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
9, 2016
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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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
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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 9, 2016, USANA Health Sciences, Inc. issued a press release
announcing its financial results for the fourth quarter and fiscal year
ended January 2, 2016. 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 9, 2016 (furnished herewith).
Exhibit
99.2 Management Commentary, Results and Outlook provided by USANA
Health Sciences, Inc. dated February 9, 2016 (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 9, 2016
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Exhibit 99.1
USANA
Health Sciences Reports Fourth Quarter and Full-Year Financial Results
-
Fourth
quarter net sales increased by 2.1% to $232.6 million, but increased
by 17.7% excluding the impact of a stronger U.S. dollar and a shorter
13-week reporting period
-
Fourth
quarter EPS increased by 10.9% to $1.83
-
Number
of active Associates increased by 20.6% to 421,000
-
For
the year, net sales increased by 16.2% to a record $918.5 million and
EPS increased by 28.2% to a record $7.18
-
Initial
2016 net sales and earnings outlook provided
SALT LAKE CITY--(BUSINESS WIRE)--February 9, 2016--USANA Health
Sciences, Inc. (NYSE: USNA) today announced financial results for its
fiscal fourth quarter and year ended January 2, 2016. The Company also
provided initial net sales and earnings guidance for 2016.
Financial Performance
For the fourth quarter of 2015, net sales increased to $232.6 million,
up 2.1%, compared with $227.9 million in the prior-year period. A
stronger U.S. dollar negatively impacted net sales by $16.5 million for
the current year quarter. Additionally, the fourth quarter of 2015 was a
13-week quarter, compared to a 14-week quarter in the prior year period.
The Company estimates that the extra week in 2014 contributed
approximately $16 million to sales for that quarter. Excluding the
impact of currency and the extra week of sales in the prior year period,
net sales would have increased by 17.7% for the fourth quarter of 2015.
Net sales growth was driven by 20.6% growth in the number of active
Associates and nearly 10% growth in the number of Preferred Customers.
Net earnings for the fourth quarter increased by 12.5% to $24.0 million,
compared with $21.3 million during the prior-year period. Although net
earnings increased meaningfully year-over-year, they were below the
Company’s expectations, due to higher than anticipated selling, general
and administrative expenses and Associate Incentives expenses. Selling,
general and administrative expenses were higher than anticipated largely
as a result of higher equity compensation expense, while Associate
incentives expenses were higher as a result of a greater number of
Associates qualifying for incentive trips and contests.
Earnings per diluted share for the fourth quarter increased by 10.9% to
$1.83, compared with $1.65 in the prior year period. This increase in
earnings per share is the result of higher net earnings. Weighted
average diluted shares outstanding were 13.1 million as of the end of
the fourth quarter of 2015, compared with 12.9 million in the prior-year
period. During the fourth quarter of 2015, the Company repurchased
456,790 shares of common stock for a total investment of $61.2 million.
The Company ended the year with $143.2 million in cash and cash
equivalents and no debt. As of February 5, 2016, the Company has
invested an additional $44.8 million to repurchase approximately 366,134
shares pursuant to a Rule 10b5-1 plan. As of February 5, 2016, there was
$55.2 million remaining under the current share repurchase authorization
and a balance of $32 million on the company’s line of credit.
“We finished the year strong and achieved our goal for net sales,
despite the significant negative impact from a stronger U.S. dollar and
a tough prior year comparable that included an extra week of sales,”
said Dave Wentz, USANA’s Co-CEO. “We also generated double-digit
customer, earnings, and earnings per share growth in 2015 and in the
fourth quarter, despite our decision to invest more aggressively in our
strategies for long-term growth.”
Regional Results
Net sales in the Asia Pacific region increased by 5.4% to $172.1
million, despite a negative $11.2 million impact from the strengthening
U.S. dollar, and an extra week of sales in the prior year quarter.
