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):
February
10, 2015
USANA HEALTH
SCIENCES, INC.
(Exact
name of registrant as specified in its charter)
Utah
(State
or other jurisdiction of incorporation)
001-35024
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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
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(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 February 10, 2015, USANA Health Sciences, Inc. issued a press release
announcing its financial results for the fourth quarter and fiscal year
ended January 3, 2015. 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 February 10, 2015 (furnished herewith).
Exhibit
99.2 Management Commentary, Results and Outlook provided by USANA
Health Sciences, Inc. dated February 10, 2015 (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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February 10, 2015
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Exhibit 99.1
USANA
Health Sciences Announces Record Fourth Quarter and Full-Year 2014
Financial Results
-
Fourth
quarter net sales increased by 22.3% to $227.9 million
-
Fourth
quarter EPS increased by 17.0% to $1.65
-
Number
of active Associates increased by 31.7%
-
2014
marks 12th
consecutive year of record sales
-
EPS
increased to a record $5.60 for the year
-
Initial
2015 net sales and earnings outlook provided
SALT LAKE CITY--(BUSINESS WIRE)--February 10, 2015--USANA Health
Sciences, Inc. (NYSE: USNA) today announced financial results for its
fiscal fourth quarter ended January 3, 2015. The Company also provided
net sales and earnings guidance for 2015.
Financial Performance
For the fourth quarter of 2014, net sales increased by 22.3% to $227.9
million, compared with $186.3 million in the prior-year period. The
fourth quarter of 2014 was a 14-week quarter as compared to a typical
13-week quarter in the prior year period. The Company estimates that
this extra week contributed approximately $16 million to net sales for
the quarter. The increase in net sales was driven by 31.7% growth in the
number of active Associates, largely as a result of strong growth in the
Company’s Asia Pacific region. Net sales, on a comparative basis, were
negatively impacted by $6.3 million due to a strengthening U.S. dollar.
Net earnings for the fourth quarter increased by 5.0% to $21.3 million,
compared with $20.3 million during the prior-year period. This increase
was driven by higher net sales and improved gross margins, which was
partially offset by higher operating expenses. On a relative basis,
Associate Incentives expense increased 170 basis points due to the
incentive program that the Company offered during the fourth quarter.
Earnings per share for the quarter increased 17.0% to $1.65, compared
with $1.41 in the fourth 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 12.9 million as of the end of the fourth quarter of 2014, compared
with 14.4 million in the prior-year period. The Company estimates that
the extra week of sales contributed approximately $0.12 to earnings per
share for the quarter.
During the quarter, the Company repurchased approximately 172,000 shares
under its authorized repurchase program for a total investment of $13.2
million. As of January 3, 2015, there was $61.2 million remaining under
the current share repurchase authorization. The Company ended the fourth
quarter with no debt and with $111.1 million in cash and cash
equivalents.
“USANA generated exceptional results in the fourth quarter, which
included double-digit sales, earnings per share and customer growth,”
said Kevin Guest, USANA’s President. “While our results did benefit from
the extra week of sales during the quarter, the more significant
catalyst for our performance was the incentive we introduced to our
Associate sales force during the fourth quarter. Although it created
pressure on our operating margin, the incentive was very successful in
accelerating our sales and customer growth for the quarter. This
incentive will end in February 2015, but we will offer other
market-specific incentives throughout 2015 and expect to carry the
momentum we are seeing in our business throughout the year.”
Regional Results
Net sales in the Asia Pacific region increased by 34.1% to $163.3
million, compared with $121.8 million for the fourth quarter of the
prior year. Net sales also increased by 25.4% on a sequential quarter
basis. The year-over-year increase was due to 45.1% sales growth in the
Greater China region, 18.8% sales growth in the Southeast Asia Pacific
region, and 16.1% sales growth in the North Asia 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 double-digit sales and customer growth in the Philippines,
Australia/New Zealand, Malaysia and Thailand. Sales growth in North Asia
was driven by double-digit sales and customer growth in South Korea. The
number of active Associates in the Asia Pacific region increased by
44.3% year-over-year, and increased 26.3% sequentially.
Net sales in the Americas/Europe region were essentially flat at $64.5
million, due primarily to a sales decline in the U.S., which was offset
by double-digit local currency sales growth in Canada and Mexico. The
number of active Associates in this region increased by 3.7% compared to
the prior-year period.
