September 01, 2012
Financial News, September 2012
Avon Products Inc.
Avon Products Inc. (AVP—NYSE) reported second quarter 2012 results.
Total revenue of $2.6 billion decreased 9 percent, or was down 1 percent in constant dollars.
Second quarter 2012 gross margin was 62.8 percent, 160 basis points lower than the prior-year quarter, due to higher product costs impacted by inflationary pressures, as well as negative impact from foreign exchange.
In the quarter, the company took further action to enhance its operating model, reduce costs and improve efficiencies. The company recorded costs associated with restructuring of $38 million pretax, up from $12 million pretax in the year-ago period, or 6 cents and 2 cents per diluted share, respectively.
Operating profit was $127 million in the quarter and operating margin was 4.9 percent. Adjusted non-GAAP operating profit was $165 million and adjusted non-GAAP operating margin was 6.4 percent, down 510 basis points from the second quarter of 2011.
Income from continuing operations in the second quarter of 2012 was $63 million, or 14 cents per diluted share. Adjusted non-GAAP income from continuing operations was $89 million, or 20 cents per diluted share.
Net cash provided by operating activities was $41 million for the six months ended June 30, 2012, compared with $101 million in the same period of 2011, as lower net income was partially offset by improvements in working capital, lower contributions to the U.S. pension plan, and a payment in 2011 associated with a long-term incentive compensation plan.
Avon’s net debt (total debt less cash) for the second quarter of 2012 was $2.3 billion, up $194 million from the year-end level, primarily due to a new term loan in the amount of $500 million in the quarter, partially offset by commercial paper repayments.
In Latin America, second quarter 2012 revenue was down 9 percent compared to the same quarter a year ago, or up 3 percent in constant dollars, which was driven by growth in both average order and Active Representatives. Effective in the second quarter of 2012, the Dominican Republic was included in Latin America, whereas in prior periods it had been included in North America.
In Europe, Middle East and Africa, total revenue was down 14 percent compared to the previous year and down 5 percent in constant dollars. Effective in the second quarter of 2012, the results of Central and Eastern Europe and Western Europe, Middle East and Africa were managed as a single operating segment. Accordingly, Europe, Middle East and Africa amounts include the results of Central and Eastern Europe and Western Europe, Middle East and Africa for all periods presented.
Avon’s core U.S. business (which excludes Silpada) was down 4 percent. Silpada sales declined 14 percent. In Asia Pacific, revenue was down 4 percent, or 2 percent in constant dollars.
Avon also declared a regular quarterly dividend on its common stock of 23 cents per share, payable Sept. 4, 2012, to shareholders of record on Aug. 15, 2012.
Avon, the company for women, is a leading global beauty company, with over $11 billion in annual revenue. As the world’s largest direct seller, Avon markets to women in more than 100 countries through over 6 million active independent Avon sales representatives.
Blyth Inc. (BTH—NYSE), a direct to consumer company and leading designer and marketer of candles, accessories for the home, and health and wellness products, reported earnings for the second quarter. Net sales for the three months ended June 30, 2012, increased 70 percent to $324.8 million versus $191.5 million for the comparable prior year period, primarily due to significant year-over-year sales growth at ViSalus™. ViSalus is a lifestyle company that markets health and wellness products, such as weight management products, nutritional supplements and energy drinks, through the Body by Vi™ 90-Day Challenge, using a network marketing model of direct selling. International sales for Blyth represented 20 percent of second quarter sales this year, compared to 39 percent last year, driven by ViSalus’ strong domestic sales growth.
Operating profit for the second quarter was $19.0 million this year versus a loss of $800,000 last year and includes a pretax ViSalus equity incentive charge of $9.6 million this year and $6.0 million last year. The company also incurred pretax restructuring charges of $200,000 for PartyLite this year. Excluding the impact of these charges, operating profit would have been $28.9 million this year versus $5.3 million last year. The increase in operating profit is principally due to the growth in ViSalus.
Net earnings for the second quarter were $8.0 million compared to a loss of $5.2 million for the prior year. Diluted earnings per share for the second quarter were 46 cents this year compared to a loss of 31 cents last year. Normalized earnings per share before the aforementioned ViSalus equity incentive charges, PartyLite restructuring and discontinued operations were 72 cents this year versus 7 cents in last year’s comparable quarter. All earnings per share reflect the company’s two-for-one stock split effective June 15, 2012.
In the direct selling segment, second quarter net sales increased 98 percent to $278.3 million versus $140.9 million for the same period last year due to significant sales growth at ViSalus. Sales at ViSalus were $190.4 million in this year’s second quarter versus $40.6 million for the same period last year.