Within Asia Pacific, net sales:
-
Increased by 10.9% in Greater China (15.1% on a constant currency
basis);
-
Increased by 13.5% in the North Asia region (20.7% on a constant
currency basis); and
-
Decreased by 7.5% in the Southeast Asia Pacific region (increased by
4.8% on a constant currency basis).
Sales growth in Greater China was driven by 46.6% Associate growth in
Mainland China, while sales growth in North Asia resulted from 33.3%
Associate growth in South Korea. Finally, customer growth in Southeast
Asia Pacific was primarily due to 30.8% Associate growth in Malaysia.
The total number of active Associates in the Asia Pacific region
increased by 26.1% year-over-year and 5.4% sequentially.
Net sales in the Americas/Europe region decreased by 6.3% to $60.5
million. This decrease was due largely to the negative impact of $5.3
million from the strengthening U.S. dollar and an extra week of sales in
the prior year quarter. On a constant currency basis, net sales in this
region increased by 1.9% year-over-year. Canada and Mexico generated
local currency sales growth of 8.4% and 13.3%, respectively. Both of
these markets also reported strong year-over-year customer growth.
“Our growth continues to be driven by momentum in our Asia Pacific
region, particularly in Mainland China,” continued Mr. Wentz. “During
the quarter, we held our annual China National Meeting in Qingdao, where
a record number of Associates were recognized for their achievements. In
addition, we officially launched our 20th market in Indonesia
during the quarter. We are optimistic about this market for the future.
We’re also encouraged by the Associate growth that we are experiencing
worldwide, and we expect this to continue during 2016.”
2015 Results
For the year ended January 2, 2016, net sales increased by 16.2% to
$918.5 million, compared with $790.5 million in the prior year. This
increase in net sales was driven largely by sales and Associate growth
in the Company’s Asia Pacific region. Net sales for the full-year 2015
were negatively impacted by $53.6 million due to a strengthening U.S.
dollar and an extra week of sales in the prior year. Excluding the
impact of currency and the extra week of sales in the prior year, net
sales would have increased by 25.6% for the year.
Net earnings for 2015 increased by 23.5% to $94.7 million, compared with
$76.6 million in the prior year. This increase resulted primarily from
higher net sales. Earnings per share for the year increased by 28.2% to
$7.18, compared with $5.60 in 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
2015. Weighted average diluted shares outstanding were 13.2 million for
fiscal 2015, compared with 13.7 million for fiscal 2014.
“This was another outstanding year for USANA,” said Kevin Guest, USANA’s
Co-CEO. “We generated our 13th consecutive year of
record sales and reported our highest net earnings in the history of the
company. Importantly, we also reported a record number of active
Associates. We believe 2016 will be another outstanding year for USANA
as we continue to execute our personalization strategy. In this regard,
we have several new product and technology launches planned during the
year, which will take USANA’s world-class products to a new level.
During the year, we will also make several key investments in our
business to support the needs of our growing customer base and create
the foundation for future growth.”
Outlook
The Company provided the following consolidated net sales and earnings
per share outlook for 2016:
-
Consolidated net sales between $1.02 billion and $1.05 billion
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Earnings per share between $7.60 and $8.15
Our outlook reflects:
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A continued negative impact from currency fluctuations, which we
estimate will reduce sales by approximately $54 million for the full
year;
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Relative gross margin and Associate incentives expense in-line with
2015 operating results;
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An operating margin between 14% and 14.5% as a result of strategic
investments in the business; and
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A reduced share count as a result of the company’s active share
repurchase program.
