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8-K - 8-K - NATURES SUNSHINE PRODUCTS INCa12-12251_18k.htm

Exhibit 99.1

 

GRAPHIC

 

FOR IMMEDIATE RELEASE

 

NATURE’S SUNSHINE PRODUCTS REPORTS FIRST QUARTER FINANCIAL RESULTS AND REINSTATES QUARTERLY CASH DIVIDEND

 

PROVO, Utah, May 7, 2012 — Nature’s Sunshine Products, Inc. (NASDAQ:NATR), including its subsidiary Synergy Worldwide, Inc., a leading natural health and wellness company engaged in the manufacture and direct selling of nutritional and personal care products, today reported its consolidated financial results for the first quarter ended March 31, 2012, and reinstated a quarterly cash dividend.

 

Reinstatement of Quarterly Cash Dividend:

 

The Company’s Board of Directors authorized a regular quarterly cash dividend of $0.05 per share, or $0.20 per share on an annual basis, payable on May 29, 2012 to shareholders of record as of the close of business on May 18, 2012.  The Company suspended its dividend to shareholders on August 10, 2009, having previously paid a dividend every quarter since 1988.  Michael Dean, Chief Executive Officer, stated: “We are pleased with the stability of our revenue, the improvement in our cash flow and the restoration of our strong balance sheet.  These factors, combined with our growth prospects, have positioned us to reinstate the dividend to our shareholders on the occasion of Nature’s Sunshine’s 40th anniversary.”

 

For the First Quarter of 2012:

 

·                  Net sales were $92.9 million, compared with $92.8 million in the same quarter a year ago.

 

·                  As of March 31, 2012, active Managers worldwide were 29,800, a decrease of 1.7 percent from March 31, 2011, while active Distributors and customers worldwide were 675,400, a decrease of 3.0 percent from the end of the quarter a year ago.

 

·                  Operating income was $9.2 million, compared with $7.6 million in the same quarter a year ago, an increase of 20.4 percent.

 

·                  Adjusted EBITDA, defined here as net income before taxes, depreciation and amortization, and other income, adjusted to exclude share-based compensation expense, was $10.9 million, compared with $8.8 million in the same quarter a year ago, an increase of 24.3 percent.

 



 

·                  Net income was $7.2 million, compared with $6.6 million in the same quarter a year ago, an increase of 9.2 percent.

 

·                  Basic and diluted net income per share was $0.46 compared to $0.43 for the same quarter a year ago.

 

·                  As of March 31, 2012, shareholders’ equity was $95.8 million, compared to $87.4 million on December 31, 2011, an increase of 9.6 percent.

 

NSP United States Results for the First Quarter:

 

·                  Net sales were $34.8 million, compared with $35.6 million in the same quarter a year ago, a decrease of 2.3 percent. Active Managers within NSP United States totaled approximately 6,300 and 6,500 at March 31, 2012 and 2011, respectively. Active Distributors and customers within NSP United States totaled approximately 195,300 and 205,000 at March 31, 2012 and 2011, respectively. Managers and Distributors within NSP United States are predominantly practitioners of nutritional supplement therapies and retailers or consumers of our products. The number of active Managers, Distributors and customers decreased due to lower retention, partially offset by a modest improvement in recruiting, in a business environment that continues to be challenging.

 

·                  Operating income was $2.9 million, compared with $3.8 million in the same quarter a year ago, a decrease of 22.1 percent. The decrease was due to modestly lower sales and increases in our selling, general and administrative expenses related to promotional incentive trip expenses and stock-based compensation expense.

 

NSP International Results for the First Quarter:

 

·                  Net sales were $34.7 million, compared with $36.5 million in the same quarter a year ago, a decrease of 5.1 percent. In local currencies, net sales decreased by 4.2 percent. Active Managers within NSP International totaled approximately 20,500 and 21,200 at March 31, 2012 and 2011, respectively. Active Distributors and customers within NSP International totaled approximately 382,900 and 409,800 at March 31, 2012 and 2011, respectively. Managers and Distributors within NSP International are predominantly practitioners of nutritional supplement therapies and retailers or consumers of our products, with the exception of our Russian markets, which are more network marketing oriented. The number of active Managers, Distributors and customers decreased in NSP International (excluding our Russian markets which increased by 2.3%) due to lower retention, partially offset by a modest improvement in recruiting, in a business environment that continues to be challenging. Sales also decreased due to the significant weakening of the Belarusian ruble in Belarus, the adverse effect of collecting additional value-added taxes from our Distributor and customer base in Mexico and product restrictions in Peru.

