- First quarter net sales increased 6.2%
to $255.3 million, up 8.8% in constant currency
- Number of active Customers1 at
quarter-end increased 8.1% to 574,000
- First quarter EPS of $0.86, or $0.91
excluding incremental expense related to the Company’s internal
investigation of its China operations disclosed in February
2017
- G. Douglas Hekking named as new Chief
Financial Officer
- Company reiterates 2017 Outlook
USANA Health Sciences, Inc. (NYSE: USNA) today announced
financial results for its fiscal first quarter ended April 1,
2017.
Financial Performance
For the first quarter of 2017, net sales increased to $255.3
million, up 6.2%, compared with $240.4 million in the prior-year
period. A stronger U.S. dollar negatively affected net sales by
$6.2 million for the quarter with $6.1 million of that change
attributable to mainland China. On a constant currency basis, net
sales increased by 8.8% for the first quarter of 2017. Net sales
growth was driven primarily by an 8.1% increase in the number of
active Customers.
Net earnings for the first quarter decreased by 4.2% to $21.4
million, compared with $22.3 million during the prior-year period.
Higher operating expenses, primarily in SG&A expense, and a
higher effective tax rate negatively impacted net earnings during
the quarter. These were partially offset by improved gross margins,
which benefitted from favorable changes in currency and annual
price adjustments.
Earnings per diluted share for the first quarter decreased by
3.4% to $0.86, compared with $0.89 in the prior year period. The
decrease in earnings per diluted share is the result of lower net
earnings, partially offset by a lower diluted share count. The
expense related to the Company’s internal investigation into its
China operations, which was disclosed in February 2017, negatively
impacted diluted earnings per share by approximately $0.05.
Weighted average diluted shares outstanding were 25.0 million for
the first quarter of 2017, compared with 25.2 million in the
prior-year period. The Company did not repurchase any shares during
the quarter and finished the quarter with $176.3 million in cash
and cash equivalents and no debt. As of May 2, 2017, $35.4 million
remains available under the current share repurchase
authorization.
“USANA generated solid top-line and customer growth during the
quarter,” said Kevin Guest, Chief Executive Officer. “Our earnings
were impacted by additional expense related to our previously
disclosed internal investigation during the quarter. Setting aside
these expenses, our bottom-line results were essentially in-line
with our expectations. We remain focused on implementing our 2017
growth strategies, including our initiatives designed to drive
overall customer growth and our new product announcements later
this year.”
Regional Results
Net sales in the Asia Pacific region increased by 10.6% to
$195.1 million, despite a negative $5.7 million impact from the
strengthening of the U.S. dollar. Within Asia Pacific, net
sales:
- Increased 12.6% in Greater China (up
17.4% on a constant currency basis);
- Increased 3.2% in Southeast Asia
Pacific region (up 4.5% on a constant currency basis); and
- Increased 22.7% in North Asia (up 18.0%
on a constant currency basis).
Sales growth in Greater China was primarily driven by 18.2%
active Customer growth in mainland China, while sales growth in
Southeast Asia Pacific resulted from modest active Customer growth
in a few markets in the region. Finally, sales growth in North Asia
resulted from 21.7% active Customer growth in South Korea. The
total number of active Customers in the Asia Pacific region
increased by 12.2% year-over-year.
Net sales in the Americas and Europe region decreased by 5.9% to
$60.2 million. The decrease was due to a decline in sales and
active Customers in the U.S., which was partially offset by sales
and active Customer growth in Mexico. A stronger U.S. dollar
negatively impacted top-line results in the region by $0.5
million.
“We continue to see solid growth in each of our regions within
Asia Pacific,” continued Mr. Guest. “China and South Korea remained
the standouts during the quarter and drove the majority of our
growth. Our performance in the Americas and Europe region, however,
was below our expectations due to a continued sales and customer
decline in the U.S. and softer-than-anticipated sales and customer
results in Canada. Our team continues to focus on improving our
sales and customer growth in the United States through both
existing and new strategies.”
