- Second quarter net sales of $188.3
million; EPS of $1.36
- Associate growth of 11.4%
- Company repurchases 682,000 shares
under program during second quarter
- Company reiterates 2014 net sales and
earnings outlook
- Company announces promotion of Kevin
Guest to President
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 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.
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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