Nu Skin Enterprises Reports Fourth-quarter and 2015 Results

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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 FOURTH-QUARTER AND 2015 RESULTS

PROVO, Utah — Feb. 11, 2016 — Nu Skin Enterprises, Inc. (NYSE: NUS) today announced fourth-quarter results, with revenue of $572.2 million, compared to $609.6 million in the prior-year period. Revenue grew on a constant-currency basis, but was negatively impacted 7 percent, or approximately $42 million, by foreign currency fluctuations. Earnings per share for the quarter were $0.62, compared to $0.77 in the prior-year period.

 

The company also reported full-year 2015 revenue of $2.25 billion, compared to $2.57 billion in 2014. Annual revenue was negatively impacted 8 percent by a strengthened U.S. dollar. Earnings per share for 2015 were $2.25, compared to $3.11 in 2014.

 

“We generated sequential business improvement in the fourth quarter as we continued introducing our newest ageLOC products,” said Truman Hunt, president and chief executive officer. “We began initial sales of our ageLOC Youth nutritional supplement in the Americas region in the fourth quarter, generating a 16 percent year-over-year revenue improvement. This builds on the successful third-quarter introduction of ageLOC Youth in the South Asia/Pacific region.

 

“The December introduction of our ageLOC Me customized skin care system was well received in Japan where we offered the product only through qualified sales leaders. We were encouraged by product sales, as well as sales leader growth. In South Korea, the introductory offer bundled the ageLOC Me device with a 12-month product subscription commitment. While we believe this approach muted initial sales, we are seeing a high level of follow-on purchases in the first quarter, and we have gained valuable insights from these initial launches that we believe will help us maximize the impact of this innovative product going forward.

 

“Looking at sales force trends, we see encouraging signs in several markets, which posted sales leader improvements in the quarter,” continued Hunt. “As we introduce our new products throughout the year, the key to our success will be our ability to generate growth in sales leaders and a corresponding increase in actives.”

 

Regional Results

 

The company’s regional revenue results for the three-month periods ended December 31 are presented in the following table.

 

 

2015

 

2014

 

%

Change

 

Constant Currency

% Change

 

 

 

 

 

 

 

 

 

Greater China

 

$             195,495

 

$               212,981

 

    (8%)

 

        (5%)

North Asia

 

               173,798

 

                 186,041

 

    (7%)

 

        ---*

Americas

 

                 95,553

 

                  82,470

 

  16%

 

     26%

South Asia/Pacific

 

                 74,274

 

                  86,626

 

  (14%)

 

        (2%)

EMEA

 

                 33,078

 

                  41,489

 

  (20%)

 

       (8%)

 

 

 

 

 

 

 

 

 

Total

 

$             572,198

 

$               609,607

 

    (6%)

 

       ---*

*Less than a 1% change.

 

 

The Company’s regional revenue results for the years ended December 31 are presented in the following table.

 

 

 

2015

 

2014

 

%

Change

 

Constant Currency

% Change

 

 

 

 

 

 

 

 

 

Greater China

 

$             771,667

 

$               948,523

 

(19%)

 

(17%)

North Asia

 

               686,555

 

                 782,985

 

(12%)

 

  (4%)

Americas

 

               329,668

 

                 329,027

 

  ---*

 

13%

South Asia/Pacific

 

               321,971

 

                 328,388

 

  (2%)

 

10%

EMEA

 

               137,186

 

                 180,572

 

(24%)

 

  (8%)

 

 

 

 

 

 

 

 

 

Total

 

$          2,247,047

 

$            2,569,495

 

(13%)

 

  (5%)

*Less than a 1% change.

