Nu Skin Enterprises Reports Second-Quarter 2016 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 SECOND-QUARTER 2016 RESULTS

Company Raises Annual Guidance

 

PROVO, Utah — Aug. 4, 2016 — Nu Skin Enterprises, Inc. (NYSE: NUS) today announced second-quarter results with revenue above guidance at $600.5 million, compared to $560.2 million in the prior-year period. Quarterly revenue improved 7 percent, or 10 percent on a constant-currency basis. Earnings per share for the quarter were $0.79 compared to $0.75 in the prior-year period. Earnings were negatively impacted $0.13 per share due to foreign currency translation charges recorded in other income/expense.

 

“We are pleased with our second-quarter results and remain optimistic about the future as we continue to introduce our latest ageLOC products,” said Truman Hunt, president and chief executive officer. “During the quarter, we held significant product introduction events in South Asia/Pacific and Greater China, generating revenue growth of 36 and 18 percent, respectively. We are also encouraged with the increase in sales leaders during the quarter, a reflection of the strength of our product launches.”

 

 

Regional Results

 

The company’s regional revenue results for the three-month periods ended June 30 are presented in the following table.

 

 

 

2016

 

2015

 

%

Change

 

Constant Currency

% Change

 

 

 

 

 

 

 

 

 

Greater China

 

$     236,716

 

$      200,136

 

18%

 

24%

North Asia

 

       165,885

 

        172,943

 

  (4%)

 

  (6%)

Americas

 

         67,884

 

          83,468

 

(19%)

 

(15%)

South Asia/Pacific

 

         92,297

 

          68,023

 

36%

 

42%

EMEA

 

         37,693

 

          35,639

 

  6%

 

  5%

 

 

 

 

 

 

 

 

 

Total

 

$     600,475

 

$      560,209

 

  7%

 

10%

 

 

The company’s regional revenue results for the six-month periods ended June 30 are presented in the following table.

 

 

 

2016

 

2015

 

%

Change

 

Constant Currency

% Change

 

 

 

 

 

 

 

 

 

Greater China

 

 $     395,427

 

 $      387,503

 

  2%

 

  7%

North Asia

 

        317,094

 

         345,009

 

  (8%)

 

  (7%)

Americas

 

        133,632

 

         163,340

 

(18%)

 

(13%)

South Asia/Pacific

 

        155,875

 

         138,840

 

12%

 

19%

EMEA

 

          70,278

 

           68,849

 

  2%

 

  3%

 

 

 

 

 

 

 

 

 

Total

 

$    1,072,306

 

$    1,103,541

 

  (3%)

 

  1%

 

 

The Company’s regional actives and sales leaders statistics are presented in the following table.

 

 

As of June 30, 2016

 

As of June 30, 2015

 

% Increase (Decrease)

 

 

Actives

 

Sales Leaders

 

Actives

 

Sales Leaders

 

Actives

 

Sales Leaders

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Greater China

 

  257,000

 

  31,554

 

  215,000

 

  25,956

 

19.5%

 

21.6%

 

North Asia

 

  356,000

 

  16,128

 

  387,000

 

  16,991

 

(8.0%)

 

  (5.1%)

 

Americas

 

  165,000

 

    6,515

 

  180,000

 

    7,892

 

(8.3%)

 

(17.4%)

 

South Asia/Pacific

 

  113,000

 

    7,747

 

  120,000

 

    7,279

 

(5.8%)

 

  6.4%

 

EMEA

 

  121,000

 

    4,168

 

  113,000

 

    4,042

 

7.1%

 

  3.1%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total

 

 1,012,000

 

  66,112

 

 1,015,000

 

  62,160

 

(0.3%)

 

  6.4%

 

                             

 

 

 

“Actives” are persons who purchased products directly from the company during the previous three months.


“Sales Leaders” are independent distributors, and sales employees and independent marketers in China, who achieve certain qualification requirements.

