Nature’s Sunshine Products Reports 4.5% First Quarter Net Sales Growth and Continued Margin Improvement

First Quarter 2019 Highlights

  • First quarter net sales increased 4.5 percent to $91.3 million from $87.3 million in the prior year
  • Key drivers of first quarter top-line growth included Synergy Worldwide up 10.0 percent, NSP Russia, Central and Eastern Europe up 18.9 percent and NSP China up 52.4 percent
  • First quarter GAAP net income was $1.7 million compared to $0.3 million in the prior year
  • First quarter GAAP net income per diluted share was $0.09 compared to $0.03 per diluted share in the prior year
  • First quarter adjusted net income per share was $0.14 compared to $0.03  per share in the prior year
  • First quarter Adjusted EBITDA increased to $7.3 million from $4.0 million in the prior year

LEHI, Utah, May 09, 2019 (GLOBE NEWSWIRE) -- Nature’s Sunshine Products, Inc. (NASDAQ: NATR), a leading natural health and wellness company engaged in the manufacture and sale of nutritional and personal care products, today reported its financial results for the first quarter ended March 31, 2019.

Management Commentary

"We are pleased to report a strong start to fiscal 2019 with continued net sales growth and significantly improved earnings. Growth continues to be driven by sustained positive sales trends in NSP China, Synergy Asia Pacific and NSP Russia, Central and Eastern Europe, as well as positive growth in Synergy North America during the first quarter,” stated Terrence Moorehead, Chief Executive Officer. “We are seeing an enhanced profit profile, reflecting the benefits of our cost control initiatives that contributed to a more than an eighty-one percent increase in adjusted EBITDA during the first quarter. We continue to focus on growth while controlling costs and streamlining the organization to drive accelerated earnings gains. We have further opportunities to improve expense infrastructure, all while aligning our global organization to deliver upon our strategic growth goals.”

First Quarter 2019 Financial Summary

 Net Sales by Operating Segment
 Three Months
Ended
March 31,
2019
 Three Months
Ended
March 31,
2018
 Percent
Change
 Impact of
Currency
Exchange
 Percent
Change
Excluding
Impact of
Currency
NSP Americas:         
NSP North America$33,595  $35,605  (5.6)% $(134) (5.3)%
NSP Latin America5,072  6,267  (19.1) (124) (17.1)
 38,667  41,872  (7.7) (258) (7.0)
NSP Russia, Central and Eastern Europe11,358  9,551  18.9  (181) 20.8 
Synergy WorldWide:         
Synergy Asia Pacific27,344  23,707  15.3  (1,103) 20.0 
Synergy Europe4,723  5,656  (16.5) (387) (9.7)
Synergy North America2,927  2,454  19.3    19.3 
 34,994  31,817  10.0  (1,490) 14.7 
NSP China6,253  4,102  52.4  (366) 61.4 
 $91,272  $87,342  4.5% $(2,295) 7.1%

Net sales of $91.3 million increased 4.5 percent compared to $87.3 million in the first quarter of 2018. Net sales were also negatively impacted by $2.3 million of unfavorable foreign currency exchange rate fluctuations. On a local currency basis, net sales increased 7.1 percent compared to 2018. The increase was primarily related to growth in Synergy Asia Pacific, NSP Russia, Central and Eastern Europe and NSP China offset by a $3.2 million decline in net sales in NSP Americas and a $0.9 million decline in Synergy Europe.

Gross margin, as a percentage of net sales, increased to 74.3 percent from 74.0 percent in the first quarter of 2018. The increase in gross margin as compared to the prior year was primarily driven by changes in market mix and reserves for obsolete inventory recorded in the prior year.

Volume incentives, as a percentage of net sales, decreased to 34.0 percent from 35.9 percent in the first quarter of 2018. The decrease in volume incentives as a percent of net sales is primarily due to changes in market mix, reflecting growth in markets where volume incentives as a percentage of net sales are lower than the consolidated average, and the growth in NSP China where sales commissions to independent service providers are included in selling, general and administrative expenses (“SG&A”).

SG&A expenses increased by approximately $1.5 million to $33.9 million for the first quarter of 2019. The increase in SG&A expenses is primarily due to increase in independent service fees in China and restructuring expenses. As a percentage of net sales, SG&A expenses were 37.1 percent for both the current period and the same period in 2018. Excluding the impact of restructuring related expenses, first quarter of 2019 SG&A expenses as a percentage of net sales were 35.4 percent.