Chief Financial Officer Paul Jones, commented, “Our outlook for the
top-line projects another year of double-digit sales growth, despite the
anticipated negative impact from currency. Our EPS outlook also reflects
several strategic investments during the year, including (i) increased
research and development investment to drive future product and
technology innovation, (ii) investment in information technology systems
and infrastructure to support our growing customer base and to further
improve the experience of doing business with USANA around the world,
and (iii) continued investment in Mainland China. We believe that these
investments are essential to support USANA’s recent growth and to
achieve both current and longer-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 10, 2016, at 11:00 a.m. 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 supplements,
healthy foods and personal care 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, Colombia and Indonesia. 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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Year Ended
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3-Jan-15
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2-Jan-16
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3-Jan-15
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2-Jan-16
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Net sales
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$
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227,870
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$
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232,585
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$
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790,471
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$
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918,499
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Cost of sales
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37,516
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40,181
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140,794
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159,682
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Gross profit
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190,354
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192,404
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649,677
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758,817
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Operating expenses
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Associate incentives
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106,467
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103,409
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349,044
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408,160
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Selling, general and administrative
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51,249
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53,858
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184,531
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208,995
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Earnings from operations
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32,638
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35,137
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116,102
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141,662
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Other income (expense)
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(574
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)
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404
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(449
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)
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927
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Earnings before income taxes
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32,064
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35,541
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115,653
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142,589
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Income taxes
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10,764
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11,574
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39,017
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47,917
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NET EARNINGS
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$
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21,300
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$
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23,967
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$
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76,636
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$
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94,672
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Earnings per share - diluted
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$
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1.65
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$
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1.83
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$
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5.60
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$
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7.18
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Weighted average shares outstanding - diluted
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12,920
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13,082
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13,689
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13,177
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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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3-Jan-15
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2-Jan-16
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Current Assets
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Cash and cash equivalents
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$
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111,126
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$
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143,210
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Inventories
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45,248
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66,119
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Prepaid expenses and other current assets
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34,553
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34,935
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Total current assets
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190,927
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244,264
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Property and equipment, net
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71,164
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87,982
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Goodwill
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17,941
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17,432
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Intangible assets, net
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40,952
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38,269
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Deferred income taxes
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5,933
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9,844
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Other assets
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23,667
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25,446
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Total assets
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$
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350,584
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$
|
423,237
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LIABILITIES AND STOCKHOLDERS' EQUITY
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Current Liabilities
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Accounts payable
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$
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7,779
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$
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10,043
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Other current liabilities
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|
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100,926
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121,369
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Total current liabilities
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108,705
