10-Q 1 ef20029695_10q.htm 10-Q
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 JUNE 30, 2024

OR

☐
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 August 1, 2024, 49,701,640 shares of the registrant’s Class A common stock, $.001 par value per share, were outstanding.

NU SKIN ENTERPRISES, INC.

QUARTERLY REPORT ON FORM 10-Q – SECOND QUARTER 2024

TABLE OF CONTENTS

   
Page
Part I.
Financial Information
  
 
Item 1.
Financial Statements (Unaudited):
  
   
1
   
2
   
3
   
4
    6
    7
 
Item 2.
 20
 
Item 3.
 30
 
Item 4.
 30
       
       
Part II.
Other Information
  
 
Item 1.
 31
 
Item 1A.
 31
 
Item 2.
 31
 
Item 3.
 31
 
Item 4.
 31
 
Item 5.
 31
 
Item 6.
 32
       
  Signature
 33

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.

PART I.  FINANCIAL INFORMATION

ITEM 1.
FINANCIAL STATEMENTS

NU SKIN ENTERPRISES, INC.
Consolidated Balance Sheets (Unaudited)
(U.S. dollars in thousands)

 
June 30,
2024
    
December 31,
2023
  
ASSETS
            
Current assets:
            
Cash and cash equivalents
  
$
224,250
    
$
256,057
  
Current investments
    
8,671
      
11,759
  
Accounts receivable, net
    
71,554
      
72,879
  
Inventories, net
    
243,994
      
279,978
  
Prepaid expenses and other
    
105,937
      
81,198
  
Total current assets
    
654,406
      
701,871
  
                 
Property and equipment, net
    
411,918
      
432,965
  
Operating lease right-of-use assets
    
88,071
      
90,107
  
Goodwill
    
99,885
      
230,768
  
Other intangible assets, net
    
88,464
      
105,309
  
Other assets
    
243,228
      
245,443
  
Total assets
  
$
1,585,972
    
$
1,806,463
  
                 
LIABILITIES AND STOCKHOLDERS’ EQUITY
                
Current liabilities:
                
Accounts payable
  
$
36,305
    
$
43,505
  
Accrued expenses
    
242,288
      
260,366
  
Current portion of long-term debt
    
30,000
      
25,000
  
Total current liabilities
    
308,593
      
328,871
  
                 
Operating lease liabilities
    
70,318
      
70,943
  
Long-term debt
    
428,327
      
478,040
  
Other liabilities
    
92,570
      
106,641
  
Total liabilities
    
899,808
      
984,495
  
                 
Commitments and contingencies (Notes 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
    
621,440
      
621,853
  
Treasury stock, at cost – 40.9 million and 41.1 million shares
    
(1,564,090
)
    
(1,570,440
)
Accumulated other comprehensive loss
    
(116,995
)
    
(100,006
)
Retained earnings
    
1,745,718
      
1,870,470
  
Total stockholders’ equity
    
686,164
      
821,968
  
Total liabilities and stockholders’ equity
  
$
1,585,972
    
$
1,806,463
  

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

1
NU SKIN ENTERPRISES, INC.
Consolidated Statements of Income (Unaudited)
(U.S. dollars in thousands, except per share amounts)

 
Three Months Ended
June 30,
    
Six Months Ended
June 30,
  
   
2024
    
2023
    
2024
    
2023
  
Revenue
  
$
439,081
    
$
500,257
    
$
856,387
    
$
981,719
  
Cost of sales
    
131,904
      
135,542
      
255,146
      
269,130
  
Gross profit
    
307,177
      
364,715
      
601,241
      
712,589
  
                                 
Operating expenses:
                                
Selling expenses
    
165,463
      
185,165
      
319,005
      
373,289
  
General and administrative expenses
    
117,921
      
137,044
      
242,487
      
270,943
  
Restructuring and impairment expenses
     149,350       —       156,484       9,787  
Total operating expenses
    
432,734
      
322,209
      
717,976
      
654,019
  
                                 
Operating income (loss)
    
(125,557
)
    
42,506
      
(116,735
)
    
58,570
  
Interest expense
    6,720       5,769       14,045       10,657  
Other income, net
    
