- Record third quarter net sales of
$261.8 million, an increase of 3.0% year-over-year
- Number of active Customers1 at quarter
end increased 2.4% to 563,000
- Third quarter EPS of $0.97, or $1.02
excluding incremental expense related to China and the Company’s
previously disclosed internal investigation
- Company updates 2017 outlook
USANA Health Sciences, Inc. (NYSE: USNA) today announced
financial results for its fiscal third quarter ended September 30,
2017.
Financial Performance
For the third quarter of 2017, net sales were $261.8 million
compared with $254.2 million in the prior-year period, or a 3.0%
increase year-over-year. There was no meaningful year-over-year
impact from changes in currency exchange rates on quarterly net
sales. The Company’s total number of active Customers increased by
2.4% year-over-year to 563,000.
Net earnings for the third quarter were $23.8 million compared
with $30.1 million during the prior-year period, a decrease of
21.0%. Higher SG&A expense and a higher effective tax rate
reduced net earnings during the quarter as they have throughout
2017.
Earnings per diluted share for the third quarter were $0.97
compared with $1.20 in the prior year period, a decrease of 19.2%.
The expense related to China and the Company’s internal
investigation into its China operations, which was disclosed in
February 2017, negatively impacted the third quarter by
approximately $1.9 million and earnings per diluted share by $0.05.
Weighted average diluted shares outstanding were 24.6 million for
the third quarter of 2017, compared with 25.1 million in the
prior-year period. The Company repurchased 865 thousand shares
during the quarter for a total investment of $50.0 million. The
Company ended the quarter with $191.7 million in cash and cash
equivalents and no debt. As of September 30, 2017, there was $50.0
million remaining under the current share repurchase
authorization.
“The third quarter was significant for USANA, not only for
delivering record quarterly sales, but because of the
accomplishments and announcements we made during the quarter,” said
Kevin Guest, Chief Executive Officer. “In particular, we celebrated
our 25th anniversary at our annual International Convention, where
we introduced a new skincare line, Celavive®, and announced our
plans to expand into four additional European countries. Celavive®
is formulated with our cell-signaling technology, InCelligence.
Both the launch of Celavive® and the rollout of our European
expansion will take place throughout 2018. These announcements were
well received by thousands of our Associates at our convention and
demonstrate our commitment to improving the health of more
individuals and families around the world.”
Regional Results
Net sales in the Asia Pacific region increased by 4.7% to $199.3
million. Within Asia Pacific, net sales:
- Increased 5.5% in Greater China;
- Increased 35.9% in North Asia; and
- Decreased 3.8% in the Southeast Asia
Pacific region.
Sales growth in Greater China was primarily driven by 8.7%
active Customer growth in Mainland China, while sales growth in
North Asia resulted from 39.1% active Customer growth in South
Korea. The total number of active Customers in the Asia Pacific
region increased by 6.5% year-over-year.
Net sales in the Americas and Europe region decreased by 2.1% to
$62.5 million, largely due to an 8.6% decrease in active
Customers.
“For the first time in nearly three years, the overall revenue
impact from changes in currency exchange rates was neutral,”
continued Mr. Guest. “Our Asia Pacific region continues to be the
driver of our sales growth. While we continue to face a challenging
trend in the Americas and Europe region, we will continue to offer
short-term promotions leading up to the launch of Celavive and the
opening of our new European markets next year.
Outlook
The Company is updating its consolidated net sales and earnings
per share outlook for 2017 as follows:
- Consolidated net sales approaching
$1.030 billion (the top end of the company’s previously issued
guidance of $1.015 billion and $1.030 billion); and
- Earnings per share of approximately
$3.70 (previously $3.50 and $3.70).
The Company’s outlook reflects:
- No significant impact from changes in
currency exchange rates during the fourth quarter;
- An estimated operating margin of
approximately 14% for the fourth quarter, which includes continued
investments in the business;
- An effective tax rate of 31.2% for
2017, which excludes any prospective impact from excess tax
benefits; and
- An annualized diluted share count of
approximately 24.7 million.
Chief Financial Officer Doug Hekking, commented, “As we head
into the final months of 2017, we are adjusting our guidance to
reflect our year-to-date results and forecast for the remainder of
2017. We continue to have confidence in the Company’s long-term
growth trajectory and look forward to finishing 2017 strong and
continuing to grow in 2018.”
Internal Investigation of China Operations
As the Company first disclosed in February 2017, it is
voluntarily conducting an internal investigation of its China
operations, BabyCare Ltd. The investigation focuses on compliance
with the Foreign Corrupt Practices Act (“FCPA”) and certain conduct
and policies at BabyCare, including BabyCare’s expense
reimbursement policies. The Audit Committee of the Board of
Directors has assumed direct responsibility for reviewing these
matters and has hired experienced counsel to conduct the
investigation. While the Company does not believe that the subject
amounts are quantitatively material or will materially affect its
financial statements, it cannot currently predict the outcome of
the investigation on its business, results of operations or
financial condition. The Company has voluntarily contacted the
Securities and Exchange Commission and the United States Department
of Justice to advise both agencies that an internal investigation
is underway and intends to provide additional information to both
agencies as the investigation progresses. The Company cannot
currently predict the duration, scope, or result of the
investigation.
