EX-99.1 2 ex99-1.htm PRESS RELEASE DATED JULY 28, 2010 ex99-1.htm
 
 
 
 
NSE Logo
 
 
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 QUARTERLY RESULTS
 
Company Increases 2010 Guidance

PROVO, Utah — July 28, 2010 — Nu Skin Enterprises, Inc. (NYSE: NUS) today announced record quarterly results, with revenue of $388.4 million for the second quarter, a 20 percent improvement over the prior-year period. Quarterly revenue was positively impacted 4 percent by foreign currency fluctuations. Earnings per share for the quarter were $0.50, a 43 percent improvement, or 39 percent when excluding prior-year restructuring charges of approximately $0.01.

“The introduction of our breakthrough ageLOC skin care system has been a huge success around the world, generating $150 million of revenue in the past three quarters,” said Truman Hunt, president and chief executive officer. “We continue to build tremendous energy within our distributor force, as demonstrated by a 15 percent quarterly growth rate in executive distributors. In addition, our continued focus on operational efficiency resulted in a record 15.2 percent operating margin for the quarter, evidence of our ability to leverage revenue growth to improve profitability.”

Regional Results
 
North Asia. Second-quarter revenue in North Asia grew 12 percent to $164.1 million, compared to $146.7 million for the same period in 2009. Revenue was positively impacted 7 percent by foreign currency fluctuations. Local-currency revenue increased 28 percent in South Korea, offsetting a 3 percent local currency decline in Japan. The number of executive and active distributors in the region was up 4 percent and 2 percent, respectively, compared to the prior year.
 
 

 

 
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July 28, 2010
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Americas. Second-quarter revenue in the Americas was $62.4 million, compared to $62.2 million for the prior year. Revenue in the United States improved 3 percent, offsetting a local currency decline of 12 percent in Canada, and 19 percent in Latin America. The number of executive distributors in the region increased 3 percent compared to the prior year, while the number of active distributors declined 1 percent.

Greater China. Revenue in Greater China improved 53 percent to $80.6 million for the quarter, and was positively impacted 2 percent by foreign currency fluctuations. Local-currency revenue in both Mainland China and Taiwan improved 18 percent. Hong Kong revenue improved 162 percent, reflecting sales from the launch of the Nu Skin ageLOC™ Transformation System at the Greater China convention. The executive distributor count in the region increased 37 percent, and the number of active distributors improved 11 percent.

Europe. Second-quarter revenue in Europe was $35.3 million, a 10 percent improvement over the prior-year. Results in the region were negatively impacted approximately 5 percent by foreign currency fluctuations. Executive and active distributor counts in the region increased 16 percent and 15 percent, respectively, compared to the prior year.

South Asia/Pacific. Revenue in South Asia/Pacific was $45.9 million for the second quarter, a 60 percent improvement over the prior year. Regional results were driven by solid performances in all markets and were positively impacted 13 percent by foreign currency fluctuations. The region’s second-quarter executive count improved 44 percent, while the active distributor count increased 10 percent.

Operational Performance
 
The company’s operating margin improved to 15.2 percent, compared to 10.7 percent in the prior year. Gross margin also improved during the quarter to 82.5 percent, representing a 130 basis-point improvement, primarily as a result of sales of higher-margin ageLOC products. Selling expenses, as a percent of revenue, were 41.4 percent. This 120-basis-point decrease is due in part to convention fee income and higher sales aid revenue during the quarter which is non-commissionable. General and administrative expenses, as a percent of revenue, were 25.9 percent, a 160 basis-point improvement over the prior year as the company continues to leverage revenue growth to improve profitability.
 
 
 

 

 
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July 28, 2010
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The company’s income tax rate for the quarter was 37.6 percent. Dividend payments during the quarter were $7.9 million and the company repurchased $29.1 million of its outstanding shares.

Outlook
 
“Our strong first-half performance pushed us well ahead of our targets as we look to achieve another year of record results," said Hunt. “We continue to drive growth by innovating in all aspects of our business, particularly with respect to our products, business opportunity and improvement in operational efficiency.

“We posted solid results in nearly all of our markets. We are particularly pleased with the strength of the business in emerging markets, including China and Southeast Asia, which are providing an expanding platform for future success.

“On the product front, we are infusing our ageLOC science into nutritional solutions that target the internal sources of aging. And later this year, we will be taking the next step as we launch our first ageLOC nutritional product – ageLOC Vitality – in the United States, Europe and Japan. This product introduction will be a prelude to the global launch of a new Pharmanex flagship nutritional supplement in the fall of 2011. Our ability to address the sources of aging at the genetic level gives us a clear competitive advantage that we believe will continue to drive both growth and profitability,” concluded Hunt.