629
      
376
      
233
      
3,788
  
                                 
Income (loss) before provision for income taxes
    
(131,648
)
    
37,113
      
(130,547
)
    
51,701
  
Provision (benefit) for income taxes
    
(13,390
)
    
10,221
      
(11,756
)
    
13,433
  
                                 
Net income (loss)
  
$
(118,258
)
  
$
26,892
    
$
(118,791
)
  
$
38,268
  
                                 
Net income (loss) per share (Note 6):
                                
Basic
  
$
(2.38
)
  
$
0.54
     $ (2.39 )   $ 0.77  
Diluted
  
$
(2.38
)
  
$
0.54
     $ (2.39 )   $ 0.76  
                                 
Weighted-average common shares outstanding (000s):
                                
Basic
    
49,688
      
49,931
       49,613
       49,789
  
Diluted
    
49,688
      
50,161
       49,613
       50,098
  

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

2
NU SKIN ENTERPRISES, INC.
Consolidated Statements of Comprehensive Income (Unaudited)
(U.S. dollars in thousands)

 
Three Months Ended
June 30,
    
Six Months Ended
June 30,
  
   
2024
    
2023
    
2024
    
2023
  
Net income (loss)
  
$
(118,258
)
  
$
26,892
    
$
(118,791
)
  
$
38,268
  
                                 
Other comprehensive loss, net of tax:
                                
Foreign currency translation adjustment, net of taxes of zero for the three months ended June 30, 2024 and 2023, and zero and $(68) for the six months ended June 30, 2024 and 2023, respectively
    
(4,875
)
    
(11,539
)
    
(14,979
)
    
(13,678
)
Net unrealized gains/(losses) on cash flow hedges, net of taxes of $(152) and $(837) for the three months ended June 30, 2024 and 2023, respectively and $(587) and $(662) for the six months ended June 30, 2024 and 2023, respectively
    
553
      
3,031
      
2,127
      
2,396
  
Reclassification adjustment for realized losses/(gains) in current earnings on cash flow hedges, net of taxes of $570 and $533 for the three months ended June 30, 2024 and 2023, respectively and $1,142 and $1,008 for the six months ended June 30, 2024 and 2023, respectively
    
(2,066
)
    
(1,933
)
    
(4,137
)
    
(3,655
)
     
(6,388
)
    
(10,441
)
    
(16,989
)
    
(14,937
)
Comprehensive income (loss)
  
$
(124,646
)
  
$
16,451
    
$
(135,780
)
  
$
23,331
  

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

3
NU SKIN ENTERPRISES, INC.
Consolidated Statements of Stockholders’ Equity (Unaudited)
(U.S. dollars in thousands)

 
For the Three Months Ended June 30, 2024
  
   
Class A
Common
Stock
    
Additional
Paid-in
Capital
    
Treasury
Stock
    
Accumulated
Other
Comprehensive
Loss
    
Retained
Earnings
    
Total
  
Balance at April 1, 2024
  
$
91
    
$
618,706
    
$
(1,564,942
)
  
$
(110,607
)
  
$
1,866,958
    
$
810,206
  
                                                 
Net loss
    
—
      
—
      
—
      
—
      
(118,258
)
    
(118,258
)
Other comprehensive loss, net of tax
    
—
      
—
      
—
      
(6,388
)
    
—
      
(6,388
)
Exercise of employee stock options (0.1 million shares)/vesting of stock awards
    
—
      
(912
)
    
852
      
—
      
—
      
(60
)
Stock-based compensation
    
—
      
3,646
      
—
      
—
      
—
      
3,646
  
Cash dividends
    
—
      
—
      
—
      
—
      
(2,982
)
    
(2,982
)
Balance at June 30, 2024
  
$
91
    
$
621,440
    
$
(1,564,090
)
  
$
(116,995
)
  
$
1,745,718
    
$
686,164
  

 
For the Three Months Ended June 30, 2023
  
   
Class A
Common
Stock
    
Additional
Paid-in
Capital
    
Treasury
Stock
    
Accumulated
Other
Comprehensive
Loss
    
Retained
Earnings
    
Total
  
Balance at April 1, 2023
  
$
91
    
$
611,483
    
$
(1,559,080
)
  
$
(91,005
)
  
