- Third quarter net sales of $296.8
million, an increase of 13.4% year-over-year
- Third quarter diluted earnings per
share increased 27.8% year-over-year to $1.24
- Total Active Customers increased 9.2%
year-over-year to 615,000
- Board increases share repurchase
authorization
USANA Health Sciences, Inc. (NYSE: USNA) today announced
financial results for its fiscal third quarter ended September 29,
2018.
Financial Performance
For the third quarter of 2018, net sales were $296.8 million,
compared with $261.8 million in the prior-year period, a 13.4%
increase year-over-year. Unfavorable currency exchange rates
negatively impacted net sales by $6.2 million for the quarter as
compared to the prior year. The Company’s skin and personal care
product category contributed approximately $9.5 million in
incremental sales for the quarter. The Company’s total number of
active Customers increased 9.2% year-over-year to 615,000.
Net earnings for the third quarter increased 30.6% to $31.0
million, compared with net earnings of $23.8 million reported in
the prior-year period. Earnings per diluted share increased to
$1.24, an increase of 27.8% 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.
Weighted average diluted shares outstanding were 25.0 million for
the third quarter of 2018, compared with diluted shares of 24.6
million in the prior-year period.
“We continue to see strong momentum in most of our regions,
which is reflected in our double-digit third quarter growth,” said
Kevin Guest, Chief Executive Officer. “Our growth strategies and
investments into the business are producing results and our team
remains committed to providing the best overall customer experience
at USANA.”
During the quarter, the Company repurchased 177,724 shares of
common stock for an investment of $22.6 million. The Company ended
the quarter with no debt, $239.8 million in cash and cash
equivalents, and an additional $81.7 million invested in short-term
securities. As of September 29, 2018, there was $24.4 million
remaining under the current share repurchase authorization.
Regional Results
Net sales in the Asia Pacific region increased by 20.2% to
$239.6 million for the third quarter of 2018. The total number of
active Customers in the Asia Pacific region increased by 13.9%
year-over-year. Within Asia Pacific, net sales increased:
- 22.6% in Greater China;
- 26.7% in North Asia; and
- 12.3% in the Southeast Asia Pacific
region.
Sales growth in Greater China was primarily driven by a 16.7%
increase in Active Customers in Mainland China, while sales growth
in North Asia resulted primarily from 15.6% Active Customer growth
in South Korea. Sales growth in Southeast Asia Pacific was driven
by 24.0% Active Customer growth in Malaysia, and 8.6% growth in the
Philippines.
Net sales in the Americas and Europe region for the third
quarter of 2018 decreased by 8.5% to $57.2 million, and active
Customers in this region declined 5.1%. The Company’s new European
markets, which opened during the second quarter of 2018,
contributed positively to the region’s third quarter
performance.
“During the quarter, we hosted thousands of Associates here in
Salt Lake City for our annual International Convention,” continued
Mr. Guest. “In China, we launched our new skincare line, Celavive,
which accounted for $4.1 million in incremental sales of the $28.5
million year-over-year growth in this market. We are now turning
our attention to our China national sales meeting to be held in
Macau in late November where, for the first time, we will offer
products for sale at the event.”
Tariffs and Trade Policies
While the Company continues to evaluate the evolving tariffs and
trade policies between the United States and other countries, the
Company does not currently expect these tariffs and trade policies,
as they currently exist, to have a material impact on its future
operating results. Additional changes in tariffs and trade policies
may have a negative impact on currency exchange rates and economic
conditions generally, which could negatively affect the Company’s
results of operations.
Outlook
Chief Financial Officer, Doug Hekking, commented, “Our business
generated strong third quarter net sales, despite pressure from a
strengthening U.S. dollar on both a sequential quarter and
year-over-year basis. Although favorable currency exchange rates
benefited our operating results in the first half of 2018, the U.S.
dollar strengthened more than expected in the third quarter and we
anticipate a similar pattern in the fourth quarter. Consequently,
we have again reduced the estimated benefit to net sales from
currency for the full year. This considered, and with only one
quarter remaining in fiscal 2018, we have tightened our revenue
outlook. Our operating results continue to be strong and,
accordingly, we have tightened our range for diluted earnings per
share and increased the top-end of our outlook.”
The Company is updating its outlook for 2018 as follows:
- Consolidated net sales between $1.185
and $1.20 billion, previously between $1.17 and $1.20 billion;
and
- Earnings per share between $5.00 and
$5.15, previously between $4.75 and $5.05.
The Company’s full-year outlook reflects:
- A year-over-year benefit to net sales
of approximately $16 million from favorable currency exchange
rates, which was previously estimated at $29 million;
- An estimated operating margin between
15.7% and 15.9%;
- An effective tax rate of approximately
34%; and
- An annualized diluted share count of
approximately 24.8 million.
