- Record second quarter net sales of
$301.5 million, an increase of 17.3% year-over-year
- Second quarter diluted earnings per
share increased 46.2% year-over-year to $1.36 per share
USANA Health Sciences, Inc. (NYSE: USNA) today announced
financial results for its fiscal second quarter ended June 30,
2018.
Financial Performance
For the second quarter of 2018, net sales were $301.5 million,
compared with $257.1 million in the prior-year period, a 17.3%
increase year-over-year. Favorable currency exchange rates
positively impacted net sales by $12.5 million for the quarter as
compared to the prior-year. Celavive, the Company’s new skincare
line, contributed approximately $7 million in incremental sales for
the quarter. In markets where Celavive has launched, skin and
personal care products accounted for 9.5% of overall sales in the
second quarter of 2018, versus 5.7% a year ago. The Company’s total
number of active Customers increased 5.3% year-over-year to
597,000.
Net earnings for the second quarter increased 45.8% to $33.9
million, compared with net earnings of $23.3 million reported in
the prior-year period. Earnings per diluted share increased to
$1.36 per diluted share, an increase of 46.2% on a year-over-year
basis. The increase in net earnings was due primarily to higher net
sales and lower relative operating expenses compared to the prior
year period. Costs related to China and the Company’s internal
investigation into its China operations were nominal during the
second quarter of 2018 as compared to approximately $1.3 million,
after tax, during the prior year period.
“Our operating results for the second quarter exceeded our
expectations and reflect the momentum we are seeing in most of our
regions. This momentum helped us generate the highest quarterly
revenue and earnings per share in the Company’s history,” said
Kevin Guest, Chief Executive Officer. “Although the strengthening
of the U.S. dollar will be a challenge during the second half of
the year, we are positioned to deliver additional sales growth as
we host our International Convention in Salt Lake City, launch
Celavive in China, and hold our Chinese national meeting in
Macau.”
Weighted average diluted shares outstanding were 24.8 million
for the second quarter of 2018, compared with diluted shares of
25.0 million in the prior-year period. The Company ended the
quarter with $256.3 million in cash and cash equivalents, with an
additional $42.4 million invested in short-term securities, and
with no debt. As of June 30, 2018, there was $47.1 million
remaining under the current share repurchase authorization.
Regional Results
Net sales in the Asia Pacific region increased by 21.2% to
$241.6 million for the second quarter of 2018. Within Asia Pacific,
net sales:
- Increased 22.8% in Greater China;
- Increased 36.1% in North Asia; and
- Increased 12.5% in the Southeast Asia
Pacific region.
Sales growth in Greater China was primarily driven by an 8.9%
increase in Active Customers in Mainland China, while sales growth
in North Asia resulted primarily from 20.7% Active Customer growth
in South Korea. Sales growth in Southeast Asia Pacific was driven
by 23.8% Active Customer growth in Malaysia. The total number of
active Customers in the Asia Pacific region increased by 8.8%
year-over-year.
Net sales in the Americas and Europe region for the second
quarter of 2018 increased by 3.7% to $59.9 million, and active
Customers in this region declined 4.8%.
“Our Asia Pacific region continues to drive our growth, as we
experienced double-digit sales growth in several markets within
this region for the quarter,” continued Mr. Guest. “In the Americas
and Europe region, net sales increased modestly on both a
year-over-year and sequential-quarter basis, although the number of
active Customers declined. The highlight for this region during the
quarter was the opening of four new European markets on June 20th,
which generated both excitement for our customers and momentum in
Europe.”
Tariffs and Trade Policies
The Company does not currently expect the recently announced
tariffs between the United States and other countries to have a
material impact on its results of operations. Additional changes in
tariffs and trade policies, however, may have a negative impact on
currency exchange rates and economic conditions generally, which
could negatively affect our results of operations.
Outlook
The Company is updating its outlook for 2018 as follows:
- Consolidated net sales between $1.17
and $1.20 billion, previously between $1.13 and $1.17 billion;
and
- Earnings per share between $4.75 and
$5.05, previously between $4.25 and $4.55.
The Company’s full-year outlook reflects:
- A year-over-year benefit to net sales
of approximately $29 million from favorable currency exchange
rates, which was previously estimated at $45 million;
- An estimated operating margin between
15.0% and 15.5%;
- An effective tax rate of approximately
34%; and
- An annualized diluted share count of
approximately 24.8 million.
Chief Financial Officer, Doug Hekking, commented, “Given our
results for the first six months of the year and our forecast for
the remainder of the year, we are raising our outlook for fiscal
2018. Although favorable currency exchange rates benefited our
operating results in the first half of 2018, we saw the U.S. dollar
strengthen during the quarter and expect it to continue to
strengthen during the remainder of 2018. Consequently, we have
significantly reduced the estimated benefit to net sales from
currency for the full year. Additionally, we plan to continue
investing in our business during the second half of 2018, while
also leveraging the investments we have made over the last several
years.”
