Utah | 001-34483 | 87-0327982 | ||
(State or other jurisdiction of incorporation) | (Commission File Number) | (I.R.S. Employer Identification No.) |
2500 West Executive Parkway, Suite 100, Lehi, Utah | 84043 | |
(Address of principal executive offices) | (Zip Code) |
Item No. | Exhibit | |
99.1 | Press Release issued by the Company, dated May 10, 2016 |
NATURE’S SUNSHINE PRODUCTS, INC. | ||
Dated: May 11, 2016 | By: | /s/ Stephen M. Bunker |
Stephen M. Bunker, Executive Vice President, Chief Financial Officer and Treasurer |
• | Seventh consecutive quarter of net sales growth for NSP United States and NSP Canada |
• | Net sales revenue of $82.4 million was down 1.8% year-over-year; up 1.3% year-over-year on a local currency basis |
• | Earnings from continuing operations of $0.11 per diluted common share |
• | Board of Directors approved a $0.10 per share quarterly cash dividend |
• | Net sales revenue of $82.4 million decreased 1.8% compared to $83.9 million in the first quarter of 2015. On a local currency basis, net sales revenue increased 1.3% compared to the first quarter of 2015. Net sales revenue was negatively impacted by $2.5 million of unfavorable foreign currency exchange rate fluctuations as well as a $1.1 million decline in net sales in the NSP Russia, Central and Eastern Europe segment. |
• | Net income from continuing operations was $1.8 million, or $0.11 per diluted common share, compared to $4.2 million, or $0.23 per diluted common share, in the first quarter of 2015. Earnings per diluted common share for the first quarter of 2016 were impacted by several factors including: the Company’s investment in China of approximately $0.07 per share and unfavorable changes in the effective tax rate of $0.02 per share. |
• | Adjusted EBITDA was $4.2 million compared to $7.7 million in the first quarter of 2015. Adjusted EBITDA, which is a non-GAAP financial measure, is defined here as net income from continuing operations before taxes, depreciation, amortization and other income adjusted to exclude share-based compensation expense. |
Net Sales Revenue by Operating Segment | |||||||||||||||||
Three Months Ended March 31, 2016 | Three Months Ended March 31, 2015 | Percent Change | Impact of Currency Exchange | Percent Change Excluding Impact of Currency | |||||||||||||
NSP Americas: | |||||||||||||||||
NSP North America | $ | 38,306 | $ | 38,174 | 0.3 | % | $ | (301 | ) | 1.1 | % | ||||||
NSP Latin America | 6,877 | 8,336 | (17.5 | ) | (596 | ) | (10.4 | ) | |||||||||
45,183 | 46,510 | (2.9 | ) | (897 | ) | (0.9 | ) | ||||||||||
NSP Russia, Central and Eastern Europe | 6,352 | 7,443 | (14.7 | ) | (53 | ) | (13.9 | ) | |||||||||
Synergy WorldWide: | |||||||||||||||||
Synergy Asia Pacific | 20,816 | 18,698 | 11.3 | (1,434 | ) | 19.0 | |||||||||||
Synergy Europe | 6,257 | 6,728 | (7.0 | ) | (143 | ) | (4.9 | ) | |||||||||
Synergy North America | 2,775 | 3,342 | (17.0 | ) | — | (17.0 | ) | ||||||||||
29,848 | 28,768 | 3.8 | (1,577 | ) | 9.2 | ||||||||||||
China and New Markets | 1,019 | 1,157 | (11.9 | ) | — | (11.9 | ) | ||||||||||
$ | 82,402 | $ | 83,878 | (1.8 | )% | $ | (2,527 | ) | 1.3 | % |
As of March 31, 2016 | As of December 31, 2015 | ||||||||||||
Distributors & Customers | Managers | Distributors & Customers | Managers | ||||||||||
NSP Americas | 133,800 | 7,300 | 131,600 | 6,500 | |||||||||
NSP Russia, Central and Eastern Europe | 65,200 | 2,800 | 72,000 | 2,800 | |||||||||
Synergy WorldWide | 54,400 | 3,700 | 60,800 | 3,400 | |||||||||
China and New Markets | — | — | — | — | |||||||||
253,400 | 13,800 | 264,400 | 12,700 |
(1) | Active Distributors and customers include Nature’s Sunshine Products’ independent Distributors and customers who have purchased products directly from the Company for resale and/or personal consumption during the previous three months ended as of the date indicated. Total Manager, Distributors and Customers, which includes those who have made a purchase in the last twelve months, was 573,200 as of March 31, 2016. |
• | Net cash provided by operating activities was $2.9 million compared to $0.9 million of cash used in operating activities for the three months ended March 31, 2015. |
• | Cash and cash equivalents at March 31, 2016 were $46.4 million, compared to $41.4 million at December 31, 2015. |
• | The Company’s Board of Directors approved a quarterly cash dividend of $0.10 per share, payable on June 6, 2016, to shareholders of record as of the close of business on May 25, 2016. Dividend payments were $1.9 million during the first quarter of 2016. |
• | any negative consequences resulting from the economy, including the availability of liquidity to the Company, its independent distributors and its suppliers or the willingness of its customers to purchase products; |
