QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934 FOR THE QUARTERLY PERIOD ENDED
|
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM _____________ TO
_____________
|
|
||
(Exact name of registrant as specified in its charter)
|
|
|
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(State or other jurisdiction of incorporation or organization)
|
(IRS Employer Identification No.)
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|
||
(Address of principal executive offices, including zip code)
|
(
|
||
(Registrant’s telephone number, including area code)
|
Title of each class
|
Trading Symbol(s)
|
Name of each exchange on which registered
|
||
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|
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Accelerated filer ☐
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Non-accelerated filer ☐
|
Smaller reporting company
|
Emerging growth company
|
Page
|
|||
Part I.
|
Financial Information
|
||
Item 1.
|
|||
1
|
|||
2
|
|||
3
|
|||
4
|
|||
6
|
|||
7
|
|||
Item 2.
|
18 | ||
Item 3.
|
27 | ||
Item 4.
|
27 | ||
Part II.
|
Other Information
|
||
Item 1.
|
28 | ||
Item 1A.
|
28 | ||
Item 2.
|
29 | ||
Item 3.
|
29 | ||
Item 4.
|
29 | ||
Item 5.
|
29 | ||
Item 6.
|
30 | ||
31 |
September 30,
2022
|
December 31,
2021
|
|||||||
ASSETS
|
||||||||
Current assets:
|
||||||||
Cash and cash equivalents
|
$
|
|
$
|
|
||||
Current investments
|
|
|
||||||
Accounts receivable, net
|
|
|
||||||
Inventories, net
|
|
|
||||||
Prepaid expenses and other
|
|
|
||||||
Total current assets
|
|
|
||||||
Property and equipment, net
|
|
|
||||||
Operating lease right-of-use assets
|
|
|
||||||
Goodwill
|
|
|
||||||
Other intangible assets, net
|
|
|
||||||
Other assets
|
|
|
||||||
Total assets
|
$
|
|
$
|
|
||||
LIABILITIES AND STOCKHOLDERS’ EQUITY
|
||||||||
Current liabilities:
|
||||||||
Accounts payable
|
$
|
|
$
|
|
||||
Accrued expenses
|
|
|
||||||
Current portion of long-term debt
|
|
|
||||||
Total current liabilities
|
|
|
||||||
Operating lease liabilities
|
|
|
||||||
Long-term debt
|
|
|
||||||
Other liabilities
|
|
|
||||||
Total liabilities
|
|
|
||||||
Commitments and contingencies (Notes 5 and 11)
|
|
|
||||||
Stockholders’ equity:
|
||||||||
Class A common stock –
|
|
|
||||||
Additional paid-in capital
|
|
|
||||||
Treasury stock, at cost –
|
(
|
)
|
(
|
)
|
||||
Accumulated other comprehensive loss
|
(
|
)
|
(
|
)
|
||||
Retained earnings
|
|
|
||||||
Total stockholders’ equity
|
|
|
||||||
Total liabilities and stockholders’
equity
|
$
|
|
$
|
|
Three Months Ended
September 30,
|
Nine Months
Ended
September 30,
|
|||||||||||||||
2022
|
2021
|
2022
|
2021
|
|||||||||||||
Revenue
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||
Cost of sales
|
|
|
|
|
||||||||||||
Gross profit
|
|
|
|
|
||||||||||||
Operating expenses:
|
||||||||||||||||
Selling expenses
|
|
|
|
|
||||||||||||
General and administrative expenses
|
|
|
|
|
||||||||||||
Restructuring and impairment expenses
|
||||||||||||||||
Total operating expenses
|
|
|
|
|
||||||||||||
Operating income (loss)
|
(
|
)
|
|
|
|
|||||||||||
Other income (expense), net
|
(
|
)
|
|
(
|
)
|
|
||||||||||
Income (loss) before provision for income taxes
|
(
|
)
|
|
|
|
|||||||||||
Provision (benefit) for income taxes
|
(
|
)
|
|
|
|
|||||||||||
Net income (loss)
|
$
|
(
|
)
|
$
|
|
$
|
|
$
|
|
|||||||