ViSalus also announced that it has filed a registration statement on Form S-1 with the U.S. Securities and Exchange Commission for a potential initial public offering (IPO) of its Class A common stock. The registration statement has been filed by FVA Ventures, Inc., which will be renamed ViSalus, Inc. in connection with the IPO. The number of shares to be offered and the price range for the offering have not yet been determined. A portion of the shares to be offered in the IPO will be issued and sold by ViSalus, and a portion will be sold by certain stockholders of ViSalus. Blyth will continue to own over 50 percent of ViSalus’ common stock following the IPO. Jefferies & Company, Inc. will act as book-running manager for the offering.
Total PartyLite sales for the second quarter declined 13 percent to $86.8 million from $100.1 million last year. PartyLite’s European sales declined 6 percent in local currency, translating into a decline of 16 percent in U.S. dollars during the quarter as booking shows was challenging in the current economic environment throughout Europe. PartyLite’s U.S. sales declined 11 percent versus the prior year period. In PartyLite Canada, sales declined 10 percent in local currency, which translated into a decline of 14 percent in U.S. dollars during the quarter.
Second quarter operating profit in the direct selling segment was $20.7 million versus $1.2 million in the same period last year. Excluding the aforementioned $9.6 million ViSalus equity incentive charge this year and $6.0 million last year, as well as the PartyLite restructuring charge of $200,000 this year, the segment’s second quarter operating profit would have been $30.5 million this year versus $7.2 million last year.
Blyth Inc., headquartered in Greenwich, Conn., is a multi-channel company primarily focused on direct selling, offering its products directly to the consumer through PartyLite and ViSalus.
Herbalife Ltd. (HLF—NYSE) reported second quarter record net sales of $1.0 billion, a 17 percent increase, driven by a 23 percent increase in volume points compared to the prior-year period. The company reported net income of $133.4 million, or $1.10 per diluted share, compared to the second quarter 2011 net income of $111.2 million, or 88 cents per diluted share, reflecting an increase of 20 percent and 25 percent, respectively.
For the quarter ended June 30, 2012, the company generated cash flow from operations of $137.1 million, paid dividends of $35.1 million, invested $15.0 million in capital expenditures and repurchased $239.0 million in common shares outstanding under a share repurchase program. As of July 27, 2012, the company has completed the $427.9 million repurchase agreement announced on May 3, 2012. The company repurchased a total of 9.2 million shares at an average price of $46.37.
The company also reported that its board of directors has approved a dividend of 30 cents per share to shareholders of record on Aug. 14, 2012, payable on Aug. 30, 2012.
Following the completion of the prior $1 billion share repurchase authorization, the company’s board of directors authorized a new $1 billion share repurchase authorization available to be utilized over the next five-year period, expiring on June 30, 2017.
Since 2007, the company has returned $1.5 billion to shareholders through the repurchase of approximately 52.6 million shares and $350 million in dividends for a total of approximately $1.9 billion, or 118 percent of net income.
The company amended its credit facility to add a new $500 million term loan to the existing $700 million senior credit facility entered into in March 2011. This new facility was arranged by Bank of America Merrill Lynch with RaboBank, HSBC and Wells Fargo as joint lead arrangers and joint book managers.
Herbalife Ltd. is a global nutrition company that sells weight-management, nutritional, and personal-care products intended to support a healthy lifestyle. Herbalife products are sold in 83 countries to and through a network of independent distributors.
Nu Skin Enterprises Inc.
Nu Skin Enterprises Inc. (NUS—NYSE) announced record second quarter results with revenue of $593.2 million, a 40 percent improvement over the prior-year period. Revenue was negatively impacted 2 percent from foreign currency fluctuations. Earnings per share for the quarter increased 45 percent to 94 cents, compared to 65 cents in the prior year.
Second quarter revenue in North Asia was $177.7 million, compared to $183.1 million for the same period in 2011. Revenue in Greater China increased 152 percent to $199.7 million, compared to $79.4 million in the prior-year period. South Asia/Pacific revenue was $98.3 million, a 66 percent improvement compared to the prior year. Revenue in the Americas improved 20 percent to $71.8 million, compared to $59.8 million in the prior-year period. Revenue in Europe was $45.7 million, a 7 percent improvement over the prior-year period.
The company’s operating margin was 16.5 percent for the quarter, compared to 15.6 percent for the prior-year period. Gross margin during the quarter improved 70 basis points to 83.9 percent. Selling expenses, as a percent of revenue, were 45.1 percent in the second quarter, a 180 basis-point increase.
The company had cash and current investments of $385 million at the end of the quarter. Dividend payments during the quarter were $12.3 million, and the company repurchased $108 million of its shares.
