UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
WASHINGTON,
D.C. 20549
______________
FORM 8-K
______________
CURRENT
REPORT
Pursuant
to Section 13 or 15(d) of
the
Securities Exchange Act of 1934
Date
of Report (Date of Earliest Event Reported):
October
28, 2014
USANA HEALTH
SCIENCES, INC.
(Exact
name of registrant as specified in its charter)
Utah
(State
or other jurisdiction of incorporation)
0-21116
|
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87-0500306
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(Commission File No.)
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|
(IRS Employer Identification
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|
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Number)
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3838 West Parkway Boulevard Salt Lake City, Utah 84120
|
(Address
of principal executive offices, Zip
Code)
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Registrant’s
telephone number, including area code: (801)
954-7100
|
Check the
appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any
of the following provisions:
[ ] Written
communications pursuant to Rule 425 under the Securities Act (17 CFR
230.425)
[ ] Soliciting
material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
[ ] Pre-commencement
communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR
240.14d-2(b))
[ ] Pre-commencement
communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR
240.13e-4(c))
Item 2.02 Results of Operations and Financial
Condition.
On October 28, 2014, USANA Health Sciences, Inc. issued a press release
announcing its financial results for the third quarter and nine months
ended September 27, 2014. The release also announced that the Company
will post a document titled “Management Commentary, Results and Outlook”
on the Company’s website and that executives of the company would hold a
conference call with investors, to be broadcast over the World Wide Web
and by telephone and provided access information, date and time for the
conference call. The Company noted that the call will consist of brief
remarks by the Company’s management team, before moving directly into
questions and answers. A copy of the press release, and the Management
Commentary, Results and Outlook, are furnished herewith as Exhibits to
this Current Report on Form 8-K and are incorporated herein by
reference. These documents will be posted on the Company’s corporate
website, www.usanahealthsciences.com.
The information in this Current Report is being furnished and shall not
be deemed “filed” for the purposes of Section 18 of the Securities
Exchange Act of 1934, as amended, or otherwise subject to the
liabilities of that Section. The information in this Current Report
shall not be incorporated by reference into any registration statement
or other document pursuant to the Securities Act of 1933, as amended.
The furnishing of the information in this Current Report is not intended
to, and does not, constitute a representation that such furnishing is
required by Regulation FD or that the information this Current Report
contains is material investor information that is not otherwise publicly
available.
Item 9.01 Financial Statements and Exhibits.
(d) Exhibits
Exhibit 99.1 Press release issued by USANA Health Sciences, Inc.
dated October 28, 2014 (furnished herewith).
Exhibit
99.2 Management Commentary, Results and Outlook provided by USANA
Health Sciences, Inc. dated October 28, 2014 (furnished herewith).
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
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USANA HEALTH SCIENCES, INC.
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By: /s/ Paul A. Jones
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Paul A. Jones, Chief Financial Officer
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Date:
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October 28, 2014
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Exhibit 99.1
USANA
Health Sciences Announces Record Third Quarter 2014 Financial Results
-
Net
sales increased by 10.5% to $191.9 million
-
Net
earnings increased by 16.4%, while earnings per share increased by
26.7% to $1.47
-
Number
of active Associates increased by 18.8%
-
Company
repurchased approximately 1.1 million shares during third quarter
SALT LAKE CITY--(BUSINESS WIRE)--October 28, 2014--USANA Health
Sciences, Inc. (NYSE: USNA) today announced financial results for its
fiscal third quarter ended September 27, 2014. The Company also provided
updated net sales and earnings guidance for 2014.
Financial Performance
For the third quarter of 2014, net sales increased by 10.5% to $191.9
million, compared with $173.7 million in the prior-year period. The
increase in net sales was driven by overall Associate growth of 18.8%,
which was generated by the Company’s Asia Pacific region.
Net earnings for the third quarter increased by 16.4% to $19.5 million,
compared with $16.8 million during the prior-year period. This increase
was driven by higher net sales and lower relative Associate Incentives
expense. On a relative basis, Associate Incentives expense declined due
to a $4.5 million one-time payout resulting from the pricing and
compensation plan initiatives implemented by the Company in the third
quarter of 2013. Earnings per share for the quarter increased by 26.7%
to $1.47, compared with $1.16 in the third quarter of the prior year.
