USANA Health Sciences Announces Record Third Quarter 2010 Financial Results
-- Net sales increased by 21.9% to $135.0 million; Active Associates
increased by 17.6%
-- Earnings per share increased by 54.9% to $0.79
-- Company raises outlook for 2010
SALT LAKE CITY--(BUSINESS WIRE)-- USANA Health Sciences, Inc. (NASDAQ: USNA) today announced record financial results for its fiscal third quarter ended October 2, 2010.
Financial Performance
Net sales in the third quarter of 2010 increased 21.9% to $135.0 million, compared with $110.7 million in the third quarter of the prior year. This growth was due to higher product sales, driven primarily by a 17.6% increase in the number of active Associates.
Net earnings in the third quarter of 2010 increased to $12.8 million, or $0.79 per share, compared with $7.9 million, or $0.51 per share, in the third quarter of the prior year, representing a 54.9% increase. This significant year-over-year increase resulted from an improved gross profit margin, a higher operating margin and a lower effective tax rate. The earnings per share gains were partially offset by a higher number of diluted shares outstanding.
For the nine months ended October 2, 2010, net sales increased by 18.7% to $380.1 million, compared with $320.2 million for the first nine months of the prior year. This growth in sales was due to an overall increase in product sales, driven by a higher average number of active Associates. Additionally, favorable changes in currency exchange rates accounted for $17.4 million of the increase in net sales for the first nine months of 2010.
Net earnings for the first nine months of 2010 increased to $33.3 million, or $2.11 per share, compared with net earnings of $23.3 million, or $1.51 per share, for the first nine months of the prior year. This increase in earnings per share during the nine-month period resulted from significantly improved gross profit margins, lower relative selling, general and administrative expenses, and a lower effective tax rate, which were partially offset by higher Associate incentives expenses and a higher average number of diluted shares outstanding.
Regional Results
Net sales in the Asia Pacific region for the third quarter of 2010 increased by 48.7% to $75.0 million, compared with the third quarter of the prior year. This improvement was primarily due to 134% growth in Hong Kong. Additionally, the recent acquisition of BabyCare added $3.4 million in sales for the quarter. The number of active Associates increased by 47.4%, which was primarily the result of growth in Hong Kong and the addition of 10,000 active Associates purchasing product in BabyCare.
"Asia Pacific continues to be the region that is driving our current success, resulting in record highs for both sales and earnings," said Chief Executive Officer Dave Wentz. "With our focus on expanding our product and business offerings in the growing markets of Asia, the addition of BabyCare into the USANA family is significant because it provides the platform necessary to introduce our products into that market."
During the third quarter of 2010, net sales in the North America region decreased by 0.6% to $60.0 million, compared with the third quarter of the prior year. The United States, however, experienced modest growth of 0.3% in the third quarter, while sales decreased in both Canada and Mexico. The number of Active Associates in the North America region declined by 10.8%, compared with the third quarter of the prior year.
Wentz also emphasized the company's continuing commitment to building its North American region. "In August we held our annual International Convention in Salt Lake City, where we launched several new products and a new interactive presentation tool. These new products and this new sales tool are designed to promote sales growth in North America, as well as in our other markets."
Outlook
Chief Financial Officer Jeff Yates said, "I am very pleased to see further improvements in our operating results during the third quarter. Our objective over the last several quarters has been to position ourselves for operating leverage as we experience growth in our top-line. Additionally, capital investments aimed at improving operating efficiencies facilitated a 290 basis-point improvement to our operating margin, compared with last year, and a 20 basis-point improvement on a consecutive quarter basis. In light of our sales growth and our margin improvements, coupled with the acquisition of BabyCare, we are raising our financial guidance for 2010. We now project consolidated net sales to be between $512 million and $515 million and earnings per share to be between $2.90 and $2.93."
