December 01, 2014
Financial News, December 2014
CVSL Plans $60 Million NYSE Uplisting
IPO investment manager Renaissance Capital has reported the terms of CVSL’s planned uplisting to the NYSE MKT. The direct-selling conglomerate is looking to raise $60 million with an offering of 6.7 million shares priced at $8 to $10. That would place CVSL’s midrange market value at $308 million. Shares in CVSL are currently traded over the counter, with a market value of about $293 million on the OTCQX.
To comply with NYSE MKT terms, CVSL implemented a 1-for-20 reverse stock split of its common stock. Though it had no impact on the par value per share, the split reduced CVSL’s shares of common stock from 487,975,986 to approximately 24,398,800.
CVSL has built a portfolio that now includes seven direct selling or “micro-enterprise” companies across the home improvement, gourmet foods, skincare and nutrition industries. The brands operate independently of one another, while benefitting from combined expertise and efficiencies in finance, IT and the supply chain.
USANA Posts Record Q3 Profit
USANA Health Sciences Inc. (USNA—NYSE) announced a record profit of $19.5 million, or $1.47 EPS, when it released its third quarter earnings statement. Earnings increased by 16.4 percent, compared with $16.8 million during the prior-year period with EPS beating estimates of 10 cents, according to Zacks Investment Research. Earnings per share for the quarter increased by 26.7 percent, compared with $1.16 in the third quarter of 2013.
For the third quarter of 2014, net sales increased by 10.5 percent to $191.9 million, compared with $173.7 million in the prior-year period. This beat estimates by $1.4 million. The increase in net sales was driven by overall associate growth of 18.8 percent, which was generated by the company’s Asia Pacific region.
The increase in earnings per share was attributable to higher net earnings and a lower number of diluted shares outstanding due to the company’s share repurchases during 2014. Weighted average diluted shares outstanding were 13.3 million as of the end of the third quarter of 2014, compared with 14.4 million in the prior-year period.
During the quarter, the company repurchased approximately 1.1 million shares under its authorized repurchase program for a total investment of $76.6 million.
2014 guidance includes consolidated net sales between $780 million and $790 million, versus the previous outlook of between $770 million and $790 million, and earnings per share between $5.85 and $5.95, versus the previous outlook of between $5.50 and $5.65.
Herbalife Shares Drop, but CEO Optimistic
Global health and wellness company Herbalife Ltd. (HLF—NYSE) reported its third quarter earnings, disappointing investors with its earnings miss and a lower than anticipated fourth quarter outlook. Adjusted net income for the quarter was $125.1 million, or $1.45 per diluted share, compared to $152.1 million, or $1.41 per diluted share, for the same period in 2013.
On the news, shares dropped 11 percent to $49.60 during after-hours trading on Nov. 3, 2014, the day of release, according to MarketWatch, and continued to fall to $44.26 by close on Nov. 4. Wall Street expected earnings per share to come in at $1.51, up from $1.41 at the same time last year.
On a positive note, Herbalife reported net sales of $1.3 billion, reflecting an increase of 4 percent compared to the same period in 2013, and, according to CEO Michael O. Johnson, the quarter saw volume increases in two-thirds of the company’s 91 countries, especially Russia and China.
Johnson sought to allay concerns about the company’s forecast during its earnings call with investors on Nov. 4. “While the third quarter represented a record level of net sales, our performance was below expectations, and this performance was clearly out of character for us,” Johnson said. “There was a confluence of factors—some external and some internal—that had an impact on our results. The main factors were Venezuela, FX and the short-term effect of structural changes that we are making to our business.”
Net income fell 92 percent to $11.2 million, or 13 cents a share, down from $142.0 million or $1.32 per diluted share for the same period in 2013. Third quarter 2014 reported net income was negatively impacted by $139.5 million in pre-tax charges, or 97 cents per diluted share after tax, related to the remeasurement of the Venezuelan Bolivar, and $17.5 million in pre-tax charges, or 13 cents per diluted share after tax, related to a legal reserve.
According to Johnson, Herbalife continues to implement a global expansion of marketing plan enhancements to improve productivity, activity, and retention of sales leaders, driving a more consistent and sustainable growth model.
“We are making changes to the business model that will not only improve our way of doing business, but also improve our results,” he told investors on the call. “This period of transition for the company is an important chapter in our history, and one that will make us stronger. Some of these changes, however, take time to be digested and implemented by our members, and as a result this has affected our performance for the short term.”
Guidance for fourth quarter FY 2014 included an unfavorable impact from currency rates of approximately 31 cents compared to the prior year, inclusive of approximately 22 cents from Venezuela. Guidance for FY 2015 includes a currency headwind of approximately 66 cents, including approximately 45 cents from Venezuela.
Avon Beats Q3 Expectations, Still Shows Signs of Struggle
The release of Avon Products Inc. (AVP—NYSE) third quarter results surpassed earnings expectations while missing revenue forecasts. The company reported adjusted net income from continuing operations of $99 million, or 23 cents per diluted share, beating expectations of 16 cents, according to the Zacks Consensus Estimate, and jumped approximately 64.3 percent from 14 cents, or $60 million, for the third quarter of 2013.
“We began the year with the expectation that the second half of 2014 would show improvement relative to the first half, and Avon’s third quarter results are consistent with modest improvement on both top and bottom line,” said Avon CEO Sheri McCoy. “We saw good results from our EMEA region, while sluggish performance in Brazil contributed to softer results in Latin America. Despite the strong headwinds in a number of markets, we continue to make progress on Avon’s turnaround journey.”