• | its relationship with, and its inability to influence the actions of, its independent distributors, and other third parties with whom it does business; |
• | improper activity by its employees or independent distributors; |
• | negative publicity related to its products, ingredients, or direct selling organization and the nutritional supplement industry; |
• | changing consumer preferences and demands; |
• | its reliance upon, or the loss or departure of any member of, its senior management team, which could negatively impact its distributor relations and operating results; |
• | increased state and federal regulatory scrutiny of the nutritional supplement industry, including, but not limited to targeting of ingredients, testing methodology and product claims; |
• | the competitive nature of its business and the nutritional supplement industry; |
• | regulatory matters governing its products, ingredients, the nutritional supplement industry, its direct selling program, or the direct selling market in which it operates; |
• | legal challenges to its direct selling program or to the classification of its independent distributors; |
• | risks associated with operating internationally and the effect of economic factors, including foreign exchange, inflation, disruptions or conflicts with the its third party importers, governmental sanctions, ongoing Ukraine and Russia political conflict, pricing and currency devaluation risks, especially in countries such as Ukraine, Russia and Belarus; |
• | uncertainties relating to the application of transfer pricing, duties, value-added taxes, and other tax regulations, and changes thereto; |
• | its dependence on increased penetration of existing markets; |
• | cyber security threats and exposure to data loss; |
• | its reliance on its information technology infrastructure; |
• | the sufficiency of trademarks and other intellectual property rights; |
• | changes in tax laws, treaties or regulations, or their interpretation; |
• | taxation relating to its independent distributors; |
• | product liability claims; |
• | the full implementation of its joint venture for operations in China with Fosun Industrial Co., Ltd., as well as the legal complexities, unique regulatory environment and challenges of doing business in China generally; |
• | its inability to register products for sale in Mainland China and difficulty or increased cost of importing products into Mainland China; |
• | managing rapid growth in China; and |
• | the slowing of the Chinese economy and/or the devaluation of the Chinese Renminbi. |
Three Months Ended March 31, | |||||||||
2016 | 2015 | ||||||||
Net sales revenue | $ | 82,402 | $ | 83,878 | |||||
Cost of sales | (22,020 | ) | (21,881 | ) | |||||
Gross profit | 60,382 | 61,997 | |||||||
Operating expenses: | |||||||||
Volume incentives | 29,877 | 30,337 | |||||||
Selling, general and administrative | 28,385 | 26,330 | |||||||
Operating income | 2,120 | 5,330 | |||||||
Other income (loss), net | 1,559 | (318 | ) | ||||||
Income before provision for income taxes | 3,679 | 5,012 | |||||||
Provision for income taxes | 1,890 | 809 | |||||||
Net income from continuing operations | 1,789 | 4,203 | |||||||
Income from discontinued operations | — | 1,312 | |||||||
Net income | 1,789 | 5,515 | |||||||
Net loss attributable to non-controlling interests | (280 | ) | (152 | ) | |||||
Net income attributable to common shareholders | $ | 2,069 | $ | 5,667 | |||||
Earnings per common share: | |||||||||
Basic earnings per share attributable to common shareholders: | |||||||||
Net income from continuing operations | $ | 0.11 | $ | 0.23 | |||||
Income from discontinued operations | $ | — | $ | 0.07 | |||||
Net income attributable to common shareholders | $ | 0.11 | $ | 0.30 | |||||
Diluted earnings per share attributable to common shareholders: | |||||||||
Net income from continuing operations | $ | 0.11 | $ | 0.23 | |||||
Income from discontinued operations | $ | — | $ | 0.07 | |||||
Net income attributable to common shareholders | $ | 0.11 | $ | 0.30 | |||||
Weighted average basic common shares outstanding | 18,694 | 18,621 | |||||||
Weighted average diluted common shares outstanding | 19,130 | 19,192 | |||||||
Dividends declared per common share | $ | 0.10 | $ | 0.10 |
March 31, 2016 | December 31, 2015 | |||||||||
Assets | ||||||||||
Current assets: | ||||||||||
Cash and cash equivalents | $ | 46,433 | $ | 41,420 | ||||||
Accounts receivable, net of allowance for doubtful accounts of $181 and $190, respectively | 8,146 | 7,700 | ||||||||
Investments available for sale | 1,791 | 1,772 | ||||||||
Inventories | 41,570 | 38,495 | ||||||||
Deferred income tax assets | 4,795 | 5,021 | ||||||||
Prepaid expenses and other | 7,262 | 7,110 | ||||||||
Total current assets | 109,997 | 101,518 | ||||||||