Net income (loss) per share (Note 6):
|
||||||||||||||||
Basic
|
$
|
(
|
)
|
$
|
|
$
|
|
$
|
|
|||||||
Diluted
|
$
|
(
|
)
|
$
|
|
$
|
|
$
|
|
|||||||
Weighted-average common shares outstanding (000s):
|
||||||||||||||||
Basic
|
|
|
|
|
||||||||||||
Diluted
|
|
|
|
|
Three Months Ended
September 30,
|
Nine Months
Ended
September 30,
|
|||||||||||||||
2022
|
2021
|
2022
|
2021
|
|||||||||||||
Net income (loss)
|
$
|
(
|
)
|
$
|
|
$
|
|
$
|
|
|||||||
Other comprehensive (loss) income, net of tax:
|
||||||||||||||||
Foreign currency translation adjustment, net of taxes of $(
|
(
|
)
|
(
|
)
|
(
|
)
|
(
|
)
|
||||||||
Net unrealized gains/(losses) on cash flow hedges, net of taxes of $(
|
|
|
|
|
||||||||||||
Reclassification adjustment for realized losses/(gains) in current earnings on cash flow hedges, net of
taxes of $
|
(
|
)
|
|
(
|
)
|
|
||||||||||
(
|
)
|
(
|
)
|
(
|
)
|
(
|
)
|
|||||||||
Comprehensive income (loss)
|
$
|
(
|
)
|
$
|
|
$
|
|
$
|
|
For the Three Months Ended September 30, 2022
|
||||||||||||||||||||||||
Class A
Common Stock
|
Additional
Paid-in Capital
|
Treasury
Stock
|
Accumulated Other
Comprehensive Loss
|
Retained
Earnings
|
Total
|
|||||||||||||||||||
Balance at July 1, 2022
|
$
|
|
$
|
|
$
|
(
|
)
|
$
|
(
|
)
|
$
|
|
$
|
|
||||||||||
Net loss
|
|
|
|
|
(
|
)
|
(
|
)
|
||||||||||||||||
Other comprehensive loss, net of tax
|
|
|
|
(
|
)
|
|
(
|
)
|
||||||||||||||||
Repurchase of Class A common stock (Note 6)
|
|
|
(
|
)
|
|
|
(
|
)
|
||||||||||||||||
Exercise of employee stock options (
|
|
|
|
|
|
|
||||||||||||||||||
Stock-based compensation
|
|
|
|
|
|
|
||||||||||||||||||
Cash dividends
|
|
|
|
|
(
|
)
|
(
|
)
|
||||||||||||||||
Balance at September 30, 2022
|
$
|
|
$
|
|
$
|
(
|
)
|
$
|
(
|
)
|
$
|
|
$
|
|
For the Three Months Ended September 30, 2021
|
||||||||||||||||||||||||
Class A
Common Stock
|
Additional
Paid-in Capital
|
Treasury
Stock
|
Accumulated Other
Comprehensive Loss
|
Retained
Earnings
|
Total
|
|||||||||||||||||||
Balance at July 1, 2021
|
$
|
|
$
|
|
$
|
(
|
)
|
$
|
(
|
)
|
$
|
|
$
|
|
||||||||||
Net income
|
|
|
|
|
|
|
||||||||||||||||||
Other comprehensive income, net of tax
|
|
|
|
(
|
)
|
|
(
|
)
|
||||||||||||||||
Repurchase of Class A common stock (Note 6)
|
|
|
(
|
)
|
|
|
(
|
)
|
||||||||||||||||
Exercise of employee stock options (
|
|
|
|
|
|
|
||||||||||||||||||
Stock-based compensation
|
|
|
|
|
|
|
||||||||||||||||||
Cash dividends
|
|
|
|
|
(
|
)
|
(
|
)
|
||||||||||||||||
Balance at September 30, 2021
|
$
|
|
$
|
|
$
|
(
|
)
|
$
|
(
|
)
|
$
|
|
$
|
|
For the Nine Months Ended September 30, 2022
|
||||||||||||||||||||||||
Class A
Common
Stock
|
Additional
Paid-in
Capital
|
Treasury
Stock
|
Accumulated
Other
Comprehensive
Loss
|
Retained
Earnings
|
Total
|
|||||||||||||||||||
Balance at January 1, 2022
|
$
|
|
$
|
|
$
|
(
|
)
|
$
|
(
|
)
|
$
|
|
$
|
|
||||||||||
Net income
|
|
|
|
|
|
|
||||||||||||||||||
Other comprehensive loss, net of tax
|
|
|
|
(
|
)
|
|
(
|
)
|
||||||||||||||||
Repurchase of Class A common stock (Note 6)
|
|
|
(
|
)
|
|
|
(
|
)
|
||||||||||||||||
Exercise of employee stock options (
|
|
(
|
)
|
|
|
|
|
|||||||||||||||||
Stock-based compensation
|
|
|
|
|
|
|
||||||||||||||||||
Cash dividends
|
|
|
|
|
(
|
)
|
(
|
)
|
||||||||||||||||
Balance at September 30, 2022
|
$
|
|
$
|
|
$
|
(
|
)
|
$
|
(
|
)
|
$
|
|
$
|
|
For the Nine
Months Ended September 30, 2021