This increase in earnings per share was attributable to higher net
earnings and a lower number of diluted shares outstanding due to the
Company’s share repurchases during 2014. Weighted average diluted shares
outstanding were 13.3 million as of the end of the third quarter of
2014, compared with 14.4 million in the prior-year period.
Top and bottom line results for the third quarter benefitted from the
recognition of $3.1 million of deferred revenue in Hong Kong. Earnings
per share for the quarter benefitted by $0.11 as a result of this
revenue recognition.
During the quarter, the Company repurchased approximately 1.1 million
shares under its authorized repurchase program for a total investment of
$76.6 million. Additionally, as of October 24, 2014, the Company has
subsequently invested $13.2 million to repurchase approximately 172,000
shares pursuant to a Rule 10b5-1 plan. As of October 24, 2014, there
were $61.2 million remaining under the current share repurchase
authorization. The Company ended the third quarter with approximately
$87.7 million in cash and cash equivalents and $10 million on its
revolving line of credit.
“USANA generated solid operating results in the third quarter, which
included double-digit sales, earnings and customer growth,” said Kevin
Guest, USANA’s President. “We also continued to see impressive growth in
world-wide unit volume, Auto Order sales and check earners. This growth
was driven by the pricing and compensation plan enhancements we made a
year ago and our management team’s continued promotion of those
enhancements during 2014. While we are pleased with the growth in each
of these metrics, customer growth continues to be our highest priority,
as we seek to improve the overall health and nutrition of individuals
and families around the world.”
Regional Results
Net sales in the Asia Pacific region increased by 21.3% to $130.2
million, compared with $107.4 million for the third quarter of the prior
year, and increased 4.5% sequentially. The year-over-year increase was
due to 29.2% sales growth in the Greater China region and 10.6% sales
growth in the Southeast Asia Pacific region. Sales growth in Greater
China was driven by double-digit sales and customer growth in Mainland
China, while sales growth in Southeast Asia Pacific resulted from strong
sales and customer growth in Australia/New Zealand, the Philippines and
Thailand. The number of active Associates in the Asia Pacific region
increased by 28.2% year-over-year, due primarily to double-digit
Associate growth in the Greater China and Southeast Asia Pacific regions.
Net sales in the Americas/Europe region declined 6.9% to $61.7 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 declined slightly compared to the prior-year
period.
Outlook
The Company provided the following updated consolidated net sales and
earnings per share outlook for 2014:
-
Consolidated net sales between $780 million and $790 million, versus
the previous outlook of between $770 and $790 million
-
Earnings per share between $5.85 and $5.95, versus the previous
outlook of between $5.50 and $5.65
Chief Financial Officer, Paul Jones, commented, “As we head into the
final quarter of 2014, we are tightening our guidance range for the
topline and raising the outlook for EPS. The increase in our EPS outlook
is the result of another quarter of share repurchases and lower than
expected promotional costs. We are confident in the strategies that we
have in place and expect USANA to deliver another year of record
results.”
Conference Call
Shortly following the issuance of this earnings release, the Company
will post a new document titled “Management Commentary, Results and
Outlook” on the Company’s website (www.usanahealthsciences.com)
under the “Investor Relations” section of the site. USANA will hold a
conference call and webcast to discuss this announcement with investors
on Wednesday, October 29, 2014 at 11:00 AM Eastern Time. Investors
may listen to the call by accessing USANA’s website at http://www.usanahealthsciences.com.
The call will consist of brief remarks by the Company’s management team,
before moving directly into questions and answers.
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.
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USANA Health Sciences, Inc.
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Consolidated Statements of Earnings
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(In thousands, except per share data)
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(Unaudited)
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Quarter Ended
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Nine Months Ended
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28-Sep-13
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27-Sep-14
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28-Sep-13
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27-Sep-14
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Net sales
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$
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173,691
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$
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191,944
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$
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531,909
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$
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562,601
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Cost of sales
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|
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31,491
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34,585
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93,657
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103,278
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Gross profit
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142,200
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|
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157,359
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438,252
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459,323
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Operating expenses
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|
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Associate incentives
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76,361
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82,605
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224,017
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242,577
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Selling, general and administrative
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41,145
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45,499
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126,527
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|
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133,282
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Earnings from operations
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|
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24,694
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|
29,255
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87,708
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83,464
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Other income (expense)
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76
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(297
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)
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(33
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)
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|
125
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Earnings before income taxes
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|
|
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24,770
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|
|
28,958
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|
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|
87,675
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|
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83,589
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Income taxes
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|
|
|
|
8,017
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|
|
|
9,460
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|
|
|
|
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28,933
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|
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|
28,253
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|
|
|
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|
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NET EARNINGS
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|
$
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16,753
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|
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$
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19,498
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|
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|
|
$
|
58,742
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|
|
|
$
|
55,336
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
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|
|
|
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|
Earnings per share - diluted
|
|
|
|
$
|
1.16
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|
|
$
|
1.47
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|
|
|
|
$
|
4.16
|
|
|
|
$
|
3.96
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Weighted average shares outstanding - diluted
|
|
|
|
|
14,393
|
|
|
|
13,263
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|
|
|
|
|
14,132
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|
|
|
|
13,964
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
|
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|
USANA Health Sciences, Inc.