“Our Asia Pacific region led the way during the quarter, where we saw
double-digit sales and customer growth in most markets in the region.
Our Associates throughout the region embraced the promotion we offered
during the fourth quarter and utilized it to grow their sales
organizations at an accelerated pace. This was most evident in Mainland
China, where we saw significant sales and customer growth, which was
bolstered by the excitement generated by our National Sales Meeting in
early November. We were also pleased with the results we generated in
the Americas/Europe region during the quarter, which included solid
customer and sales growth in Canada and Mexico,” continued Mr. Guest.
2014 Results
For the year ended January 3, 2015, net sales increased by 10.1% to
$790.5 million, compared with $718.2 million in the prior year. The
increase in net sales was largely driven by sales and Associate growth
in the Company’s Asia Pacific region. Net sales for the full-year were
negatively impacted by $14.9 million due to a strengthening U.S. dollar.
Net earnings for 2014 decreased by 3.0% to $76.6 million, compared with
$79.0 million in the prior year. This decrease resulted primarily from a
130 basis point increase in Associate Incentives expense due primarily
to the pricing and compensation plan changes implemented during the
third quarter of 2013. Earnings per share for the year increased by 0.7%
to $5.60, compared with $5.56 in the prior year. This increase in
earnings per share was attributable to a lower number of diluted shares
outstanding due to the Company’s share repurchases during 2014. Weighted
average diluted shares outstanding were 13.7 million for fiscal 2014,
compared with 14.2 million for fiscal 2013.
“2014 was another exceptional year for USANA,” concluded Mr. Guest. “Our
vision as a Company continues to center on improving the overall health
and nutrition of individuals and families around the world through our
world-class product offering. To further this vision in 2015, we will
continue to execute our overall strategy, which focuses on promoting
customer loyalty, enjoyment and success with USANA. This includes
advancing our personalization initiative with investments in product and
technology innovation to benefit our customers. We are also excited
about our recent announcement that USANA is now a Trusted Partner and
Sponsor of the Dr. Oz Show. This expansion of our marketing strategy is
intended to make it easier for our Associates to introduce USANA
products to potential customers. Finally, we will continue to enhance
our rewarding Associate Compensation Plan by introducing short-term,
market-specific incentives to drive customer growth. I am excited about
our growth opportunities in the coming year and believe that the
strategies we have in place will produce another record year for USANA
in 2015.”
Outlook
The Company provided the following consolidated net sales and earnings
per share outlook for 2015:
-
Consolidated net sales between $850 million and $870 million
-
Earnings per share between $6.40 and $6.70
Chief Financial Officer, Paul Jones, commented, “We are pleased with the
results that USANA delivered in 2014 and are encouraged about our
opportunities in 2015. As our initial outlook suggests, we are confident
in the strength of our underlying business and expect 2015 to be another
record year. Consistent with prior years, we anticipate that our results
will accelerate during the year following the customary seasonal
pressure from the Chinese New Year. We will also make several necessary
investments in Fiscal 2015 to strengthen key areas of our business.
These investments will include our information technology systems and
infrastructure, brand-awareness, product innovation, and new technology
to complement product innovation. These investments will be reflected in
both higher SG&A expense along with a significant amount of capital
expenditures. We believe that they are the proper investments to support
USANA’s long-term growth objectives.”
Conference Call
The Company has posted the “Management Commentary, Results and Outlook”
document 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 today’s announcement with
investors on Wednesday, February 11, 2015 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 opening 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.