|
||||||||||||||||||||||||
Class A
Common Stock
|
Additional
Paid-in Capital
|
Treasury
Stock
|
Accumulated Other
Comprehensive Loss
|
Retained
Earnings
|
Total
|
|||||||||||||||||||
Balance at January 1, 2021
|
$
|
|
$
|
|
$
|
(
|
)
|
$
|
(
|
)
|
$
|
|
$
|
|
||||||||||
Net income
|
|
|
|
|
|
|
||||||||||||||||||
Other comprehensive loss, net of tax
|
|
|
|
(
|
)
|
|
(
|
)
|
||||||||||||||||
Repurchase of Class A common stock (Note 6)
|
|
|
(
|
)
|
|
|
(
|
)
|
||||||||||||||||
Exercise of employee stock options (
|
|
(
|
)
|
|
|
|
|
|||||||||||||||||
Stock-based compensation
|
|
|
|
|
|
|
||||||||||||||||||
Cash dividends
|
|
|
|
|
(
|
)
|
(
|
)
|
||||||||||||||||
Balance at September 30, 2021
|
$
|
|
$
|
|
$
|
(
|
)
|
$
|
(
|
)
|
$
|
|
$
|
|
Nine Months
Ended
September 30,
|
||||||||
2022
|
2021
|
|||||||
Cash flows from operating activities:
|
||||||||
Net income
|
$
|
|
$
|
|
||||
Adjustments to reconcile net income to cash flows from operating activities:
|
||||||||
Depreciation and amortization
|
|
|
||||||
Non-cash lease expense
|
|
|
||||||
Stock-based compensation
|
|
|
||||||
Foreign currency losses
|
|
|
||||||
Loss on disposal of assets
|
|
|
||||||
Deferred taxes
|
|
|
||||||
Impairment of fixed assets and other intangibles
|
||||||||
Unrealized gain on equity investments
|
( |
) | ||||||
Changes in operating assets and liabilities:
|
||||||||
Accounts receivable, net
|
(
|
)
|
|
|||||
Inventories, net
|
|
(
|
)
|
|||||
Prepaid expenses and other
|
(
|
)
|
(
|
)
|
||||
Other assets
|
|
(
|
)
|
|||||
Accounts payable
|
(
|
)
|
(
|
)
|
||||
Accrued expenses
|
(
|
)
|
(
|
)
|
||||
Other liabilities
|
(
|
)
|
|
|||||
Net cash provided by operating activities
|
|
|
||||||
Cash flows from investing activities:
|
||||||||
Purchases of property and equipment
|
(
|
)
|
(
|
)
|
||||
Proceeds on investment sales
|
|
|
||||||
Purchases of investments
|
(
|
)
|
(
|
)
|
||||
Acquisitions, net of cash acquired
|
( |
) | ||||||
Net cash used in investing activities
|
(
|
)
|
(
|
)
|
||||
Cash flows from financing activities:
|
||||||||
Exercise of employee stock options and taxes paid related to the net shares settlement of stock awards
|
|
|
||||||
Payment of cash dividends
|
(
|
)
|
(
|
)
|
||||
Repurchases of shares of common stock
|
(
|
)
|
(
|
)
|
||||
Finance lease principal payments
|
(
|
)
|
(
|
)
|
||||
Payment of debt issuance costs
|
( |
) | ||||||
Payments of debt
|
(
|
)
|
(
|
)
|
||||
Proceeds from debt
|
|
|
||||||
Net cash used in financing activities
|
(
|
)
|
(
|
)
|
||||
Effect of exchange rate changes on cash
|
(
|
)
|
(
|
)
|
||||
Net increase (decrease) in cash and cash equivalents
|
(
|
)
|
(
|
)
|
||||
Cash and cash equivalents, beginning of period
|
|
|
||||||
Cash and cash equivalents, end of period
|
$
|
|
$
|
|
1. |
The Company
|
2. |
Summary of Significant Accounting Policies
|
September 30,
2022
|
December 31,
2021
|
|||||||
Raw materials
|
$
|
|
$
|
|
||||
Finished goods
|
|
|
||||||
Total Inventory, net
|
$
|
|
$
|
|
3. |
Goodwill
|
September 30,
2022
|
December 31,
2021
|
|||||||
Nu Skin
|
||||||||
Americas
|
$
|
|
$
|
|
||||
Mainland China
|
|
|
||||||
Southeast Asia/Pacific
|
|
|
||||||
South Korea
|
|
|
||||||
Japan
|
|
|
||||||
EMEA
|
|
|
||||||
Hong Kong/Taiwan
|
|
|
||||||
Rhyz Investments
|
||||||||
Manufacturing
|
|
|
||||||
Rhyz Other
|
|
|
||||||
Total
|
$
|
|
$
|
|
4. |
Debt
|
