Nu Skin Enterprises Reports Record 2013 Annual and Fourth-Quarter Results
Nu Skin Enterprises, Inc. (NYSE: NUS) today announced record fourth-quarter results with revenue of $1.056 billion, an 82 percent improvement over the prior-year period. Revenue was negatively impacted 4 percent by foreign currency fluctuations. Earnings per share for the quarter were $2.02, a 108 percent year-over-year improvement.
The company reported full-year 2013 revenue of $3.177 billion, a 49 percent year-over-year improvement. Annual revenue was negatively impacted 3 percent by foreign currency fluctuations. Earnings per share for the year were $5.94, a 69 percent increase over 2012.
Recently, the company reclassified a small portion of selling expenses as a product rebate. This reclassification reduced fourth-quarter and annual revenue by approximately 1.8 percent and 1.9 percent, respectively, with a corresponding reduction of selling expenses. This reclassification had no impact on operating income, net income, earnings per share or cash flow, but resulted in slightly lower revenue than the company's previous estimate. The presentation of financial data for previous periods has been similarly reclassified for comparative purposes.
We are pleased to report solid growth for the fourth quarter and full year of 2013, said Truman Hunt, president and chief executive officer. We achieved this growth by continuing to increase our consumer base and sales force, while also executing the limited-time offering of our ageLOC TR90 weight management and body shaping system.
Greater China. In Greater China, fourth-quarter revenue increased 248 percent to $481.6 million, compared to $138.3 million in the prior-year period. Foreign currency fluctuations had a positive impact of 6 percent on the region's revenue. The sales leader count in the region improved 232 percent, while the number of actives increased 127 percent compared to the prior year.
North Asia. Fourth-quarter revenue in North Asia was $286.3 million, compared to $246.9 million for the same period in 2012. The region's results were negatively impacted approximately 8 percent by foreign currency fluctuations. The number of sales leaders in the region was up 14 percent and the number of actives improved 17 percent.
South Asia/Pacific. Revenue in South Asia/Pacific was $99.5 million, a 57 percent increase compared to the prior year. Sales in the quarter were negatively impacted 11 percent by foreign currency fluctuations. The region's fourth-quarter sales leaders improved 60 percent while actives increased 22 percent compared to the same period in 2012.
Americas. Revenue in the Americas improved 59 percent to $126.1 million, compared to $79.1 million in the prior-year period. Foreign currency fluctuations negatively impacted sales in the region by 8 percent in the quarter. The number of sales leaders improved 30 percent while the number of actives increased 18 percent compared to the prior year.
Europe. Revenue in Europe was $62.3 million, a 21 percent improvement over the prior-year period. Results in the region were positively impacted 5 percent by foreign currency fluctuations. Sales leaders in Europe decreased 1 percent while actives improved 3 percent compared to the prior year.
The company's operating margin was 17.9 percent for the quarter, compared to 15.4 percent in the prior year. Operating margin for the year was 17.4 percent, up 140 basis points compared to 2012. Gross margin during the quarter was 84.4 percent, up 80 basis points over the prior-year period. Selling expenses, as a percent of revenue, were 48.2 percent in the fourth quarter, representing a 410 basis-point increase. The increase was driven by successful product launches and a higher number of sales leaders qualifying for promotional incentives. General and administrative expenses, as a percent of revenue, were 18.3 percent, improving 580 basis points over the prior year. Other income and expenses reflected a gain of $3.4 million.
The company's income tax rate for the quarter was 34.8 percent compared to 35.5 percent in the prior-year period. The company's cash and short-term investment position at the end of the quarter was $547.1 million. Dividend payments during the quarter were $17.6 million, and the company repurchased $50.0 million of its outstanding shares, leaving $395 million in the company's repurchase authorization at year end.
In response to recent media reports in China and the ensuing investigation by Chinese regulators, the company's audit committee recently began an internal review of the company's China operations. The company is unable at this time to predict the timing and outcome of the review. Given this review and the possibility that various components of its annual report on Form 10-K could be impacted, the company's board of directors has determined that it cannot file its annual report by the March 3rd due date. The company currently expects that the audit committee will have made sufficient progress in its review to enable the company to file its annual report by the March 18th extended filing deadline.
We remain optimistic about the potential of our business globally, said Hunt. Our outlook for 2014, however, has been impacted by recent events that will negatively impact revenue this year.
As previously announced, in China we have temporarily suspended all business promotional meetings as well as applications for new sales representatives. While these voluntary steps will negatively impact revenue and profitability in China in the short term, we believe these measures will enhance the likelihood of our long-term success in this important market.
We are encouraged by the Chinese government's continuing commitment to develop its economy. We remain fully committed to working cooperatively with the government in China to ensure our operations are in compliance with the regulation of direct selling. We are diligently preparing to resume normal business activities as soon as possible, subject to resolution of the China regulatory review. In the meantime, we are taking steps to enhance our sales leader training processes following a period of rapid growth.
In addition, we continue to plan on regional LTOs of either our ageLOC TR90 system or ageLOC Tru Face Essence Ultra in all of our geographic regions during the year, and expect a positive impact to revenue from these LTOs and subsequent product roll-outs, concluded Hunt.
For the first quarter of 2014 we now estimate revenue growth of 20 to 24 percent, or $650 to $670 million in revenue, stated Ritch Wood, chief financial officer. We believe all of our regions are on track to show year-over-year revenue growth in the first quarter. The decrease in projected revenue versus our first-quarter guidance provided last November is primarily a result of the recent measures we have taken in China, slightly lower than anticipated revenue increases in other markets, and an anticipated impact of about $20 million associated with the reclassification of a small percentage of selling expenses. In addition, our first-quarter revenue guidance anticipates a 4 percent negative impact from foreign currency fluctuations. Costs associated with China internal and external business reviews as well as lower than originally budgeted revenue will put pressure on our operating margin. We now project first-quarter earnings per share in the $0.90 to $0.94 range.
We are early in the process of understanding the impact of recent events in China on our business, so it is difficult to project how reflective anticipated first quarter results will be of results for the remainder of the year. We believe we will be in a better position to provide specific updated annual guidance in conjunction with our first-quarter earnings release, concluded Wood.
The company's management will host a webcast with the investment community on March 3, 2014, at 11 a.m. EST. 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, https://ir.nuskin.com. An archive of the webcast will be available at this same URL through March 14, 2014.
About Nu Skin Enterprises, Inc.
Nu Skin Enterprises, Inc. demonstrates its tradition of innovation through its comprehensive anti-aging product portfolio, independent business opportunity and corporate social responsibility initiatives. The company's scientific leadership in both skin care and nutrition has established Nu Skin as a premier anti-aging company. The company's anti-aging portfolio features the new ageLOC line of products including the ageLOC® TR90™ weight management and body shaping system, ageLOC® R2 nutritional supplement, and ageLOC® Transformation daily skin care system. A global direct selling company, Nu Skin operates in 53 markets worldwide and is traded on the New York Stock Exchange under the symbol 'NUS'. More information is available at https://www.nuskin.com.
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