 

·                  Operating income was $4.6 million, compared with operating income of $2.1 million in the same quarter a year ago, an increase of 123.8 percent. This increase was the result of lower royalty costs and professional fees due to the termination of the Company’s contract with NutriPlus LLC and the impact of current year value-added tax reserve reductions.

 



 

Synergy Worldwide Results for the First Quarter:

 

·                  Net sales were $23.3 million, compared with $20.7 million in the same quarter a year ago, an increase of 13.0 percent. In local currencies, net sales increased 15.5 percent. Active Managers within Synergy Worldwide totaled approximately 3,000 and 2,600 at March 31, 2012 and 2011, respectively. Active Distributors and customers within Synergy Worldwide totaled approximately 97,200 and 81,600 at March 31, 2012 and 2011, respectively. Synergy Worldwide is more network-marketing oriented, and the increase in net sales was primarily due to strong recruiting and retention of Managers and Distributors in our Korean and European markets.

 

·                  Operating income was $1.7 million, compared with $1.8 million for the same quarter in the prior year, a decrease of 8.8 percent. This decrease was primarily due to unusually high product returns during the quarter related to a specific promotion which contributed significantly to reduced net sales revenue in Japan.  The products returns were not related to product quality.

 

Effective Income-tax Rate

 

The effective income tax rate for the quarter was 20.3 percent compared with 16.0 percent in the same quarter a year ago.  The current quarter’s effective tax rate was below the U.S. federal statutory tax rate of 35.0 percent, and was primarily attributed to foreign deductible items, a decrease in tax liabilities associated with uncertain tax positions due to the expiration of the statute of limitations in various foreign jurisdictions and a valuation allowance release related to the utilization of foreign tax credits. The effective income tax rate of 16.0 percent for the same quarter a year ago was primarily attributed to net decreases in tax liabilities associated with uncertain tax positions due to the expiration of the statute of limitations in various foreign jurisdictions.

 

Non-GAAP Financial Measures

 

The Company has included information concerning adjusted EBITDA because management utilizes this information in the evaluation of its operations and believes that this measure is a useful indicator of the Company’s ability to fund its business.  Adjusted EBITDA has not been prepared in accordance with generally accepted accounting principles (GAAP).  This non-GAAP financial measure should not be considered as an alternative to, or more meaningful than, net income as an indicator of the Company’s operating performance.  Moreover, this non-GAAP financial measure, as presented by the Company, may not be comparable to similarly titled measures reported by other companies.  The Company has included a reconciliation of adjusted EBITDA to reported earnings under GAAP in the attached financial tables.

 

About Nature’s Sunshine Products

 

Nature’s Sunshine Products (NASDAQ:NATR), a leading natural health and wellness company, markets and distributes nutritional and personal care products through a global direct sales force of over 600,000 independent distributors in more than 40 countries.  Nature’s Sunshine manufactures its products through its own state-of-the-art facilities to ensure its products continue to set the standard for the highest quality, safety and efficacy on

 



 

the market today. The Company has two reportable business segments that operate under the Nature’s Sunshine Products brand and are divided based on their geographic operations in the United States (NSP United States) and in countries outside the United States (NSP International), as well as a third reportable business segment operates under the Synergy Worldwide brand. The Company also supports health and wellness for children around the world through its partnership with the Little Heroes Foundation.  Additional information about the Company can be obtained at its website, www.natr.com.