Facility or Arrangement
|
Original
Principal Amount
|
Balance as of
September 30, 2022 (1)(2)
|
Balance as of
December 31, 2021
(1)(2)
|
Interest Rate
|
Repayment Terms
|
|||||
2018 Credit Agreement term loan facility
|
$ |
$ |
|
|||||||
|
||||||||||
2018 Credit Agreement revolving credit facility
|
$ |
|
||||||||
|
||||||||||
Credit Agreement term loan facility
|
$
|
$
|
|
|
|
|||||
|
||||||||||
Credit Agreement revolving credit facility
|
$
|
|
|
|
(1) |
|
(2) |
|
5. |
Leases
|
Three Months Ended
September 30,
|
Nine
Months Ended
September 30,
|
|||||||||||||||
2022
|
2021
|
2022
|
2021
|
|||||||||||||
Operating lease expense
|
||||||||||||||||
Operating lease cost
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||
Variable lease cost
|
|
|
|
|
||||||||||||
Short-term lease cost
|
|
|
|
|
||||||||||||
Sublease income
|
|
(
|
)
|
|
(
|
)
|
||||||||||
Finance lease expense
|
||||||||||||||||
Amortization of right-of-use assets
|
|
|
|
|
||||||||||||
Interest on lease liabilities
|
|
|
|
|
||||||||||||
Total lease expense
|
$
|
|
$
|
|
$
|
|
$
|
|
Nine
Months Ended
September 30,
|
||||||||
2022
|
2021
|
|||||||
Operating cash outflow from operating leases
|
$
|
|
$
|
|
||||
Operating cash outflow from finance leases
|
$
|
|
$
|
|
||||
Financing cash outflow from finance leases
|
$
|
|
$
|
|
||||
Right-of-use assets obtained in exchange for operating lease obligations
|
$
|
|
$
|
|
||||
Right-of-use assets obtained in exchange for finance lease obligations
|
$
|
|
$
|
|
Year Ending December 31
|
Operating
Leases
|
Finance
Leases
|
||||||
2022
|
$
|
|
$
|
|
||||
2023
|
|
|
||||||
2024
|
|
|
||||||
2025
|
|
|
||||||
2026
|
|
|
||||||
Thereafter
|
|
|
||||||
Total
|
|
|
||||||
Less: Finance charges
|
|
|
||||||
Total principal liability
|
$
|
|
$
|
|
6. |
Capital Stock
|
7. |
Fair Value and Equity Investments
|
■ |
Level 1 – quoted prices in active markets for identical assets or liabilities;
|
■ |
Level 2 – inputs, other than the quoted prices in active markets, that are observable either directly or indirectly; and
|
■ |
Level 3 – unobservable inputs based on the Company’s own assumptions.
|
Fair Value at September 30,
2022
|
||||||||||||||||
Level 1
|
Level 2
|
Level 3
|
Total
|
|||||||||||||
Financial assets (liabilities):
|
||||||||||||||||
Cash equivalents and current investments
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||
Derivative financial instruments asset
|
|
|
|
|
||||||||||||
Life insurance contracts
|
|
|
|
|
||||||||||||
Contingent consideration
|
|
|
(
|
)
|
(
|
)
|
||||||||||
Total
|
$
|
|
$
|
|
$
|
|
$
|
|
Fair Value at December 31, 2021
|
||||||||||||||||
Level 1
|
Level 2
|
Level 3
|
Total
|
|||||||||||||
Financial assets (liabilities):
|
||||||||||||||||
Cash equivalents and current investments
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||
Derivative financial instruments asset
|
|
|
|
|
||||||||||||
Life insurance contracts
|
|
|
|
|
||||||||||||
Contingent consideration
|
|
|
(
|
)
|
(
|
)
|
||||||||||
Total
|
$
|
|
$
|
|
$
|
|
$
|
|
2022
|
2021
|
|||||||
Beginning balance at January 1
|
$
|
|
$
|
|
||||
Actual return on plan assets
|
(
|
)
|
|
|||||
Purchases and issuances
|
|
|
||||||
Sales and settlements
|
|
(
|
)
|
|||||
Transfers into Level 3
|
|
|
||||||
Ending balance at September 30
|
$
|
|
$
|
|
2022
|
2021
|
|||||||
Beginning balance at January 1
|
$
|
(
|
)
|
$
|
(
|
)
|
||