Operating income in the first quarter of 2019 was $3.0 million, or 3.3 percent of net sales, as compared to $0.9 million, or 1.0 percent of net sales in the first quarter of 2018. Excluding non-recurring items noted below, operating income was $4.6 million, or 5.0 percent of net sales, compared to a $0.9 million, or 1.0 percent of net sales in the prior year period.

Other income (loss), net, in the first quarter of 2019 was a loss of $48,000 compared to income of $0.7 million in the first quarter of 2018. The provision for income taxes was $1.2 million in the first quarter of 2019 compared to $1.3 million in the first quarter of 2018.

GAAP net income attributable to common shareholders was $1.8 million, or $0.09 per diluted common share, compared to $0.5 million, or $0.03 per diluted common share in the first quarter 2018. Net loss attributable to NSP China was $0.1 million or $0.01 per diluted common share for the quarter, compared to a loss of $0.8 million, or $0.04 per common share for the first quarter of 2018.

Adjusted net income attributable to common shareholders was $2.7 million, or $0.14 per diluted common share, compared to an adjusted net income of $0.5 million, or $0.03 per diluted common share in the prior year period. A reconciliation of adjusted net income to GAAP net income is provided in the attached financial tables.

Adjusted EBITDA was $7.3 million, compared to $4.0 million in 2018. 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/loss adjusted to exclude share-based compensation expense and certain noted adjustments. A reconciliation of Net Income to Adjusted EBITDA is provided in the attached financial tables.

Balance Sheet and Cash Flow

Net cash used in operating activities was $4.6 million for the three months ended March 31, 2019, compared to $3.7 million provided in the prior year period. Capital expenditures during the quarter ended March 31, 2019 totaled $0.4 million compared to $0.5 million in the same period of 2018. The Company ended the first quarter of 2019 with cash and cash equivalents of $45.4 million.

Active Distributors and Customers by Segment (1)

    
 2019 2018
 Distributors
& Customers
 Managers Distributors
& Customers
 Managers
NSP Americas104,100  6,200  107,700  6,500 
NSP Russia, Central and Eastern Europe79,000  3,800  69,100  3,500 
Synergy WorldWide49,700  4,000  47,300  3,700 
 232,800  14,000  224,100  13,700 

(1) Active Distributors and customers include Nature’s Sunshine Products’ independent Distributors and customers who have purchased our products directly for resale and/or personal consumption during the previous three months ended as of the date indicated. Total Managers, Distributors and Customers, which includes those who have made a purchase in the last twelve months, was 494,000 as of March 31, 2019.

In China, we do not sell our products through Managers and Distributors, but rather through independent service providers who are compensated for marketing, sales support, and other services.

Conference Call

Nature’s Sunshine Products will host a conference call to discuss its first quarter 2019 results on Thursday, May 9, 2019 at 5:00 PM Eastern Time. The toll-free dial-in number for callers in the U.S. and Canada is 1-888-394-8218, conference ID: 2251761. International callers can dial 1-323-701-0225, conference ID: 2251761. A replay will be available from May 9, 2019 at 8:00 PM Eastern Time through Thursday, May 23, 2019 at 11:59 PM Eastern Time by dialing 1-844-512-2921 (U.S. and Canada) or 1-412-317-6671 (International), replay PIN: 2251761. 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.

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 approximately 494,000 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 NSP China). Additional information about the Company can be obtained at its website, www.naturessunshine.com.

CAUTIONARY NOTE 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, strategies and financial results. 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:

  • laws and regulations regarding direct selling may prohibit or restrict our ability to sell our products in some markets or require us to make changes to our business model in some markets;
  • extensive government regulations to which the Company's products, business practices and manufacturing activities are subject;
  • legal challenges to the Company's direct selling program or to the classification of its independent distributors;
  • impact of anti-bribery laws, including the U.S. Foreign Corrupt Practices Act;
  • the Company’s ability to attract and retain independent distributors;
  • the loss of one or more key independent distributors who have a significant sales network;
  • the full implementation of the Company’s joint venture for operations in China with Fosun Industrial Co., Ltd.;
  • registration of products for sale in foreign markets, or difficulty or increased cost of importing products into foreign markets;
  • cybersecurity threats and exposure to data loss;
  • the storage, processing, and use of data, some of which contain personal information, are subject to complex and evolving privacy and data protection laws and regulations;
  • reliance on information technology infrastructure;
  • the effect of fluctuating foreign exchange rates;
  • liabilities and obligations arising from improper activity by the Company’s independent distributors;
  • failure of the Company’s independent distributors to comply with advertising laws;
  • changes to the Company’s independent distributor compensation plans;
  • geopolitical issues and conflicts;
  • negative consequences resulting from difficult economic conditions, including the availability of liquidity or the willingness of the Company’s customers to purchase products;
  • risks associated with the manufacturing of the Company's products;
  • uncertainties relating to the application of transfer pricing, duties, value-added taxes, and other tax regulations, and changes thereto;
  • changes in tax laws, treaties or regulations, or their interpretation;
  • actions on trade relations by the U.S. and foreign governments;
  • product liability claims; and
  • the sufficiency of trademarks and other intellectual property rights.

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 reports filed with the Securities and Exchange Commission, including our Annual Report on Form 10-K and Quarterly Reports filed on Form 10-Q.

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.

Non-GAAP Financial Measures

We have included information which has not been prepared in accordance with generally accepted accounting principles (GAAP), such as information concerning Adjusted EBITDA and net sales excluding the impact of foreign currency exchange fluctuations. We utilize the non-GAAP measure Adjusted EBITDA in the evaluation of our operations and believe that this measure is a useful indicator of our ability to fund our business. These non-GAAP financial measures should not be considered as an alternative to, or more meaningful than, U.S. GAAP net income as an indicator of our operating performance. Moreover, our Adjusted EBITDA presented may not be comparable to similarly titled measures reported by other companies.

Net sales in local currency removes, from net sales in U.S. dollars, the impact of changes in exchange rates between the U.S. dollar and the functional currencies of our foreign subsidiaries. This is accomplished by translating the current period net sales into U.S. dollars using the same foreign currency exchange rates that were used to translate the net sales for the previous comparable period.

In addition, we believe presenting the impact of foreign currency fluctuations is useful to investors because it allows a more meaningful comparison of net sales of our foreign operations from period to period. Net sales excluding the impact of foreign currency fluctuations should not be considered in isolation or as an alternative to net sales in U.S. dollar measures that reflect current period exchange rates, or to other financial measures calculated and presented in accordance with U.S. GAAP.

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. We have included a reconciliation of Net Income to Adjusted EBITDA, the most comparable GAAP measure. We have also included a reconciliation of GAAP net income to Non-GAAP net income and Non-GAAP Adjusted EPS, in the attached financial tables.

           

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

 Three Months Ended
March 31,
 2019 2018
Net sales$91,272  $87,342 
Cost of sales(23,429) (22,713)
Gross profit67,843  64,629 
    
Operating expenses:   
Volume incentives31,013  31,362 
Selling, general and administrative33,852  32,386 
Operating income2,978  881 
Other income (expense), net(48) 740 
Income before provision for income taxes2,930  1,621 
Provision for income taxes1,201  1,288 
Net income1,729  333 
Net loss attributable to noncontrolling interests(28) (165)
Net income attributable to common shareholders$1,757  $498 
    
Basic and diluted net income per common share:   
    
Basic earnings per share attributable to common shareholders$0.09  $0.03 
    
Diluted earnings per share attributable to common shareholders$0.09  $0.03 
    
Weighted average basic common shares outstanding19,268  19,010 
Weighted average diluted common shares outstanding19,585  19,353 


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

 March 31,
 2019
 December 31,
 2018
Assets   
Current assets:   
Cash and cash equivalents$45,404  $50,638 
Accounts receivable, net of allowance for doubtful accounts of $485 and $460, respectively8,259  7,751 
Inventories42,937  42,048 
Prepaid expenses and other6,697  6,388 
Total current assets103,297  106,825 
    
Property, plant and equipment, net61,961  64,061 
Operating lease right-of-use assets21,777   
Investment securities - trading1,405  1,308 
Intangible assets, net609  618 
Deferred income tax assets8,786  9,056 
Other assets10,944  11,148 
 $208,779  $193,016 
    
Liabilities and Shareholders’ Equity   
Current liabilities:   
Accounts payable$4,911  $5,219 
Accrued volume incentives and service fees20,772  20,562 
Accrued liabilities28,520  34,801 
Deferred revenue1,232  1,197 
Related party note1,530  1,530 
Income taxes payable1,286  3,378 
Current portion of operating lease liabilities4,088   
Total current liabilities62,339  66,687 
    