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Consolidated Balance Sheets
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(In thousands)
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(Unaudited)
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As of
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As of
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ASSETS
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28-Dec-13
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27-Sep-14
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Current Assets
|
|
|
|
|
|
|
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Cash and cash equivalents
|
|
|
|
$
|
137,343
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|
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$
|
87,738
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Securities held-to-maturity, net
|
|
|
|
|
8,642
|
|
|
|
-
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Inventories
|
|
|
|
|
47,242
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|
|
|
42,584
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Prepaid Expenses and Other current assets
|
|
|
|
|
35,818
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|
|
|
32,190
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Total current assets
|
|
|
|
|
229,045
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|
|
|
162,512
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|
|
|
|
|
|
|
|
|
|
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Property and equipment, net
|
|
|
|
|
59,180
|
|
|
|
66,310
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Goodwill
|
|
|
|
|
18,243
|
|
|
|
18,092
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Intangible assets, net
|
|
|
|
|
42,329
|
|
|
|
41,482
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Deferred income taxes
|
|
|
|
|
5,519
|
|
|
|
5,597
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Other assets
|
|
|
|
|
14,154
|
|
|
|
22,937
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Total assets
|
|
|
|
$
|
368,470
|
|
|
$
|
316,930
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
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|
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LIABILITIES AND STOCKHOLDERS' EQUITY
|
|
|
|
Current Liabilities
|
|
|
|
|
|
|
|
Accounts payable
|
|
|
|
$
|
9,502
|
|
|
$
|
6,551
|
Other current liabilities
|
|
|
|
|
86,369
|
|
|
|
88,912
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Line of Credit- short term
|
|
|
|
|
-
|
|
|
|
10,000
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Total current liabilities
|
|
|
|
|
95,871
|
|
|
|
105,463
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other long-term liabilities
|
|
|
|
|
1,211
|
|
|
|
1,256
|
Deferred income taxes
|
|
|
|
|
10,866
|
|
|
|
10,763
|
Stockholders' equity
|
|
|
|
|
260,522
|
|
|
|
199,448
|
Total liabilities and stockholders' equity
|
|
|
|
$
|
368,470
|
|
|
$
|
316,930
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
USANA Health Sciences, Inc.
|
Sales by Region
|
(Unaudited)
|
(In thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter Ended
|
|
|
|
|
28-Sep-13
|
|
|
|
27-Sep-14
|
Region
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
|
|
|
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|
Americas and Europe
|
|
|
|
$
|
66,294
|
|
|
38.2
|
%
|
|
|
|
$
|
61,723
|
|
|
32.2
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Asia Pacific
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Southeast Asia Pacific
|
|
|
|
|
40,230
|
|
|
23.2
|
%
|
|
|
|
|
44,488
|
|
|
23.2
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Greater China
|
|
|
|
|
59,768
|
|
|
34.4
|
%
|
|
|
|
|
77,206
|
|
|
40.2
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
North Asia
|
|
|
|
|
7,399
|
|
|
4.2
|
%
|
|
|
|
|
8,527
|
|
|
4.4
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Asia Pacific Total
|
|
|
|
|
107,397
|
|
|
61.8
|
%
|
|
|
|
|
130,221
|
|
|
67.8
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
$
|
173,691
|
|
|
100.0
|
%
|
|
|
|
$
|
191,944
|
|
|
100.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Active Associates by Region (1)
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of
|
|
|
|
|
28-Sep-13
|
|
|
|
27-Sep-14
|
Region
