USANA Health Sciences Announces Record Second Quarter Financial Results

  • Net sales increased by 17.5% to $189.1 million
  • Net earnings increased by 44.6%, while earnings per share increased by 55.0% to $1.72
  • Company reiterates 2013 net sales outlook; raises 2013 earnings outlook

SALT LAKE CITY--()--USANA Health Sciences, Inc. (NYSE: USNA) today announced record financial results for its fiscal second quarter ended June 29, 2013.

Financial Performance

For the second quarter of 2013, net sales increased by 17.5% to $189.1 million compared with $160.9 million in the prior-year period. This growth in net sales was driven by increases in both the Company’s Asia Pacific and North America/Europe regions. Favorable changes in currency exchange rates also contributed approximately $1.2 million to the top line for the quarter.

Net earnings for the second quarter increased to $24.2 million, an improvement of 44.6%, compared with the prior-year period. This increase was due primarily to higher net sales and lower relative operating expenses, which were partially offset by a higher effective tax rate. Earnings per share for the quarter increased by 55.0% to $1.72, compared with $1.11 in the second quarter of the prior year. This improvement in earnings per share was attributable to higher net earnings and a lower number of diluted shares outstanding, which resulted from the Company’s share repurchases over the last 12 months. Total diluted common shares outstanding as of June 29, 2013 were 14.1 million, compared with 15.1 million as of June 30, 2012.

“Our team continues to effectively execute our strategic initiatives, which led to another record quarter,” said Dave Wentz, the Company’s Chief Executive Officer. “Our financial performance was driven by sales and customer growth in both our Asia Pacific and North America regions. Additionally, during the quarter we implemented a worldwide policy that focuses on customers purchasing products in their home market. This policy, which strengthens the Company’s business long-term, led to an estimated $7 million in one-time incremental sales that contributed to the quarter’s exceptional results. While we expect this policy to create pressure on our results in the near term, we believe that it is in the best interest of USANA’s long-term business.”

Regional Results

Net sales in Asia Pacific increased by 24.3% to $122.4 million, compared with $98.4 million for the second quarter of the prior year. This improvement was due to strong sales growth in the Greater China and Southeast Asia Pacific regions, which was driven by a 12.5% increase in the number of active Associates in Asia Pacific. Sales growth in Greater China was led by Mainland China, where sales were approximately $3 million higher than we anticipated. The primary reasons for China’s outperformance were continued momentum from our sold-out Asia Pacific Convention that was held in this region during the first quarter, along with the emergence of new Associate leaders and customers in China.

Net sales in North America/Europe increased by 6.9% to $66.8 million, compared with $62.5 million in the prior-year period. The Company generated double-digit sales growth in Mexico and moderate sales growth in the U.S., Canada, and France. Sales growth in the U.S. and Canada was due primarily to increased Associate productivity, while growth in Mexico and France was driven by double-digit increases in the number of Active Associates. In addition, the Company recently announced the official opening of Colombia, which is expected to make a solid contribution to the region in the second half of the year.

“I’m very pleased with the performance of our business in each of our major regions and excited about the direction of the Company,” continued Wentz. “At our upcoming International Convention, we’ll announce several significant initiatives, which are intended to reward both our business builders and long-term customers. While these new initiatives will create some short-term pressure on our top-and-bottom line performance during the second half of 2013, they will provide an increased opportunity for the long-term growth of the Company. I believe that these investments will increase the growth rate of our active Associates and Preferred Customers as soon as the fourth quarter of this year.”

The Company continued to generate meaningful levels of cash from operations and ended the quarter with $96.1 million in cash and cash equivalents. For the second quarter, cash generated from operations totaled $27 million. During the quarter, the Company did not repurchase any shares of its common stock and ended the quarter with $13.6 million remaining under the board authorized repurchase program.

Outlook

The Company reiterated consolidated net sales outlook and provided the following updated earnings per share outlook for 2013:

  • Consolidated net sales between $700 million and $720 million
  • Earnings per share between $5.30 and $5.45, versus the previous outlook of between $5.25 and $5.40

Chief Financial Officer, Paul Jones, commented, “Although our results were stronger than expected this quarter, we are reiterating our previously issued guidance for the full year 2013. The policy change we implemented during the second quarter and the initiatives we will announce at our International Convention in a few weeks will impact our results for the second half of the year. Although we do not expect our third and fourth quarter results to match our exceptional second quarter performance, we do expect these results to show growth over our first quarter results. Additionally, we believe that the investments we are announcing will provide sustainable growth for the Company over the long-term. Our business has never been stronger, and our expectation is that we will report another year of record results in 2013. We are also positioning the Company to do the same for 2014 and beyond.”

Conference Call

USANA will hold a conference call and webcast to discuss this announcement with investors on Wednesday, July 24, 2013 at 11:00 AM Eastern Time. Investors may listen to the call by accessing USANA’s website at http://www.usanahealthsciences.com.