Still shares dropped over 9 percent when earning were released on Oct. 30, 2014, according to Zacks, after results fell short of revenue forecasts. The global cosmetics company posted revenue of $2.14 billion in the period, down 8 percent, or up 1 percent in constant dollars, from $2.32 billion during the prior year period. Analysts expected $2.15 billion, according to Zacks. Revenue was negatively affected by weak foreign exchange rates and lower sales volume, partially offset by the favorable net impact of mix and pricing, primarily due to inflationary pricing in Latin America.
Beauty sales declined 9 percent, but increased 1 percent in constant dollars. Fashion and home sales declined 11 percent, or 4 percent in constant dollars.
Brazil is the company’s largest market and Latin America is its most profitable region, yet Brazil revenue was up only 1 percent, or relatively unchanged in constant dollars. According to the company, this was partially impacted by high levels of competitive activity.
“In addition, the Brazilian economy has not recovered as anticipated after the World Cup. Consumer spending also seems to be impacted by the uncertain economic environment, the election cycle and high cost of debt,” McCoy said during the earnings conference call on Oct. 30. “That being said, while growth may be slowing, Brazil remains a highly attractive market, and we are committed to participating in its longer-term growth.”
Further results showed that third quarter 2014 gross margin was 61.9 percent and adjusted gross margin was 62.0 percent. Adjusted gross margin was 110 basis points lower than the prior-year quarter.
Nu Skin Q3 Sales Drop, Earnings Rise
At Nu Skin Enterprises Inc. (NUS—NYSE), third quarter revenue was $638.8 million, down 30 percent over the prior-year period. The revenue dip partially reflects a limited-time introduction of Nu Skin’s ageLOC® TR90® weight management system in Q3 2013. The personal-care company reported earnings of $1.12 per share, ahead of Nu Skin’s 90 cents to 95 cents guidance for the quarter. The company expects fourth quarter revenue of $590 million to $610 million, with earnings per share of 72 cents to 77 cents.
“Our sales results are heavily impacted by our product launch schedule. Last year’s second-half launch, which generated approximately $550 million in sales, provides a difficult year-over-year comparison,” Nu Skin President and CEO Truman Hunt shared in the company’s report. “However, excluding product launch sales, the core business has stabilized and is trending positively sequentially.”
Primerica Sales up 9%
Primerica Inc. (PRI—NYSE) reported third quarter revenue of $339.2 million, up 9 percent year over year. Net income was down 3.7 percent to $41.6 million, or 75 cents per diluted share, impacted by accelerated equity compensation expenses related to retirement plan modifications and higher claims incurred in the quarter. The financial services provider lagged 8.43 percent behind the Zacks Consensus Estimate, but investors reacted positively to Primerica’s results. The company’s stock price gained 0.38 percent on the news Nov. 5, 2014, to close at $52.16.
Nature’s Sunshine Revenue up, Earnings down
Nature’s Sunshine Products Inc. (NATR—NASDAQ) reported increased revenue for the third quarter on Nov. 5, 2014, with $94.9 million, up 2.6 percent from $92.5 million in the third quarter of 2013. Results showed lower earnings though, with 6 cents per diluted common share or net income of $1 million, compared to 29 cents, or $4.9 million in the third quarter of 2013. It was the fifth consecutive quarter of record sales for the health and wellness company’s Synergy WorldWide business, driven by South Korea, Japan and a return to growth in Europe.
“Sales in NSP North America have begun to improve with NSP United States and NSP Canada posting net sales growth for the first time since the second quarter of 2013 and the first quarter of 2012, respectively,” said Chairman and CEO Gregory L. Probert. “We remain cautiously optimistic about the future of this core market as our new products and sales programs continue to gain traction.”
Medifast Q3 Results ahead of Consensus
Medifast Inc. (MED—NYSE) third quarter results came in ahead of expectations on Nov. 5, 2014 with net income of $4.9 million, or 39 cents per share. Excluding non-recurring costs, adjusted earnings came to 47 cents per share, or $5.9 million net income. The weight-loss company posted net revenue of $74 million. This was a decrease of 14 percent from net revenue of $86.5 million in the third quarter of 2013. Revenue in the direct sales channel, Take Shape For Life, decreased 11 percent to $49.9 million in the third quarter of 2014, compared to $56.2 million in the same period last year.
Guidance for Q4 revenue and EPS is below consensus, with net revenue to be in the range of approximately $69 million to $73 million and EPS in the range of 31 cents to 34 cents. For fiscal year 2014, the company now expects revenue to be in the range of $310 million to $314 million and EPS in the range of $1.59 to $1.62. As trading closed on Nov. 5, 2014, shares hit $30.09, an increase of 23 percent in the last 12 months.
EDC’s Home Division Continues Record Sales Trend
Educational Development Corp. (EDUC—NASDAQ) reported results for the fiscal second quarter and the six months ended Aug. 31, 2014. For the six months ended Aug. 31, 2014, EDC reports net revenue of $14.0 million, a 19 percent increase of $2.3 million when compared to $11.7 million for the same period in the previous year and net earnings of $235,800 compared to $123,000. Earnings per share were 6 cents compared to 3 cents the previous year on a fully diluted basis.
The home business division, Usborne Books & More, has now recorded 16 consecutive months of revenue growth after nine years of decline. Net revenue for the first six month of fiscal year 2015 were up 30 percent over the same period in fiscal year 2014, and for this quarter sales are up 41 percent, and the trend continued in September as sales were up 58 percent over September last year.
The net earnings for the quarter were negatively impacted by two separate non-reoccurring charges, including additional marketing and promotion expense and recording a prior year’s sales tax audit assessment, which resulted in a $164,000 pretax impact.
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