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131,412
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Other long-term liabilities
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1,114
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|
1,151
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Deferred income taxes
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10,601
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9,822
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Stockholders' equity
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230,164
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|
280,852
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Total liabilities and stockholders' equity
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$
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350,584
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$
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423,237
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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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Quarter Ended
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3-Jan-15
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2-Jan-16
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Change from Prior Year
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Currency Impact
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% Change Excluding Currency Impact
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Region
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|
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|
|
Asia Pacific
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|
|
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|
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|
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Greater China
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|
$
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103,990
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45.6
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%
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$
|
115,342
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49.6
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%
|
|
$
|
11,352
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|
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10.9
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%
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$
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(4,367
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)
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15.1
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%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
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Southeast Asia Pacific
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|
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50,315
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22.1
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%
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|
|
46,520
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20.0
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%
|
|
|
(3,795
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)
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|
-7.5
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%
|
|
|
(6,207
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)
|
|
4.8
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%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
|
North Asia
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|
|
9,034
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|
4.0
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%
|
|
|
10,256
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|
4.4
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%
|
|
|
1,222
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|
|
13.5
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%
|
|
|
(650
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)
|
|
20.7
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%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Asia Pacific Total
|
|
|
163,339
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|
71.7
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%
|
|
|
172,118
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|
74.0
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%
|
|
|
8,779
|
|
|
5.4
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%
|
|
|
(11,224
|
)
|
|
12.2
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Americas and Europe
|
|
|
64,531
|
|
28.3
|
%
|
|
|
60,467
|
|
26.0
|
%
|
|
|
(4,064
|
)
|
|
-6.3
|
%
|
|
|
(5,279
|
)
|
|
1.9
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
227,870
|
|
100.0
|
%
|
|
$
|
232,585
|
|
100.0
|
%
|
|
$
|
4,715
|
|
|
2.1
|
%
|
|
$
|
(16,503
|
)
|
|
9.3
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Active Associates by Region (1)
|
|
|
|
|
|
|
|
|
(Unaudited)
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|
|
|
|
|
|
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As of
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3-Jan-15
|
|
2-Jan-16
|
|
|
|
|
|
|
|
|
Region
|
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|
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|
|
|
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|
Asia Pacific
|
|
|
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
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|
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|
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|
|
|
|
|
|
|
|
|
|
|
|
|
Greater China
|
|
|
174,000
|
|
49.9
|
%
|
|
|
234,000
|
|
55.6
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Southeast Asia Pacific
|
|
|
79,000
|
|
22.6
|
%
|
|
|
86,000
|
|
20.4
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
North Asia
|
|
|
11,000
|
|
3.1
|
%
|
|
|
13,000
|
|
3.1
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Asia Pacific Total
|
|
|
264,000
|
|
75.6
|
%
|
|
|
333,000
|
|
79.1
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Americas and Europe
|
|
|
85,000
|
|
24.4
|
%
|
|
|
88,000
|
|
20.9
|
%
|
|
|
|
|
|
|
|
|
Total
|
|
|
349,000
|
|
100.0
|
%
|
|
|
421,000
|
|
100.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
|
|
|
|
(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.
|
|
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|
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|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Active Preferred Customers by Region (2)
|
|
|
|
|
|
|
|
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3-Jan-15
|
|
2-Jan-16
|
|
|
|
|
|
|
|
|
Region
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Asia Pacific
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Greater China
|
|
|
3,000
|
|
3.7
|
%
|
|
|
4,000
|
|
4.5
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Southeast Asia Pacific
|
|
|
12,000
|
|
14.8
|
%
|
|
|
13,000
|
|
14.6
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
North Asia
|
|
|
6,000
|
|
7.4
|
%
|
|
|
9,000
|
|
10.1
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Asia Pacific Total
|
|
|
21,000
|
|
25.9
|
%
|
|
|
26,000
|
|
29.2
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Americas and Europe
|
|
|
60,000
|
|
74.1
|
%
|
|
|
63,000
|
|
70.8
|
%
|
|
|
|
|
|
|
|
|
Total
|
|
|
81,000
|
|
100.0
|
%
|
|
|
89,000
|
|
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
or
Media
contact:
Dan Macuga, 801-954-7280
Public Relations
Exhibit 99.2
|
USANA Health Sciences, Inc.
Q4 2015 and Fiscal 2015 Management Commentary,
Results and Outlook
-
Fourth quarter net sales increased 2.1% to $232.6 million,
but increased 17.7% excluding the impact of a stronger U.S.
dollar and a shorter 13-week reporting period
-
Fourth quarter EPS increased 10.9% to $1.83
-
Number of active Associates increased 20.6% to 421,000
-
For the year, net sales increased 16.2% to a record $918.5
million and EPS increased 28.2% to a record $7.18
-
Initial 2016 net sales and EPS outlook provided
|
February 9, 2016
Overview
The fourth quarter of 2015 was a strong finish to another successful
year for USANA. In 2015, we achieved our 13th
consecutive year of record sales and reported the highest annual
earnings and earnings per share results in the history of the
Company. We also ended the year with a record number of Associates and
Preferred Customers. Customer growth continues to be our primary
objective as we focus on improving the overall health and nutrition of
individuals and families around the world. Our sales and customer
growth reflect the demand around the world for USANA’s high-quality
product offering.
Our results for the year were driven by execution of our 2015 growth
strategies, which included (i) offering market-specific incentives to
motivate our sales force, (ii) advancing our personalization initiative,
and (iii) increasing our brand recognition to make it easier for our
sales force to talk about USANA.
