased 19 percent compared to the same period in 2012.

 

Americas. Revenue in the Americas improved 22 percent over the prior-year period to $85.7 million.  The region’s results were negatively impacted 7 percent by foreign currency fluctuations. The number of sales leaders in the region improved 28 percent and the number of actives increased 8 percent compared to the prior year.

 

EMEA. Revenue in the EMEA region increased 4 percent to $45.1 million, primarily as a result of foreign currency fluctuations. The number of sales leaders declined 5 percent while actives increased 2 percent, compared to the prior year.

 

Operational Performance

The company’s operating margin improved to 18.1 percent for the quarter, compared to 15.7 percent in the prior year, as a result of strong LTO sales. Gross margin during the quarter was 84.9 percent, 140 basis points above the prior year, due primarily to the TR90 launch in Greater China and South Asia/Pacific. Selling expenses, as a percent of revenue, were 49.3 percent in the third quarter, compared to 44.8 percent in the prior-year period. The increase was a result of the successful execution of the LTO, driving sales and selling expenses higher as sales leaders qualified for promotional incentives and a higher commission level. General and administrative expenses, as a percent of revenue, were 17.5 percent, a significant improvement from 23.1 percent reported in the prior-year.

 

The company’s income tax rate for the quarter was 34.3 percent compared to 35.2 percent in the prior-year period. The company’s cash and short-term investment position at the end of the quarter was $566 million. Dividend payments during the quarter were $17.8 million, and the company repurchased $76 million of its outstanding shares.

 

Outlook

“Our optimism is a product of robust sales force growth and our innovative product portfolio,” said Hunt. “Our sales force has built strong consumer demand for our ageLOC TR90 system, with a very positive initial response to our product release. We continue to improve our execution as we strategically develop and launch innovative products, ensuring a vibrant business opportunity for our sales leaders.

 

“We have high expectations for our business in the fourth quarter and in 2014 as we continue to execute the rollout of TR90. More than 15,000 people will join us in Salt Lake City this week for our bi-annual global convention. We also look forward to sharing our business plan and financial projections for 2014 at our analyst day on Nov. 21.” Hunt concluded.

 

“Given the tremendous quarter, as well as our outlook for the remainder of the year, we are significantly raising our 2013 guidance,” said Ritch Wood, chief financial officer. “We project the fourth quarter will be our first billion-dollar quarter, with anticipated revenue of $1.02 to $1.05 billion. We estimate a negative currency impact of approximately 6 percent in the fourth quarter, with projected earnings per share of $1.85 to $1.90. This forecast includes projected sales of TR90 in the fourth quarter of approximately $350 million.”   

 

The company’s management will host a webcast with the investment community on Oct. 22, 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 Nov. 8, 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, operating margin, 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 associated with rapid growth globally, which could strain our ability to effectively manage our operations, and result in, among other things, product delays or shortages, operating mistakes and errors, inadequate customer service, inappropriate claims or promotions by our sales force, and governmental inquires and investigations, all of which could harm our revenue and ability to generate sustained growth and result in unanticipated expenses.
  • 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;
  • risk of foreign currency fluctuations and the currency translation impact on the company's business associated with these fluctuations;
  • unpredictable economic conditions and events globally;
  • 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;
  • 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;
  • 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 Third Quarters Ended September 30, 2013 and 2012

(in thousands, except per share amounts)

 

 

 

 

 

2013

 

2012

Revenue:

 

 

 

        Greater China

$                464,605

 

$                136,633

        North Asia

                  204,714

 

                  184,743

        South Asia/Pacific

                  127,545

 

                    91,124

        Americas

                    85,654

 

                    70,479

        EMEA

                    45,094

 

                    43,203

Total revenue

                  927,612

 

                  526,182

 

 

 

 

Cost of sales

                  139,816

 

                    86,768

 

 

 

 

Gross profit

                  787,796

 

                  439,414

 

 

 

 

Operating expenses:

 

 

 

        Selling expenses

                  456,975

 

                  235,701

        General and administrative expenses

                  162,546

 

                  121,346

Total operating expenses

                  619,521

 

                  357,047

 

 

 

 

Operating income

                  168,275

 

                    82,367

 

 

 

 

Other income (expense), net

                         504

 

                      1,239

Income before provision for income taxes

                  168,779

 

                    83,606

Provision for income taxes

                    57,879

 

                    29,430

 

 

 

 

Net income

$                110,900

 

$                  54,176

 

 

 

 

Net income per share:

 

 

 

        Basic

$                      1.89

 

$                      0.91

        Diluted

$                      1.80

 

$                      0.87

 

 

 

 

Weighted average common shares outstanding:

 

 

 

        Basic

                   58,661

 

                   59,780

        Diluted

                   61,508

 

                   62,060

 

 

 

 

 

 

               

 

 





NU SKIN ENTERPRISES, INC.