Changes in Customer Reporting
During the quarter, we continued to pursue our objective of
enhancing our Preferred Customer program by initiating our
Preferred Customer Invitation Plan in the United States. Under this
plan, we invited active Associates in the United States, who met
certain criteria, to become Preferred Customers. For many years, we
have collected and analyzed a variety of data on our active
Associates. This data, along with our communications with
Associates, suggest that we have a significant population of
individuals who historically joined USANA as Associates, but are
interested only in purchasing and consuming our products. Our
Preferred Customer Invitation Plan reflects our philosophy that
treating individuals who desire only to be customers as customers
is beneficial to both the customer and USANA. Doing so will allow
us to further personalize USANA to the customer and enhance our
overall customer service to them. To that effect, during the first
quarter, 16,000 active Associates in the United States became
Preferred Customers pursuant to our invitation plan. During the
remainder of 2017, we will offer the same invitation to Associates
in our other markets around the world.
New Chief Financial Officer
The Company also announced the promotion of G. Douglas Hekking,
former Executive Vice President of Finance, to Chief Financial
Officer. Mr. Hekking joined USANA in 1992 and has served the
Company in several management positions, including as Chief
Financial Officer between May 2011 and December 2012.
Mr. Guest continued, "I have had the great pleasure of working
closely with Doug for 25 years. He has been a key asset to USANA
and has made significant contributions to our growth in multiple
capacities within the Company. We are pleased to welcome him back
into the CFO role."
Outlook
The Company is reiterating its consolidated net sales and
earnings per share outlook for 2017 as follows:
- Consolidated net sales between $1.04
billion and $1.07 billion, representing approximate growth between
3.4% and 6.4% percent; and
- Earnings per share between $3.80 and
$4.10.
The Company’s outlook reflects:
- A continued negative impact from
currency fluctuations, which the Company currently estimates will
reduce net sales by approximately $36 million for the
full-year;
- Relative gross margin and Associate
incentives expense similar to 2016 operating results;
- An operating margin similar to levels
achieved in 2016 due to continued investments in the business;
- An effective tax rate of 34.6%, which
excludes any prospective impact from excess tax benefits; and
- A diluted share count of approximately
25.1 million.
Chief Financial Officer Douglas Hekking, commented, “Net sales
and customer growth were in-line with our expectations.
Notwithstanding the impact of changes in currency exchange rates
and additional operating expenses incurred in the first quarter, we
expect to see a steady acceleration as the year progresses and as
we continue to execute our 2017 growth strategies.”
Non-GAAP Financial Measures
Constant currency net sales, earnings, EPS and other
currency-related financial information (collectively, “Financial
Results”) are non-GAAP financial measures that remove the impact of
fluctuations in foreign-currency exchange rates and help facilitate
period-to-period comparisons of the Company’s Financial Results and
thus provide investors an additional perspective on trends and
underlying business results. Constant currency Financial Results
are calculated by translating the current period's Financial
Results at the same average exchange rates in effect during the
applicable prior-year period and then comparing this amount to the
prior-year period's Financial Results.
Additionally, EPS results for a reporting period which exclude
incremental expense related to the Company’s internal investigation
in China are non-GAAP financial measures that are intended to help
facilitate period-to-period comparisons of the Company’s Financial
Results. Such EPS results are calculated by (i) calculating the
total incremental expense related to the internal investigation
after taxes; and (ii) dividing the expense by the total number of
diluted shares outstanding for the applicable reporting period.
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, May 3,
2017 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
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, risks associated with our international expansion and
operations, and risks associated with the internal investigation
into BabyCare’s operations. 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.
1 The term “active Customers” refers to the combined total of
active Associates and active Preferred Customers as of April 1,
2017. During the first quarter, we initiated our Preferred Customer
Invitation Plan in the United States and, pursuant to this
invitation, 16,000 active Associates in the United States became
Preferred Customers. To avoid confusion in reporting changes in the
number of active Associates and Preferred Customers as a result of
this invitation plan, we are reporting total active Customers. The
tables, which are part of this release, however, will continue to
separately disclose the number of active Associates and active
Preferred Customers with footnotes disclosing changes to each
respective category in light of the Preferred Customer Invitation
Plan.