$
1,931,481
    
$
892,970
  
                                                 
Net income
    
—
      
—
      
—
      
—
      
26,892
      
26,892
  
Other comprehensive loss, net of tax
    
—
      
—
      
—
      
(10,441
)
    
—
      
(10,441
)
Exercise of employee stock options (0.1 million shares)/vesting of stock awards
    
—
      
(705
)
    
1,303
      
—
      
—
      
598
  
Stock-based compensation
    
—
      
4,801
      
—
      
—
      
—
      
4,801
  
Cash dividends
    
—
      
—
      
—
      
—
      
(19,475
)
    
(19,475
)
Balance at June 30, 2023
  
$
91
    
$
615,579
    
$
(1,557,777
)
  
$
(101,446
)
  
$
1,938,898
    
$
895,345
  

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

4
NU SKIN ENTERPRISES, INC.
Consolidated Statements of Stockholders’ Equity (Unaudited)
(U.S. dollars in thousands)

 
For the Six Months Ended June 30, 2024
  
   
Class A
Common
Stock
    
Additional
Paid-in
Capital
    
Treasury
Stock
    
Accumulated
Other
Comprehensive
Loss
    
Retained
Earnings
    
Total
  
Balance at January 1, 2024
  
$
91
    
$
621,853
    
$
(1,570,440
)
  
$
(100,006
)
  
$
1,870,470
    
$
821,968
  
                                                 
Net loss
    
—
      
—
      
—
      
—
      
(118,791
)
    
(118,791
)
Other comprehensive loss, net of tax
    
—
      
—
      
—
      
(16,989
)
    
—
      
(16,989
)
Exercise of employee stock options (0.3 million shares)/vesting of stock awards
    
—
      
(8,301
)
    
6,350
      
—
      
—
      
(1,951
)
Stock-based compensation
    
—
      
7,888
      
—
      
—
      
—
      
7,888
  
Cash dividends
    
—
      
—
      
—
      
—
      
(5,961
)
    
(5,961
)
Balance at June 30, 2024
  
$
91
    
$
621,440
    
$
(1,564,090
)
  
$
(116,995
)
  
$
1,745,718
    
$
686,164
  

 
For the Six Months Ended June 30, 2023
  
   
Class A
Common
Stock
    
Additional
Paid-in
Capital
    
Treasury
Stock
    
Accumulated
Other
Comprehensive
Loss
    
Retained
Earnings
    
Total
  
Balance at January 1, 2023
  
$
91
    
$
613,278
    
$
(1,569,061
)
  
$
(86,509
)
  
$
1,939,497
    
$
897,296
  
                                                 
Net income
    
—
      
—
      
—
      
—
      
38,268
      
38,268
  
Other comprehensive loss, net of tax
    
—
      
—
      
—
      
(14,937
)
    
—
      
(14,937
)
Exercise of employee stock options (0.5 million shares)/vesting of stock awards
    
—
      
(6,502
)
    
11,284
      
—
      
—
      
4,782
  
Stock-based compensation
    
—
      
8,803
      
—
      
—
      
—
      
8,803
  
Cash dividends
    
—
      
—
      
—
      
—
      
(38,867
)
    
(38,867
)
Balance at June 30, 2023
  
$
91
    
$
615,579
    
$
(1,557,777
)
  
$
(101,446
)
  
$
1,938,898
    
$
895,345
  

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

5
NU SKIN ENTERPRISES, INC.
Consolidated Statements of Cash Flows (Unaudited)
(U.S. dollars in thousands)

 
Six Months Ended
June 30,
  
   
2024
    
2023
  
Cash flows from operating activities:
            
Net (loss) income
  
$
(118,791
)
  
$
38,268
  
Adjustments to reconcile net (loss) income to cash flows from operating activities:
                
Impairment of goodwill, fixed assets and other intangibles
     147,350       —  
Depreciation and amortization
    
36,040
      
34,147
  
Non-cash lease expense
    
14,769
      
16,522
  
Stock-based compensation
    
7,888
      
8,803
  
Inventory write-down
     3,520       15,079  
Foreign currency losses (gains)
    
2,528
      
(1,435
)
(Gain) loss on disposal of assets
    
(446
)
    
349
  
Deferred taxes
    
(2,314
)
    
