USANA Announces Record Fourth Quarter 2006 Financial Results
-- Net sales increased by 16.5% to $99.8 million
-- Earnings per share increased by 13.0% to $0.61 (20.4% excluding equity-based compensation)
-- Company raises 2007 earnings per share guidance
SALT LAKE CITY--(BUSINESS WIRE)--
USANA Health Sciences, Inc. (NASDAQ: USNA) today announced record financial results for the fiscal fourth quarter and for the full-year 2006 (ended December 30).
Financial Performance
Consolidated net sales in the fourth quarter of 2006 increased by 16.5% to $99.8 million, compared with $85.6 million in the fourth quarter of the prior year. Excluding the positive impact of currency fluctuations, this sales increase would have been 15.0%. Net sales growth for the fourth quarter of 2006 resulted primarily from a 15.0% increase in the number of active Associates, compared with the fourth quarter of the prior year.
Earnings from operations in the fourth quarter of 2006 grew by 8.3% to $16.7 million, or 16.8% of net sales, compared with $15.4 million, or 18.0% of net sales, in the fourth quarter of the prior year. Earnings from operations in the fourth quarter of 2006 were reduced by $1.3 million, due to the required expensing of equity-based compensation. Earnings per share in the fourth quarter of 2006 increased by 13.0% to $0.61 per share, compared with $0.54 per share in the fourth quarter of the prior year. Excluding the expense of equity-based compensation, earnings per share in the fourth quarter of 2006 would have been $0.65, an increase of 20.4%, compared with the fourth quarter of the prior year. Earnings per share in the fourth quarter of 2006 were impacted by an expected unfavorable tax ruling, resulting in a tax rate that was higher than anticipated, and by a favorable foreign exchange gain on capital that was returned to the Company from one of its foreign subsidiaries.
"The fourth quarter marked the 18th consecutive quarter of record sales, driven by strong sales growth of 16.6% in North America and 19.9% in the Asia Pacific region," said Dave Wentz, President of USANA. "Our results demonstrate our ability to grow in both our mature markets and in our newer markets.
"The promotions that we offered during the fourth quarter, including those relating to Success from Home Magazine, were key elements of our strong performance in the quarter. We are optimistic that, as we continue to offer contests and promotions, we will consistently generate new Associate prospects throughout 2007."
For the full-year, ended December 30, 2006, consolidated net sales increased by 15.8% to $374.2 million, compared with $323.1 million in the prior year. Earnings from operations for the full-year 2006 increased by 6.8% to $62.3 million, compared with $58.4 million for the prior year. Earnings from operations for the full-year 2006 were reduced by $4.8 million, due to the required expensing of equity-based compensation. Earnings per share for the full-year 2006 increased by 11.1% to $2.20, compared with $1.98 for the prior year. Excluding the expense of equity-based compensation for the full-year 2006, earnings per share would have been $2.37, an increase of 19.7%, compared with the prior year.
Regional Results
During the fourth quarter of 2006, net sales in North America, the Company's most mature region, increased by 16.6% to $65.5 million, compared with the fourth quarter of the prior year. This growth was driven primarily by a 14.6% increase in the number of active Associates in this region. The Company also generated strong sales in Mexico, which increased by 48.9%, compared with the fourth quarter of the prior year.
During the fourth quarter of 2006, net sales in the Asia Pacific region increased by 19.9% to $32.5 million, compared with the fourth quarter of the prior year. The growth in this region was led by strong results in Hong Kong, up 62.3%, and in Singapore, up 46.7%. Additionally, the number of active Associates in the Asia Pacific region increased by 15.7% to 59,000, compared with 51,000 in the fourth quarter of the prior year.
"The number of Associate leaders continues to grow in the Asia Pacific region," continued Mr. Wentz. "We believe that the recent opening of Malaysia and the March 2007 Asia Pacific convention in Sydney, Australia, will serve as catalysts for our growth in this region."
Outlook
Commenting on USANA's future expectations, Gilbert A. Fuller, the Company's Executive Vice President and Chief Financial Officer, said, "We expect net sales in the first quarter of 2007 to be in the range of $103 million to $105 million, compared with $88.2 million in the first quarter of last year, a growth rate of between 17% and 19%. This sales guidance includes revenue from Malaysia, which opened for business on January 8, 2007. We believe that earnings per share in the first quarter of 2007 will be between $0.61 and $0.63, compared with $0.50 in the first quarter of last year, a growth rate of between 22% and 26%.
"As to our guidance for the full-year 2007, we continue to expect net sales to grow by 15% to 17% over 2006. Based on our current expectations, however, we are raising our full-year 2007 earnings per share guidance and now believe that earnings per share will grow by 17% to 20% over 2006. This earnings per share estimate includes an estimated tax rate of 36.5%, which is higher than our 35.3% tax rate for 2006," Mr. Fuller concluded.
Conference Call
USANA will hold a conference call and webcast to discuss this announcement with investors on Wednesday, February 7, 2007 at 11:00 AM ET. 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 Preferred Customers and Associates throughout the United States, Canada, Australia, New Zealand, Hong Kong, Japan, Taiwan, South Korea, Singapore, Mexico, Malaysia, the Netherlands, and the United Kingdom. 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 reliance upon our network of independent Associates, the governmental regulation of our products, manufacturing and marketing 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.
The attached financial tables have been adjusted in accordance with
our publicly issued press release on January 10, 2007.
USANA Health Sciences, Inc.