 

Operational Performance

The company’s operating margin improved to 13.3 percent, compared to 12.8 percent in the prior-year period. Gross margin for the quarter was 78.7 percent, compared to 80.3 percent in the prior-year quarter. Both gross and operating margins continued to be negatively impacted by foreign currency fluctuations. Selling expenses, as a percent of revenue, were 41.4 percent, compared to 42.7 percent in the second quarter of 2015. General and administrative expenses, as a percent of revenue, were 24.0 percent, compared to 24.8 percent in the prior-year period. The company’s effective income tax rate for the quarter was 35.0 percent, compared to 35.3 percent in the second quarter of last year. Dividend payments during the quarter were $19.9 million, and the company repurchased $4.3 million of its outstanding shares, with $422.7 million remaining in the authorized share repurchase plan at the end of the quarter.

 

Outlook

“We are pleased with the solid results of our product launches and growth of our sales force in the second quarter, which we believe will positively impact our business going forward,” said Hunt. “In July, we executed a highly successful introduction of ageLOC Youth in South Korea, and we look forward to new product initiatives in all of our regions throughout the remainder of the year.

 

“Our balance sheet continues to be strong, boosted by positive cash flow from operations for the quarter of $139 million, with continued improvements to our inventory balance. Our cash balance includes approximately $200 million of proceeds from the recent investment by Ping An Securities during the second quarter, which we plan to deploy in repurchasing shares over the balance of the year,” concluded Hunt.

 

“We are pleased with our results this quarter and are raising our revenue guidance for the year to $2.20 to $2.24 billion, assuming a negative foreign currency impact of 2 to 3 percent,” said Ritch Wood, chief financial officer. “For the third quarter, we project revenue of $560 to $580 million including a negative currency impact of 1 to 2 percent. We project third-quarter earnings per share of $0.80 to $0.84, and full-year earnings per share of $2.44 to $2.54, or $2.80 to $2.90 when excluding a $0.36 per share non-cash Japan customs charge taken in the first quarter.”

 

The Nu Skin management team will host a conference call with the investment community on Aug. 4 at 5 p.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 at ir.nuskin.com. A replay of the webcast will be available at the same URL through Aug. 19, 2016.

 

About Nu Skin Enterprises, Inc.

Founded more than 30 years ago, Nu Skin Enterprises, Inc. develops and distributes innovative consumer products, offering a comprehensive line of premium-quality beauty and wellness solutions in more than 50 markets worldwide. The company builds upon its scientific expertise in both skin care and nutrition to continually develop innovative product brands that include the Nu Skin® personal care brand, the Pharmanex® nutrition brand, and most recently, the ageLOC® anti-aging brand. Since its introduction in 2008, the ageLOC brand has generated more than $5 billion in sales, and built a loyal following for such products as the ageLOC Youth nutritional supplement, the ageLOC Me® customized skin care system, as well as the ageLOC TR90® weight management and body shaping system. Nu Skin sells its products through a global network of sales leaders. As a long-standing member of direct selling associations globally, Nu Skin is committed to the industry's consumer guidelines that protect and support those who sell and purchase its products through the direct selling channel. Nu Skin is also traded on the New York Stock Exchange under the symbol "NUS." More information is available at 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, growth, initiatives and new product introductions; projections regarding revenue, earnings per share, foreign currency fluctuations, 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 our sales force and customers and generate sponsoring and selling activities on a sustained basis;

·         risk of foreign currency fluctuations and the currency translation impact on the company's business associated with these fluctuations;

·         risk that direct selling laws and regulations in any of our markets, including the United States and China, may be modified, interpreted or enforced in a manner that results in negative changes to our business model or negatively impacts our revenue, sales force or business, including through the interruption of sales activities, loss of licenses, imposition of fines, or any other adverse actions or events;

·         risks 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;

·         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 the company's sales force or others;

·         risk that litigation, investigations or other legal matters could result in settlements, assessments or damages that significantly affect financial results;

·         unpredictable economic conditions and events globally;

·         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, 2016 and 2015

(in thousands, except per share amounts)

 

 

 

 

 

2016

 

2015

 

 

 

 

Revenue

 $              600,475

 

 $              560,209

 

 

 

 

Cost of sales

                 128,205

 

                 110,263

 

 

 

 

Gross profit

                 472,270

 

                 449,946

 

 

 

 

Operating expenses:

 

 

 

        Selling expenses

                 248,363

 

                 239,449

        General and administrative expenses

                 144,109

 

                 138,696

Total operating expenses

                 392,472

 

                 378,145

 

 

 

 

Operating income

                   79,798

 

                   71,801

 

 

 

 

Other income (expense), net

                  (11,060)

 

                    (2,758)

Income before provision for income taxes

                   68,738

 

                   69,043

Provision for income taxes

                   24,025

 

                   24,386

 

 

 

 

Net income

$                 44,713

 

$                 44,657

 

 

 

 

Net income per share:

 

 

 

        Basic

$                     0.80

 

$                     0.76

        Diluted

$                     0.79

 

$                     0.75

 

 

 

 

Weighted average common shares outstanding:

 

 

 

        Basic

                   55,952

 

                   58,506

        Diluted

                   56,356

 

                   59,713

 

NU SKIN ENTERPRISES, INC.

Consolidated Statements of Income (Unaudited)

For the Six-Month Periods Ended June 30, 2016 and 2015

(in thousands, except per share amounts)

 

 

 

 

 

2016

 

2015

 

 

 

 

Revenue

$            1,072,306

 

$             1,103,541

 

 

 

 

Cost of sales

                 266,074

 

                 215,318

 

 

 

 

Gross profit

                 806,232

 

                 888,223

 

 

 

 

Operating expenses:

 

 

 

        Selling expenses

                 443,922

 

                 473,454

        General and administrative expenses

                 274,363

 

                 274,322

Total operating expenses

                 718,285

 

                 747,776

 

 

 

 

Operating income

                   87,947

 

                 140,447

 

 

 

 

Other income (expense), net

                  (13,923)

 

                 (15,026)

Income before provision for income taxes

                   74,024

 

                 125,421

Provision for income taxes

                   25,995

 

                   44,482

 

 

 

 

Net income

$                 48,029

 

$                 80,939

 

 

 

 

Net income per share:

 

 

 

        Basic

$                     0.86

 

$                     1.38

        Diluted

$                     0.85

 

$                     1.35

 

 

 

 

Weighted average common shares outstanding:

 

 

 

        Basic

                   55,953

 

                   58,747

        Diluted

                   56,388

 

                   59,994

 

NU SKIN ENTERPRISES, INC.

Consolidated Balance Sheets (Unaudited)

(in thousands)

 

 

 

 

 

June 30, 2016

 

December 31, 2015

ASSETS

 

 

 

Current assets:

 

 

 

        Cash and cash equivalents

$               544,848

 

$               289,354

        Current investments

                    11,503

 

                    14,371

        Accounts receivable

                    31,706

 

                    35,464

        Inventories, net

                 259,933

 

                 265,256

       Prepaid expenses and other

                 162,710

 

                 101,947

 

              1,010,700

 

                 706,392

 

 

 

 

Property and equipment, net

                 453,342

 

                 454,537

Goodwill

                 114,954

 

                 112,446

Other intangible assets, net

                    67,410

 

                    67,009

Other assets

                 134,463

 

                 165,459

               Total assets

$            1,780,869

 

$            1,505,843

 

 

 

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

Current liabilities:

 

 

 

        Accounts payable

$             43,360 

 

$            28,832

        Accrued expenses

                  350,849

 

                  310,916

        Current portion of long-term debt

                  96,896

 

                   67,849

 

       491,105

 

       407,597   

 

 

 

 

Long-term debt

                  362,051

 

                  181,745

Other liabilities

                  97,473

 

                   90,880

                Total liabilities

                 950,629

 

                 680,222

 

 

 

 

Stockholders’ equity:

 

 

 

        Class A common stock

                  91

 

                  91

       Additional paid-in capital

                 431,459

 

                 419,921

       Treasury stock, at cost

            (1,032,117)

 

            (1,017,063)

       Accumulated other comprehensive loss

                (71,463)

 

                 (71,269)

       Retained earnings

              1,502,270

 

              1,493,941

 

                 830,240

 

                 825,621

              Total liabilities and stockholders’ equity

$            1,780,869

 

$            1,505,843

 

 

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