China Preferred Customers
The Company has had a long-standing Preferred Customer program
in China but, due to certain attributes of that program, had
historically reported China Preferred Customers as Associates. The
Company began reporting China Preferred Customers as Preferred
Customers with its results for the fourth quarter of 2017.
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.
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, July 25, 2018 at 11:00 AM 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, Indonesia, Germany, Spain, Romania, and Italy.
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.
USANA Health Sciences, Inc. Consolidated Statements of
Operations (In thousands, except per share data) (Unaudited)
Quarter Ended
Six Months Ended 1-Jul-17 30-Jun-18
1-Jul-17 30-Jun-18 Net sales $ 257,063 $
301,460 $ 512,386 $ 593,458 Cost of sales 43,902
49,991 86,556 99,366
Gross profit 213,161
251,469 425,830 494,092 Operating expenses Associate
incentives 118,404 132,790 234,185 262,152 Selling, general and
administrative 62,389 67,537 126,390
137,669
Earnings from operations 32,368 51,142 65,255
94,271 Other income (expense) 460 388
942 1,250
Earnings before income taxes 32,828 51,530
66,197 95,521 Income taxes 9,569 17,623
21,580 32,668
NET EARNINGS $ 23,259 $ 33,907 $
44,617 $ 62,853 Earnings per share - diluted $ 0.93 $
1.36 $ 1.78 $ 2.56 Weighted average shares outstanding - diluted
25,018 24,841 24,997 24,557
USANA Health Sciences, Inc.
Consolidated Balance Sheets
(In thousands) (Unaudited)
As of As of
ASSETS 30-Dec-17 30-Jun-18 Current Assets Cash
and cash equivalents $ 247,131 $ 256,326 Securities
held-to-maturity, net - 42,433 Inventories 62,918 74,123 Prepaid
expenses and other current assets 30,110 31,777
Total current assets 340,159 404,659 Property and
equipment, net 102,847 96,845 Goodwill 17,417 17,224 Intangible
assets, net 35,154 33,811 Deferred income taxes 2,859 3,609 Other
assets 20,833 19,136
Total assets $ 519,269 $
575,284
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities Accounts payable $ 11,787 $ 12,379 Other
current liabilities 129,396 124,371
Total current
liabilities 141,183 136,750 Deferred income taxes 13,730
8,125 Other long-term liabilities 1,146 1,128 Stockholders'
equity 363,210 429,281
Total liabilities and
stockholders' equity $ 519,269 $ 575,284
USANA
Health Sciences, Inc. Sales by Region (unaudited) (in
thousands)
Quarter Ended
1-Jul-17
30-Jun-18
Change from prioryear
Currencyimpacton
sales
%
changeexcludingcurrencyimpact
Asia Pacific Greater China $ 136,702 53.2 % $ 167,841
55.6 % $ 31,139 22.8 % $ 10,573 15.0 % Southeast Asia Pacific
48,665 18.9 % 54,771 18.2 % 6,106 12.5 % 614 11.3 % North Asia
13,948 5.4 % 18,986 6.3 % 5,038 36.1 %
812 30.3 % Asia Pacific Total 199,315 77.5 % 241,598 80.1 % 42,283
21.2 % 11,999 15.2 % Americas and Europe 57,748 22.5
% 59,862 19.9 % 2,114 3.7 % 472 2.8 % $
257,063 100.0 % $ 301,460 100.0 % $ 44,397 17.3 % $ 12,471 12.4 %
Active Associates by
Region(1)
(unaudited)
As of 1-Jul-17 30-Jun-18
Asia Pacific Greater China 105,000 37.5 % 111,000 38.0 % Southeast
Asia Pacific 83,000 29.7 % 85,000 29.1 % North Asia 20,000
7.1 % 26,000 8.9 % Asia Pacific Total 208,000 74.3 % 222,000
76.0 % Americas and Europe 72,000 25.7 %
70,000 24.0 % 280,000 100.0 % 292,000 100.0 %
Active Preferred Customers by
Region (2)
(unaudited)
As of 1-Jul-17 30-Jun-18 Asia Pacific
Greater China 189,000 65.9 % 206,000 67.5 % Southeast Asia Pacific
15,000 5.2 % 20,000 6.6 % North Asia 10,000 3.5 %
11,000 3.6 % Asia Pacific Total 214,000 74.6 % 237,000 77.7 %
Americas and Europe 73,000 25.4 % 68,000 22.3
% 287,000 100.0 % 305,000 100.0 %
(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) 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. China utilizes a Preferred Customer
program that has been implemented specifically for that market.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20180724005974/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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