 

Cautionary Statement Regarding Forward-Looking Statements

 

In addition to historical information, this release contains forward-looking statements. Nature’s Sunshine may, from time to time, make written or oral forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements encompass Nature’s Sunshine’s beliefs, expectations, hopes, or intentions regarding future events.  Words such as “expects,” “intends,” “believes,” “anticipates,” “should,” “likely,” and similar expressions identify forward-looking statements.  All forward-looking statements included in this release are made as of the date hereof and are based on information available to the Company as of such date. Nature’s Sunshine assumes no obligation to update any forward-looking statement.  Actual results will vary, and may vary materially, from those anticipated, estimated, projected or expected for a number of reasons, including, among others: further  reviews  of the Company’s financial statements by the Company and its Audit Committee; modification of the Company’s accounting practices; foreign business risks; industry cyclicality; fluctuations in customer demand and order pattern; changes in pricing and general economic conditions; as well as other risks detailed in the Company’s previous filings with the SEC.

 



 

NATURE’S SUNSHINE PRODUCTS, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(Amounts in thousands)

 

 

 

March 31,
2012

 

December 31,
2011

 

Assets

 

 

 

 

 

Current assets:

 

 

 

 

 

Cash and cash equivalents

 

$

61,342

 

$

58,969

 

Accounts receivable, net of allowance for doubtful accounts of $630 and $647, respectively

 

13,149

 

9,868

 

Investments available for sale

 

2,392

 

5,677

 

Inventories

 

41,468

 

41,611

 

Deferred income tax assets

 

4,263

 

4,395

 

Prepaid expenses and other

 

5,566

 

4,583

 

Total current assets

 

128,180

 

125,103

 

 

 

 

 

 

 

Property, plant and equipment, net

 

25,076

 

25,137

 

Investment securities

 

1,444

 

1,429

 

Intangible assets, net

 

1,114

 

1,151

 

Deferred income tax assets

 

16,259

 

16,576

 

Other assets

 

5,809

 

6,415

 

 

 

$

177,882

 

$

175,811

 

 

 

 

 

 

 

Liabilities and Shareholders’ Equity

 

 

 

 

 

Current liabilities:

 

 

 

 

 

Accounts payable

 

$

4,745

 

$

5,980

 

Accrued volume incentives

 

21,470

 

19,326

 

Accrued liabilities

 

25,222

 

27,938

 

Deferred revenue

 

3,535

 

2,603

 

Current installments of long-term debt

 

3,308

 

3,296

 

Income taxes payable

 

5,706

 

8,655

 

Total current liabilities

 

63,986

 

67,798

 

 

 

 

 

 

 

Liability related to unrecognized tax benefits

 

9,165

 

10,426

 

Long-term debt

 

5,066

 

5,894

 

Deferred compensation payable

 

1,444

 

1,429

 

Other liabilities

 

2,428

 

2,826

 

Total long-term liabilities

 

18,103

 

20,575

 

 

 

 

 

 

 

Shareholders’ equity:

 

 

 

 

 

Common stock, no par value; 50,000 shares authorized, 15,602 and 15,569 shares issued and outstanding as of March 31, 2012 and December 31, 2011, respectively

 

72,602

 

71,628

 

Retained earnings

 

33,107

 

25,879

 

Accumulated other comprehensive loss

 

(9,916

)

(10,069

)

Total shareholders’ equity

 

95,793

 

87,438

 

 

 

$

177,882

 

$

175,811

 

 


 


 

NATURE’S SUNSHINE PRODUCTS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

 (Amounts in thousands, except per share information)

 

 

 

Three Months Ended
March 31,

 

 

 

2012

 

2011

 

 

 

 

 

 

 

Net sales revenue (net of the rebate portion of volume incentives of $11,591 and $11,582, respectively)

 

$

 92,868

 

$

 92,844

 

Cost and expenses:

 

 

 

 

 

Cost of goods sold

 

18,360

 

18,552

 

Volume incentives

 

33,581

 

34,298

 

Selling, general and administrative

 

31,753

 

32,373

 

 

 

83,694

 

85,223

 

Operating income

 

9,174

 

7,621

 

Other income (loss), net

 

(110

)

265

 

Income before provision for income taxes

 

9,064

 

7,886

 

Provision for income taxes

 

1,836

 

1,264

 

Net income

 

$

 7,228

 

$

 6,622

 

 

 

 

 

 

 

Basic and diluted net income per common share

 

 

 

 

 

 

 

 

 

 

 

Basic:

 

 

 

 

 

Net income per common share

 