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Americas and Europe
|
|
|
|
|
82,000
|
|
|
33.5
|
%
|
|
|
|
|
82,000
|
|
|
28.2
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Asia Pacific
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Southeast Asia Pacific
|
|
|
|
|
60,000
|
|
|
24.4
|
%
|
|
|
|
|
70,000
|
|
|
24.1
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Greater China
|
|
|
|
|
94,000
|
|
|
38.4
|
%
|
|
|
|
|
129,000
|
|
|
44.3
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
North Asia
|
|
|
|
|
9,000
|
|
|
3.7
|
%
|
|
|
|
|
10,000
|
|
|
3.4
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Asia Pacific Total
|
|
|
|
|
163,000
|
|
|
66.5
|
%
|
|
|
|
|
209,000
|
|
|
71.8
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
245,000
|
|
|
100.0
|
%
|
|
|
|
|
291,000
|
|
|
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
|
|
|
|
|
28-Sep-13
|
|
|
|
27-Sep-14
|
Region
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Americas and Europe
|
|
|
|
|
58,000
|
|
|
81.7
|
%
|
|
|
|
|
57,000
|
|
|
74.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Asia Pacific
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Southeast Asia Pacific
|
|
|
|
|
8,000
|
|
|
11.3
|
%
|
|
|
|
|
11,000
|
|
|
14.3
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Greater China
|
|
|
|
|
3,000
|
|
|
4.2
|
%
|
|
|
|
|
3,000
|
|
|
3.9
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
North Asia
|
|
|
|
|
2,000
|
|
|
2.8
|
%
|
|
|
|
|
6,000
|
|
|
7.8
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Asia Pacific Total
|
|
|
|
|
13,000
|
|
|
18.3
|
%
|
|
|
|
|
20,000
|
|
|
26.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
71,000
|
|
|
100.0
|
%
|
|
|
|
|
77,000
|
|
|
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.
|
CONTACT:
USANA Health Sciences, Inc.
Investors contact:
Patrique
Richards, 801-954-7961
Investor Relations
investor.relations@us.usana.com
Media
contact:
Dan Macuga, 801-954-7280
Public Relations
Exhibit 99.2
USANA Health Sciences, Inc.
|
Q3 2014 Management Commentary, Results and Outlook
|
-
Net sales increased by 10.5% to $191.9 million
-
Net earnings increased by 16.4%, while earnings per share
increased by 26.7% to $1.47
-
Number of active Associates increased by 18.8%
-
Company repurchased approximately 1.1 million shares during
third quarter
|
October 28, 2014
Overview
The third quarter of 2014 was another successful quarter for USANA. Net
sales increased by 10.5% to $191.9 million on a year-over-year
basis. Net sales growth was driven by overall Associate growth of
18.8%, which was generated by our Asia Pacific region, where Associate
growth was 28.2%. Within Asia Pacific, each of the Company’s Greater
China, Southeast Asia Pacific, and North Asia regions generated
double-digit sales and customer growth.
Net earnings for the third quarter increased to $19.5 million, an
increase of 16.4% when compared with the prior-year period. Earnings
growth was primarily driven by higher net sales and lower relative
Associate Incentives expense. The relative decrease in Associate
Incentives expense was due to a one-time payout of $4.5 million during
the third quarter of 2013 in connection with the pricing and
compensation plan initiatives that were implemented at our 2013 Annual
International Convention. Earnings per share for the quarter increased
by 26.7% to $1.47, due to higher net earnings and a lower number of
diluted shares. Weighted average diluted shares outstanding were 13.3
million as of the end of the third quarter of 2014, compared with 14.4
million in the prior-year period. During the quarter, we repurchased
approximately 1.1 million shares for an investment of $76.6
million. Additionally, as of October 24, 2014, we have purchased an
additional 172,000 shares for an investment of $13.2 million under a
Rule 10b5-1 trading plan. As of October 24, 2014, there was $61.2
million remaining under the current share repurchase authorization.
Our top and bottom line results for the third quarter benefitted from
the recognition of $3.1 million of deferred revenue in Hong Kong. We
recognized this revenue as a result of changes we have experienced in
the trend of our unearned revenue following the worldwide policy changes
that were implemented in 2013. Earnings per share for the quarter
benefitted by $0.11 as a result of this revenue recognition.