Conference Call
USANA will hold a conference call and webcast to discuss this announcement with investors on Wednesday, October 27, 2010 at 11:00AM 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, Japan, Taiwan, South Korea, Singapore, Mexico, Malaysia, the Philippines, the Netherlands, and the United Kingdom. Additionally, USANA's wholly-owned subsidiary, BabyCare, Ltd., operates a direct selling business in China. 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
3-Oct-09 2-Oct-10
Net sales $ 110,764 $ 135,006
Cost of sales 22,637 25,157
Gross profit 88,127 109,849
Operating expenses
Associate incentives 50,799 60,560
Selling, general and administrative 25,414 30,751
Earnings from operations 11,914 18,538
Other income 110 551
Earnings before income taxes 12,024 19,089
Income taxes 4,112 6,240
NET EARNINGS $ 7,912 $ 12,849
Earnings per share - diluted $ 0.51 $ 0.79
Weighted average shares outstanding - diluted 15,547 16,247
USANA Health Sciences, Inc.
Consolidated Balance Sheets
(In thousands)
As of As of
2-Jan-10 2-Oct-10
(Unaudited)
ASSETS
Current Assets
Cash and cash equivalents $ 13,658 $ 22,928
Inventories 25,761 32,605
Other current assets 12,507 17,225
Total current assets 51,926 72,758
Property and equipment, net 57,241 58,326
Goodwill 5,690 16,930
Other assets 8,581 53,515
Total assets $ 123,438 $ 201,529
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable $ 5,810 $ 8,485
Other current liabilities 34,668 43,021
Line of Credit- short term - 19,000
Total current liabilities 40,478 70,506
Line of credit- long term 7,000 -
Other long-term liabilities 1,587 1,076
Stockholders' equity 74,373 129,947
Total liabilities and stockholders' equity $ 123,438 $ 201,529
USANA Health Sciences, Inc.
Sales by Region
(Unaudited)
(In thousands)
Quarter Ended
3-Oct-09 2-Oct-10
Region
North America
United States $ 38,098 34.4% $ 38,228 28.3%
Canada 16,661 15.0% 16,419 12.2%
Mexico 5,535 5.0% 5,314 3.9%
North America Total 60,294 54.4% 59,961 44.4%
Asia Pacific
Southeast Asia/Pacific 25,227 22.8% 25,730 19.1%
Greater China 20,262 18.3% 43,456 32.2%
North Asia 4,981 4.5% 5,859 4.3%
Asia Pacific Total 50,470 45.6% 75,045 55.6%
Consolidated $ 110,764 100.0% $ 135,006 100.0%
Active Associates by Region(1)
(Unaudited)
As of
3-Oct-09 2-Oct-10
Region
North America
United States 61,000 30.7% 55,000 23.5%
Canada 26,000 13.1% 25,000 10.7%
Mexico 15,000 7.5% 11,000 4.7%
North America Total 102,000 51.3% 91,000 38.9%
Asia Pacific
Southeast Asia/Pacific 49,000 24.6% 46,000 19.7%
Greater China 40,000 20.1% 89,000 38.0%
North Asia 8,000 4.0% 8,000 3.4%
Asia Pacific Total 97,000 48.7% 143,000 61.1%
Total 199,000 100.0% 234,000 100.0%
(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 product at 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
3-Oct-09 2-Oct-10
Region
North America
United States 40,000 58.8% 37,000 50.0%
Canada 15,000 22.1% 14,000 18.9%
Mexico 3,000 4.4% 3,000 4.1%
North America Total 58,000 85.3% 54,000 73.0%
Asia Pacific
Southeast Asia/Pacific 8,000 11.7% 7,000 9.5%
Greater China 1,000 1.5% 12,000 16.2%
North Asia 1,000 1.5% 1,000 1.3%
Asia Pacific Total 10,000 14.7% 20,000 27.0%
Total 68,000 100.0% 74,000 100.0%
(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 product at any time during the most recent three-month period.
Source: USANA Health Sciences, Inc.
Released October 26, 2010