Property, plant and equipment, net | 69,374 | 68,728 | ||||||||
Investment securities - trading | 1,199 | 1,044 | ||||||||
Intangible assets, net | 536 | 559 | ||||||||
Deferred income tax assets | 17,105 | 17,339 | ||||||||
Other assets | 12,264 | 11,332 | ||||||||
$ | 210,475 | $ | 200,520 | |||||||
Liabilities and Shareholders’ Equity | ||||||||||
Current liabilities: | ||||||||||
Accounts payable | $ | 8,658 | $ | 6,341 | ||||||
Accrued volume incentives | 17,313 | 14,913 | ||||||||
Accrued liabilities | 21,226 | 23,726 | ||||||||
Deferred revenue | 6,491 | 4,160 | ||||||||
Revolving credit facility payable | 7,531 | 2,696 | ||||||||
Income taxes payable | 1,019 | 1,300 | ||||||||
Total current liabilities | 62,238 | 53,136 | ||||||||
Liability related to unrecognized tax benefits | 7,777 | 7,809 | ||||||||
Deferred compensation payable | 1,199 | 1,044 | ||||||||
Other liabilities | 2.370 | 2,266 | ||||||||
Total liabilities | 73,584 | 64,255 | ||||||||
Shareholders’ equity: | ||||||||||
Common stock, no par value, 50,000 shares authorized, 18,719 and 18,588 shares issued and outstanding, respectively | 127,442 | 126,670 | ||||||||
Retained earnings | 18,285 | 18,088 | ||||||||
Noncontrolling interests | 2,470 | 2,750 | ||||||||
Accumulated other comprehensive loss | (11,306 | ) | (11,243 | ) | ||||||
Total shareholders’ equity | 136,891 | 136,265 | ||||||||
$ | 210,475 | $ | 200,520 |
Three Months Ended March 31, | ||||||||
2016 | 2015 | |||||||
CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||
Net income | $ | 1,789 | $ | 5,515 | ||||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||
Provision for doubtful accounts | 62 | 30 | ||||||
Depreciation and amortization | 1,170 | 996 | ||||||
Share-based compensation expense | 882 | 1,339 | ||||||
Tax benefit from stock option exercise | — | (52 | ) | |||||
(Gain) loss on sale of property and equipment | 68 | (1,312 | ) | |||||
Deferred income taxes | 589 | 50 | ||||||
Purchase of trading investment securities | (177 | ) | (112 | ) | ||||
Proceeds from sale of trading investment securities | 29 | 55 | ||||||
Realized and unrealized losses (gains) on investments | (25 | ) | (46 | ) | ||||
Foreign exchange (gains) losses | (913 | ) | 351 | |||||
Changes in assets and liabilities: | ||||||||
Accounts receivable | (432 | ) | (1,411 | ) | ||||
Inventories | (2,695 | ) | (1,989 | ) | ||||
Prepaid expenses and other current assets | (107 | ) | (1,837 | ) | ||||
Other assets | (792 | ) | 74 | |||||
Accounts payable | 2,607 | 3,010 | ||||||
Accrued volume incentives | 2,152 | 1,539 | ||||||
Accrued liabilities | (3,433 | ) | (6,707 | ) | ||||
Deferred revenue | 2,331 | (461 | ) | |||||
Income taxes payable | (364 | ) | (268 | ) | ||||
Liability related to unrecognized tax benefits | (34 | ) | 230 | |||||
Deferred compensation payable | 155 | 80 | ||||||
Net cash provided by (used in ) operating activities | 2,862 | (926 | ) | |||||
CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||
Purchases of property, plant and equipment | (1,312 | ) | (6,019 | ) | ||||
Proceeds from sale of property, plant and equipment | 14 | 1,312 | ||||||
Purchase of investments available for sale | — | (15 | ) | |||||
Net cash used in investing activities | (1,298 | ) | (4,722 | ) | ||||
CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||
Payments of cash dividends | (1,872 | ) | (1,865 | ) | ||||
Net borrowings on revolving credit facility | 4,835 | 348 | ||||||
Net proceeds from the exercise of stock options and issuance of stock units | 59 | 1,640 | ||||||
Payment of withholding taxes related to the vesting of restricted stock units | (169 | ) | — | |||||
Tax benefit from stock option exercise | — | 52 | ||||||
Repurchase of common stock | — | (2,857 | ) | |||||
Net cash provided by (used in) financing activities | 2,853 | (2,682 | ) | |||||
Effect of exchange rates on cash and cash equivalents | 596 | (304 | ) | |||||
Net increase (decrease) in cash and cash equivalents | 5,013 | (8,634 | ) | |||||
Cash and cash equivalents at the beginning of the period | 41,420 | 58,699 | ||||||
Cash and cash equivalents at the end of the period | $ | 46,433 | $ | 50,065 | ||||
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: | ||||||||
Cash paid for income taxes | $ | 1,474 | $ | 2,608 | ||||
Cash paid for interest | 20 | 25 |
Three Months Ended March 31, | |||||||
2016 | 2015 | ||||||
Net income from continuing operations | $ | 1,789 | $ | 4,203 | |||
Adjustments: | |||||||
Depreciation and amortization | 1,170 | 996 | |||||
Share-based compensation expense | 882 | 1,339 | |||||
Other (income) loss, net* | (1,559) | 318 | |||||
Provision (benefit) for income taxes | 1,890 | 809 | |||||
Adjusted EBITDA | $ | 4,172 | $ | 7,665 | |||
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