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TMCNet:  USANA Health Sciences Announces Second Quarter 2014 Financial Results

[July 29, 2014]

USANA Health Sciences Announces Second Quarter 2014 Financial Results

SALT LAKE CITY --(Business Wire)--

USANA Health Sciences, Inc. (NYSE: USNA) today announced financial results for its fiscal second quarter ended June 28, 2014. The Company also reiterated net sales and earnings guidance for 2014.

Financial Performance

For the second quarter of 2014, net sales decreased slightly to $188.3 million, compared with $189.1 million in the prior-year period. Net sales, on a comparative basis, were negatively impacted by: (i) $7.0 million of incremental sales in the second quarter of 2013 that occurred ahead of policy changes, which included restricting Associate purchases to their country of residence; (ii) $3.3 million from unfavorable changes in currency exchange rates, and (iii) price discounts that the Company implemented in 2013. The number of active Associates for the second quarter increased 11.4% year-over-year, and 6.8% sequentially, largely as a result of the initiatives implemented by the Company in 2013.

Net earnings for the second quarter were $19.3 million, compared with $24.2 million during the prior-year period. This decrease resulted from lower gross margins and higher operating expenses, which were due largely to the pricing and compensation plan initiatives implemented by the Company in 2013. Earnings per share for the quarter were $1.36, compared with $1.72 in the second quarter of the prior year. Weighted average diluted shares outstanding were 14.2 million in the second quarter of 2014, compared with 14.1 million in the prior-year period. During the quarter, the Company accelerated its share repurchase activity by repurchasing approximately 682,000 shares under its authorized repurchase program for a total investment of $49.1 million. Additionally, as of July 25, 2014, the Company has spent $21.4 million during the month of July to repurchase approximately 285,000 shares pursuant to a Rule 10b5-1 trading plan. As of July 25, 2014, there was $129.5 million remaining under the current share repurchase authorization. The Company ended the quarter debt-free with approximately $118.3 million in cash and cash equivalents.

"USANA generated solid results during the second quarter, notwithstanding several factors that created a challenging year-over-year comparable," said Dave Wentz, USANA's Chief Executive Officer. "In 2013, we made a number of important changes to our business, including world-wide policy changes, enhancements to our Associate compensation plan and pricing initiatives. These changes have improved our core business by generating double digit year-over-year increases in our customer counts, Auto Order sales and check earners. As we anticipated and previously communicated, these changes have also created tough year-over-year comparables in 2014 and have caused our financial results to trail our operational progress. As we execute our 2014 strategies, we are confident that our performance will continue to accelerate during the second half of the year and we will deliver another year of record results in 2014. We are also committed to returning value to shareholders through our share repurchase program."

Regional Results

Net sales in the Asia Pacific region increased by 1.8% to $124.6 million, compared with $122.4 million for the second quarter of the prior year. This improvement was due to nearly 14% sales growth in the Southeast Asia Pacific region, which was driven by sales and customer growth in every market in the region. Net sales in the Greater China region decreased 4.3% on a year-over-year basis, due to nearly $7.0 million in incremental sales during the second quarter of 2013 that occurred ahead of policy changes, which included restricting Associate purchases to their country of residence. Sequentially, net sales in the Greater China region increased 4.6% due to double-digit sales and customer growth in China. The number of active Associates in the Asia Pacific region increased by 16.9% year-over-year, due to double-digit Associate growth in the Greater China and Southeast Asia Pacific regions.

Net sales in the Americas/Europe region declined 4.7% to $63.7 million, due primarily to a sales decline in the U.S., which was partially offset by net sales growth in other markets in the region. The number of active Associates in this region was flat.

"Our business continues to produce strong results in Asia Pacific, as nearly every market in this region delivered sales and customer growth during the quarter. As we anticipated, our performance in China accelerated during the quarter and produced double-digit sales and customer growth compared to the prior quarter. We expect our results in China to continue to accelerate as the year progresses and remain confident in our long-term growth potential in this important market. We also have initiatives planned for the second-half of 2014 that are designed to drive sales and customer growth in each of our regions, with an emphasis on North America and the United States in particular. We look forward to hosting our 22nd Annual International Convention in August, where we will make several exciting announcements," concluded Mr. Wentz.

Outlook

The Company reiterated the following financial outlook for 2014:

  • Consolidated net sales between $770 million and $790 million
  • Earnings per share between $5.50 and $5.65

Chief Financial Officer, Paul Jones, commented, "During the second quarter, we faced difficult year-over-year comparables, yet generated strong results. We expect our financial performance to accelerate during the second half of 2014, as we execute initiatives to produce world-wide growth and operational efficiency, and we are reiterating our previously issued guidance. We also believe that these initiatives will provide sustainable growth for the Company over the long-term."

Kevin Guest Named Company President

Kevin G. Guest, 51, has been promoted to President of USANA world-wide effective August 1, 2014. Mr. Guest will focus his efforts on sales growth, customer growth and sales force development. Mr. Guest has been with the Company since 2003 and has served in a variety of leadership positions within the Company over the last 11 years. Most recently, he has served as President of the Americas, Europe and South Pacific since October 2012, where he has designed and executed initiatives that have generated growth in these regions.

"Kevin has been extensively involved with USANA since the Company was founded more than 20 years ago," said Dave Wentz. "His vision for the business, dedication to customers and employees, and overall integrity and leadership have been and will continue to be invaluable to our organization," concluded Wentz.

Beginning August 3, 2014, Dave Wentz will reduce his time in the office for one year to spend more time with his family. During this time, Mr. Wentz will focus his efforts on strategic initiatives, business development, the True Health Foundation and customer events, including the Company's international and regional conventions. He intends to return to his full-time role on August 3, 2015.

