UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q

☑	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2021

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM _____________ TO _____________

Commission File Number: 001-12421

	NU SKIN ENTERPRISES, INC.
	(Exact name of registrant as specified in its charter)

Delaware		87-0565309
(State or other jurisdiction of incorporation or organization)		(IRS Employer Identification No.)

	75 West Center Street Provo, Utah 84601
	(Address of principal executive offices, including zip code)

	(801) 345-1000
	(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class		Trading Symbol(s)		Name of each exchange on which registered
Class A Common Stock, $.001 par value		NUS		New York Stock Exchange

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☑ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☑ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ☑	Accelerated filer ☐
Non-accelerated filer ☐	Smaller reporting company ☐
	Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☑

As of May 1, 2021, 50,042,337 shares of the registrant’s Class A common stock, $.001 par value per share, were outstanding.

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NU SKIN ENTERPRISES, INC.

QUARTERLY REPORT ON FORM 10-Q – FIRST QUARTER 2021

TABLE OF CONTENTS

			Page
Part I.	Financial Information
	Item 1.	Financial Statements (Unaudited):	1
		Consolidated Balance Sheets	1
		Consolidated Statements of Income	2
		Consolidated Statements of Comprehensive Income	3
		Consolidated Statements of Stockholders’ Equity	4
		Consolidated Statements of Cash Flows	5
		Notes to Consolidated Financial Statements	6
	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	16
	Item 3.	Quantitative and Qualitative Disclosures about Market Risk	23
	Item 4.	Controls and Procedures	23

Part II.	Other Information
	Item 1.	Legal Proceedings	24
	Item 1A.	Risk Factors	24
	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	24
	Item 3.	Defaults Upon Senior Securities	24
	Item 4.	Mine Safety Disclosures	24
	Item 5.	Other Information	24
	Item 6.	Exhibits	25

	Signature		26

In this Quarterly Report on Form 10-Q, references to “dollars” and “$” are to United States (“U.S.”) dollars.

Nu Skin, Pharmanex, and ageLOC are our trademarks. The italicized product names used in this Quarterly Report on Form 10-Q are product names and also, in certain cases, our trademarks.

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PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

NU SKIN ENTERPRISES, INC.

Consolidated Balance Sheets (Unaudited)

(U.S. dollars in thousands)

	March 31, 2021			December 31, 2020
ASSETS
Current assets:
Cash and cash equivalents	$	339,099		$	402,683
Current investments		23,615			21,216
Accounts receivable, net		60,625			63,370
Inventories, net		363,431			314,366
Prepaid expenses and other		114,118			101,563
Total current assets		900,888			903,198

Property and equipment, net		464,247			468,181
Operating lease right-of-use assets		147,129			155,104
Goodwill		202,979			202,979
Other intangible assets, net		87,135			89,532
Other assets		147,721			138,082
Total assets	$	1,950,099		$	1,957,076

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	67,083		$	66,174
Accrued expenses		404,493			446,682
Current portion of long-term debt		90,000			30,000
Total current liabilities		561,576			542,856

Operating lease liabilities		108,237			112,275
Long-term debt		298,120			305,393
Other liabilities		110,692			102,281
Total liabilities		1,078,625			1,062,805

Commitments and contingencies (Note 5 and 11)

Stockholders’ equity:
Class A common stock – 500 million shares authorized, $0.001 par value, 90.6 million shares issued		91			91
Additional paid-in capital		579,204			579,801
Treasury stock, at cost – 40.4 million and 39.7 million shares		(1,505,076	)		(1,461,593	)
Accumulated other comprehensive loss		(71,626	)		(64,768	)
Retained earnings		1,868,881			1,840,740
Total stockholders’ equity		871,474			894,271
Total liabilities and stockholders’ equity	$	1,950,099		$	1,957,076

The accompanying notes are an integral part of these consolidated financial statements.

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NU SKIN ENTERPRISES, INC.

Consolidated Statements of Income (Unaudited)

(U.S. dollars in thousands, except per share amounts)

	Three Months Ended March 31,
	2021		2020
Revenue	$	677,026	$	518,028
Cost of sales		170,566		125,793
Gross profit		506,460		392,235

Operating expenses:
Selling expenses		273,746		206,042
General and administrative expenses		169,801		149,628
Total operating expenses		443,547		355,670

Operating income		62,913		36,565
Other income (expense), net		1,582		(6,174	)

Income before provision for income taxes		64,495		30,391
Provision for income taxes		17,065		10,661

Net income	$	47,430	$	19,730

Net income per share (Note 6):
Basic	$	0.94	$	0.36
Diluted	$	0.91	$	0.36

Weighted-average common shares outstanding (000s):
Basic		50,706		55,059
Diluted		52,172		55,101

The accompanying notes are an integral part of these consolidated financial statements.

