- Net sales increased by 5.2% to $173.7
million
- Previously announced strategies
implemented in second and third quarter result in 4.2% decrease in
net earnings; EPS decreased 1.7% to $1.16
- Company provides updated 2013 net sales
and earnings growth outlook
USANA Health Sciences, Inc. (NYSE: USNA) today announced
financial results for its fiscal third quarter ended September 28,
2013.
Financial Performance
For the third quarter of 2013, net sales increased by 5.2% to
$173.7 million, compared with $165.2 million in the prior-year
period. The growth in net sales was driven by increases in both the
Company’s Asia Pacific and North America/Europe regions. Net sales
for the quarter were negatively impacted by: (i) an estimated $5.9
million due to the worldwide policy changes that the Company
implemented at the end of the second quarter of this year, which
require customers to purchase products in their home markets; (ii)
$4.6 million due to the strategic price discounts that the Company
announced at its International Convention in August and earlier
this year; and (iii) $2.0 million due to changes in currency
exchange rates.
Net earnings for the third quarter decreased by 4.2% to $16.8
million, compared with the prior-year period. This decrease was due
primarily to higher Associate Incentives expense, attributable to
the enhancements that the Company made to its Associate
Compensation Plan at its August 2013 International Convention.
Additionally, the effective tax rate for the third quarter was 420
basis points, or $1.0 million, higher than the previous year, due
primarily to one-time tax benefits recognized in the third quarter
of 2012. Earnings per share for the quarter decreased by 1.7% to
$1.16, compared with $1.18 in the third quarter of the prior year.
This decrease in earnings per share was attributable to lower net
earnings, partially offset by a lower number of diluted shares
outstanding from the Company’s share repurchases during the 12
months ended September 29, 2013. Total diluted common shares
outstanding as of September 28, 2013 were 14.4 million, compared
with 14.9 million as of September 29, 2012.
“During the third quarter, we implemented a number of strategic
initiatives at our 2013 International Convention,” said Dave Wentz,
the Company’s Chief Executive Officer. “These initiatives, which
include price reductions and enhancements to our Associate
compensation plan, are intended to drive long-term, sustainable
customer growth for USANA. The combination of these initiatives and
the worldwide policy changes that we introduced in the second
quarter had the meaningful impact that we anticipated on our
third-quarter results. Although it is still early, these
initiatives have already produced several anticipated positive
results, including: (i) an increase of approximately 30% in our
worldwide Auto Order sales; (ii) an increase of approximately 40%
in the number of weekly commission checks earned by Associates; and
(iii) an increase of approximately 30% in the number of first-time
check earners with USANA. Going forward, we expect these
initiatives to contribute to the growth of our worldwide customer
counts.”
Regional Results
Net sales in Asia Pacific increased by 4.6% to $107.4 million,
compared with $102.7 million for the third quarter of the prior
year. This improvement was due primarily to sales growth in the
Southeast Asia Pacific region, which was driven by meaningful
growth in Singapore and Malaysia. Sales in the Greater China region
were flat, with significant growth in Mainland China and Taiwan,
offset by a sales decrease in Hong Kong.
Net sales in North America/Europe increased by 6.1% to $66.3
million, compared with $62.5 million in the prior-year period. This
improvement was due primarily to sales growth in Mexico and Canada,
as well as the addition of our newest market, Colombia, which
generated $1.4 million in sales during its first quarter of
operations. The sales growth in these markets reflected increases
in both the number of Active Associates and Preferred
Customers.
“The performance of our North America region reflects the
momentum we are generating in Mexico, Canada and, most recently,
Colombia,” continued Wentz. “Our results in Greater China were in
line with our expectations, considering the worldwide policy
changes that we implemented during the second quarter of this year.
Our expectations for Greater China have not changed and our team
continues to focus on growth in Mainland China. I am confident in
the strength of our underlying business in all of our regions and
believe that we have implemented the right strategies to drive
long-term growth.”
The Company continued to generate significant cash from
operations and ended the quarter with $115.3 million in cash and
cash equivalents. For the third quarter, cash generated from
operations totaled $17.3 million. During the quarter, the Company
did not repurchase any shares of its common stock and ended the
quarter with $13.6 million remaining under the board authorized
repurchase program.
Outlook
The Company provided the following updated consolidated net
sales and earnings per share outlook for 2013:
- Consolidated net sales between $705
million and $710 million, versus the previous outlook of between
$700 and $720 million
- Earnings per share between $5.35 and
$5.40, versus the previous outlook of between $5.30 and $5.45
Chief Financial Officer, Paul Jones, commented, “We are
tightening our guidance range as we head into the final quarter of
2013 and expect USANA to once again deliver record results in 2013.