During the year, we offered a variety of market specific incentives to
our sales force. The most impactful incentive was offered world-wide
during late 2014 and, during the first part of 2015, in China. This
incentive, and its residual effect, was successful in accelerating our
customer growth during much of 2015. During the second half of 2015, we
offered additional incentives in many of our markets to continue driving
customer growth. During the fourth quarter we did not offer new
promotions in China and, instead, focused on training the significant
number of new Associates in this key market. Nevertheless, the
short-term incentives we offered in many of our markets during 2015
contributed to our 20.6% Associate growth and 9.9% Preferred Customer
growth year-over-year.
We also continued to advance our personalization strategy during the
year. Over the last few years, we have added personalized aspects to
our global brand, Associate compensation plan, and our Associates’
e-business environment to make it easier and more enjoyable to do
business with USANA. In 2015, we continued to personalize our product
line by introducing our new “MySmartTMFoods”
products. MySmartTMFoods are science-based,
healthy nutrition shakes, bars, boosters and flavor optimizers that
provide our customers with customized healthy food options. We made
MySmartTMFoods available to our Associates for a limited time
in 2015 as a pre-launch opportunity to purchase and try the
products. During the first half of 2016, we will officially launch
these products.
Finally, we increased our brand recognition in 2015 by expanding our
relationship with Dr. Mehmet Oz, as a Trusted Partner and Sponsor of The
Dr. Oz Show, and by continuing to advance our athlete sponsorship
program around the world. Under our partnership with Dr. Oz, USANA
products were regularly featured on The Dr. Oz Show in
2015. This partnership has increased our brand recognition in North
America and our other regions around the world. Today, each episode of The
Dr. Oz Show that features a USANA product, is translated and made
available to Associates in individual markets via YouTube and other
social media outlets for use in promoting the USANA
brand. Additionally, viewers of The Dr. Oz Show are
able to purchase USANA products via a direct link on the show’s website.
Q4 2015 Results
For the fourth quarter of 2015, net sales increased by 2.1% to $232.6
million on a year-over-year basis. Fluctuations in currency exchange
rates negatively impacted net sales by $16.5 million. On a constant
currency basis, net sales increased by 9.3% year-over-year as a result
of strong local currency sales growth in most of our
markets. Additionally, the fourth quarter of 2015 was a 13-week quarter
as compared to a 14-week quarter in the prior year period. The Company
estimates that the extra week in 2014 contributed approximately $16
million to sales for that quarter. Excluding the impact of currency and
the extra week of sales in the prior year period, net sales would have
increased 17.7% for the quarter.
Sales growth was driven by a 20.6% increase in the number of active
Associates and a nearly 10% increase in the number of active Preferred
Customers. Our Asia Pacific region generated most of our Associate
growth, where the number of Associates increased 26.1%
year-over-year. Every market within Asia Pacific generated solid
customer growth with Greater China representing the majority of growth.
During the quarter, we held our annual China National Meeting in
Qingdao, where a record number of our Associates gathered to celebrate
their success and receive additional training. We also officially
opened Indonesia, which marks our 20th market worldwide. We
are optimistic about the potential of Indonesia and continue to execute
our post-launch strategies to build a solid base of product users and
sales leaders in this market.
Net earnings for the fourth quarter increased by 12.5% to $24.0 million
year-over-year, while earnings per share increased 10.9% to
$1.83. Fluctuations in currency exchange rates negatively impacted
earnings per share by an estimated $0.28.
Relative to our expectations for the fourth quarter, earnings per share
did not meet our expectations. This was the result of higher than
anticipated selling, general and administrative expense and Associate
incentives expense, as well as the negative impact of currency
fluctuations. The incremental selling, general and administrative
expense was largely the result of higher equity compensation expense,
which reduced earnings per share for the quarter by approximately $0.07
cents. Associate Incentive expense was higher due to a larger than
expected number of Associates qualifying for incentive trips and
contests, which reduced earnings per share for the quarter by
approximately $0.03. Finally, currency negatively impacted EPS by $0.03.