“Based on the strength of our results in the first half of the year, we are increasing our 2010 projected revenue and earnings per share guidance to $1.47 to $1.49 billion and $1.90 to $1.96, respectively,” said Ritch Wood, chief financial officer. “We expect currency to benefit revenue 1 to 2 percent for the year, while we project local-currency revenue growth of 9 to 10 percent. Assuming neutral currency impact for the third quarter, we project revenue in the $352 to $360 million range with earnings per share in the $0.45 to $0.48 range,” concluded Wood.
 
 
 
 

 

 
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July 28, 2010
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The company’s management will host a webcast with the investment community on July 29, 2010 at noon. (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. 14, 2010.

The Company
 
Nu Skin Enterprises, Inc. demonstrates its tradition of innovation through its comprehensive anti-aging product portfolio, independent business opportunity and corporate social responsibility initiatives. Nu Skin’s scientific leadership in both skin care and nutrition has established Nu Skin as a premier anti-aging company, evidenced in its unique ageLOC™ science that addresses aging at its source. The company’s anti-aging products feature the new ageLOC family of skin care products including ageLOC Future Serum and the ageLOC Edition Galvanic Spa® System II, as well as Tru Face® Essence Ultra and LifePak® Nano. A global direct selling company, Nu Skin operates in 50 markets worldwide and has more than 785,000 independent sales representatives. Nu Skin 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 21E of the Securities Exchange Act of 1934 that represent the company’s current expectations and beliefs, including, among other things: (i) management’s positive outlook for the company; (ii) management’s expectations regarding the company’s initiatives, strategies, development and launch of new products, and other innovation efforts; and (iii) management’s projections regarding revenue, earnings per share, and the impact of foreign currency fluctuations for the year 2010 and for the third quarter of 2010 set forth in the “Outlook” section. 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: (a) challenging economic conditions globally; (b) the risk of foreign currency fluctuations and the currency translation impact on our business associated with these fluctuations; (c) uncertainty regarding the impact on our business of increased regulatory scrutiny of the direct selling industry in Japan and our efforts to increase distributor compliance efforts in this market;(d) an increase in complaints and general inquiries to consumer protection agencies in Japan regarding the activities of some distributors and the associated risks to the company’s business if such increase results in further regulatory scrutiny; (e) regulatory risks associated with the company’s tools and products, which could inhibit the company’s ability to market a tool or product in a market if it is determined to be a medical device in any market, if
 
 

 

 
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July 28, 2010
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distributors make unauthorized claims that would cause such products to be classified as drugs, or if the company is unable to obtain necessary product registrations in a timely manner;  (f) 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; (g) 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; (h) any failure of the implementation of business transformation initiatives to reduce overhead and drive growth, and any negative impact of such initiatives on the company’s ability to effectively manage its operations; (i) adverse publicity related to the company’s business, products, industry or any legal actions or complaints by distributors or others; (j) any prospective or retrospective increases in duties on our products imported into our markets outside of the United States and any adverse results of tax audits or unfavorable changes to tax laws in our various markets;and (k) 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, including the company’s Annual Report on Form 10-K filed on March 1, 2010. The forward-looking statements set forth the company’s beliefs as of the date of this release, 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.
 



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Nu Skin Enterprises, Inc.
July 28, 2010
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NU SKIN ENTERPRISES, INC.
  
Consolidated Statements of Income (Unaudited)
  
For the Second Quarters Ended June 30, 2010 and 2009
  
(in thousands, except per share amounts)
  
             
   
2010
    
2009
  
Revenue:
            
  North Asia
   $ 164,105     $ 146,712  
      Americas
     62,389       62,240  
      Greater China
     80,642       52,753  
      Europe
     35,288       32,173  
      South Asia/Pacific
      45,938        28,687  
Total revenue
     388,362       322,565  
                 
Cost of sales
     67,937       60,637  
                 
Gross profit
     320,425       261,928  
                 
Operating expenses:
                
  Selling expenses
     160,739       137,242  
      General and administrative expenses
     100,525       88,674  
      Restructuring charges
  
─
       1,561  
Total operating expenses
     261,264       227,477  
                 
Operating income
     59,161       34,451  
                 
Other income (expense), net
     (7,287 )     882  
Income before provision for income taxes
     51,874       35,333  
Provision for income taxes
     19,482       13,219  
                 
Net income
   $ 32,392     $ 22,114  
                 
Net income per share:
                
  Basic
   $ 0.51     $ 0.35  
      Diluted
   $ 0.50     $ 0.35  
                 
Weighted average common shares outstanding:
                
  Basic
     62,919       63,109  
      Diluted
     65,072       63,726  
                 




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July 28, 2010
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NU SKIN ENTERPRISES, INC.
  