 

 

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

 

 

2015

 

2014

 

% Increase (Decrease)

 

 

Actives

 

Sales Leaders

 

Actives

 

Sales Leaders

 

Actives

 

Sales Leaders

 

 

 

 

 

 

 

 

 

 

 

 

 

Greater China

 

 223,000

 

  27,064

 

  393,000

 

   4,537

 

(43.3%)

 

10.3%

North Asia

 

 366,000

 

    7,415

 

  391,000

 

  17,478

 

  (6.4%)

 

  (0.4%)

Americas

 

 176,000

 

    8,708

 

  186,000

 

    7,471

 

  (5.4%)

 

16.6%

South Asia/Pacific

 

 119,000

 

  10,476

 

  124,000

 

    8,458

 

  (4.0%)

 

23.9%

EMEA

 

 110,000

 

    3,912

 

  114,000

 

    4,065

 

 (3.5%)

 

  (3.8%)

 

 

 

 

 

 

 

 

 

 

 

 

 

Total

 

 994,000

 

  67,575

 

 1,208,000

 

  62,009

 

 (17.7%)

 

  9.0%

“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 for the quarter was 10.8 percent, compared to 15.0 percent in the fourth quarter of 2014. Gross margin during the quarter was 78.8 percent, versus 82.5 percent in the prior-year period. Gross margin was negatively impacted by a reclassification of certain inventory-related expenses from general and administrative expenses to cost of goods sold beginning in the first quarter of 2015. Both gross and operating margins were also negatively impacted by significant strengthening of the U.S. dollar. Selling expenses were 41.5 percent of sales in the fourth quarter, compared to 42.1 percent in the prior-year period. General and administrative expenses were 26.5 percent of sales, which included costs associated with our 2015 global convention, compared to 25.4 percent in the prior-year period. The company’s effective income tax rate for the quarter was 38.7 percent, compared to 38.1 percent in the prior-year period. Cash and current investments at the end of the quarter were $303.7 million, and debt was $249.6 million. Dividend payments during the quarter were $19.8 million. Cash flow from operations for the quarter was $80.1 million, and the company repurchased $60.0 million of its outstanding shares.

 

Outlook

“We enter 2016 with a calendar filled with significant product launches,” said Hunt. “In the Americas, Japan and South Asia, where we have executed well, these product launches have generated positive results. In South Korea and China, we are moderating our expectations based on the December launch of ageLOC Me in South Korea and economic uncertainty in China.

 

“Our balance sheet also remains strong as we continue to generate healthy cash flow. We repurchased $60 million of our outstanding shares in the fourth quarter. For the year, we repurchased more than 5 percent of our outstanding shares. We also announced today an increased dividend for the 15th consecutive year, demonstrating our continuing commitment to return value to shareholders,” concluded Hunt.

 

“As we update our outlook for 2016, we forecast even local-currency revenue in North Asia and EMEA versus 2015, with mid-single-digit growth in each of our other regions,” said Ritch Wood, chief financial officer. “This forecast reflects local-currency growth in the 2 percent range for the year. We now forecast the strengthening dollar to negatively impact revenue by approximately 7 percent versus our prior forecast of 4 percent, resulting in revenue of $2.10 billion to $2.15 billion for 2016. At this revenue level, we forecast an operating margin of 10.5 percent to 11.0 percent for the year, with earnings per share of $2.40 to $2.60. Our most significant product launch events are scheduled in the second and fourth quarters of this year, which we believe will drive stronger results in those quarters. For the first quarter, assuming a negative currency impact of 6 to 7 percent, we estimate revenue of $450 million to $470 million with earnings per share of $0.35 to $0.38,” concluded Wood.

 

The Nu Skin management team will host a conference call with the investment community on Feb. 11, at 5 p.m. (ET). 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 Feb. 26, 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 54 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, and 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 protective guidelines that support and protect 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 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, sales force and consumers; projections regarding revenue, operating margin, 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;

·         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 Fourth Quarters Ended December 31, 2015 and 2014

(in thousands, except per share amounts)

 

 

 

 

 

2015

 

2014

 

 

 

 

Revenue

$                572,198

 

$                609,607

 

 

 

 

Cost of sales

                  121,437

 

                  106,505

 

 

 

 

Gross profit

                  450,761

 

                  503,102

 

 

 

 

Operating expenses:

 

 

 

        Selling expenses

                  237,658

 

                  256,693

        General and administrative expenses

                  151,389

 

                  155,111

Total operating expenses

                  389,047

 