Increased Share Repurchase Authorization
The Board of Directors has authorized up to $150 million in
funding for share repurchases by the Company of its outstanding
common stock. This authorization is inclusive of the $24.4 million
that was remaining under the prior authorization as of the end of
the second quarter. Repurchases may be made from time to time, in
the open market, through block trades or otherwise. The number of
shares to be purchased and the timing of purchases will be based on
market conditions, the level of cash balances, general business
opportunities, and other factors. Additional share repurchases
would represent upside to the revised EPS outlook the Company
issued today.
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, October 24, 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
Nine Months Ended 30-Sep-17 29-Sep-18
30-Sep-17 29-Sep-18 Net sales $ 261,765 $
296,767 $ 774,151 $ 890,225 Cost of sales 47,135
51,877 133,691 151,243
Gross profit 214,630
244,890 640,460 738,982 Operating expenses Associate
incentives 116,010 130,264 350,195 392,416 Selling, general and
administrative 67,263 69,112 193,653
206,781
Earnings from operations 31,357 45,514 96,612
139,785 Other income (expense) 690 1,012
1,632 2,262
Earnings before income taxes
32,047 46,526 98,244 142,047 Income taxes 8,278
15,486 29,858 48,154
NET
EARNINGS $ 23,769 $ 31,040 $ 68,386 $ 93,893
Earnings per share - diluted $ 0.97 $ 1.24 $ 2.75 $ 3.80 Weighted
average shares outstanding - diluted 24,588 25,001 24,871 24,705
USANA Health Sciences, Inc.
Consolidated Balance Sheets (In thousands) (Unaudited)
As of As of ASSETS 30-Dec-17
29-Sep-18 Current Assets Cash and cash equivalents $ 247,131
$ 239,751 Securities held-to-maturity, net - 81,673 Inventories
62,918 81,110 Prepaid expenses and other current assets
30,110 32,228
Total current assets 340,159 434,762
Property and equipment, net 102,847 93,555 Goodwill 17,417
16,829 Intangible assets, net 35,154 32,217 Deferred income taxes
2,859 3,771 Other assets 20,833 18,247
Total
assets $ 519,269 $ 599,381
LIABILITIES AND
STOCKHOLDERS' EQUITY Current Liabilities Accounts payable $
11,787 $ 14,467 Other current liabilities 129,396
138,419
Total current liabilities 141,183 152,886
Deferred income taxes 13,730 9,848 Other long-term liabilities
1,146 1,058 Stockholders' equity 363,210
435,589
Total liabilities and stockholders' equity $ 519,269
$ 599,381
USANA Health Sciences, Inc.
Sales by Region
(unaudited) (in thousands)
Quarter
Ended 30-Sep-17 29-Sep-18 Change from
prior year Currency impact on sales % change
excluding currency impact Asia Pacific Greater
China $ 131,273 50.1% $ 160,932 54.2% $ 29,659 22.6% $ (3,221)
25.0% Southeast Asia Pacific 52,310 20.0% 58,770 19.8% 6,460 12.3%
(1,942) 16.1% North Asia 15,708 6.0% 19,899 6.7% 4,191 26.7% 182
25.5% Asia Pacific Total 199,291 76.1% 239,601 80.7% 40,310 20.2%
(4,981) 22.7% Americas and Europe 62,474 23.9% 57,166 19.3%
(5,308) (8.5%) (1,236) (6.5%) $ 261,765 100.0% $ 296,767
100.0% $ 35,002 13.4% $ (6,217) 15.7%
Active
Associates by Region(1) (unaudited)
As of
30-Sep-17 29-Sep-18 Asia Pacific
Greater China 104,000 36.4% 111,000 36.8% Southeast Asia Pacific
90,000 31.5% 95,000 31.4% North Asia 23,000 8.0% 28,000 9.3% Asia
Pacific Total 217,000 75.9% 234,000 77.5% Americas and
Europe 69,000 24.1% 68,000 22.5% 286,000 100.0% 302,000
100.0%
Active Preferred Customers by Region
(2) (unaudited)
As of 30-Sep-17
29-Sep-18 Asia Pacific Greater China 181,000 65.3% 219,000
70.0% Southeast Asia Pacific 16,000 5.8% 20,000 6.4% North Asia
11,000 4.0% 11,000 3.5% Asia Pacific Total 208,000 75.1% 250,000
79.9% Americas and Europe 69,000 24.9% 63,000 20.1%
277,000 100.0% 313,000 100.0%
(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/20181023006105/en/
USANA Health Sciences, Inc.Investors contact:Patrique
RichardsInvestor Relations(801)
954-7961investor.relations@us.usana.comorMedia contact:Dan
MacugaPublic Relations(801) 954-7280
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