Nu Skin Enterprises (NUS) Restates Q1 Financials Following Audit Committee Determination
On August 5, 2014 the Audit Committee (the "Committee") of Nu Skin Enterprises (NYSE: NUS) determined to restate the Company's consolidated financial statements for the quarter ended March 31, 2014 to correct the accounting related to (i) hyper-inflationary adjustments with respect to operations in Venezuela, and (ii) tax rebates related to the Company's new China headquarters. Based on discussions with its independent registered public accounting firm, PricewaterhouseCoopers LLP, the Committee has determined that hyper-inflationary adjustments should have been recorded as charges to Other Income (Expense) rather than as adjustments to Accumulated Other Comprehensive Loss in the Stockholders' Equity section of the balance sheet. The Committee also determined that the Company should have recorded income to Other Income (Expense) for the China tax rebates.
The Company plans to make these corrections by restating its consolidated financial statements for the period ended March 31, 2014 in an amendment to its Quarterly Report on Form 10-Q to include a $21 million charge to Other Income (Expense) related to the hyper-inflationary accounting error and $7 million of income related to the China tax rebate. With respect to the hyper-inflationary correction, $15 million related to the first quarter of 2014, and $6 million related to periods prior to 2014. The Company does not plan to amend financial statements for periods prior to 2014 as the amounts were determined to be immaterial.
A preliminary estimate of the impact of these corrections is shown in the following tables:
Three Months Ended March 31, 2014 (in thousands, except per share amounts) | ||||||||||||
As Reported | As Adjusted | Difference | ||||||||||
Revenue | $ | 671,061 | $ | 671,061 | ─ | |||||||
Cost of sales | 106,644 | 106,644 | ─ | |||||||||
Gross profit | 564,417 | 564,417 | ─ | |||||||||
Operating expenses: | ||||||||||||
Selling expenses | 313,101 | 313,101 | ─ | |||||||||
General and administrative expenses | 150,119 | 150,119 | ─ | |||||||||
Total operating expenses | 463,220 | 463,220 | ─ | |||||||||
Operating income | 101,197 | 101,197 | ─ | |||||||||
Other income (expense), net | (3,604 | ) | (17,508 | ) | (13,904 | ) | ||||||
Income before provision for income taxes | 97,593 | 83,689 | (13,904 | ) | ||||||||
Provision for income taxes | 33,332 | 28,835 | (4,497 | ) | ||||||||
Net income | $ | 64,261 | $ | 54,854 | (9,407 | ) | ||||||
Net income per share: | ||||||||||||
Basic | $ | 1.09 | $ | 0.93 | $ | (0.16 | ) | |||||
Diluted | $ | 1.05 | $ | 0.90 | $ | (0.15 | ) | |||||
Weighted average common shares outstanding: | ||||||||||||
Basic | 58,869 | 58,869 | ─ | |||||||||
Diluted | 61,227 | 61,227 | ─ | |||||||||
March 31, 2014 (in thousands) | ||||||||||||
As Reported | As Adjusted | Difference | ||||||||||
ASSETS | ||||||||||||
Current assets: | ||||||||||||
Cash and cash equivalents | $ | 284,580 | $ | 284,580 | ─ | |||||||
Current investments | 18,703 | 18,703 | ─ | |||||||||
Accounts receivable | 56,644 | 56,644 | ─ | |||||||||
Inventories, net | 410,668 | 410,668 | ─ | |||||||||
Prepaid expenses and other | 149,523 | 150,375 | 852 | |||||||||
920,118 | 920,970 | 852 | ||||||||||
Property and equipment, net | 411,929 | 411,929 | ─ | |||||||||
Goodwill | 112,446 | 112,446 | ─ | |||||||||
Other intangible assets, net | 81,377 | 81,377 | ─ | |||||||||
Other assets | 115,751 | 115,751 | ─ | |||||||||
Total assets | $ | 1,641,621 | $ | 1,642,473 | 852 | |||||||
LIABILITIES AND STOCKHOLDERS' EQUITY | ||||||||||||
Current liabilities: | ||||||||||||
Accounts payable | $ | 51,276 | $ | 51,276 | ─ | |||||||
Accrued expenses | 449,434 | 439,815 | (9,619 | ) | ||||||||
Current portion of long-term debt | 88,031 | 88,031 | ─ | |||||||||
588,741 | 579,122 | (9,619 | ) | |||||||||
Long-term debt | 109,882 | 109,882 | ─ | |||||||||
Other liabilities | 79,418 | 77,910 | (1,508 | ) | ||||||||
Total liabilities | 778,041 | 766,914 | (11,127 | ) | ||||||||
Stockholders' equity: | ||||||||||||
Class A common stock | 91 | 91 | ─ | |||||||||
Additional paid-in capital | 399,677 | 399,677 | ─ | |||||||||
Treasury stock, at cost | (848,335 | ) | (848,335 | ) | ─ | |||||||
Accumulated other comprehensive loss | (66,250 | ) | (44,864 | ) | 21,386 | |||||||
Retained earnings | 1,378,397 | 1,368,990 | (9,407 | ) | ||||||||
863,580 | 875,559 | 11,979 | ||||||||||
Total liabilities and stockholders' equity | $ | 1,641,621 | $ | 1,642,473 | 852 | |||||||