We believe that the improvements we implemented in our business a year
ago significantly contributed to our strong operating results this
quarter. These improvements were intended to promote long-term customer
growth and included:
-
Simplification of our pricing structure and an additional 10% price
discount on products ordered through our monthly Auto Order program;
-
The introduction of an initial order reward based on the amount of a
customer’s initial product order, which is credited on the customer’s
subsequent two Auto Orders; and
-
Increased payout on and simplification of, our Associate Compensation
Plan.
As we mark the one-year anniversary of these changes, we are encouraged
by the results they are producing. Customer growth remains our highest
priority as we seek to do our part in improving the overall health and
nutrition of individuals and families around the world. During the
third quarter, we generated strong customer growth as demonstrated by
the 18.8% increase in our number of active Associates, and 8.5% increase
in Preferred Customers. In addition to customer growth, we have
continued to see improvement in other key areas of our business,
including world-wide unit volume, Auto Order sales, the number of check
earners and rank advancements. During the third quarter:
-
World-wide unit volume increased 12.2% year over year;
-
Auto Order sales increased to 49.9% of unit sales compared to 33.6% of
unit sales a year ago;
-
The number of Associates who received a commission check from USANA
also continued to increase, and includes many who received their first
check with USANA; and
-
Associate rank advancements continued to increase.
These metrics illustrate how our business has accelerated as a result of
the changes we made in 2013.
At our 2014 Annual International Convention in August, we continued to
build on the success of these 2013 improvements and announced new
enhancements to our business. These enhancements include an all-new
digital marketing suite for our world-wide Associate base. This suite
provides our Associates with new tools, including a back office Hub,
personal websites, and advanced communication and marketing tools, which
all significantly enhance our Associates’ ability to manage and build
their USANA business in today’s demanding ebusiness environment. These
new tools are designed to simplify conducting a USANA business, enhance
communications and provide an online atmosphere that is personal to the
Associate and highly engaging for the customer.
At our convention, we also announced a strategic change in our approach
to market-specific incentives and promotions. For the last 12 months,
we have focused solely on promoting the benefits of the 2013
improvements to our sales force. With the anniversary of these
improvements, we announced that we will begin offering market-specific
incentives and promotions to further accelerate growth. The first
incentive became effective at our 2014 convention and we have additional
incentives and promotions planned for 2015. Consistent with our primary
goal, these incentives are all intended to generate long-term customer
growth.
Regional and Financial Results
Asia Pacific Region | Q3 2014 Net Sales of $130.2 million; 67.8 % of
Consolidated Net Sales
Net sales in our Asia Pacific region increased 21.3% year-over-year, and
4.5% on a consecutive quarter basis, while the number of active
Associates in the region increased by 28.2% year-over-year. This
growth was the result of double-digit sales and customer growth in each
of our Greater China, Southeast Asia Pacific and North Asia
regions. Net sales in the region as a whole were only modestly impacted
by changes in currency, which increased sales by $628,000.
Greater China. Net sales in Greater China increased 29.2%
year-over-year as a result of strong sales and customer growth in
Mainland China. Specifically, net sales in Mainland China increased
69.1% year-over year, while the number of active Associates increased
85.7%. We continue to see improvement in the business environment in
China, as our Associates hold meetings to introduce our high-quality
products to new customers. We are also preparing to hold our annual
National Sales Meeting in China in November and expect record attendance
at this event. Finally, we continue to make progress on renovating our
branches and service centers in China and are progressing with the
construction of our new state-of-the-art production facility in
Beijing. Construction is on schedule and we continue to anticipate that
this facility will become operational in late 2015.
Our results in the Greater China region during the quarter were
partially offset by the anticipated decrease in sales in Hong Kong, as
well as a slight decrease in Taiwan. Net sales in Hong Kong decreased
by 13.0% year-over-year. Sales in Hong Kong benefitted by our
recognition of $3.1 million of deferred revenue during the quarter,
without which sales would have declined 27.2% compared to the prior year
period.
Southeast Asia Pacific. The 10.6% net sales increase in the
Southeast Asia Pacific region was driven by local currency sales growth
in most markets within this region and an increase in the number of
active Associates in nearly every market within the region. The
strongest growth in this region came from the Philippines, where net
sales increased 31.8% and the number of active Associates increased by
28.0%. We are also encouraged by our results in Australia and New
Zealand, where we continue to see growth in both sales and customers.