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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Year Ended
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28-Dec-13
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3-Jan-15
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28-Dec-13
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3-Jan-15
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Net sales
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$
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186,266
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$
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227,870
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$
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718,175
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$
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790,471
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Cost of sales
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33,778
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37,516
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127,435
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140,794
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Gross profit
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152,488
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190,354
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590,740
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649,677
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Operating expenses
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Associate incentives
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83,803
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106,467
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307,820
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349,044
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Selling, general and administrative
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39,681
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51,249
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166,208
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|
|
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184,531
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Earnings from operations
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29,004
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|
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32,638
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|
|
|
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116,712
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|
|
|
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116,102
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|
|
|
|
|
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|
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|
|
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|
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Other income (expense)
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(98
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)
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(574
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)
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(131
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)
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(449
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)
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Earnings before income taxes
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28,906
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32,064
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|
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116,581
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|
|
|
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115,653
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Income taxes
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|
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|
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8,624
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|
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10,764
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37,557
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39,017
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NET EARNINGS
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$
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20,282
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$
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21,300
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$
|
79,024
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|
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$
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76,636
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Earnings per share - diluted
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|
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$
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1.41
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$
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1.65
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$
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5.56
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$
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5.60
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Weighted average shares outstanding - diluted
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14,421
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12,920
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14,204
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|
|
|
13,689
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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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|
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28-Dec-13
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3-Jan-15
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Current Assets
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Cash and cash equivalents
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$
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137,343
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$
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111,126
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Securities held-to-maturity, net
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|
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8,642
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|
-
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Inventories
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|
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|
47,242
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|
|
|
|
45,248
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Prepaid Expenses and Other current assets
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|
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|
35,818
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|
|
|
|
34,553
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Total current assets
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|
|
|
|
|
229,045
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|
|
|
|
190,927
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Property and equipment, net
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|
|
|
|
|
59,180
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|
|
|
|
71,164
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Goodwill
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|
|
|
|
|
18,243
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|
|
|
|
17,941
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Intangible assets, net
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|
|
|
|
|
42,329
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|
|
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|
40,952
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Deferred income taxes
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|
|
|
|
|
5,519
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|
|
|
|
5,933
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Other assets
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|
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|
14,154
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|
|
|
|
23,667
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Total assets
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|
|
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|
$
|
368,470
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|
|
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$
|
350,584
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|
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LIABILITIES AND STOCKHOLDERS' EQUITY
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|
|
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Current Liabilities
|
|
|
|
|
|
|
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|
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Accounts payable
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|
|
|
|
$
|
9,502
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|
|
|
$
|
7,779
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Other current liabilities
|
|
|
|
|
|
86,369
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|
|
|
|
100,926
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Total current liabilities
|
|
|
|
|
|
95,871
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|
|
|
|
108,705
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Other long-term liabilities
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|
|
|
|
|
1,211
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|
|
|
|
1,114
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Deferred income taxes
|
|
|
|
|
|
10,866
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|
|
|
|
10,601
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|
Stockholders' equity
|
|
|
|
|
|
260,522
|
|
|
|
|
230,164
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Total liabilities and stockholders' equity
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|
|
|
|
$
|
368,470
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|
|
|
$
|
350,584
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|
|
USANA Health Sciences, Inc.
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Sales by Region
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(Unaudited)
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(In thousands)
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|
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Quarter Ended
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|
|
|
|
|
28-Dec-13
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|
|
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3-Jan-15
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Region
|
|
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|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
|
Americas and Europe
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|
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|
$
|
64,467
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|
|
34.6
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%
|
|
|
|
$
|
64,531
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|
|
28.3
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Asia Pacific
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Southeast Asia Pacific
|
|
|
|
|
|
42,348
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|
|
22.7
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%
|
|
|
|
|
50,315
|
|
|
22.1
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Greater China
|
|
|
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|
|
71,671
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|
|
38.5
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%
|
|
|
|
|
103,990
|
|
|
45.6
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
North Asia
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|
|
|
|
|
7,780
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|
|
4.2
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%
|
|
|
|
|
9,034
|
|
|
4.0
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%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Asia Pacific Total
|
|
|
|
|
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121,799
|
|
|
65.4
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%
|
|
|
|
|
163,339
|
|
|
71.7
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
$
|
186,266
|
|
|
100.0
|
%
|
|
|
|
$
|
227,870
|
|
|
100.0
|
%
|
|
|
Active Associates by Region (1)
|
(Unaudited)
|
|
|
|
|
|
|
As of
|
|
|
|
|
|
28-Dec-13
|
|
|
|
3-Jan-15
|
Region
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Americas and Europe
|
|
|
|
|
82,000
|
|
|
30.9
|
%
|
|
|
|
85,000
|
|
|
24.4
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Asia Pacific
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Southeast Asia Pacific
|
|
|
|
|
62,000
|
|
|
23.4
|
%
|
|
|
|
79,000
|
|
|
22.6
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Greater China
|
|
|
|
|
111,000
|
|
|
41.9
|
%
|
|
|
|
174,000
|
|
|
49.9
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
North Asia
|
|
|
|
|
10,000
|
|
|
3.8
|
%
|
|
|
|
11,000
|
|
|
3.1
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Asia Pacific Total
|
|
|
|
|
183,000
|
|
|
69.1
|
%
|
|
|
|
264,000
|
|
|
75.6
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
265,000
|
|
|
100.0
|
%
|
|
|
|
349,000
|
|
|
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-Dec-13
|
|
|
|
3-Jan-15
|
Region
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Americas and Europe
|
|
|
|
|
60,000
|
|
|
76.9%
|
|
|
|
60,000
|
|
|
74.1%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Asia Pacific
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Southeast Asia Pacific
|
|
|
|
|
10,000
|
|
|
12.8%
|
|
|
|
12,000
|
|
|
14.8%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Greater China
|
|
|
|
|
5,000
|
|
|
6.4%
|
|
|
|
3,000
|
|
|
3.7%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
North Asia
|
|
|
|
|
3,000
|
|
|
3.9%
|
|
|
|
6,000
|
|
|
7.4%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Asia Pacific Total
|
|
|
|
|
18,000
|
|
|
23.1%
|
|
|
|
21,000
|
|
|
25.9%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
78,000
|
|
|
100.0%
|
|
|
|
81,000
|
|
|
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.
