Company News

Nu Skin Enterprises Reports Third-Quarter 2015 Results

PROVO, Utah, Oct. 29, 2015 /PRNewswire/ -- Nu Skin Enterprises, Inc. (NYSE: NUS) today announced third-quarter results, with revenue of $571.3 million compared to $638.8 million in the prior-year period. Revenue improved on a sequential basis and was relatively even with the prior year in constant currency, but was negatively impacted 10 percent by foreign currency fluctuations. Revenue in the prior year was positively impacted by $81 million of product launch volume, versus $47 million in the third quarter of 2015. Earnings per share of $0.28 were significantly impacted by several factors, including a $37.9 million charge, or approximately $0.43 per share, to write down inventory in China, foreign currency translation expenses of approximately $0.13 per share, and a higher-than-normal tax rate primarily related to the inventory write down.

"Our business continued to progress sequentially in each quarter of 2015, with constant-currency revenue improving in the third quarter to be even with the prior year," said Truman Hunt, president and chief executive officer. "We kicked off our current business cycle with a third-quarter introduction of our ageLOC Youth anti-aging supplement in the South Asia/Pacific region. This introduction generated local-currency sales growth of 44 percent, or 22 percent on a reported basis over the prior year, with a 36 percent sequential increase in sales leaders. We expect to see continued trend improvement in the fourth quarter with the introduction of ageLOC Youth in the Americas and our ageLOC Me customized skin care system in the North Asia region.

"While we are excited about our upcoming product introductions and anticipate continued improvements in our global business, the Greater China region underperformed in the quarter," continued Hunt. "Results for the region were impacted by a combination of lower-than-expected sales of our cosmetic oils, and the scale back of product promotions during the quarter that were being used to reduce inventory levels. Economic conditions may have also impacted results. Looking forward, we believe the Greater China business will benefit by focusing sales leaders on the upcoming launch of our ageLOC Me skin care system rather than focusing on discounted product promotions. These factors resulted in a decision to take an inventory write-down charge."

Regional Results

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



2015


2014


%

Change


Constant
Currency

% Change










Greater China


$              188,669


$               226,744


(17%)


(15%)

North Asia


167,748


205,488


(18%)


(6%)

South Asia/Pacific


108,857


88,915


22%


44%

Americas


70,775


76,737


(8%)


2%

EMEA


35,259


40,916


(14%)


4%










Total


$              571,308


$               638,800


(11%)


     ---*

*Less than 1% change.









 

Mainland China revenue declined eight percent in local currency and 10 percent on a reported basis. Taiwan and Hong Kong declined 32 percent and 30 percent, respectively, due primarily to a large product introduction in the prior-year quarter.

The company's regional revenue results for the nine-month periods ended September 30 are presented in the following table.



2015


2014


%

Change


Constant
Currency

% Change










Greater China


$             576,172


$                735,542


(22%)


(20%)

North Asia


512,757


596,944


(14%)


(4%)

South Asia/Pacific


247,697


241,762


2%


15%

Americas


234,115


246,557


(5%)


9%

EMEA


104,108


139,083


(25%)


(8%)










Total


$          1,674,849


$             1,959,888


(15%)


(7%)

 

The company's regional actives and sales leaders statistics are presented in the following table.


As of September 30, 2015


As of September 30, 2014


% Increase (Decrease)



Actives


Sales
Leaders


Actives


Sales
Leaders


Actives


Sales
Leaders
















Greater China


211,000


25,044


238,000


24,823


(11%)


    ---*


North Asia


374,000


18,038


398,000


17,153


(6%)


5%


South Asia/Pacific


120,000


9,925


121,000


7,881


  ---*


26%


Americas


178,000


7,962


186,000


7,244


(4%)


10%


EMEA


110,000


4,120


113,000


4,103


(3%)


  ---*
















Total


993,000


65,089


1,056,000


61,204


(6%)


6%


*Less than 1% change.































"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 and gross margins were both negatively impacted by the China inventory write-down. Operating margin for the quarter was 7.4 percent, compared to 16.4 percent in the third quarter of 2014. Excluding the impact of the inventory write down, operating margin was 14.1 percent. Gross margin during the quarter was 73.3 percent, versus 82.9 percent in the prior-year period. Selling expenses were 42.1 percent of sales in the third quarter, compared to 41.2 percent in the prior-year period. General and administrative expenses were 23.8 percent of sales compared to 25.3 percent. The company's effective income tax rate for the quarter increased from 35.6 percent in the prior year to 42.1 percent. The higher tax rate was primarily related to the inventory write-down. Cash and current investments at the end of the quarter were $316.7 million and debt was $253.0 million. Dividend payments during the quarter were $20.2 million. Cash flow from operations for the quarter was $82.4 million, and the company repurchased $28.2 million of its outstanding shares.

Outlook

"With the introductions of ageLOC Me and ageLOC Youth, we are beginning a new business cycle that we believe will drive meaningful growth," said Hunt. "Based on the successful third-quarter introduction of ageLOC Youth in South Asia/Pacific, we anticipate positive global momentum from the introduction of these new products to continue in the fourth quarter and throughout 2016.

