EX-99.1 2 a11-29679_1ex99d1.htm EX-99.1

Exhibit 99.1

 

GRAPHIC

 

FOR IMMEDIATE RELEASE

 

NATURE’S SUNSHINE PRODUCTS REPORTS THIRD QUARTER

FINANCIAL RESULTS

 

PROVO, Utah, November 7, 2011 — Nature’s Sunshine Products, Inc. (NASDAQ:NATR), a leading natural health and wellness company, today reported consolidated financial results for the third quarter ended September 30, 2011.

 

For the Third Quarter of 2011:

 

·                  Net sales were $91.1 million, compared with $86.1 million in the same quarter a year ago, an increase of 5.8 percent.

 

·                  Earnings for the quarter included non-recurring contract termination costs of $14.7 million related to the NutriPlus arbitration settlement described in further detail below.  Excluding the contract termination costs, pro forma operating income and net income from continuing operations increased by 148.8 percent and 153.9 percent, respectively, compared with the third quarter of 2010.

 

·                  Operating losses from continuing operations were $5.1 million, compared with operating income of $3.9 million in the same quarter a year ago, a decrease of 231.7 percent. Excluding the contract termination costs, pro forma operating income from continuing operations was $9.6 million, compared with $3.9 million in the same quarter a year ago, an increase of 148.8 percent.

 

·                  EBITDA, defined here as net income before taxes, depreciation and amortization, other income adjusted to exclude share-based compensation expense and contract termination costs, was $11.5 million, compared with $5.1 million in the same quarter a year ago, an increase of 126.7 percent.

 

·                  Net loss from continuing operations was $2.3 million, compared with net income from continuing operations of $2.7 million in the same quarter a year ago, a decrease of 184.2 percent.  Excluding contract termination costs, pro forma net income from continuing operations was $6.8 million, compared with $2.7 million in the same quarter a year ago, an increase of 153.9 percent.

 

·                  Basic and diluted net loss per share from continuing operations was $0.14 compared with net income per share of $0.17, for the same quarter a year ago.

 



 

·                  As of September 30, 2011, shareholders’ equity was $80.4 million, compared to $68.4 million on December 31, 2010, an increase of 17.6 percent.

 

·                  As of September 30, 2011, active Managers worldwide were 28,100, a decrease of 5.1 percent from the end of the prior quarter, while active distributors and customers worldwide increased 1.1 percent from the end of the prior quarter to 682,300.

 

For the First Nine Months of 2011:

 

·                  Net sales were $275.8 million, compared with $260.0 million in the same period a year ago, an increase of 6.0 percent.

 

·                  Operating income from continuing operations was $10.6 million, compared with $7.7 million in the same period a year ago, an increase of 36.9 percent.  Excluding the contract termination costs of $14.7 million, pro forma operating income from continuing operations was $25.3 million, compared with $7.7 million in the same period a year ago, an increase of 228.0 percent.

 

·                  EBITDA, defined here as net income before taxes, depreciation and amortization, other income adjusted to exclude share-based compensation expense and the contract termination costs, was $30.4 million, compared with $11.3 million in the same period a year ago, an increase of 169.0 percent.

 

·                  Net income from continuing operations was $10.0 million, compared with $8.9 million in the same period a year ago, an increase of 12.7 percent.  Excluding the contract termination costs, pro forma net income from continuing operations was $19.0 million, compared with $8.9 million in the same period a year ago, an increase of 115.0 percent.

 

·                  Basic and diluted net income per share from continuing operations was $0.64, compared with earnings per share of $0.57, for the same period a year ago.

 

NSP United States Results for the Third Quarter:

 

·                  Net sales were $33.5 million, compared with $34.5 million in the same quarter a year ago, a decrease of 2.9 percent. NSP United States Managers and Distributors are predominantly practitioners of nutritional supplement therapies, and retailers and consumers of our products, segments that continue to be adversely affected by the economic downturn.  Net sales revenues also decreased due to changes to some of our less profitable promotional programs.

 

·                  Operating income was $2.3 million, compared with $2.4 million in the same quarter a year ago, a decrease of 4.2 percent.

 

NSP International Results for the Third Quarter:

 

·                  Net sales were $33.1 million, compared with $33.3 million in the same quarter a year ago, a decrease of 0.8 percent. In local currencies, net sales decreased by 2.4 percent

 



 

compared to the same quarter a year ago. Higher sales in our Russian markets and positive currency fluctuations were offset by lower sales in our Dominican Republic, Japan and Mexico markets.