Conference Call

USANA will hold a conference call and webcast to discuss this announcement with investors on Wednesday, July 30, 2014 at 11:00 AM Eastern Time. Investors may listen to the call by accessing USANA's website at http://www.usanahealthsciences.com.

About USANA

USANA develops and manufactures high-quality nutritional, personal care, and weight-management products that are sold directly to Associates and Preferred Customers throughout the United States, Canada, Australia, New Zealand, Hong Kong, China, Japan, Taiwan, South Korea, Singapore, Mexico, Malaysia, the Philippines, the Netherlands, the United Kingdom, Thailand, France, Belgium and Colombia. More information on USANA can be found at http://www.usanahealthsciences.com.

Safe Harbor

This press release contains forward-looking statements within the meaning of Section 27A of the Securities Act and Section 21E of the Securities Exchange Act. Our actual results could differ materially from those projected in these forward-looking statements, which involve a number of risks and uncertainties, including global economic conditions generally, reliance upon our network of independent Associates, the governmental regulation of our products, manufacturing and marketing risks, adverse publicity risks, and risks associated with our international expansion. The contents of this release should be considered in conjunction with the risk factors, warnings, and cautionary statements that are contained in our most recent filings with the Securities and Exchange Commission.




 
USANA Health Sciences, Inc.
Consolidated Statements of Earnings
(In thousands, except per share data)
(Unaudited)
             
Quarter Ended Six Months Ended
29-Jun-13 28-Jun-14 29-Jun-13 28-Jun-14
 
Net sales $ 189,136 $ 188,256 $ 358,218 $ 370,657
Cost of sales   31,905     34,865   62,166     68,693
Gross profit 157,231 153,391 296,052 301,964

 

Operating expenses
Associate incentives 77,801 81,098 147,656 159,972
Selling, general and administrative   42,978     43,206   85,382     87,783
 
Earnings from operations 36,452 29,087 63,014 54,209
 
Other income (expense)   (83 )   297   (109 )   422
Earnings before income taxes 36,369 29,384 62,905 54,631
 
Income taxes   12,159     10,083   20,916     18,793
 
NET (News - Alert) EARNINGS $ 24,210   $ 19,301 $ 41,989   $ 35,838
 
 
Earnings per share - diluted $ 1.72 $ 1.36 $ 2.99 $ 2.50
Weighted average shares outstanding - diluted 14,099 14,235 14,034 14,315
 
 
USANA Health Sciences, Inc.
Consolidated Balance Sheets
(In thousands)
(Unaudited)
         
As of As of
ASSETS 28-Dec-13 28-Jun-14
Current Assets
Cash and cash equivalents $ 137,343 $ 118,267
Securities held-to-maturity, net 8,642 3,374
Inventories 47,242 44,528
Prepaid Expenses and Other current assets   35,818   35,756
Total current assets 229,045 201,925
 
Property and equipment, net 59,180 65,859
Goodwill 18,243 17,919
Intangible assets, net 42,329 41,015
Deferred income taxes 5,519 5,515
Other assets   14,154   22,688
Total assets $ 368,470 $ 354,921
 
 
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable $ 9,502 $ 6,408
Other current liabilities   86,369   82,297
Total current liabilities 95,871 88,705
 
 
Other long-term liabilities 1,211 1,290
Deferred income taxes 10,866 10,672
Stockholders' equity   260,522   254,254
Total liabilities and stockholders' equity $ 368,470 $ 354,921
 

 
USANA Health Sciences, Inc.
Sales by Region
(Unaudited)
(In thousands)
         
Quarter Ended
29-Jun-13 28-Jun-14

Region

 
Americas and Europe $ 66,769 35.3 % $ 63,661 33.8 %
 
Asia Pacific
 
Southeast Asia Pacific 37,475 19.8 % 42,689 22.7 %
 
Greater China 77,388 40.9 % 74,091 39.4 %
 
North Asia   7,504 4.0 %   7,815 4.1 %
 
Asia Pacific Total   122,367 64.7 %   124,595 66.2 %
 
Total $ 189,136 100.0 % $ 188,256 100.0 %
 
 
Active Associates by Region (1)
(Unaudited)
 
  As of
29-Jun-13   28-Jun-14

Region

   
 
Americas and Europe 82,000 32.3 % 82,000 29.0 %
 
Asia Pacific
 
Southeast Asia Pacific 60,000 23.6 % 67,000 23.7 %
 
Greater China 103,000 40.6 % 125,000 44.1 %
 
North Asia 9,000 3.5 % 9,000 3.2 %
 
Asia Pacific Total 172,000 67.7 % 201,000 71.0 %
 
Total 254,000 100.0 % 283,000 100.0 %
 
(1) Associates are independent distributors of our products who also purchase our products for their personal use. We only count as active those Associates who have purchased from us any time during the most recent three-month period, either for personal use or for resale.
 
Active Preferred Customers by Region (2)
(Unaudited)
 
  As of

29-Jun-13

 

28-Jun-14

Region

   
 
Americas and Europe 57,000 81.4 % 60,000 75.9 %
 
Asia Pacific
 
Southeast Asia Pacific 7,000 10.0 % 11,000 13.9 %
 
Greater China 4,000 5.7 % 3,000 3.8 %
 
North Asia 2,000 2.9 % 5,000 6.4 %
 
Asia Pacific Total 13,000 18.6 % 19,000 24.1 %
 
Total 70,000 100.0 % 79,000 100.0 %
 
  (2) Preferred Customers purchase our products strictly for their personal use and are not permitted to resell or to distribute the products. We only count as active those Preferred Customers who have purchased from us any time during the most recent three-month period.


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