NATURES SUNSHINE PRODUCTS INC - FORM 8-K - EX-99.1 - PRESS RELEASE - May 11, 2016

Attached files

file filename
8-K - 8-K - NATURES SUNSHINE PRODUCTS INCa8-kq1earningsrelease.htm



FOR IMMEDIATE RELEASE

NATURE’S SUNSHINE PRODUCTS REPORTS FIRST QUARTER 2016 FINANCIAL RESULTS

•
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

LEHI, Utah, May 10, 2016 – Nature’s Sunshine Products, Inc. (NASDAQ: NATR), a leading natural health and wellness company engaged in the manufacture and direct selling of nutritional and personal care products, today reported its financial results for the first quarter ended March 31, 2016.

First Quarter 2016 Financial Highlights

•
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.


Management Commentary

“While the overall results for the quarter were depressed by continuing currency headwinds and challenges in Russia, Central and Eastern Europe, I am pleased with our first quarter results, which reflect the progress we have made toward returning Nature’s Sunshine to sustainable,

1



long-term growth,” commented Gregory L. Probert, Chairman and Chief Executive Officer. “We were particularly pleased by the ongoing strong execution in NSP United States and NSP Canada, which both posted their seventh consecutive quarters of year-over-year local currency sales growth. In addition, Synergy WorldWide reported its best first quarter ever, which was driven by a successful business model and process improvements taking hold in Korea, Japan, Indonesia and Thailand. We also continue to make good progress in China and remain on-track to obtain our direct selling license in the third quarter of 2016.”

Mr. Probert continued, “The vast majority of the strength demonstrated in NSP United States and NSP Canada during the quarter was led by our patent-pending IN.FORM program. The new and improved IN.FORM program was clinically studied in the Hughes Center for Research and Innovation and formulated to improve gut health and support healthy metabolic function. IN.FORM has been integral to attracting new Distributors, and increasing engagement among existing Distributors in the United States and Canada. We believe IN.FORM will also be key to igniting growth in our Latin American markets. Furthermore, we made significant progress in streamlining our focus for Synergy WorldWide to a more unified sales and product strategy, the Elite Health System. This system has proven successful in Asia and we intend to expand it into other markets, such as other parts of Asia and Europe, later this year.”

First Quarter 2016 Regional Sales by Operating Segment

 
 
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
%
 



2



Active Distributors and Customers by Segment (1) 

 
 
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.

Cash Flow and Balance Sheet Highlights

•
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.

Conference Call

Nature’s Sunshine Products will host a conference call to discuss its first quarter 2016 results on May 10, 2016 at 4:30 PM Eastern Time.  The toll-free dial-in number for callers in the U.S. and Canada is 1-877-407-0789, conference ID: 13634141.  International callers can dial 1-201-689-8562, conference ID: 13634141.  A replay will be available from May 10, 2016 at 7:30 PM Eastern Time through May 24, 2016 at 11:59 PM Eastern Time by dialing 1-877-870-5176 (U.S. and Canada) or 1-858-384-5517 (International), replay PIN: 13634141.  The call will also be webcast live and will be available on the Investors section of Nature’s Sunshine Products’ website at www.naturessunshine.com for 90 days.


3




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 573,000 independent Managers, Distributors and customers in more than 40 countries. Nature’s Sunshine manufactures most of 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 four reportable business segments that are divided based on the characteristics of their Distributor base, similarities in compensation plans, as well as the internal organization of NSP’s officers and their responsibilities (NSP Americas; NSP Russia, Central and Eastern Europe; Synergy WorldWide; and China and New Markets). The Company also supports health and wellness for children around the world through its partnership with the Sunshine Heroes Foundation. Additional information about the Company can be obtained at its website, www.naturessunshine.com.

Cautionary Statement Regarding Forward-Looking Statements
This press release contains forward-looking statements regarding the Company’s future business expectations, which are subject to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements may include, but are not limited to, statements relating to the Company’s objectives, plans and strategies. All statements (other than statements of historical fact) that address activities, events or developments that the Company intends, expects, projects, believes or anticipates will or may occur in the future are forward-looking statements. These statements are often characterized by terminology such as “believe,” “hope,” “may,” “anticipate,” “should,” “intend,” “plan,” “will,” “expect,” “estimate,” “project,” “positioned,” “strategy” and similar expressions, and are based on assumptions and assessments made by management in light of their experience and their perception of historical trends, current conditions, expected future developments and other factors they believe to be appropriate. Forward-looking statements are not guarantees of future performance and are subject to risks and uncertainties, including the following.

•
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;

4



•
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.

These and other risks and uncertainties that could cause actual results to differ from predicted results are more fully detailed under the caption “Risk Factors” in our Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 14, 2016.

All forward-looking statements speak only as of the date of this press release and are expressly qualified in their entirety by the cautionary statements included in or incorporated by reference into this press release. Except as is required by law, the Company expressly disclaims any obligation to publicly release any revisions to forward-looking statements to reflect events after the date of this press release.

5




Non-GAAP Financial Measures

The Company has included information which has not been prepared in accordance with generally accepted accounting principles (GAAP), such as 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. This non-GAAP financial measure should not be considered as an alternative to, or more meaningful than, U.S. GAAP net income as an indicator of the Company’s operating performance. Moreover, Adjusted EBITDA, as presented by the Company, may not be comparable to similarly titled measures reported by other companies. Other companies may use the same or similarly named measures, but exclude different items, which may not provide investors with a comparable view of Nature’s Sunshine Products’ performance in relation to other companies. The Company has included a reconciliation of Adjusted EBITDA to net income, the most comparable GAAP measure, in the attached financial tables.

    

6



NATURE’S SUNSHINE PRODUCTS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Amounts in thousands, except per share information)
(Unaudited)

 
 
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

 


7




NATURE’S SUNSHINE PRODUCTS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Amounts in thousands)
(Unaudited)
 
 
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

 
 

8




NATURE’S SUNSHINE PRODUCTS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in thousands)
(Unaudited)
 
 
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
 

9




NATURE’S SUNSHINE PRODUCTS, INC. AND SUBSIDIARIES
RECONCILIATION OF NET INCOME TO ADJUSTED EBITDA
(Amounts in thousands)
(Unaudited)

 
 
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
 
 
 
 
 
 
 

* Other income (loss), 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.
Lehi, Utah 84043
(801) 341-7303
investorrelations@natr.com


10

NATURES SUNSHINE PRODUCTS INC Reports