 

·                  Operating loss was $10.1 million, compared with operating income of $0.7 million in the same quarter a year ago.  Excluding the contract termination costs, pro forma operating income was $4.6 million, compared with $0.7 million in the same quarter a year ago, an increase of 557.1 percent. This increase was the result of higher sales in our Russian markets, lower royalty costs due to the termination of the Company’s contract with NutriPlus and the impact of prior year value-added tax reserve charges in our Mexico business.

 

Synergy Worldwide Results for the Third Quarter:

 

·                  Net sales were $24.5 million, compared with $18.3 million in the same quarter a year ago, an increase of 34.3 percent. In local currencies, net sales increased 26.9 percent compared to the same quarter a year ago. The increase in net sales was primarily due to strong growth in our United States, Korean and European markets.

 

·                  Operating income was $2.6 million, compared with $0.8 million for the same quarter in the prior year. This increase was primarily due to significant sales growth and managing expenses.

 

NutriPlus Arbitration Settlement

 

On July 8, 2011, we entered into a settlement agreement with NutriPlus, from which we acquired certain assets in 1999 in order to establish our Russian business and to which we agreed to make royalty payments as a percentage of sales from our Russian business. As a result of the settlement, wherein both parties settled all claims in the arbitration and bore their own costs associated with the arbitration, the Company agreed to pay NutriPlus $21.7 million for the release of all past and future royalty obligations. Of the $21.7 million, the Company applied $7.0 million toward previously accrued and expensed but unpaid royalties, and $14.7 million in exchange for the contract termination and extinguishment of future royalty obligations.

 

For the year ended December 31, 2010, the Company recorded and expensed royalty payments to NutriPlus of approximately $5.6 million (included in selling, general and administrative expenses), which was approximately 4.0 percent of NSP International’s revenue and 1.6 percent of the Company’s consolidated revenue. For the six months ended June 30, 2011, the Company recorded and expensed royalty payments to NutriPlus of approximately $2.9 million, which was approximately 4.2 percent of NSP International’s revenue and 1.6 percent of the Company’s consolidated revenue.

 

As a result of the settlement, our operating costs for the quarter ended September 30, 2011, were reduced by $1.3million, which resulted in a corresponding increase to operating income of $1.3 million. Similarly, based on current sales from our Russian business, we expect the settlement will result in an annual reduction of $5.6 to $6.0 million in operating costs and a corresponding increase in operating income above the level the Company would otherwise achieve if the NutriPlus royalty obligation remained in effect. This impact on

 



 

operating costs and operating income will fluctuate with sales volumes in our Russian business.

 

Effective Income-tax Rate

 

The effective income tax rate was (42.2) percent compared with 37.0 percent in the same quarter a year ago.  The effective income tax rate of (42.2) percent for the current quarter was below the U.S. federal statutory tax rate of 35.0 percent and was primarily attributed to foreign deductible items, including a favorable inflation adjustment, as well as lower tax rates in foreign jurisdictions than the rates in the U.S., and a decrease in the recognition of previous expense related to unremitted earnings. The effective income tax rate of 37.0 percent for the same quarter a year ago was above the U.S. federal statutory tax rate of 35.0 percent as a result of foreign subsidiary net losses for which no tax benefit was recognized.

 

Non-GAAP Financial Measures

 

The Company has included information concerning 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.  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.  Further, 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 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, herbal, weight management, energy and other complementary 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 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

CONDENSED CONSOLIDATED BALANCE SHEETS

(Amounts in thousands)

(Unaudited)

 

 

 

September 30,
2011

 

December 31,
 2010

 

Assets

 

 

 

 

 

Current Assets:

 

 

 

 

 

Cash and cash equivalents

 

$

54,103

 

$

47,604

 

Accounts receivable, net of allowance for doubtful accounts of $686 and $918, respectively

 

11,765

 

5,947

 

Investments available for sale

 

4,551

 

6,470

 

Inventories

 

38,454

 

36,235

 

Deferred income tax assets

 

4,976

 

4,582

 

Prepaid expenses and other

 

5,052

 

5,700

 

Total current assets

 

118,901

 

106,538

 

 

 

 

 

 

 

Property, plant and equipment, net

 

25,208

 

27,391

 

Investment securities

 

1,423

 

1,778

 

Intangible assets

 

1,191

 

1,303

 

Deferred income tax assets

 

16,866

 

12,916

 

Other assets

 

11,594

 

9,489

 

 

 

$

175,183

 

$

159,415

 

 

 

 

 

 

 

Liabilities and Shareholders’ Equity

 

 

 

 

 

Current Liabilities:

 

 

 

 

 

Accounts payable

 

$

5,130

 

$

4,855

 

Accrued volume incentives

 

19,789

 

18,619

 

Accrued liabilities

 

29,777

 

34,601

 

Deferred revenue

 

3,042

 

3,385

 