Weighted average diluted shares outstanding were 13.1 million at the end
of the fourth quarter of 2015, compared to 12.9 million in the
prior-year period. During the fourth quarter of 2015, the Company
repurchased 456,790 shares of common stock for a total investment of
$61.2 million. The Company ended the year with $143.2 million in cash
and cash equivalents and no debt. As of February 5, 2016, the Company
has subsequently invested $44.8 million to repurchase approximately
366,134 shares pursuant to a Rule 10b5-1 plan. As of February 5, 2016,
there was $55.2 million remaining under the current share repurchase
authorization. Also as of this date, the company had $32 million
outstanding on its line of credit.
Regional and Financial Results
Asia Pacific Region | Q4 2015 Net Sales of $172.1 million; 74.0% of
Consolidated Net Sales
Net sales in Asia Pacific increased 5.4% year-over-year. The number of
active Associates in the region increased 26.1% year-over-year and 5.4%
sequentially. This performance was the result of strong growth in our
active Associates in each of Greater China, Southeast Asia Pacific, and
North Asia. Net sales in Asia Pacific as a whole were negatively
impacted by $11.2 million due to a strengthening U.S. dollar, and an
additional week of sales in Q4 2014. Excluding the impact of currency
and the extra week of sales in the prior year period, net sales in Asia
Pacific would have increased approximately 20.9% for the quarter.
Greater China. Net sales in Greater China increased 10.9%
year-over-year, but increased 15.1% on a constant currency
basis. Currency fluctuations reduced net sales by $4.4 million in this
region. Mainland China continued to drive our growth here, where local
currency sales increased 33.7% year-over year and the number of active
Associates increased 46.6%. Excluding the impact of currency and the
extra week of sales in the prior year period, net sales in Greater China
would have increased approximately 24.0% for the quarter.
Southeast Asia Pacific. Net sales in the Southeast Asia Pacific
region decreased 7.5% year-over-year, but increased 4.8% on a constant
currency basis. A strong U.S. dollar negatively impacted net sales by
$6.2 million in this region. During the quarter, we saw strong local
currency sales growth in most of the markets within this
region. Excluding the impact of currency and the extra week of sales in
the prior year period, net sales in the Southeast Asia Pacific region
would have increased by around 12.9% for the quarter.
North Asia. Net sales in North Asia increased 13.5%
year-over-year, but increased 20.7% on a constant currency basis. Sales
growth was driven by 18.2% Associate growth in the region. South Korea
continued to drive our growth in this region, where the number of
Associates increased 33.3% and local currency sales increased 23.7%
year-over-year. Excluding the impact of currency and the extra week of
sales in the prior year period, net sales in North Asia would have
increased approximately 30.0% for the quarter.
Americas and Europe Region | Q4 2015 Net Sales of $60.5 million;
26.0% of Consolidated Net Sales
In the Americas and Europe region, net sales decreased 6.3%
year-over-year, but increased 1.9% on a constant currency basis. In
absolute terms, a strong U.S. dollar had the effect of reducing net
sales in the region by $5.3 million. The number of active Associates in
the region increased 3.5% largely as a result of strong customer growth
in Mexico and Canada. Mexico and Canada also generated year-over-year
local currency sales growth of 13.3% and 8.4%, respectively. Excluding
the impact of currency and the extra week of sales in the prior year
period, net sales in the Americas and Europe region would have increased
by approximately 9.7% for the quarter.
Quarterly Income Statement Discussion
Gross margins declined 80 basis points year-over-year, due in
large part to unfavorable changes in currency exchange rates. This
impact was partially offset by a favorable change in our market sales
mix as well as modest price increases introduced during the first
quarter of 2015.
Associate incentives expense for the quarter decreased 220 basis
points year-over-year to 44.5% of net sales. The decrease in
Associate Incentives expense as a percentage of net sales was due
primarily to a promotion during the fourth quarter of 2014, which
significantly increased incentives in that quarter.