USANA Health Sciences, Inc. Consolidated Statements of
Earnings (In thousands, except per share data) (Unaudited)
Quarter Ended 2-Apr-16 1-Apr-17
Net sales $ 240,449 $ 255,323 Cost of sales 42,920 42,654
Gross profit 197,529 212,669 Operating expenses
Associate incentives 107,394 115,781 Selling, general and
administrative 56,631 64,001
Earnings from operations
33,504 32,887 Other income (expense) (496) 482
Earnings
before income taxes 33,008 33,369 Income taxes 10,709
12,011
NET EARNINGS $ 22,299 $ 21,358
Earnings per share - diluted $ 0.89 $ 0.86 Weighted average shares
outstanding - diluted 25,183 24,976
USANA
Health Sciences, Inc. Consolidated Balance Sheets (In
thousands) (Unaudited)
As of As of
ASSETS 2-Jan-16 1-Apr-17 Current Assets Cash
and cash equivalents $ 175,774 $ 176,320 Inventories 64,810 69,680
Prepaid expenses and other current assets 37,277 33,161
Total
current assets 277,861 279,161 Property and equipment,
net 101,267 102,035 Goodwill 16,715 16,801 Intangible assets, net
34,349 34,273 Deferred income taxes 18,292 17,321 Other assets
22,158 22,422
Total assets $ 470,642 $ 472,013
LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities
Accounts payable $ 9,040 $ 8,839 Other current liabilities 129,451
102,023
Total current liabilities 138,491 110,862
Deferred income taxes 5,499 5,952 Other long-term liabilities 1,365
1,266 Stockholders' equity 325,287 353,933
Total
liabilities and stockholders' equity $ 470,642 $ 472,013
USANA Health Sciences, Inc. Sales by Region
(unaudited) (in thousands)
Quarter Ended 2-Apr-16 1-Apr-17
Change from prioryear
Currencyimpact
onsales
%
changeexcludingcurrencyimpact
Asia Pacific Greater China $ 116,998 48.7% $ 131,738
51.6% $ 14,740 12.6% $ (5,576) 17.4% Southeast Asia Pacific 48,861
20.3% 50,406 19.7% 1,545 3.2% (655) 4.5% North Asia 10,560 4.4%
12,956 5.1% 2,396 22.7% 492 18.0% Asia Pacific Total 176,419 73.4%
195,100 76.4% 18,681 10.6% (5,739) 13.8% Americas and Europe
64,030 26.6% 60,223 23.6% (3,807) (5.9%) (504) (5.2%) $
240,449 100.0% $ 255,323 100.0% $ 14,874 6.2% $ (6,243) 8.8%
Active Associates by Region(1) (unaudited)
As of 2-Apr-16 1-Apr-17
Asia Pacific Greater China 245,000 56.1% 285,000 61.7%
Southeast Asia Pacific 88,000 20.1% 88,000 19.0% North Asia 15,000
3.4% 19,000 4.1% Asia Pacific Total 348,000 79.6% 392,000 84.8%
Americas and Europe 89,000 20.4% 70,000 (2) 15.2%
437,000 100.0% 462,000 100.0%
Active Preferred Customers
by Region (3) (unaudited)
As
of 2-Apr-16 1-Apr-17 Asia Pacific Greater
China 5,000 5.3% 5,000 4.5% Southeast Asia Pacific 13,000 13.8%
14,000 12.5% North Asia 10,000 10.7% 11,000 9.8% Asia Pacific Total
28,000 29.8% 30,000 26.8% Americas and Europe 66,000 70.2%
82,000 (2) 73.2% 94,000 100.0% 112,000 100.0%
(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
resale.
(2) The Company initiated a Preferred Customer Invitation Plan
in the United States during the first quarter of 2017. Pursuant to
this invitation, 16,000 active Associates became Preferred
Customers.
(3) 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.
View source
version on businesswire.com: http://www.businesswire.com/news/home/20170502006802/en/
USANA Health Sciences, Inc.Investors contact:Patrique Richards,
801-954-7961Investor
Relationsinvestor.relations@us.usana.comorMedia contact:Dan Macuga,
801-954-7280Public Relations
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