Current installments of long-term debt

 

3,283

 

 

Income taxes payable

 

4,503

 

3,708

 

Total current liabilities

 

65,524

 

65,168

 

 

 

 

 

 

 

Liability related to unrecognized tax benefits

 

18,559

 

21,366

 

Long-term debt

 

6,717

 

 

Deferred compensation payable

 

1,423

 

1,778

 

Other liabilities

 

2,574

 

2,721

 

Total long-term liabilities

 

29,273

 

25,865

 

Shareholders’ Equity:

 

 

 

 

 

Common stock, no par value; 50,000 shares authorized, 15,567 and 15,533 issued and outstanding as of September 30, 2011 and December 31, 2010

 

70,043

 

67,752

 

Retained earnings

 

18,258

 

8,278

 

Accumulated other comprehensive loss

 

(7,915

)

(7,648

)

Total shareholders’ equity

 

80,386

 

68,382

 

 

 

$

175,183

 

$

159,415

 

 



 

NATURE’S SUNSHINE PRODUCTS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

 (Amounts in thousands, except per share information)

(Unaudited)

 

 

 

Three Months Ended
September 30,

 

 

 

2011

 

2010

 

 

 

 

 

 

 

Net sales revenue (net of the rebate portion of volume incentives of $10,877 and $10,726, respectively)

 

$

91,102

 

$

86,096

 

Cost and expenses:

 

 

 

 

 

Cost of goods sold

 

16,879

 

16,632

 

Volume incentives

 

32,733

 

32,065

 

Selling, general and administrative

 

31,845

 

33,523

 

Contract termination costs

 

14,750

 

 

 

 

96,207

 

82,220

 

Operating income (loss)

 

(5,105

)

3,876

 

Other income, net

 

1,204

 

375

 

 

 

 

 

 

 

Income (loss) before provision for income taxes

 

(3,901

)

4,251

 

(Benefit) provision for income taxes

 

(1,645

)

1,573

 

Net income (loss) from continuing operations

 

(2,256

)

2,678

 

Loss from discontinued operations

 

 

(8,418

)

Net loss

 

$

(2,256

)

$

(5,740

)

 

 

 

 

 

 

Basic and diluted net income per common share

 

 

 

 

 

 

 

 

 

 

 

Basic:

 

 

 

 

 

Net income (loss) from continuing operations

 

$

(0.14

)

$

0.17

 

Loss from discontinued operations

 

$

 

$

(0.54

)

Net loss

 

$

(0.14

)

$

(0.37

)

 

 

 

 

 

 

Diluted:

 

 

 

 

 

Net income (loss) from continuing operations

 

$

(0.14

)

$

0.17

 

Loss from discontinued operations

 

$

 

$

(0.54

)

Net loss

 

$

(0.14

)

$

(0.37

)

 

 

 

 

 

 

Weighted average basic common shares outstanding

 

15,562

 

15,514

 

Weighted average diluted common shares outstanding

 

15,562

 

15,612

 

 



 

NATURE’S SUNSHINE PRODUCTS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

 (Amounts in thousands, except per share information)

(Unaudited)

 

 

 

Nine Months Ended
September 30,

 

 

 

2011

 

2010

 

 

 

 

 

 

 

Net sales revenue (net of the rebate portion of volume incentives of $33,815 and $32,942, respectively)

 

$

275,757

 

$

260,029

 

Cost and expenses:

 

 

 

 

 

Cost of goods sold

 

52,560

 

51,308

 

Volume incentives

 

100,421

 

97,162

 

Selling, general and administrative

 

97,458

 

103,840

 

Contract termination costs

 

14,750

 

 

 

 

265,189

 

252,310

 

Operating income

 

10,568

 

7,719

 

Other income (expense), net

 

1,049

 

2,374

 

 

 

 

 

 

 

Income before provision (benefit) for income taxes

 

11,617

 

10,093

 

Provision for income taxes

 

1,637

 

1,238

 

Net income from continuing operations

 

9,980

 

8,855

 

Loss from discontinued operations

 

 

(9,388

)

Net income (loss)

 

$

9,980

 

$

(533

)

 

 

 

 

 

 

Basic and diluted net income per common share

 

 

 

 

 

 

 

 

 

 

 

Basic:

 

 

 

 

 

Net income from continuing operations

 

$

0.64

 

$

0.57

 

Loss from discontinued operations

 

$

 

$

(0.60

)

Net income (loss)

 

$

0.64

 

$

(0.03

)

 

 

 

 

 

 

Diluted:

 

 

 

 

 

Net income from continuing operations

 

$

0.64

 

$

0.57

 

Loss from discontinued operations

 

$

 

$

(0.60

)

Net income (loss)

 