Nu Skin Enterprises Inc. demonstrates its tradition of innovation through its comprehensive anti-aging product portfolio, independent business opportunity and corporate social responsibility initiatives. A global direct selling company, Nu Skin operates in 52 markets worldwide and has approximately 900,000 active distributors and preferred customers.
Tupperware Brands Corp.
Tupperware Brands Corp. (TUP—NYSE) reported second quarter 2012 sales and profit, with sales down 5 percent in dollars and up 5 percent in local currency.
GAAP net income for the quarter of $12.7 million, or 22 cents per diluted share, compared with 2011 second quarter GAAP net income and EPS of $65.1 million and $1.03 per share, respectively. Adjusted diluted earnings per share of $1.31 in the quarter was 6 cents, or 5 percent, better than 2011 in U.S. dollars, including a negative foreign currency impact of 18 cents. Excluding the impact of foreign exchange on the comparison, adjusted diluted earnings per share was up 24 cents, or 22 percent.
The company repurchased in the open market 413,000 shares for $25 million in the second quarter of 2012. Since 2007, the company has repurchased 13.5 million shares for $703 million and can repurchase additional shares worth up to $497 million under its current authorization that runs until Feb. 1, 2015. The company expects to repurchase $25 to $50 million worth of shares in the third quarter of 2012 and an additional $75 to $100 million worth of shares in the fourth quarter of 2012.
According to Chairman and CEO Rick Goings, the Asia Pacific and South America segments’ performance in the quarter led to a 5 percent local currency sales increase, and the company continued to see strong performance from its emerging markets overall.
The second quarter results included non-cash impairment charges to write down the purchase of accounting intangibles associated with the company’s BeautiControl, Nutrimetics and NaturCare operations of $38.9 million, $29.0 million and $9.0 million, respectively. Also included was a $7.5 million pretax gain in connection with the company’s sale of its previous manufacturing facility in Belgium.
Tupperware Brands Corp. is a portfolio of global direct selling companies, selling innovative, premium products across multiple brands and categories through an independent salesforce of 2.7 million.
USANA Health Sciences Inc.
USANA Health Sciences Inc. (USNA—NYSE) announced financial results for its fiscal second quarter ended June 30, 2012.
Net sales for the second quarter of 2012 increased by 8.0 percent to $160.9 million, compared with $148.9 million in the prior-year period. The growth in net sales was driven by increases in both the company’s Asia Pacific and North America and Europe regions.
Net earnings for the second quarter increased to $16.7 million, an increase of 20.9 percent, compared with the prior-year period. This increase was due primarily to higher net sales, improved gross margins, lower relative associate incentive expense, and a lower effective tax rate. Earnings per share for the quarter increased 26.1 percent to $1.11, compared with 88 cents in the second quarter of the prior year. This improvement in earnings per share resulted from higher net earnings and a lower number of diluted shares outstanding, resulting from the company’s share repurchases over the last 12 months.
Net sales in the Asia Pacific region increased by 11.0 percent to $98.4 million, compared with $88.7 million for the second quarter of the prior year. This improvement was due to strong sales growth in Southeast Asia/Pacific and Greater China.
During the second quarter of 2012, net sales in the North America and Europe region increased by 3.6 percent to $62.5 million, compared with the second quarter of the prior year.
The company continued its successful track record of generating meaningful levels of cash from operations and ended the quarter with approximately $65.5 million in cash and cash equivalents. Cash generated from operations totaled $21.3 million for the quarter. During the quarter, the company invested $26.6 million to repurchase 677,000 shares of the company’s stock.
USANA develops and manufactures high-quality nutritional, personal care, and weight-management products that are sold directly through more than 200,000 associates in 18 international markets.
Primerica Inc. (PRI—NYSE) announced that it has priced a public offering of $375 million in aggregate principal amount of Senior Notes due 2022. The notes will bear an annual interest rate of 4.750 percent. Interest will be paid semi-annually on the 15th day of January and July beginning on Jan. 15, 2013. The proceeds of the offering will be used to repay Primerica’s $300 million note payable to a subsidiary of Citigroup Inc. and for general corporate purposes, which may include share repurchases. J.P. Morgan Securities LLC, Citigroup Global Markets Inc. and Morgan Stanley & Co. LLC will serve as joint book-running managers for the offering.
The offering will be made pursuant to Primerica’s existing shelf registration statement that was previously filed with the Securities and Exchange Commission.
Primerica Inc., headquartered in Duluth, Ga., is a distributor of financial products to middle-income families in North America. In addition, Primerica provides an entrepreneurial full- or part-time business opportunity for individuals seeking to earn income by distributing the company’s financial products.
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