"Our balance sheet is strong, with a solid net-cash position. We are generating healthy cash flow and plan to use it to improve shareholder value, as demonstrated by today's announcement of an increase in the company's stock repurchase authorization to $500 million," concluded Hunt.

"We project fourth-quarter revenue of $570 to $590 million, which anticipates a negative foreign currency impact of 10 to 11 percent," said Ritch Wood, chief financial officer. "We also anticipate fourth-quarter earnings per share of $0.70 to $0.73. We look forward to discussing our 2016 business plans with shareholders at our investor day on December 4, 2015 in New York," concluded Wood.

The Nu Skin management team will host a conference call with the investment community on Oct. 29, 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 Nov. 16, 2015.

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 ageLOC® line of products including ageLOC® Tru Face® Essence Ultra firming serum, the ageLOC® TR90® weight management and body shaping system, ageLOC® R2 nutritional supplement, and 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 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, new product introductions, and  sales force; projections regarding revenue, earnings per share, foreign currency fluctuations, uses of cash 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;
  • 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 Third Quarters Ended September 30, 2015 and 2014

(in thousands, except per share amounts)






2015


2014





Revenue

$                571,308


$                638,800





Cost of sales

152,755


109,275





Gross profit

418,553


529,525





Operating expenses:




        Selling expenses

240,260


263,203

        General and administrative expenses

135,752


161,366

Total operating expenses

376,012


424,569





Operating income

42,541


104,956





Other income, net

(14,428)


1,073

Income before provision for income taxes

28,113


106,029

Provision for income taxes

11,846


37,721





Net income

$                  16,267


$                  68,308





Net income per share:




        Basic

$                      0.28


$                      1.15

        Diluted

$                      0.28


$                      1.12





Weighted average common shares outstanding:




        Basic

57,725


59,249

        Diluted

58,663


60,777

 



NU SKIN ENTERPRISES, INC.

Consolidated Statements of Income (Unaudited)

For the Nine-Month Periods Ended September 30, 2015 and 2014

(in thousands, except per share amounts)






2015


2014





Revenue

$            1,674,849


$            1,959,888





Cost of sales

368,073


371,929





Gross profit

1,306,776


1,587,959





Operating expenses:




        Selling expenses

713,714


859,879

        General and administrative expenses

410,074


467,190

Total operating expenses

1,123,788


1,327,069





Operating income

182,988


260,890





Other (expense), net

(29,454)


(37,554)

Income before provision for income taxes

153,534


223,336

Provision for income taxes

56,328


80,667





Net income

$                 97,206


$               142,669





Net income per share:




        Basic

$                     1.66


$                     2.42

        Diluted

$                     1.63


$                     2.34





Weighted average common shares outstanding:




        Basic

58,403


59,058

        Diluted

59,565


61,010

 

NU SKIN ENTERPRISES, INC.

Consolidated Balance Sheets (Unaudited)

(in thousands)






September 30, 2015


December 31, 2014

ASSETS




Current assets:




        Cash and cash equivalents

$                305,808


$                288,415

        Current investments

10,883


11,793

        Accounts receivable

35,682


35,834

        Inventories, net

260,464


338,491

        Prepaid expenses and other

164,046


160,134


776,883


834,667





Property and equipment, net

459,644


464,783

Goodwill

112,446


112,446

Other intangible assets, net

68,862


75,062

Other assets

135,623


127,476

                Total assets

$             1,553,458


$             1,614,434





LIABILITIES AND STOCKHOLDERS' EQUITY




Current liabilities:




        Accounts payable

$                  35,718


$                  34,712

        Accrued expenses

308,600


300,847

        Current portion of long-term debt

66,743


82,770


411,061


418,329





Long-term debt

186,222


164,567

Other liabilities

95,657


89,100

                Total liabilities

692,940


671,996





Stockholders' equity:




        Class A common stock

91


91

        Additional paid-in capital

415,026


414,394

       Treasury stock, at cost

(959,504)


(862,608)

        Accumulated other comprehensive loss

(73,000)


(51,521)

        Retained earnings

1,477,905


1,442,082


860,518


942,438

                Total liabilities and stockholders' equity

$             1,553,458


$             1,614,434

 

NU SKIN ENTERPRISES, INC.

Reconciliation of Operating Income to

Operating Income Excluding Write-down of China Inventory

(in thousands)









Quarter Ended

September 30,




2015


2014








Revenue as reported


$      571,308


$       638,800








Operating income as reported


$        42,541


$       104,956








    Write-down of China inventory


37,900









Operating income excluding write-down of China inventory


$        80,441


$       104,956








Operating income as a percent of revenue excluding write-down of China inventory


 

14.1%


 

16.4%








Operating income as a percent of revenue as reported


7.4%


16.4%










 

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SOURCE Nu Skin Enterprises, Inc.

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