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NU SKIN ENTERPRISES, INC.

Consolidated Statements of Comprehensive Income (Unaudited)

(U.S. dollars in thousands)

	Three Months Ended March 31,
	2021			2020
Net income	$	47,430		$	19,730

Other comprehensive (loss) income, net of tax:
Foreign currency translation adjustment, net of taxes of $(2) and $(3) for the three months ended March 31, 2021 and 2020, respectively		(9,919	)		(14,997	)
Net unrealized gains/(losses) on cash flow hedges, net of taxes of $(839), and zero for the for the three months ended March 31, 2021 and 2020, respectively		3,040			—
Less: Reclassification adjustment for realized losses/(gains) in current earnings, net of taxes of $(6) and zero for the three months ended March 31, 2021 and 2020, respectively		21			—
		(6,858	)		(14,997	)
Comprehensive income	$	40,572		$	4,733

The accompanying notes are an integral part of these consolidated financial statements.

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NU SKIN ENTERPRISES, INC.

Consolidated Statements of Stockholders’ Equity (Unaudited)

(U.S. dollars in thousands)

	For the Three Months Ended March 31, 2021
	Class A Common Stock		Additional Paid-in Capital			Treasury Stock			Accumulated Other Comprehensive Loss			Retained Earnings			Total
Balance at January 1, 2021	$	91	$	579,801		$	(1,461,593	)	$	(64,768	)	$	1,840,740		$	894,271

Net income		—		—			—			—			47,430			47,430
Other comprehensive loss, net of tax		—		—			—			(6,858	)		—			(6,858	)
Repurchase of Class A common stock (Note 6)		—		—			(50,406	)		—			—			(50,406	)
Exercise of employee stock options (0.3 million shares)/vesting of stock awards		—		(7,400	)		6,923			—			—			(477	)
Stock-based compensation		—		6,803			—			—			—			6,803
Cash dividends		—		—			—			—			(19,289	)		(19,289	)
Balance at March 31, 2021	$	91	$	579,204		$	(1,505,076	)	$	(71,626	)	$	1,868,881		$	871,474

	For the Three Months Ended March 31, 2020
	Class A Common Stock		Additional Paid-in Capital			Treasury Stock			Accumulated Other Comprehensive Loss			Retained Earnings			Total
Balance at January 1, 2020	$	91	$	557,544		$	(1,324,826	)	$	(85,292	)	$	1,727,772		$	875,289

Net income		—		—			—			—			19,730			19,730
Other comprehensive income, net of tax		—		—			—			(14,997	)		—			(14,997	)
Repurchase of Class A common stock (Note 6)		—		—			(60,886	)		—			—			(60,886	)
Exercise of employee stock options (0.1 million shares)/vesting of stock awards		—		(3,083	)		1,676			—			—			(1,407	)
Stock-based compensation		—		3,455			—			—			—			3,455
Cash dividends		—		—			—			—			(20,686	)		(20,686	)
Balance at March 31, 2020	$	91	$	557,916		$	(1,384,036	)	$	(100,289	)	$	1,726,816		$	800,498

The accompanying notes are an integral part of these consolidated financial statements.

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NU SKIN ENTERPRISES, INC.

Consolidated Statements of Cash Flows (Unaudited)

(U.S. dollars in thousands)

	Three Months Ended March 31,
	2021			2020
Cash flows from operating activities:
Net income	$	47,430		$	19,730
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		18,344			19,095
Non-cash lease expense		13,298			10,869
Stock-based compensation		6,803			3,455
Foreign currency losses		970			3,177
Loss on disposal of assets		506			2,286
Deferred taxes		3,363			963
Changes in operating assets and liabilities:
Accounts receivable		436			5,081
Inventories, net		(53,776	)		10,764
Prepaid expenses and other		(19,241	)		965
Other assets		(2,786	)		(24,905	)
Accounts payable		1,869			1,491
Accrued expenses		(36,779	)		12,889
Other liabilities		707			3,167
Net cash (used in) /provided by operating activities		(18,856	)		69,027

Cash flows from investing activities:
Purchases of property and equipment		(19,373	)		(19,387	)
Proceeds on investment sales		7,550			4,234
Purchases of investments		(6,973	)		(4,031	)
Net cash used in investing activities		(18,796	)		(19,184	)