North Asia. The 15.2% net sales increase in the North Asia
region was driven by double-digit sales and Associate growth in
Korea. We are pleased with the momentum that we have seen in our Korean
business during 2014.
Americas and Europe Region | Q3 2014 Net Sales of $61.7 million;
32.2% of Consolidated Net Sales
In the Americas and Europe region, net sales on a year-over-year basis
declined 6.9% to $61.7 million, due primarily to a sales decline in the
U.S. The number of active Associates in this region was essentially
flat. Unfavorable changes in currency exchange rates reduced sales for
the region by $878,000. We were, however, pleased to see local currency
sales growth in every market within the region other than the
U.S. Mexico led the way with 11.0% sales growth and 7.1% growth in
active Associates.
Net sales in the United States decreased $4.7 million due, in part, to
pressure from price discounts, as this market has one of the highest
usage rates of our Auto Order program. The U.S. continues to be an
important market for USANA and we are optimistic that we can stabilize
our results and achieve growth in the future. We believe that our new
strategy for incentives and promotions is the right approach in this
market and, although it is still early, we are encouraged by the results
that we are beginning to see after implementing this strategy at our
annual convention in August.
Income Statement Discussion
Gross margins improved 10 basis points year-over-year, due in
large part to favorable changes in product and sales market mix and the
recognition of deferred revenue. These benefits were partially offset
by unfavorable changes in currency exchange rates.
Associate incentives expense for the quarter decreased 100 basis
points year-over-year to 43.0% of net sales. The relative decrease
in Associate Incentives expense was due to a one-time payout expense of
$4.5 million that occurred during the third quarter of 2013 in
connection with pricing and compensation plan initiatives that were
implemented a year ago.
Selling, general and administrative expense was 23.7% of net sales
and flat compared to the prior year period. On an absolute basis, SG&A
increased as a result of the costs associated with supporting a higher
sales and customer base.
Our effective tax rate for the third quarter was 32.7% and 30 basis
points higher than the third quarter of the prior year. On a
consecutive quarter basis, our effective tax rate decreased 160 basis
points as the result of favorable federal and state tax return
adjustments associated with our prior year tax return filings. We
continue to expect our tax rate to be approximately 34% for 2014.
Balance Sheet
We ended the quarter with $87.7 million in cash, $57.0 million in net
working capital, and $10 million on our revolving line of credit. The
decline in cash is the result of share repurchases during the quarter.
Outlook
As we head into the final quarter of 2014, we are tightening our
guidance range for the topline and raising our outlook for
EPS. Accordingly, we now anticipate:
-
Consolidated net sales between $780 million and $790 million, versus
the previous outlook of between $770 and $790 million
-
Earnings per share between $5.85 and $5.95, versus the previous
outlook of between $5.50 and $5.65
For the full-year 2014, we estimate Earnings from Operations in the
range of 15.5% to 16% of net sales. Our outlook for earnings per share
does not reflect any share buyback activity in the fourth quarter. Note
that USANA maintains a 52/53 week fiscal year where our year end falls
on the Saturday closest to December 31. Every five to six years there
is an extra week in our fiscal year. USANA’s fiscal 2014 is a 53-week
year and accordingly, the fourth quarter will include an additional week
of sales.
As we approach 2015, it is important to note that the first quarter will
present a difficult sequential quarter comparable due to:
-
14 weeks of sales in Q4 2014, compared with only 13 weeks in Q1 2015;
-
Momentum and excitement that we are seeing in Q4 2014 in connection
with our upcoming national sales meeting in China; and
-
The typical seasonal slowing associated with Chinese New Year during
Q1 2015.
We are confident in the strategies that we have in place and expect
USANA to deliver another year of record results for our shareholders.
Kevin Guest
|
Paul Jones
|
President
|
Chief Financial Officer
|
Forward-Looking Statements
This document contains forward-looking statements regarding future
events or the future financial performance of our company. Those
statements involve risks and uncertainties that could cause actual
results to differ perhaps materially from results projected in such
forward-looking statements. Examples of these statements include those
regarding our strategies and outlook for 2014. We caution you that these
statements should be considered in conjunction with disclosures,
including specific risk factors and financial data contained in our most
recent filings with the SEC.
Investor Relations Contact Patrique Richards 801-954-7961 Investor.relations@us.usana.com
|
Media Contact Dan Macuga 801-954-7280 Public
Relations
|
8
USANA Health Sciences (NYSE:USNA)
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