1,151
  
Changes in operating assets and liabilities:
                
Accounts receivable, net
    
1,394
      
(22,368
)
Inventories, net
    
22,936
      
(33,534
)
Prepaid expenses and other
    
(25,973
)
    
(12,140
)
Other assets
    
(4,169
)
    
(2,709
)
Accounts payable
    
(6,109
)
    
(4,195
)
Accrued expenses
    
(10,722
)
    
(23,345
)
Other liabilities
    
(13,376
)
    
(1,148
)
Net cash provided by operating activities
    
54,525
      
13,445
  
                 
Cash flows from investing activities:
                
Purchases of property and equipment
    
(20,404
)
    
(26,199
)
Proceeds on investment sales
    
11,178
      
13,160
  
Purchases of investments
    
(8,567
)
    
(16,883
)
Acquisitions (net of cash acquired)
     —       (77,275 )
Net cash used in investing activities
    
(17,793
)
    
(107,197
)
                 
Cash flows from financing activities:
                
Exercise of employee stock options and taxes paid related to the net shares settlement of stock awards
    
(1,951
)
    
4,782
  
Payment of cash dividends
    
(5,961
)
    
(38,867
)
Finance lease principal payments
    
(1,560
)
    
(1,546
)
Contingent consideration payments
     (6,300 )     —  
Payments of debt
    
(45,000
)
    
(5,000
)
Proceeds from debt
    
—
      
110,000
  
Net cash (used in) / provided by financing activities
    
(60,772
)
    
69,369
  
                 
Effect of exchange rate changes on cash
    
(7,767
)
    
(4,788
)
                 
Net decrease in cash and cash equivalents
    
(31,807
)
    
(29,171
)
                 
Cash and cash equivalents, beginning of period
    
256,057
      
264,725
  
                 
Cash and cash equivalents, end of period
  
$
224,250
    
$
235,554
  

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

6
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 being the primary operating unit.  Nu Skin develops and distributes premium-quality, innovative beauty 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—Americas, which includes Canada, Latin America and the United States; Mainland China; Southeast Asia/Pacific, which includes Indonesia, Malaysia, the Philippines, Singapore, Thailand, Vietnam, Australia, New Zealand, and other markets; Japan; Europe and Africa, which includes markets in Europe as well as South Africa; South Korea; and Hong Kong/Taiwan, which also includes Macau—and two Rhyz segments—Manufacturing, which includes manufacturing and packaging subsidiaries it has acquired; and Rhyz other, which includes other investments by its Rhyz business arm (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 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 June 30, 2024, and for the three- and six-month periods ended June 30, 2024 and 2023. 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, 2023 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, 2023.


Accounting Pronouncements

In November 2023, the Financial Accounting Standards Board (“FASB”) issued ASU 2023-07, Segment Reporting (Topic 280). The amendments in this ASU require disclosures, on an annual and interim basis, of significant segment expenses that are regularly provided to the chief operating decision maker (CODM), as well as the aggregate amount of other segment items included in the reported measure of segment profit or loss. This ASU requires that a public entity disclose the title and position of the CODM and an explanation of how the CODM uses the reported measure(s) of segment profit or loss. Public entities will be required to provide all annual disclosures currently required by Topic 280 in interim periods, and entities with a single reportable segment are required to provide all the disclosures required by the amendments in the update and existing segment disclosures in Topic 280. This amendment is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, and requires retrospective adoption. Early adoption is permitted. The Company will adopt this standard with its fiscal 2024 annual filing. The Company is currently evaluating these new disclosure requirements and the impact of adoption.


Reclassifications

Certain prior period amounts have been reclassified to conform with current presentation. The Company reclassified $5.8 million and $10.7 million of interest expense from other income (expense), net to the interest expense line on the consolidated statement of income for the second  quarter  and first half of 2023, respectively. The reclassification had no impact on net income for the second quarter and first half of 2023.