Consolidated Statements of Earnings
(In thousands, except per share data)
Quarter Ended Year Ended
----------------------- ---------------------
31-Dec-05 30-Dec-06 31-Dec-05 30-Dec-06
----------- ----------- --------- -----------
(Unaudited) (Unaudited) (Unaudited)
Net sales $85,646 $99,781 $323,089 $374,190
Cost of sales 20,747 23,743 78,016 89,545
----------- ----------- --------- -----------
Gross profit 64,899 76,038 245,073 284,645
Operating expenses
Associate incentives 33,414 39,226 124,045 146,251
Selling, general and
administrative 15,553 19,339 60,326 72,854
Research and
development 500 754 2,339 3,197
----------- ----------- --------- -----------
Earnings from
operations 15,432 16,719 58,363 62,343
Other income 217 712 487 1,411
----------- ----------- --------- -----------
Earnings before income
taxes 15,649 17,431 58,850 63,754
Income taxes 5,168 6,292 19,856 22,488
----------- ----------- --------- -----------
NET EARNINGS $10,481 $11,139 $38,994 $41,266
=========== =========== ========= ===========
Earnings per share -
diluted $0.54 $0.61 $1.98 $2.20
=========== =========== ========= ===========
Weighted average shares
outstanding - diluted 19,336 18,405 19,721 18,724
=========== =========== ========= ===========
USANA Health Sciences, Inc.
Consolidated Balance Sheets
(in thousands)
As of As of
31-Dec- 30-Dec-06
05
-------- -----------
(Unaudited)
ASSETS
Cash and cash equivalents $10,579 $27,029
Inventories, net 22,223 22,483
Other current assets 9,028 11,103
-------- -----------
Total current assets 41,830 60,615
Property and equipment, net 23,302 29,431
Goodwill 5,690 5,690
Other assets 2,886 3,374
-------- -----------
Total assets $73,708 $99,110
======== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable $4,955 $9,349
Other current liabilities 21,601 29,564
-------- -----------
Total current liabilities 26,556 38,913
Other long-term liabilities 1,414 -
Stockholders' equity 45,738 60,197
-------- -----------
Total liabilities and stockholders' equity $73,708 $99,110
======== ===========
USANA Health Sciences, Inc.
Sales by Segment and Region
(in thousands)
Quarter Ended
-------------------------------
31-Dec-05 30-Dec-06
--------------- ---------------
(Unaudited) (Unaudited)
Region
-------------------------------------
North America
United States $36,148 42.2% $42,234 42.3%
Canada 16,547 19.3% 18,057 18.1%
Mexico 3,479 4.1% 5,180 5.2%
-------- ------ -------- ------
North America Total $56,174 65.6% $65,471 65.6%
Asia Pacific
Australia-New Zealand 11,956 14.0% 12,815 12.8%
Hong Kong 3,127 3.7% 5,076 5.1%
Japan 2,605 3.0% 2,019 2.0%
Taiwan 4,860 5.7% 5,742 5.8%
South Korea 1,225 1.4% 1,940 1.9%
Singapore 3,370 3.9% 4,945 5.0%
-------- ------ -------- ------
Asia Pacific Total 27,143 31.7% 32,537 32.6%
-------- ------ -------- ------
Segment Total 83,317 97.3% 98,008 98.2%
-------- ------ -------- ------
Contract Manufacturing 2,329 2.7% 1,773 1.8%
-------- ------ -------- ------
Consolidated $85,646 100.0% $99,781 100.0%
======== ====== ======== ======
Active Associates by Region
As of
-------------------------------
31-Dec-05 30-Dec-06
--------------- ---------------
(Unaudited) (Unaudited)
Region
-------------------------------------
North America
United States 51,000 38.3% 59,000 38.5%
Canada 23,000 17.3% 24,000 15.7%
Mexico 8,000 6.0% 11,000 7.2%
-------- ------ -------- ------
North America Total 82,000 61.6% 94,000 61.4%
Asia Pacific
Australia-New Zealand 17,000 12.8% 19,000 12.4%
Hong Kong 4,000 3.0% 9,000 5.9%
Japan 5,000 3.8% 4,000 2.6%
Taiwan 13,000 9.8% 14,000 9.2%
South Korea 2,000 1.5% 2,000 1.3%
Singapore 10,000 7.5% 11,000 7.2%
-------- ------ -------- ------
Asia Pacific Total 51,000 38.4% 59,000 38.6%
-------- ------ -------- ------
Total 133,000 100.0% 153,000 100.0%
======== ====== ======== ======
Active Preferred Customers by Region
As of
-------------------------------
31-Dec-05 30-Dec-06
--------------- ---------------
(Unaudited) (Unaudited)
Region
-------------------------------------
North America
United States 44,000 62.9% 50,000 64.1%
Canada 18,000 25.7% 18,000 23.1%
Mexico 1,000 1.4% 2,000 2.5%
-------- ------ -------- ------
North America Total 63,000 90.0% 70,000 89.7%
Asia Pacific
Australia-New Zealand 6,000 8.6% 7,000 9.0%
Hong Kong (a) 0.0% (a) 0.0%
Japan 1,000 1.4% 1,000 1.3%
Taiwan (a) 0.0% (a) 0.0%
South Korea (a) 0.0% (a) 0.0%
Singapore (a) 0.0% (a) 0.0%
-------- ------ -------- ------
Asia Pacific Total 7,000 10.0% 8,000 10.3%
-------- ------ -------- ------
Total 70,000 100.0% 78,000 100.0%
======== ====== ======== ======
(a) Count of Active Preferred Customers is less than 500.
Source: USANA Health Sciences, Inc.
Released February 6, 2007