$

0.64

 

$

(0.03

)

 

 

 

 

 

 

Weighted average basic common shares outstanding

 

15,544

 

15,512

 

Weighted average diluted common shares outstanding

 

15,674

 

15,606

 

 



 

NATURE’S SUNSHINE PRODUCTS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Amounts in thousands)

(Unaudited)

 

 

 

Nine Months Ended
September 30,

 

 

 

2011

 

2010

 

CASH FLOWS FROM OPERATING ACTIVITIES:

 

 

 

 

 

Net income (loss)

 

$

9,980

 

$

(533

)

Adjustments to reconcile net income (loss) to net cash (used in) provided by operating activities:

 

 

 

 

 

Write-off of cumulative translation adjustments

 

 

7,364

 

Provision for doubtful accounts

 

(101

)

182

 

Depreciation and amortization

 

3,204

 

3,243

 

Share-based compensation expense

 

1,917

 

325

 

Loss on sale of property and equipment

 

14

 

50

 

Deferred income taxes

 

(4,419

)

146

 

Loss on restricted cash

 

 

497

 

Amortization of bond discount

 

13

 

17

 

Purchase of trading investment securities

 

(59

)

(141

)

Proceeds from sale of trading investment securities

 

338

 

109

 

Realized and unrealized losses (gains) on investments

 

25

 

(93

)

Amortization of prepaid taxes related to gain on intercompany sales

 

 

813

 

Foreign exchange losses (gains)

 

106

 

(3,231

)

Changes in assets and liabilities:

 

 

 

 

 

Accounts receivable

 

(5,691

)

198

 

Inventories

 

(2,313

)

3,224

 

Prepaid expenses and other current assets

 

607

 

(595

)

Other assets

 

(2,155

)

(420

)

Accounts payable

 

428

 

425

 

Accrued volume incentives

 

1,224

 

1,216

 

Accrued liabilities

 

(4,554

)

2,552

 

Deferred revenue

 

(343

)

(1,286

)

Income taxes payable

 

848

 

(6,704

)

Liability related to unrecognized tax benefits

 

(2,834

)

2,750

 

Deferred compensation payable

 

(355

)

112

 

Net cash (used in) provided by operating activities

 

(4,120

)

10,220

 

CASH FLOWS FROM INVESTING ACTIVITIES:

 

 

 

 

 

Purchases of property, plant and equipment

 

(1,117

)

(2,118

)

Proceeds from sale of investments available for sale

 

5,650

 

109

 

Purchase of investments available for sale

 

(3,867

)

 

Net cash provided by (used in) investing activities

 

666

 

(2,009

)

CASH FLOWS FROM FINANCING ACTIVITIES:

 

 

 

 

 

Proceeds from the issuance of long-term debt

 

10,000

 

 

Proceeds from the exercise of stock options

 

372

 

31

 

Net cash provided by financing activities

 

10,372

 

31

 

Effect of exchange rates on cash and cash equivalents

 

(419

)

1,877

 

Net increase in cash and cash equivalents

 

6,499

 

10,119

 

Cash and cash equivalents at the beginning of the period

 

47,604

 

35,538

 

Cash and cash equivalents at end of the period

 

$

54,103

 

$

45,657

 

 



 

NATURE’S SUNSHINE PRODUCTS, INC. AND SUBSIDIARIES

RECONCILIATION OF NET INCOME to EBITDA

 (Amounts in thousands)

(Unaudited)

 

 

 

Three Months Ended
September 30,

 

 

 

2011

 

2010

 

 

 

 

 

 

 

Net loss

 

$

(2,256

)

$

(5,740

)

EBITDA adjustments:

 

 

 

 

 

Loss from discontinued operations

 

 

8,418

 

Depreciation and amortization

 

1,087

 

1,091

 

Share-based compensation expense

 

773

 

107

 

Contract termination costs

 

14,750

 

 

Other expense (income), net*

 

(1,204

)

(375

)

Taxes

 

(1,645

)

1,573

 

EBITDA

 

$

11,505

 

$

5,074

 

 

 

 

Nine Months Ended
September 30,

 

 

 

2011

 

2010

 

 

 

 

 

 

 

Net income (loss)

 

$

9,980

 

$

(533

)

EBITDA adjustments:

 

 

 

 

 

Loss from discontinued operations

 

 

9,388

 

Depreciation and amortization

 

3,204

 

3,243

 

Share-based compensation expense

 

1,917

 

325

 

Contract termination costs

 

14,750

 

 

Other (income) expense, net*

 

(1,049

)

(2,374

)

Taxes

 

1,637

 

1,238

 

EBITDA

 

$

30,439

 

$

11,287

 

 


* Other income (expense), 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