Selling, general and administrative expense was 23.2% of net sales,
an increase of 70 basis points compared to the prior year period. The
increase in selling, general and administrative expense, on an absolute
basis, was due to expenses related to our growth in China as well as
investments in infrastructure, brand recognition, and product
innovation. A stronger U.S. dollar negatively impacted SG&A by 60 basis
points, on a comparative basis.
2015 Results
For fiscal 2015, net sales increased by 16.2% to $918.5 million. Net
sales growth was largely driven by sales and Associate growth in the
Company’s Asia Pacific region. Additionally, the prior year benefited
from an extra week of sales and net sales for the full-year 2015 were
negatively impacted by $53.6 million due to a strengthening U.S.
dollar. Excluding the impact of currency and the extra week of sales in
the prior year, net sales would have increased by around 25.6%.
Net earnings for 2015 were $94.7 million, an increase of 23.5% when
compared with the prior-year. Higher net sales were the primary
catalyst to the growth in net earnings. Fluctuations in currency
exchange rates negatively impacted earnings per share by an estimated
$0.92. Earnings per share for the year increased by 28.2% to $7.18,
compared to $5.60 in the prior year. This increase in earnings per
share is attributable to higher net earnings and a lower number of
diluted shares outstanding due to the Company’s share repurchases during
2015. Weighted average diluted shares outstanding were 13.2 million as
of the end of 2015, compared with 13.7 million in the prior year.
Outlook
Fiscal 2016 will be another important year for USANA as we execute the
next phase of personalizing our product line and continue investing in
our business to support both current and future growth
objectives. During the first half of the year, we plan on officially
launching our MySmartTMFoods product line around the world
and hosting a variety of launch events with our Associates. We will
follow this up with another significant product launch as well as a new
technology launch in the second half of the year, which will take
USANA’s world-class products to a new level, keeping USANA at the
forefront of nutritional supplementation.
We plan on continuing our strategy to increase brand recognition through
our partnership with The Dr. Oz show and our athlete sponsorship
program. We will also continue to offer market-specific incentives to
drive customer growth.
Finally, we will make several strategic investments in our business in
2016, including:
-
Investment to support new product offerings and launches in 2016 and
2017 as previously mentioned;
-
Increased research and development investment to drive future product
and technology innovation;
-
Investment in information technology systems and infrastructure to
support our growing customer base and to further improve the
experience of doing business with USANA around the world; and
-
Continued investment in Mainland China to support and train a growing
Associate base, shift production to a new manufacturing facility, and
enhance other infrastructure and operations throughout this key market.
These investments are central to USANA’s business and we believe they
are essential to achieving both current and longer-term growth
objectives.
In light of our 2016 growth strategies and investments, we provided the
following consolidated net sales and earnings per share outlook for
fiscal year 2016:
-
Consolidated net sales between $1.02 billion and $1.05 billion
-
Earnings per share between $7.60 and $8.15
Our outlook reflects:
-
Continued negative currency pressure from a stronger U.S. dollar,
which we estimate will reduce sales by approximately $54 million for
2016;
-
Relative gross margin and Associate incentives expense in-line with
2015 operating results;
-
An operating margin between 14% to 14.5% as a result of the previously
noted investments; and
-
A reduced share count as a result of the company’s active share
repurchase program.
For fiscal 2015 we communicated that capital spending would total around
$45 million. A significant portion of the planned capital spending for
2015 was delayed and has been rolled forward and added to the planned
capital outlay for fiscal 2016. We believe capital spending will total
between $35 and $40 million for the year. Although we are planning to
increase the level of expense investing for 2016, our long-term target
for operating margin continues to be 15%. We believe that this level of
operating margin provides motivation and balance for USANA’s key
stakeholders.
As we begin fiscal 2016, we are confident in the strength of our
business around the world and the growth strategies we have in place. We
expect to deliver another year of record results in 2016.
Dave Wentz
Co-CEO
Kevin Guest
Co-CEO
Paul Jones
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 2016. 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
|
10
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