Cash flows from financing activities:
Exercise of employee stock options and taxes paid related to the net shares settlement of stock awards		(477	)		(1,407	)
Payment of cash dividends		(19,289	)		(20,686	)
Repurchases of shares of common stock		(50,406	)		(60,886	)
Finance lease principal payments		(483	)		—
Payments of debt		(17,500	)		(5,000	)
Proceeds from debt		70,000			65,000
Net cash used in financing activities		(18,155	)		(22,979	)

Effect of exchange rate changes on cash		(7,777	)		(9,916	)

Net increase (decrease) in cash and cash equivalents		(63,584	)		16,948

Cash and cash equivalents, beginning of period		402,683			335,630

Cash and cash equivalents, end of period	$	339,099		$	352,578

The accompanying notes are an integral part of these consolidated financial statements.

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NU SKIN ENTERPRISES, INC.

Notes to Consolidated Financial Statements

1.	The Company

Nu Skin Enterprises, Inc. (the “Company”) is a holding company, with Nu Skin, a leading global direct selling company, being the primary operating unit. Nu Skin develops and distributes premium-quality, innovative personal care products and wellness products that are sold worldwide under the Nu Skin, Pharmanex and ageLOC brands and a small number of other products and services. The Company reports revenue from nine segments, consisting of its seven geographic Nu Skin segments—Mainland China; Americas/Pacific, which includes Australia, Canada, Latin America, New Zealand and the United States; South Korea; Europe, Middle East and Africa (“EMEA”), which includes markets in Europe as well as Israel, Russia and South Africa; Japan; Southeast Asia, which includes Indonesia, Malaysia, the Philippines, Singapore, Thailand and Vietnam; and Hong Kong/Taiwan, which also includes Macau—its Manufacturing segment, which includes manufacturing and packaging subsidiaries it has acquired; and its Grow Tech segment, which focuses on developing controlled-environment agriculture technologies (the Company’s subsidiaries operating within each segment are collectively referred to as the “Subsidiaries”).

2.	Summary of Significant Accounting Policies

The accompanying unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“US GAAP”) for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by US GAAP for complete financial statements. The unaudited consolidated financial statements include the accounts of the Company and its Subsidiaries. All significant intercompany accounts and transactions are eliminated in consolidation. In the opinion of management, the accompanying unaudited consolidated financial statements contain all adjustments, consisting of normal recurring adjustments, considered necessary for a fair statement of the Company’s financial information as of March 31, 2021, and for the three-month periods ended March 31, 2021 and 2020. The results of operations of any interim period are not necessarily indicative of the results of operations to be expected for the fiscal year. The consolidated balance sheet as of December 31, 2020 has been prepared using information from the audited financial statements at that date. For further information, refer to the consolidated financial statements and accompanying footnotes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020.

Accounting Pronouncements

In March 2020, the FASB issued, ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting, which provides optional guidance for a limited time to ease the potential burden in accounting for the effects of reference rate reform on financial reporting. The guidance provides optional expedients and exceptions for applying US GAAP to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met. ASU 2020-04 applies only to contracts and hedging relationships that reference LIBOR or another reference rate expected to be discontinued due to reference rate reform. The expedients and exceptions provided by the amendments do not apply to contract modifications made and hedging relationships entered into or evaluated after December 31, 2022. The amendments in ASU 2020-04 are elective and are effective upon issuance for all entities. The Company elected to apply the hedge accounting expedients related to probability and the assessments of effectiveness for future LIBOR-indexed cash flows to assume that the index upon which future hedged transactions will be based matches the index on the corresponding derivatives. Application of these expedients preserves the presentation of derivatives consistent with past presentation. The Company continues to evaluate the impact of the guidance and may apply other elections as applicable as additional changes in the market occur.

Inventory

Inventories consist of the following (U.S. dollars in thousands):

	March 31, 2021		December 31, 2020
Raw materials	$	143,998	$	118,877
Finished goods		219,433		195,489
Total Inventory, net	$	363,431	$	314,366

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Revenue Recognition

Contract Liabilities – Customer Loyalty Programs

Contract liabilities, recorded as deferred revenue within the accrued expenses line in the consolidated balance sheets, include loyalty point program deferrals with certain customers which are accounted for as a reduction in the transaction price and are generally recognized as points are redeemed for additional products.

The balance of deferred revenue related to contract liabilities as of March 31, 2021 and December 31, 2020 was $19.8 million and $

SEC Form 10-Q filed by Nu Skin Enterprises, Inc.