Although we expect continued pressure on our operating results for
the next few quarters, we are confident that we will deliver growth
during this period. More importantly, we believe that the
strategies that we have implemented will increase our long-term
growth potential.”
Conference Call
USANA will hold a conference call and webcast to discuss this
announcement with investors on Wednesday, October 23, 2013 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 Nine Months Ended
29-Sep-12 28-Sep-13 29-Sep-12 28-Sep-13
Net sales $ 165,175 $ 173,691 $ 480,196 $ 531,909 Cost of
sales 30,343 31,491 85,633 93,657
Gross profit 134,832 142,200 394,563 438,252
Operating expenses Associate incentives 70,406 76,361 209,316
224,017 Selling, general and administrative 40,342
41,145 115,150 126,527
Earnings from
operations 24,084 24,694 70,097 87,708 Other income
(expense) 267 76 177 (33 )
Earnings
before income taxes 24,351 24,770 70,274 87,675 Income
taxes 6,861 8,017 22,288 28,933
NET EARNINGS $ 17,490 $ 16,753 $ 47,986 $ 58,742
Earnings per share -
diluted $ 1.18 $ 1.16 $ 3.19 $ 4.16 Weighted average shares
outstanding - diluted 14,884 14,393 15,064
14,132
USANA Health Sciences, Inc. Consolidated
Balance Sheets (In thousands) (Unaudited)
As of As of ASSETS 29-Dec-12
28-Sep-13 Current Assets Cash and cash equivalents $ 70,839
$ 115,349 Inventories 36,481 45,671 Other current assets
25,225 35,105
Total current assets 132,545 196,125
Property and equipment, net 61,751 60,432 Goodwill 17,890
18,105 Intangible assets, net 42,085 42,078 Deferred income taxes
5,956 3,562 Other assets 7,128 11,031
Total
assets $ 267,355 $ 331,333
LIABILITIES AND
STOCKHOLDERS' EQUITY Current Liabilities Accounts payable $
7,040 $ 8,061 Other current liabilities 63,804 74,474
Total current liabilities 70,844 82,535 Other
long-term liabilities 938 1,127 Deferred income taxes 10,001 9,022
Stockholders' equity 185,572 238,649
Total
liabilities and stockholders' equity $ 267,355 $ 331,333
USANA Health Sciences, Inc. Sales by
Region (Unaudited) (In thousands)
Quarter Ended 29-Sep-12
28-Sep-13
Region
North America / Europe $ 62,490 37.8 % $ 66,294 38.2 %
Asia Pacific Southeast Asia Pacific 35,709 21.6 %
40,230 23.1 % Greater China 59,722 36.2 % 59,768 34.4 %
North Asia 7,254 4.4 % 7,399 4.3 % Asia
Pacific Total 102,685 62.2 % 107,397 61.8 %
Total $ 165,175 100.0 % $ 173,691 100.0 %
Active Associates by Region (1) (Unaudited)
As of 29-Sep-12 28-Sep-13
Region
North America / Europe 79,000 32.6 % 82,000 33.5 %
Asia Pacific Southeast Asia Pacific 58,000 24.0 % 60,000
24.5 % Greater China 97,000 40.1 % 94,000 38.3 %
North Asia 8,000 3.3 % 9,000 3.7 % Asia Pacific Total
163,000 67.4 % 163,000 66.5 % Total
242,000 100.0 % 245,000 100.0 %
(1) Associates are independent
distributors of our products who also purchase our products
fortheir personal use. We only count as active those Associates who
have purchased from us anytime during the most recent three-month
period, either for personal use or for resale.
Active Preferred Customers by Region
(2) (Unaudited)
As of 29-Sep-12
28-Sep-13
Region
North America / Europe 52,000 81.3 % 58,000 81.7 %
Asia Pacific Southeast Asia Pacific 6,000 9.4 % 8,000 11.3 %
Greater China 5,000 7.8 % 3,000 4.2 % North Asia
1,000 1.6 % 2,000 2.8 % Asia Pacific Total 12,000 18.8 %
13,000 18.3 % Total 64,000 100.0 %
71,000 100.0 %
(2) Preferred Customers purchase our
products strictly for their personal use and are not permittedto
resell or to distribute the products. We only count as active those
Preferred Customers who havepurchased from us any time during the
most recent three-month period.
USANA Health Sciences, Inc.Investors contact:Patrique Richards,
801-954-7961Investor Relationsinvestor.relations@us.usana.comMedia
contact:Dan Macuga, 801-954-7280Public Relations
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