Inventory

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

 
June 30,
2024
    
December 31,
2023
  
Raw materials
  
$
129,506
    
$
140,133
  
Finished goods
    
114,488
      
139,845
  
Total Inventory, net
  
$
243,994
    
$
279,978
  

7

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


   
Three Months Ended
June 30,
    
Six Months Ended
June 30,
  
   
2024
    
2023
    
2024
    
2023
  
Beginning balance
  
$
80,519
    
$
36,016
    
$
83,378
    
$
37,267
  
Additions
    
1,517
      
11,812
      
3,520
      
15,079
  
Write-offs
    
(11,753
)
    
(6,811
)
    
(16,615
)
    
(11,329
)
Ending Balance
  
$
70,283
    
$
41,017
    
$
70,283
    
$
41,017
  

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 June 30, 2024 and December 31, 2023 was $11.8 million and $12.6 million, respectively. The contract liabilities impact to revenue for the three-month periods ended June 30, 2024 and 2023 was an increase of $0.1 million and an increase of $4.7 million, respectively. The impact to revenue for the six-month periods ended June 30, 2024, and 2023 was an increase of $0.8 million and an increase of $6.0 million, respectively.

3.
Goodwill and Intangibles

Goodwill

The Company’s reporting units for goodwill are its operating segments, which are also its reportable segments, with the exception of Rhyz other. The Rhyz other segment is made up of three reporting units, which had goodwill of $12.6 million, $3.7 million and $4.7 million as of June 30, 2024, and $12.6 million, $19.6 million and $4.7 million as of December 31, 2023, respectively.

During the three months ended June 30, 2024, the Company determined that the continued decline in the Company’s stock price and corresponding market capitalization as well as declines in some of the Company’s reporting units’ forecasts were triggering events that required the Company to perform a quantitative impairment analysis for all reporting units. Based on the analysis, the Company concluded the fair value of certain of its reporting units were less than their carrying value. As a result, the Company recorded non-cash goodwill impairment charges of $130.9 million within restructuring and impairment expenses on the consolidated statement of income. The impairment charges were $9.4 million for the Americas segment, $32.2 million for the Mainland China segment, $18.5 million for the Southeast Asia/Pacific segment, $16.0 million for the Japan segment, $29.3 million for the South Korea segment, $2.9 million for the Europe & Africa segment, $6.6 million for the Hong Kong/Taiwan segment and $15.9 million for the BeautyBio reporting unit within the Rhyz other segment. As part of the Company’s impairment analysis, the fair values of the reporting units were determined using the income approach. The income approach used level 3 inputs and utilized management estimates related to revenue growth rates, profitability margins, estimated future cash flows and discount rates.

The Manufacturing and Rhyz other reporting units’ fair values remain sensitive to unfavorable changes in assumptions utilized, including revenue growth rates, profitability margins, estimated future cash flows, and the discount rates that could result in impairment charges in a future period.

The following table presents goodwill allocated to the Company’s reportable segments for the periods ended June 30, 2024 and December 31, 2023 (U.S. dollars in thousands):

 
June 30,
2024
    
December 31,
2023
  
Nu Skin
            
Americas
 
$
—
    
$
9,449
  
Mainland China
    
—
      
32,179
  
Southeast Asia/Pacific
    
—
      
18,537
  
Japan
    
—
      
16,019
  
South Korea
    
—
      
29,261
  
Europe & Africa
    —       2,875  
Hong Kong/Taiwan
    
—
      
6,634
  
Rhyz Investments
                
Manufacturing
    
78,875
      
78,875
  
Rhyz other
    
21,010
      
36,939
  
Total
  
$
99,885
    
$
230,768
  

8
Accumulated impairment charges as of June 30, 2024 were $9.4 million for the Americas segment, $32.2 million for the Mainland China segment, $18.5 million for the Southeast Asia/Pacific segment, $16.0 million for the Japan segment, $29.3 million for the South Korea segment, $2.9 million for the Europe & Africa segment, $6.6 million for the Hong Kong/Taiwan segment and $15.9 million for the Rhyz other segment. There were no accumulated impairment charges as of December 31, 2023.

Intangibles

The Company reviews long-lived assets for impairment when performance expectations, events or change in circumstances indicate that the assets’ carrying value may not be recoverable. The evaluation is performed at the lowest level of identifiable cash flows by comparing the carrying value of the asset group to the net undiscounted cash flows. If the evaluation indicates that the carrying amount of the assets may not be recoverable, any potential impairment is measured based upon the fair value of the related asset group.