Consolidated Statements of Income (Unaudited)

For the Nine-Month Periods Ended September 30, 2013 and 2012

(in thousands, except per share amounts)

 

 

 

 

 

2013

 

2012

Revenue:

 

 

 

        Greater China

$               909,457

 

$               428,972

        North Asia

                 589,664

 

                 544,638

        South Asia/Pacific

                 280,703

 

                 266,789

        Americas

                 246,484

 

                 208,585

        EMEA

                 134,325

 

                 132,435

Total revenue

              2,160,633

 

              1,581,419

 

 

 

 

Cost of sales

                 341,134

 

                 258,108

 

 

 

 

Gross profit

              1,819,499

 

              1,323,311

 

 

 

 

Operating expenses:

 

 

 

        Selling expenses

              1,007,627

 

                 705,599

        General and administrative expenses

                 446,355

 

                 365,770

Total operating expenses

              1,453,982

 

              1,071,369

 

 

 

 

Operating income

                 365,517

 

                 251,942

 

 

 

 

Other income (expense), net

                       (571)

 

                     1,505

Income before provision for income taxes

                 364,946

 

                 253,447

Provision for income taxes

                 125,329

 

                   91,035

 

 

 

 

Net income

$               239,617

 

$               162,412

 

 

 

 

Net income per share:

 

 

 

        Basic

$                     4.09

 

$                     2.65

        Diluted

$                     3.91

 

$                     2.55

 

 

 

 

Weighted average common shares outstanding:

 

 

 

        Basic

                   58,544

 

                   61,265

        Diluted

                   61,234

 

                   63,742

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

NU SKIN ENTERPRISES, INC.

Consolidated Balance Sheets (Unaudited)

(in thousands)

 

 

 

 

 

September 30, 2013

 

December 31, 2012

ASSETS

 

 

 

Current assets:

 

 

 

        Cash and cash equivalents

$                553,499

 

$                320,025

        Current investments

                    12,099

 

                    13,378

        Accounts receivable

                    50,506

 

                    36,850

        Inventories, net

                  254,187

 

                  135,874

        Prepaid expenses and other

                  143,066

 

                    93,276

 

               1,013,357

 

                  599,403

 

 

 

 

Property and equipment, net

                  352,709

 

                  229,787

Goodwill

                  112,446

 

                  112,446

Other intangible assets, net

                    85,901

 

                    92,518

Other assets

                  124,074

 

                  118,753

                Total assets

$             1,688,487

 

$             1,152,907

 

 

 

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

Current liabilities:

 

 

 

        Accounts payable

$                  67,516     

 

$                  47,882     

        Accrued expenses

                  572,432

 

                  233,202

        Current portion of long-term debt

                    68,562

 

                    39,019 

 

                  708,510           

 

                  320,103           

 

 

 

 

Long-term debt

                  120,606

 

                  154,963

Other liabilities

                  116,942

 

                    87,229

        Total liabilities

                  946,058

 

                  562,295

 

 

 

 

Stockholders’ equity:

 

 

 

        Class A common stock

                           91        

 

                           91        

        Additional paid-in capital

                  357,701

 

                  317,293

       Treasury stock, at cost

                 (788,128)

 

                 (714,853)

        Retained earnings

               1,226,629

 

               1,039,903

        Accumulated other comprehensive loss

                   (53,864)

 

                   (51,822)

 

                  742,429

 

                  590,612

                Total liabilities and stockholders’ equity

$             1,688,487

 

$             1,152,907

 

 

 

 

 

 

 

 

 

 

 

NU SKIN ENTERPRISES, INC.

Actives/Sales Leaders Statistics

 

 

As of September 30, 2013

 

As of September 30, 2012

 

% Increase (Decrease)

 

 

Actives

 

Sales Leaders

 

Actives

 

Sales Leaders

 

Actives

 

Sales Leaders

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Greater China

 

       418,000

 

          57,780

 

       188,000

 

          16,269

 

122.3%

 

255.2%

 

North Asia

 

       430,000

 

          17,994

 

       336,000

 

          15,603

 

  28.0%

 

  15.3%

 

South Asia/Pacific

 

       125,000

 

            9,280

 

       105,000

 

            5,880

 

  19.0%

 

  57.8%

 

Americas

 

       179,000

 

            7,461

 

       166,000

 

            5,831

 

    7.8%

 

  28.0%

 

EMEA

 

       121,000

 

            4,375

 

       118,000

 

            4,581

 

    2.5%

 

    (4.5%)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total

 

    1,273,000

 

          96,890

 

       913,000

 

          48,164

 

  39.4%

 

101.2%

 

                             

 

 

 

“Actives” are persons who purchased products directly from the company during the three months ended as of the date indicated.

 

“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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