About USANA

USANA develops and manufactures high-quality nutritional, personal care, and weight-management 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 and Colombia. 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.

 
USANA Health Sciences, Inc.
Consolidated Statements of Earnings
(In thousands, except per share data)
(Unaudited)
                   
Quarter Ended Six Month Ended
30-Jun-12 29-Jun-13 30-Jun-12 29-Jun-13
 
 
Net sales $ 160,901 $ 189,136 $ 315,021 $ 358,218
Cost of sales   28,073     31,905     55,290     62,166  
Gross profit 132,828 157,231 259,731 296,052
 
Operating expenses
Associate incentives 70,901 77,801 138,910 147,656
Selling, general and administrative   36,776     42,978     74,808     85,382  
 
Earnings from operations 25,151 36,452 46,013 63,014
 
Other income (expense)   (222 )   (83 )   (90 )   (109 )
Earnings before income taxes 24,929 36,369 45,923 62,905
 
Income taxes   8,184     12,159     15,427     20,916  
 
NET EARNINGS $ 16,745   $ 24,210   $ 30,496   $ 41,989  
 
       
Earnings per share - diluted $ 1.11   $ 1.72   $ 2.01   $ 2.99  
Weighted average shares outstanding - diluted   15,090     14,099     15,192     14,034  
 
 
           
USANA Health Sciences, Inc.
Consolidated Balance Sheets
(In thousands)
(Unaudited)
As of As of
29-Dec-12 29-Jun-13
 
ASSETS
Current Assets
Cash and cash equivalents $ 70,839 $ 96,056
Inventories 36,481 41,712
Other current assets   25,225   28,252
Total current assets 132,545 166,020
 
Property and equipment, net 61,751 58,796
Goodwill 17,890 17,969
Intangible assets, net 42,085 41,812
Deferred income taxes 5,956 4,380
Other assets   7,128   9,947
Total assets $ 267,355 $ 298,924
 
 
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable $ 7,040 $ 7,285
Other current liabilities   63,804   67,328
Total current liabilities 70,844 74,613
 
 
Other long-term liabilities 938 1,196
Deferred income taxes 10,001 9,109
Stockholders' equity   185,572   214,006
Total liabilities and stockholders' equity $ 267,355 $ 298,924
 
 

 
USANA Health Sciences, Inc.
Sales by Region
(Unaudited)
(In thousands)
                   
Quarter Ended
30-Jun-12 29-Jun-13

Region

 
North America / Europe $ 62,464 38.8 % $ 66,769 35.3 %
 
Asia Pacific
 
Southeast Asia Pacific 34,271 21.3 % 37,475 19.8 %
 
Greater China 56,770 35.3 % 77,388 40.9 %
 
North Asia   7,396 4.6 %   7,504 4.0 %
 
Asia Pacific Total   98,437 61.2 %   122,367 64.7 %
 
Total $ 160,901 100.0 % $ 189,136 100.0 %
 
 
 
Active Associates by Region (1)
(Unaudited)
                   
As of
30-Jun-12 29-Jun-13

Region

 
North America / Europe 82,000 34.9% 82,000 32.3%
 
Asia Pacific
 
Southeast Asia Pacific 58,000 24.7% 60,000 23.6%
 
Greater China 87,000 37.0% 103,000 40.6%
 
North Asia 8,000 3.4% 9,000 3.5%
 
Asia Pacific Total 153,000 65.1% 172,000 67.7%
       
Total 235,000 100.0% 254,000 100.0%
 

(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 for resale.

 
 

 
Active Preferred Customers by Region (2)
(Unaudited)
                   
As of
30-Jun-12 29-Jun-13

Region

 
North America / Europe 52,000 78.8% 57,000 81.4%
 
Asia Pacific
 
Southeast Asia Pacific 6,000 9.1% 7,000 10.0%
 
Greater China 7,000 10.6% 4,000 5.7%
 
North Asia 1,000 1.5% 2,000 2.9%
 
Asia Pacific Total 14,000 21.2% 13,000 18.6%
       
Total 66,000 100.0% 70,000 100.0%
 
(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.

Contacts

USANA Health Sciences, Inc.
Investors contact:
Patrique Richards, 801-954-7961
Investor Relations
investor.relations@us.usana.com
Media contact:
Dan Macuga, 801-954-7280
Public Relations

Release Summary

USANA Health Sciences announced record financial results for its fiscal second quarter. Net sales increased by 17.5%. Earnings per share increased by 55.0%. Company raises 2013 earnings outlook.

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Contacts

USANA Health Sciences, Inc.
Investors contact:
Patrique Richards, 801-954-7961
Investor Relations
investor.relations@us.usana.com
Media contact:
Dan Macuga, 801-954-7280
Public Relations