Q4 and Full-Year 2014
Management Commentary,
Results and Outlook
|
•
|
Fourth quarter net sales increased by 22.3% to $227.9 million
|
|
•
|
Fourth quarter EPS increased by 17.0% to $1.65
|
|
•
|
Number of active Associates increased by 31.7%
|
|
•
|
2014 marks 12th consecutive year of record sales ($790.5
million)
|
|
•
|
EPS increased to a record $5.60 for the year
|
|
•
|
Initial 2015 net sales and earnings outlook provided
|
February 10, 2015
Overview
The fourth quarter of 2014 was another record quarter for USANA, wherein
sales increased by 22.3% to $227.9 million on a year-over-year basis.
Net sales growth was driven by overall Associate growth of 31.7%, which
was primarily generated by our Asia Pacific region, where Associate
growth was 44.3%. Each region within Asia Pacific generated
double-digit sales and customer growth. Net sales, on a comparative
basis, were negatively impacted $6.3 million due to a strengthening U.S.
dollar.
Net earnings for the fourth quarter increased to $21.3 million, an
increase of 5.0% when compared with the prior-year period. Earnings
growth was driven by higher net sales and improved gross margins, and
was partially offset by higher operating expenses and income
taxes. Associate Incentives expense was the primary driver of the
higher operating expenses during the quarter and increased by 170 basis
points. This increase was due to an incentive program that the Company
offered to Associates during the fourth quarter. This incentive had a
higher participation rate than we initially anticipated and,
consequently, we had meaningfully higher Associate Incentives expense
for the quarter. Additionally, SG&A increased 120 basis points during
the quarter due primarily to expenses related to our business in
China. Earnings per share for the quarter increased by 17.0% to $1.65,
due to higher net earnings and a lower number of diluted
shares. Weighted average diluted shares outstanding were 12.9 million at
the end of the fourth quarter of 2014, compared with 14.4 million in the
prior-year period. During the quarter, we repurchased approximately
172,000 shares for an investment of $13.2 million. As of January 3,
2015, there was $61.2 million remaining under the current share
repurchase authorization.
Additionally, the fourth quarter of 2014 was a 14-week quarter as
compared to the typical 13-week quarter in the prior year period. The
Company estimates that this extra week contributed approximately $16
million to net sales and approximately $0.12 to diluted earnings per
share for the quarter.
While our results benefitted from the extra week of sales, the more
significant driver of our top-line growth during the quarter was the
incentive program that we offered to our Associate sales force. Prior
to the fourth quarter, we had focused largely on promoting the benefits
of the price reductions and compensation plan enhancements that we
introduced at our 2013 convention. At our 2014 convention, we announced
a strategic change in our approach to market-specific incentives and
promotions.
The fourth quarter incentive that we offered began at our 2014
Convention and will run through February of 2015. This incentive
increased compensation to Associates for sales generated by new
customers, and offered an added incentive for sales made to new
customers on Auto Order. USANA’s Auto Order program is a key part of
our operating strategy, as it has been shown to increase the success and
longevity of a customer. In the fourth quarter, Auto Orders made up
48.3% of product volume, compared to 41.7% in Q4 of 2013.