During the second quarter of 2024, based on continued losses and change in forecasted losses associated with the BeautyBio retail asset group within the Rhyz other segment, the Company concluded that these factors were an interim triggering event. As a result, the Company performed an interim impairment test of the asset group and assessed the recoverability of the related asset group by comparing the carrying value of the retail asset group to the net undiscounted cash flow expected to be generated. The recoverability test indicated that the retail asset group was impaired. The Company concluded the retail assets group’s carrying value exceeded its estimated fair value, which was determined utilizing the discounted projected future cash flows, which resulted in an impairment charge. The estimated fair value was based on expected future cash flows using level 3 inputs and utilized management estimates related to revenue growth rates, profitability margins and discount rates. The Company recorded an impairment charge of $10.1 million for its Rhyz other segment during the three months ended June 30, 2024 within restructuring and impairment expenses on the consolidated statement of income. The retail asset group has a remaining carrying of value of $2.3 million with a remaining amortization period of approximately 9 years.

4.
Debt

Credit Agreement

On June 14, 2022, the Company entered into an Amended and Restated Credit Agreement (the “Credit Agreement”) with several financial institutions as lenders and Bank of America, N.A., as administrative agent, which amended and restated the 2018 Credit Agreement. The Credit Agreement provides for a $400 million term loan facility and a $500 million revolving credit facility, each with a term of five years. Both facilities bear interest at the SOFR, plus a margin based on the Company’s consolidated leverage ratio. Commitment fees payable under the Credit Agreement are also based on the consolidated leverage ratio as defined in the Credit Agreement and range from 0.175% to 0.30% on the unused portion of the total lender commitments then in effect. The term loan facility amortizes in quarterly installments in amounts resulting in an annual amortization of 2.5% during the first year and 5.0% during the second, third, fourth and fifth years after the closing date of the Credit Agreement, with the remainder payable at final maturity. The Credit Agreement is guaranteed by certain of the Company’s domestic subsidiaries and collateralized by assets of such subsidiaries, including a pledge of 65% of the capital stock of certain foreign subsidiaries. The Credit Agreement requires the Company to maintain a consolidated leverage ratio not exceeding 2.75 to 1.00 and a consolidated interest coverage ratio of no less than 3.00 to 1.00. As of June 30, 2024, the Company was in compliance with all covenants under the Credit Agreement.

The following table summarizes the Company’s debt facilities as of June 30, 2024 and December 31, 2023:

Facility or
Arrangement
  
Original
Principal
Amount
  
Balance as of
June 30,
2024(1)(2)
  
Balance as of
December 31,
2023(1)(2)
  
Interest
Rate
  
Repayment
Terms
Credit Agreement term loan facility
  
$400.0 million
  
$370.0 million

  
$385.0 million
 
Variable 30 day: 7.44%
  
21% of the principal amount is payable in increasing quarterly installments over a five-year period that began on September 30, 2022, with the remainder payable at the end of the five-year term.
Credit Agreement revolving credit facility
      
$90.0 million
  
$120.0 million
 
Variable 30 day: 7.44%
 
Revolving line of credit expires June 14, 2027.

(1)
As of June 30, 2024 and December 31, 2023, the current portion of the Company’s debt (i.e., becoming due in the next 12 months) included $20.0 million and $25.0 million, respectively, of the balance of its term loan under the Credit Agreement and $10.0 million and zero, respectively, of the balance under the revolving line of credit.

(2)
The carrying value of the debt reflects the amounts stated in the above table, less debt issuance costs of $1.7 million and $2.0 million as of June 30, 2024 and December 31, 2023, respectively, related to the Credit Agreement, which are not reflected in this table.

9
5.
Leases

As of June 30, 2024, the weighted-average remaining lease term was 7.0 and 3.3 years for operating and finance leases, respectively. As of June 30, 2024, the weighted-average discount rate was 3.7% and 3.7% for operating and finance leases, respectively.