Liability related to unrecognized tax benefits2,128  2,192 
Long-term portion of operating lease liabilities18,818   
Deferred compensation payable1,405  1,308 
Long-term deferred income tax liabilities1,548  1,556 
Other liabilities519  705 
Total liabilities86,757  72,448 
    
Shareholders’ equity:   
Common stock, no par value, 50,000 shares authorized, 19,273 and 19,204 shares issued and outstanding, respectively133,725  133,684 
Accumulated deficit(315) (2,072)
Noncontrolling interests35  63 
Accumulated other comprehensive loss(11,423) (11,107)
Total shareholders’ equity122,022  120,568 
 $208,779  $193,016 


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

 Three Months Ended
March 31,
 2019 2018
CASH FLOWS FROM OPERATING ACTIVITIES:   
Net income$1,729  $333 
Adjustments to reconcile net income to net cash provided by (used in) operating activities:   
Provision for doubtful accounts31  46 
Depreciation and amortization2,496  2,601 
Noncash lease expense1,394   
Share-based compensation expense230  543 
Gain on sale of property and equipment45   
Deferred income taxes258  (46)
Purchase of trading investment securities(40) (50)
Proceeds from sale of trading investment securities76  265 
Realized and unrealized (gains) losses on investments(133) 23 
Foreign exchange (gains) losses64  (967)
Changes in assets and liabilities:   
Accounts receivable(546) 683 
Inventories(1,038) 856 
Prepaid expenses and other current assets(357) 18 
Other assets117  27 
Accounts payable(281) 957 
Accrued volume incentives and service fees164  1,062 
Accrued liabilities(5,683) (1,148)
Deferred revenue35  (1,069)
Lease liabilities(1,086)  
Income taxes payable(2,112) (261)
Liability related to unrecognized tax benefits(69) 68 
Deferred compensation payable97  (227)
Net cash provided by (used in) operating activities(4,609) 3,714 
CASH FLOWS FROM INVESTING ACTIVITIES:   
Purchases of property, plant and equipment(387) (489)
Net cash used in investing activities(387) (489)
CASH FLOWS FROM FINANCING ACTIVITIES:   
Principal payments of revolving credit facility(1,517) (5,456)
Proceeds from revolving credit facility1,517   
Proceeds from borrowings on related party note  500 
Proceeds from the exercise of stock awards  228 
Tax benefit from stock awards(189) (466)
Net cash used in financing activities(189) (5,194)
Effect of exchange rates on cash and cash equivalents(49) 1,362 
Net decrease in cash and cash equivalents(5,234) (607)
Cash and cash equivalents at the beginning of the period50,638  42,910 
Cash and cash equivalents at the end of the period$45,404  $42,303 


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

 Three Months Ended
March 31,
 2019 2018
Net income$1,729  $333 
Adjustments:   
Depreciation and amortization2,496  2,601 
Share-based compensation expense230  543 
Other (income) loss, net*48  (740)
Provision for income taxes1,201  1,288 
Other adjustments (1)1,587   
Adjusted EBITDA$7,291  $4,025 
    
    
(1) Other adjustments   
Restructuring related expenses$1,587  $ 
Total adjustments$1,587  $ 

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


NATURE’S SUNSHINE PRODUCTS, INC. AND SUBSIDIARIES
RECONCILIATION OF GAAP NET INCOME TO
NON-GAAP NET INCOME and NON-GAAP ADJUSTED EPS
 (Amounts in thousands)
(Unaudited)

 Three Months Ended
March 31,
 2019 2018
Net income$1,729  $333 
Adjustments:   
Restructuring related expenses1,587   
Tax impact of adjustments(603)  
Total adjustments984   
Non-GAAP net income$2,713  $333 
    
Reported income attributable to common shareholders$1,757  $498 
Total adjustments984   
Non-GAAP net income attributable to common shareholders$2,741  $498 
    
Basic income per share, as reported$0.09  $0.03 
Total adjustments, net of tax0.05   
Basic income per share, as adjusted$0.14  $0.03 
    
Diluted income per share, as reported$0.09  $0.03 
Total adjustments, net of tax0.05   
Diluted income per share, as adjusted$0.14  $0.03 


Contact:

Scott Van Winkle
Managing Director, ICR
(617) 956-6736
scott.vanwinkle@icrinc.com

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