$

 0.46

 

$

 0.43

 

 

 

 

 

 

 

Diluted:

 

 

 

 

 

Net income per common share

 

$

 0.46

 

$

 0.43

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average basic common shares outstanding

 

15,578

 

15,533

 

 

 

 

 

 

 

Weighted average diluted common shares outstanding

 

15,846

 

15,561

 

 



 

NATURE’S SUNSHINE PRODUCTS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Amounts in thousands)

 

 

 

Three Months Ended
March 31,

 

 

 

2012

 

2011

 

CASH FLOWS FROM OPERATING ACTIVITIES:

 

 

 

 

 

Net income

 

$

 7,228

 

$

 6,622

 

Adjustments to reconcile net income to net cash provided by operating activities:

 

 

 

 

 

Provision for doubtful accounts

 

5

 

(61

)

Depreciation and amortization

 

1,084

 

1,054

 

Share-based compensation expense

 

636

 

88

 

Loss on sale of property and equipment

 

13

 

 

Deferred income taxes

 

449

 

22

 

Amortization of bond discount

 

3

 

5

 

Purchase of trading investment securities

 

(19

)

(20

)

Proceeds from sale of trading investment securities

 

92

 

107

 

Realized and unrealized gains on investments

 

(42

)

(72

)

Foreign exchange losses

 

553

 

589

 

Changes in assets and liabilities:

 

 

 

 

 

Accounts receivable

 

(3,279

)

(4,660

)

Inventories

 

281

 

713

 

Prepaid expenses and other current assets

 

(884

)

(733

)

Other assets

 

578

 

(152

)

Accounts payable

 

(1,250

)

(298

)

Accrued volume incentives

 

2,038

 

3,340

 

Accrued liabilities

 

(3,597

)

530

 

Deferred revenue

 

933

 

(245

)

Income taxes payable

 

(2,988

)

1,231

 

Liability related to unrecognized tax benefits

 

(1,261

)

(799

)

Deferred compensation payable

 

15

 

(8

)

Net cash provided by operating activities

 

588

 

7,253

 

CASH FLOWS FROM INVESTING ACTIVITIES:

 

 

 

 

 

Purchases of property, plant and equipment

 

(917

)

(209

)

Proceeds from sale of property, plant and equipment

 

15

 

 

Proceeds from sale of investments available for sale

 

3,499

 

686

 

Purchase of investments available for sale

 

(217

)

 

Net cash provided by investing activities

 

2,380

 

477

 

CASH FLOWS FROM FINANCING ACTIVITIES:

 

 

 

 

 

Principal payments of long-term debt

 

(816

)

 

Proceeds from the exercise of stock options

 

337

 

 

Net cash used in financing activities

 

(479

)

 

Effect of exchange rates on cash and cash equivalents

 

(116

)

84

 

Net increase in cash and cash equivalents

 

2,373

 

7,814

 

Cash and cash equivalents at the beginning of the period

 

58,969

 

47,604

 

Cash and cash equivalents at end of the period

 

$

 61,342

 

$

 55,418

 

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:

 

 

 

 

 

Cash paid for income taxes

 

$

 6,327

 

$

 650

 

Cash paid for interest

 

33

 

 

 



 

NATURE’S SUNSHINE PRODUCTS, INC. AND SUBSIDIARIES

RECONCILIATION OF NET INCOME TO ADJUSTED EBITDA

(Amounts in thousands)

 

 

 

Three Months Ended
March 31,

 

 

 

2012

 

2011

 

 

 

 

 

 

 

Net income

 

$

 7,228

 

$

 6,622

 

Adjustments:

 

 

 

 

 

Depreciation and amortization

 

1,084

 

1,054

 

Share-based compensation expense

 

636

 

88

 

Other (income) loss, net*

 

110

 

(265

)

Taxes

 

1,836

 

1,264

 

Adjusted EBITDA

 

$

 10,894

 

$

 8,763

 

 


* Other income, net is primarily comprised of foreign exchange gains (losses), interest income, and interest expense.

 

Contact:

 

Stephen M. Bunker

Chief Financial Officer

Nature’s Sunshine Products, Inc.

Provo, Utah 84606

(801) 342-4370