USANA Health Sciences, Inc. (NYSE: USNA) today reported
financial results for its fiscal second quarter ended July 2, 2011,
which were stronger than the preliminary results announced on June
29, 2011.
Financial Performance
Net sales in the second quarter of 2011 increased by 18.2% to
$148.9 million, compared with $126.0 million in the second quarter
of the prior year. Higher product sales and an increased number of
active Associates in the Company’s Asia Pacific region were the
primary drivers of this growth. Favorable changes in currency
exchange rates added $5.9 million to sales during the quarter, and
BabyCare, the Company’s operating entity in China, added $5.6
million to sales.
Net earnings in the second quarter increased by 28.7% to $13.9
million, or $0.88 per share, compared with $0.69 per share in the
second quarter of the prior year. Net earnings growth resulted from
improved gross profit margins on higher net sales and lower
relative selling, general and administrative expenses. Earnings per
share for the period benefited by $0.06 due to the recapture of
unvested equity compensation expense related to the departure of
certain executives from the Company.
Chief Executive Officer Dave Wentz said, “Our team generated
solid performance during the second quarter, despite unanticipated
changes and challenges. The execution of our strategic plan by the
management team and Associate sales force, in light of these
challenges, reflects the strength of the underlying business and
the dedication of our people. A major factor behind our
performance, and confidence in the future, is the synergy that
exists between the management team and our Associate leaders. We
believe that this relationship is as strong as ever.”
For the six months ended July 2, 2011, net sales increased by
19.3% to $292.5 million, compared with $245.1 million in the prior
year. This growth was driven by higher product sales and an
increased number of active Associates in the Asia Pacific region.
For this period, BabyCare added $11.3 million to sales, and
favorable changes in currency exchange rates accounted for $10.0
million of the $47.4 million increase.
Net earnings for the six months ended July 2, 2011 increased by
23.5% to $25.2 million, or $1.58 per share, compared with $1.31 per
share in the prior year. This net earnings growth resulted from
significantly improved gross profit margins on higher sales. These
improvements were partially offset by higher selling, general, and
administrative expenses that can primarily be attributed to the
inclusion of BabyCare’s operations.
Regional Results
Net sales in the Asia Pacific region for the second quarter of
2011 increased by 38.7% to $88.7 million, compared with the second
quarter of the prior year. This improvement was due to strong
growth in Hong Kong, South Korea, and the Philippines, as well as
the addition of BabyCare. In the second quarter, the number of
active Associates in this region increased by 20.9%, which was
primarily the result of double-digit growth in Hong Kong, South
Korea, and the Philippines, as well as the inclusion of 14,000
BabyCare Associates. On a sequential quarter basis, net sales and
the number of Active Associates in the region increased 6.1% and
6.9%, respectively.
“The performance from our Asia Pacific region was particularly
impressive given the strategic changes that occurred during the
quarter and the competitive pressures that currently exist in this
region,” continued Mr. Wentz. “Our Asia Pacific team, led by
Deborah Woo, is to be credited for our strong growth in the region
and for the improvements to our China integration strategy. Our
management team is confident that the modified integration approach
for BabyCare will drive long-term, sustainable growth in this
region. In addition to our recent entry into China, we are
expanding our international operations into Thailand in the fourth
quarter of 2011, and we plan to be more aggressive in our
international expansion efforts in the near future.”
During the second quarter of 2011, net sales in the North
America region decreased by three percent to $60.3 million,
compared with the second quarter of the prior year. The number of
Active Associates in the North America region during this period
also declined by 12.6%, compared with the second quarter of the
prior year. On a sequential quarter basis, sales in this region
were up slightly and the number of Active Associates was flat.
“We remain committed to growing our North America region,” added
Mr. Wentz. “Our North America team, led by Kevin Guest, and
Associate leaders are working closely together to achieve this
goal. The strategies that we are evaluating for this region include
product innovation and customization initiatives, as well as
incentive offerings for our Associates to reward top performers. In
August 2011, we will hold our 19th Annual International Convention
in Salt Lake City, where we expect Associates from each of our 15
markets will attend. This event provides an excellent opportunity
to introduce new programs and incentives, while training and
motivating our Associates.”