For 2015 we have additional market-specific incentives and promotions
planned, which are consistent with our primary goal of generating
long-term customer growth as we seek to improve the overall health and
nutrition of individuals and families around the world. During the
fourth quarter, we generated strong customer growth as demonstrated by
the 31.7% increase in our number of active Associates, and 3.8% increase
in Preferred Customers. We believe that the incentive we offered during
the quarter played a key role in driving this growth. In addition to
customer growth, we have continued to see improvement in other key
metrics of our business, including world-wide unit volume, Auto Order
sales, the number of check earners and rank advancements.
Regional and Financial Results
Asia Pacific Region | Q4 2014 Net Sales of $163.3 million; 71.7% of
Consolidated Net Sales
Net sales in our Asia Pacific region increased by 34.1% year-over-year,
and 25.4% on a consecutive quarter basis, while the number of active
Associates in the region increased by 44.3% 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 were negatively impacted by $4.0
million due to a strengthening U.S. dollar.
Greater China. Net sales in Greater China increased 45.1%
year-over-year as a result of strong sales and customer growth in
Mainland China. Specifically, net sales in Mainland China increased
91.5% year-over year, while the number of active Associates increased
94.7%. The incentive that we offered during the fourth quarter was a key
driver in the acceleration of our growth in Mainland
China. Additionally, we held our annual National Sales Meeting in China
in November, where we had a record number of Associates in
attendance. This event contributed to the momentum we gained from the
incentive program.
In China, we continue to make progress on renovating our branch service
center locations. Additionally, the construction of our new
state-of-the-art production facility in Beijing is progressing according
to schedule. We continue to anticipate that this facility will be
completed in late 2015 or early 2016.
Our results in the Greater China region during the quarter were
partially offset by the anticipated sales decrease in Hong Kong, where
sales declined 19.0% year-over-year.
Southeast Asia Pacific. The 18.8% net sales increase in the
Southeast Asia Pacific region was driven by a double-digit increase in
the number of active Associates in every market within this region and
local currency sales growth in all but one market. The Philippines led
the way in this region, where net sales increased 56.3% and the number
of active Associates increased by 44.0%. Australia, New Zealand,
Malaysia and Thailand also delivered strong growth in both sales and
customers.
North Asia. Net sales in North Asia increased 16.1%
year-over-year as a result of 37.5% net sales growth and 28.6% customer
growth in South Korea. We are pleased with the momentum that we are
seeing in our Korean market.
Americas and Europe Region | Q4 2014 Net Sales of $64.5 million;
28.3% of Consolidated Net Sales
In the Americas and Europe region, net sales on a year-over-year basis
were essentially flat, while the number of active Associates increased
3.7%. Net sales were negatively impacted by $2.3 million due to a
strengthening U.S. dollar. We were pleased to see double-digit local
currency sales growth in every market within the region outside the
U.S. In particular, Canada and Mexico generated local currency sales
growth of 12.6% and 19.7% respectively. The number of active Associates
increased 8.0% in Canada and 7.1% in Mexico.
2014 Results
The fiscal year ended January 3, 2015 was the 12th
consecutive year of record sales for USANA. We also reported our highest
annual earnings per share in the history of the Company.
Net sales increased by 10.1% to $790.5 million on a year-over-year
basis. Net sales growth was largely driven by sales and Associate growth
in the Company’s Asia Pacific region. Notably, net sales for the
full-year were negatively impacted by $14.9 million due to a
strengthening U.S. dollar.
Net earnings for 2014 were $76.6 million, a decrease of 3.0% when
compared with the prior-year period. This decrease resulted primarily
from a 130 basis point increase in Associate Incentives expense due to
the pricing and compensation plan initiatives implemented during the
third quarter of 2013. Earnings per share for the year increased to
$5.60, compared to $5.56 in the prior year. This increase in earnings
per share is attributable to a lower number of diluted shares
outstanding due to the Company’s share repurchases during
2014. Weighted average diluted shares outstanding were 13.7 million as
of the end of 2014, compared with 14.2 million in the prior year. During
the year, we repurchased 1.9 million shares for a total investment of
$138.8 million. As of January 3, 2015, there was $61.2 million
remaining under the current share repurchase authorization.
Balance Sheet
We ended the 2014 fiscal year with no debt, $111.1 million in cash, and
$82.2 million in net working capital.
Quarterly Income Statement Discussion
Gross margins improved 160 basis points year-over-year, due in
large part to favorable changes in product and sales market mix. This
benefit was partially offset by the negative impact of a strengthening
U.S. dollar.