                  411,804

 

 

 

 

Operating income

                    61,714

 

                    91,298

 

 

 

 

Other (expense)/income, net

                     (3,289)

 

                   (16,127)

Income before provision for income taxes

                    58,425

 

                    75,171

Provision for income taxes

                    22,585

 

                    28,664

 

 

 

 

Net income

$                  35,840

 

$                  46,507

 

 

 

 

Net income per share:

 

 

 

        Basic

$                      0.63

 

$                      0.79

        Diluted

$                      0.62

 

$                      0.77

 

 

 

 

Weighted average common shares outstanding:

 

 

 

        Basic

                    56,792

 

                    59,117

        Diluted

                    57,524

 

                    60,442

 

 

               

 

 





NU SKIN ENTERPRISES, INC.

Consolidated Statements of Income (Unaudited)

For the Years Ended December 31, 2015 and 2014

(in thousands, except per share amounts)

 

 

 

 

 

2015

 

2014

 

 

 

 

Revenue

$            2,247,047

 

$            2,569,495

 

 

 

 

Cost of sales

                 489,510

 

                 478,434

 

 

 

 

Gross profit

              1,757,537

 

              2,091,061

 

 

 

 

Operating expenses:

 

 

 

        Selling expenses

                 951,372

 

              1,116,572

        General and administrative expenses

                 561,463

 

                 622,301

Total operating expenses

              1,512,835

 

              1,738,873

 

 

 

 

Operating income

                 244,702

 

                 352,188

 

 

 

 

Other (expense)/income, net

                  (32,743)

 

                  (53,681)

Income before provision for income taxes

                 211,959

 

                 298,507

Provision for income taxes

                   78,913

 

                 109,331

 

 

 

 

Net income

$               133,046

 

$               189,176

 

 

 

 

Net income per share:

 

 

 

        Basic

$                     2.29

 

$                     3.20

        Diluted

$                     2.25

 

$                     3.11

 

 

 

 

Weighted average common shares outstanding:

 

 

 

        Basic

                   57,997

 

                   59,073

        Diluted

                   59,057

 

                   60,887

 

 

 

 

 

 

 

 

 

 

 

NU SKIN ENTERPRISES, INC.

Consolidated Balance Sheets (Unaudited)

As of December 31, 2015 and 2014

(in thousands)

 

 

 

 

 

2015

 

2014

ASSETS

 

 

 

Current assets:

 

 

 

        Cash and cash equivalents

$                289,354

 

$                288,415

        Current investments

                    14,371

 

                    11,793

        Accounts receivable

                    35,464

 

                    35,834

        Inventories, net

                  265,256

 

                  338,491

        Prepaid expenses and other

                  101,947

 

                  160,134

 

                  706,392

 

                  834,667

 

 

 

 

Property and equipment, net

                  454,537

 

                  464,783

Goodwill

                  112,446

 

                  112,446

Other intangible assets, net

                    67,009

 

                    75,062

Other assets

                  165,459

 

                  127,476

                Total assets

$             1,505,843

 

$             1,614,434

 

 

 

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

Current liabilities:

 

 

 

        Accounts payable

$                  28,832     

 

$                  34,712     

        Accrued expenses

                  310,916

 

                  300,847

        Current portion of long-term debt

                    67,849

 

                    82,770

 

                  407,597           

 

                  418,329           

 

 

 

 

Long-term debt

                  181,745

 

                  164,567

Other liabilities

                    90,880

 

                    89,100

        Total liabilities

                  680,222

 

                  671,996

 

 

 

 

Stockholders’ equity:

 

 

 

        Class A common stock

                           91        

 

                           91        

        Additional paid-in capital

                  419,921

 

                  414,394

       Treasury stock, at cost

              (1,017,063)

 

                 (862,608)

        Accumulated other comprehensive loss

                   (71,269)

 

                   (51,521)

        Retained earnings

               1,493,941

 

               1,442,082

 

                  825,621

 

                  942,438

                Total liabilities and stockholders’ equity

$             1,505,843

 

$             1,614,434

 

 

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