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 (http://ir.usana.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, October 25, 2017 at 11:00 a.m. Eastern
Time. Investors may listen to the call by accessing USANA’s
website at http://ir.usana.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 www.usana.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 September
30, 2017. During the first quarter of 2017, 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.
USANA Health Sciences, Inc. Consolidated Statements of
Earnings (In thousands, except per share data) (Unaudited)
Quarter Ended Nine
Months Ended 1-Oct-16 30-Sep-17 1-Oct-16
30-Sep-17 Net sales $ 254,219 $ 261,765 $ 753,182 $
774,151 Cost of sales 44,979 47,135 133,869
133,691
Gross profit 209,240 214,630 619,313
640,460 Operating expenses Associate incentives 112,816
116,010 335,541 350,195 Selling, general and administrative
60,591 67,263 176,986 193,653
Earnings from operations 35,833 31,357 106,786 96,612
Other income (expense) 268 690 (9 )
1,632
Earnings before income taxes 36,101 32,047 106,777
98,244 Income taxes 6,003 8,278 28,618
29,858
NET EARNINGS $ 30,098 $ 23,769 $
78,159 $ 68,386 Earnings per share - diluted $
1.20 $ 0.97 $ 3.12 $ 2.75 Weighted average shares outstanding -
diluted 25,050 24,588 25,050 24,871
USANA
Health Sciences, Inc. Consolidated Balance Sheets (In
thousands) (Unaudited)
As of As of
ASSETS 31-Dec-16 30-Sep-17 Current Assets Cash
and cash equivalents $ 175,774 $ 191,745 Inventories 64,810 63,334
Prepaid expenses and other current assets 37,277
31,373
Total current assets 277,861 286,452 Property
and equipment, net 101,267 102,146 Goodwill 16,715 17,167
Intangible assets, net 34,349 34,728 Deferred income taxes 18,292
28,577 Other assets 22,158 21,581
Total assets
$ 470,642 $ 490,651
LIABILITIES AND STOCKHOLDERS'
EQUITY Current Liabilities Accounts payable $ 9,040 $ 9,290
Other current liabilities 129,451 112,137
Total
current liabilities 138,491 121,427 Deferred income
taxes 5,499 5,249 Other long-term liabilities 1,365 1,163
Stockholders' equity 325,287 362,812
Total
liabilities and stockholders' equity $ 470,642 $ 490,651
USANA Health Sciences, Inc. Sales by Region
(unaudited) (in thousands)
Quarter Ended
1-Oct-16 30-Sep-17
Change from prioryear
Currencyimpact
onsales
%
changeexcludingcurrencyimpact
Asia Pacific Greater China $ 124,470 49.0 % $ 131,273
50.1 % $ 6,803 5.5 % $ 201 5.3 % Southeast Asia Pacific 54,351 21.4
% 52,310 20.0 % (2,041 ) (3.8 %) (1,197 ) (1.6 %) North Asia
11,555 4.5 % 15,708 6.0 % 4,153 35.9 %
(243 ) 38.0 % Asia Pacific Total 190,376 74.9 % 199,291 76.1 %
8,915 4.7 % (1,239 ) 5.3 % Americas and Europe 63,843
25.1 % 62,474 23.9 % (1,369 ) (2.1 %) 1,198
(4.0 %) $ 254,219 100.0 % $ 261,765 100.0 % $ 7,546
3.0 % $ (41 ) 3.0 %
Active Associates by
Region(1) (unaudited)
As of
1-Oct-16 30-Sep-17 Asia Pacific Greater China
263,000 57.7 % 281,000 60.7 % Southeast Asia Pacific 91,000 20.0 %
90,000 19.4 % North Asia 15,000 3.3 % 23,000 5.0 %
Asia Pacific Total 369,000 81.0 % 394,000 85.1 % Americas
and Europe 87,000 19.0 % 69,000 14.9 %
456,000 100.0 % 463,000 100.0 % (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.
Active Preferred Customers by Region
(2) (unaudited)
As of 1-Oct-16
30-Sep-17 Asia Pacific Greater China 5,000 5.3 %
4,000 4.0 % Southeast Asia Pacific 15,000 16.0 % 16,000 16.0 %
North Asia 10,000 10.6 % 11,000 11.0 % Asia Pacific
Total 30,000 31.9 % 31,000 31.0 % Americas and Europe
64,000 68.1 % 69,000 69.0 % 94,000 100.0 %
100,000 100.0 % (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.
View source
version on businesswire.com: http://www.businesswire.com/news/home/20171024006651/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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