Outlook
Chief Financial Officer Doug Hekking commented, “Based on the
strength of our results in the first half of the year, we are
raising our outlook for 2011. We now project consolidated net sales
to be between $565 million and $575 million for the year, versus
our previous outlook of $530 million to $550 million. In addition,
we now expect to generate earnings per share between $3.05 and
$3.10 versus our previous outlook of $2.85 to $2.95. This renewed
outlook reflects the continued integration of BabyCare into our
business, as well as the competitive challenges that we will likely
face in the second half of the year. We remain committed to the
goal of delivering growth in each of our markets, with a continued
focus on operational efficiency. Overall, we expect USANA to finish
off a strong 2011 and to deliver our ninth consecutive year of
record financial performance.”
Conference Call
USANA will hold a conference call and webcast to discuss this
announcement with investors on Wednesday, July 27, 2011 at 11:00AM
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, Japan,
Taiwan, South Korea, Singapore, Mexico, Malaysia, the Philippines,
the Netherlands, and the United Kingdom. Additionally, USANA’s
wholly-owned subsidiary, BabyCare, Ltd., operates a direct selling
business in China. 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
3-Jul-10 2-Jul-11 Net sales $ 126,011 $
148,925 Cost of sales 22,735 26,208
Gross
profit 103,276 122,717 Operating expenses Associate
incentives 57,065 67,760 Selling, general and administrative
29,149 33,803
Earnings from operations
17,062 21,154 Other income (expense) (587 ) -
Earnings before income taxes 16,475 21,154 Income
taxes 5,705 7,298
NET EARNINGS $
10,770 $ 13,856 Earnings per share -
diluted $ 0.69 $ 0.88 Weighted average shares outstanding -
diluted 15,697 15,752
USANA Health
Sciences, Inc. Consolidated Balance Sheets (In
thousands)
As of As of 1-Jan-11
2-Jul-11 (Unaudited)
ASSETS Current Assets Cash and
cash equivalents $ 24,222 $ 24,944 Inventories 34,078 35,381 Other
current assets 21,972 18,932
Total current
assets 80,272 79,257 Property and equipment, net 57,568
60,564 Goodwill 16,930 16,930 Other assets 49,032
49,177
Total assets $ 203,802 $ 205,928
LIABILITIES AND STOCKHOLDERS' EQUITY Current
liabilities Accounts payable $ 6,445 $ 8,345 Other current
liabilities 51,179 46,144
Total current
liabilities 57,624 54,489 Other long-term
liabilities 1,012 1,020 Stockholders' equity 145,166
150,419
Total liabilities and stockholders' equity $
203,802 $ 205,928
USANA Health Sciences,
Inc. Sales by Region (Unaudited) (In thousands)
Quarter
Ended 3-Jul-10 2-Jul-11
Region
North America United States $ 37,992 30.1 % $ 37,121 25.0 %
Canada 18,373 14.6 % 17,462 11.7 % Mexico
5,748 4.6 % 5,684 3.8 % North America Total 62,113
49.3 % 60,267 40.5 % Asia Pacific Southeast
Asia/Pacific 23,968 19.0 % 27,225 18.3 % Greater China
34,437 27.3 % 53,678 36.0 % North Asia 5,493 4.4 %
7,755 5.2 % Asia Pacific Total 63,898 50.7 %
88,658 59.5 % Total $ 126,011 100.0 % $ 148,925 100.0
%
Active Associates by Region
(1)
(Unaudited)
As of 3-Jul-10 2-Jul-11
Region
North America United States 57,000 27.1 % 49,000 22.1 %
Canada 26,000 12.4 % 24,000 10.8 % Mexico
12,000 5.7 % 10,000 4.5 % North America Total 95,000
45.2 % 83,000 37.4 % Asia Pacific Southeast
Asia/Pacific 44,000 21.0 % 43,000 19.4 % Greater China
63,000 30.0 % 87,000 39.2 % North Asia 8,000 3.8 %
9,000 4.0 % Asia Pacific Total 115,000 54.8 % 139,000
62.6 % Total 210,000 100.0 %
222,000 100.0 % (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 product at 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
3-Jul-10 2-Jul-11
Region
North America United States 39,000 59.1 % 37,000 54.4 %
Canada 15,000 22.7 % 13,000 19.1 % Mexico
3,000 4.6 % 3,000 4.4 % North America
Total 57,000 86.4 % 53,000 77.9 % Asia Pacific
Southeast Asia/Pacific 6,000 9.1 % 6,000 8.8 % Greater China
2,000 3.0 % 8,000 11.8 % North Asia 1,000 1.5
% 1,000 1.5 % Asia Pacific Total 9,000 13.6 %
15,000 22.1 %
Total 66,000 100.0 % 68,000
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 product at any time during the most
recent three-month period.
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