The components of lease expense were as follows (U.S. dollars in thousands):

 
Three Months Ended
June 30,
    
Six Months Ended
June 30,
  
   
2024
    
2023
    
2024
    
2023
  
Operating lease expense
                        
Operating lease cost
  
$
5,873
    
$
8,022
    
$
11,939
    
$
16,183
  
Variable lease cost
    
964
      
412
      
2,740
      
1,487
  
Finance lease expense
                                
Amortization of right-of-use assets
    
725
      
1,603
      
1,483
      
2,603
  
Interest on lease liabilities
    
94
      
123
      
203
      
257
  
 Total lease expense
  
$
7,656
    
$
10,160
    
$
16,365
    
$
20,530
  

Supplemental cash flow information related to leases was as follows (U.S. dollars in thousands):

 
Six Months Ended June 30,
  
   
2024
    
2023
  
Operating cash outflow from operating leases
  
$
12,515
    
$
15,310
  
Operating cash outflow from finance leases
  
$
204
    
$
260
  
Financing cash outflow from finance leases
  
$
1,560
    
$
1,546
  
Right-of-use assets obtained in exchange for operating lease obligations
  
$
14,595
    
$
14,052
  
Right-of-use assets obtained in exchange for finance lease obligations
  
$
10
    
$
576
  

Maturities of lease liabilities were as follows (U.S. dollars in thousands):

Year Ending December 31
  
Operating
Leases
    
Finance
Leases
  
2024
  
$
12,332
    
$
1,569
  
2025
    
20,230
      
2,891
  
2026
    
15,540
      
2,884
  
2027
    
11,810
      
2,811
  
2028
    
8,738
      
60
  
Thereafter
    
32,402
      
—
  
Total
    
101,052
      
10,215
  
Less: Finance charges
    
10,731
      
643
  
Total principal liability
  
$
90,321
    
$
9,572
  


6.
Capital Stock

Net income per share

Net income per share is computed based on the weighted-average number of common shares outstanding during the periods presented. Additionally, diluted earnings per share data gives effect to all potentially dilutive common shares that were outstanding during the periods presented. For the three-month periods ended June 30, 2024 and 2023, stock options of 1.7 million and 0.2 million, respectively, and for the six-month periods ended June 30, 2024 and 2023, stock options of 1.7 million and 0.2 million, respectively, were excluded from the calculation of diluted earnings per share because they were anti-dilutive.

10
Dividends

In February and May 2024, the Company’s board of directors declared quarterly cash dividends of $0.06 per share. These quarterly cash dividends of $3.0 million and $3.0 million were paid on March 6, 2024 and June 12, 2024, respectively, to stockholders of record on February 26, 2024 and May 31, 2024, respectively. In August 2024, the Company’s board of directors declared a quarterly cash dividend of $0.06 per share to be paid on September 11, 2024 to stockholders of record on August 30, 2024.

Repurchase of common stock

During the three- and six-month periods ended June 30, 2024, the Company repurchased zero shares of its Class A common stock under its stock repurchase plan. As of June 30, 2024, $162.4 million was available for repurchases under the Company’s stock repurchase plan.


7.
Fair Value and Equity Investments

Fair Value

The carrying value of financial instruments including cash and cash equivalents, accounts receivable and accounts payable approximates fair values due to the short-term nature of these instruments. The carrying value of debt approximates fair value due to the variable 30-day interest rate. Fair value estimates are made at a specific point in time, based on relevant market information.

The FASB Codification defines fair value as the price that would be received to sell an asset or paid to transfer a liability in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants at the measurement date. On a quarterly basis, the Company measures at fair value certain financial assets, including cash equivalents. Accounting standards specify a hierarchy of valuation techniques based on whether the inputs to those valuation techniques are observable or unobservable. Observable inputs reflect data obtained from independent sources, while unobservable inputs reflect the Company’s market assumptions. These two types of inputs have created the following fair-value hierarchy:

■
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.

Accounting standards permit companies, at their option, to measure certain financial instruments and other eligible items at fair value. The Company has elected not to apply the fair value option to existing eligible items beyond what is required by US GAAP.

The following tables present the fair value hierarchy for those assets and liabilities measured at fair value on a recurring basis (U.S. dollars in thousands):

 
Fair Value at June 30, 2024
  
   
Level 1
    
Level 2
    
Level 3
    
Total
  
Financial assets (liabilities):
                        
Cash equivalents and current investments
  
$
33,014
    
$
—
    
$
—
    
$
33,014
  
Derivative financial instruments asset