Consolidated Statements of Income (Unaudited)
  
For the Six Month Periods Ended June 30, 2010 and 2009
  
(in thousands, except per share amounts)
  
             
   
2010
    
2009
  
Revenue:
            
  North Asia
   $ 334,966     $ 286,530  
      Americas
     124,843       120,656  
      Greater China
     138,327       100,223  
      Europe
     73,068       58,847  
      South Asia/Pacific
     81,282       52,507  
Total revenue
     752,486       618,763  
                 
Cost of sales
     132,770       114,443  
                 
Gross profit
     619,716       504,320  
                 
Operating expenses:
                
  Selling expenses
     315,001       261,741  
      General and administrative expenses
     199,437       177,030  
      Restructuring charges
  
 ─
        10,947  
Total operating expenses
     514,438       449,718  
                 
Operating income
     105,278       54,602  
                 
Other income (expense), net
     (6,673 )     (354 )
Income before provision for income taxes
     98,605       54,248  
Provision for income taxes
     35,173       20,293  
                 
Net income
   $ 63,432     $ 33,955  
                 
Net income per share:
                
  Basic
   $ 1.01     $ 0.54  
      Diluted
   $ 0.98     $ 0.53  
                 
Weighted average common shares outstanding:
                
  Basic
     62,698       63,221  
      Diluted
     64,904       63,585  
                 





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July 28, 2010
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NU SKIN ENTERPRISES, INC.
  
Consolidated Balance Sheets (Unaudited)
  
(in thousands)
  
             
   
June 30, 2010
    
December 31, 2009
  
ASSETS
            
Current assets:
            
    Cash and cash equivalents
   $ 172,674     $ 158,045  
    Accounts receivable
     26,150       22,513  
    Inventories, net
     113,819       105,661  
    Prepaid expenses and other
     51,372       51,724  
      364,015       337,943  
                 
Property and equipment, net
     88,979       79,356  
Goodwill
     112,446       112,446  
Other intangible assets, net
     79,925       81,968  
Other assets
     127,202       136,736  
           Total assets
   $ 772,567     $ 748,449  
                 
LIABILITIES AND STOCKHOLDERS’ EQUITY
                
Current liabilities:
                
    Accounts payable
   $ 28,385     $ 25,292  
    Accrued expenses
     129,494       124,520  
    Current portion of long-term debt
     32,809       35,400  
      190,688       185,212  
                 
Long-term debt
     113,258       121,119  
Other liabilities
     65,129       66,431  
Total liabilities
     369,075       372,762  
                 
Stockholders’ equity:
                
    Class A common stock
     91       91  
    Additional paid-in capital
     247,077       232,219  
    Treasury stock, at cost
     (464,506 )     (433,567 )
    Retained earnings
     692,835       645,078  
    Accumulated other comprehensive loss
     (72,005 )     (68,134 )
      403,492       375,687  
                      Total liabilities and stockholders’ equity
   $ 772,567     $ 748,449  








 

 
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NU SKIN ENTERPRISES, INC.
Distributor/Preferred Customer Growth by Market
 
 
As of June 30, 2010
     As of June 30, 2009      % Increase (Decrease)
   
  Active*
  
Executive
  
  Active*
  
Executive
  
    Active*
  
Executive
  
                           
North Asia
  
327,000
  
14,286
  
322,000
  
13,803
  
  1.6%
  
  3.5%
  
Americas
  
169,000
  
5,528
  
171,000
  
5,385
  
  (1.2%)
  
  2.7%
  
Greater China
  
114,000
  
8,398
  
103,000
  
6,129
  
10.7%
  
37.0%
  
Europe
  
102,000
  
3,664
  
89,000
  
3,173
 
14.6%
  
15.5%
  
South Asia/Pacific
  
74,000
  
3,630
  
67,000
  
2,525
  
 10.4%
  
43.8%
  
                           
Total
  
786,000
  
35,506
  
752,000
  
31,015
 
     4.5%
  
14.5%
  


 
    *  Active distributors include preferred customers and distributors purchasing products directly from the company during the quarter.


 
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