Associate incentives expense for the quarter increased 170 basis
points year-over-year to 46.7% of net sales. The relative increase
in Associate Incentives expense was due to the incentive we offered
during the fourth quarter. This incentive had a higher participation
rate than we anticipated and resulted in a meaningful increase in
Associate Incentives expense for the quarter. This incremental expense
was the primary catalyst for the Company falling short of its 2014 EPS
outlook.
Selling, general and administrative expense was 22.5% of net sales,
an increase of 120 basis points compared to the prior year period. On
an absolute basis, SG&A increased due to expenses related to our
business in China, along with our continued investment in infrastructure
to support our growing sales and customer base.
Our effective tax rate for the fourth quarter was 33.6% and 380 basis
points higher than the fourth quarter of the prior year. The
increase in the effective tax rate for the quarter was due primarily to
benefits from a Utah state tax policy election change recognized in the
fourth quarter of 2013 that did not occur again in 2014. On a
consecutive quarter basis, our effective tax rate increased 90 basis
points as the result of favorable federal and state tax return
adjustments associated with our prior year tax return filings.
Outlook
In 2015, we will continue to focus on our vision of improving the
overall health and nutrition of individuals and families around the
world through our world-class product offering. The strategies that we
have in place to support this vision will focus on:
|
•
|
Expanding our marketing and branding efforts to make it easier for
our Associates to talk about USANA with potential customers;
|
|
•
|
Advancing our personalization initiative with investments in
product and technology innovation; and
|
|
•
|
Enhancing our Associate Compensation Plan with short-term,
market-specific incentives to encourage sales and customer growth.
|
Our marketing and branding efforts include the expansion of our
relationship with Dr. Mehmet Oz as a Trusted Partner and Sponsor of the
Dr. Oz Show. Under this partnership, USANA products will be regularly
featured on The Dr. Oz Show as part of their sponsorship integration
program. This new partnership kicked off in January when Procosa®, our
joint health supplement product, was featured on the show. Additional
products will follow and be featured on the show approximately on a
monthly basis. This partnership is intended to primarily facilitate
growth in our North America region, with an emphasis on the U.S., by
increasing awareness and recognition of the USANA brand and, thereby,
making it easier for our Associates to talk about USANA with potential
customers. The partnership is also intended to directly facilitate
preferred customer growth in North America, by allowing viewers of The
Dr. Oz Show to purchase USANA products via a direct link on The Dr. Oz
Show website.
Finally, the Company continues to research new market expansion
opportunities as part of its international growth strategy. Our goal
remains to identify markets where our current Associate base has strong
connections and which also present an excellent direct selling
opportunity. We’re optimistic about several potential new markets. We
plan to announce the opening of a new market in the Southeast Asia
Pacific region during the first half of the year with a target opening
date in the fourth quarter. This market will provide our Associates
with an additional opportunity to expand their businesses
internationally.
The Company provided the following consolidated net sales and earnings
per share outlook for 2015:
|
•
|
Consolidated net sales between $850 million and $870 million
|
|
•
|
Earnings per share between $6.40 and $6.70
|
USANA’s 2015 fiscal year is a 52-week year and accordingly, will include
one less week of sales when compared to the 53-week fiscal year in
2014. For the full-year 2015, we estimate that Earnings from Operations
will be approximately 15% of net sales with an effective tax rate of
about 34%. Additionally, our outlook assumes a diluted share count of
approximately 13 million shares and does not reflect any share buyback
activity in 2015.
Our estimate for Earnings from Operations reflects several necessary
investments we plan to make during the year to strengthen key areas of
our business to help prepare USANA for future growth as we strive to
become a much larger company. We expect the Company’s total capital
spending, which will include the new facility in China, branch upgrades,
and investment in our information technology infrastructure will
approach $45 million for the full-year 2015.
We note that the first quarter of 2015 will present a difficult
sequential comparison with the fourth quarter of 2014 due to:
|
•
|
14 weeks of sales in Q4 2014, compared with only 13 weeks in Q1
2015;
|
|
•
|
Increased sales in Q4 2014 as a result of the incentive we offered
during the quarter and our 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 look
forward to another successful year at USANA, where we remain committed
to delivering another year of record results for all of our stakeholders.
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 2015. 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
|
|
Media Contact
|
Patrique Richards
|
|
Dan Macuga
|
801-954-7961
|
|
801-954-7280
|
Investor.relations@us.usana.com
|
|
Public Relations
|
9
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