USANA Health Sciences Announces Record Second Quarter 2010 Financial Results
-- Net sales increased by 12.4% to a record $126.0 million
-- Earnings per share increased by 21.1% to a record $0.69
-- Company raises outlook for 2010
SALT LAKE CITY--(BUSINESS WIRE)-- USANA Health Sciences, Inc. (NASDAQ: USNA) today announced record financial results for its fiscal second quarter ended July 3, 2010.
Financial Performance
Net sales in the second quarter of 2010 improved 12.4% to $126.0 million, compared with $112.1 million in the second quarter of the prior year. This increase was due to an overall increase in product sales, driven primarily by a 5% increase in the number of active Associates, which is the result of continued growth in the Asia Pacific region. Additionally, favorable changes in currency exchange rates accounted for $5.2 million of the increase in net sales for the second quarter of 2010.
Net earnings in the second quarter of 2010 increased 22.5% to $10.8 million, or $0.69 per share, compared with $8.8 million, or $0.57 per share, in the second quarter of the prior year. This year-over-year increase resulted from higher net sales and improved gross profit margins. These improvements, however, were partially offset by higher Associate incentives expenses and higher selling, general and administrative expenses.
For the six months ended July 3, 2010, net sales increased by 17.1% to $245.1 million, compared with $209.4 million for the first six months of the prior year. This growth in sales was due to an overall increase in product sales, driven again by a higher average number of active Associates. Additionally, favorable changes in currency exchange rates accounted for $13.9 million of the increase in net sales for the first six months of 2010. Net earnings for the first six months of 2010 increased by 32.2% to $20.4 million, or $1.31 per diluted share, compared with net earnings of $15.4 million, or $1.00 per diluted share, for the first six months of the prior year. This increase in net earnings during the period resulted from higher net sales, improved gross profit margins, and lower relative selling, general and administrative expenses, which were partially offset by higher Associate incentives expenses.
Regional Results
During the second quarter of 2010, net sales in the North America region decreased by 1.0% to $62.1 million, compared with the second quarter of the prior year. Net sales in North America benefited by $2.4 million from changes in currency exchange rates in Canada and Mexico. Active Associates in the North America region decreased by 10.4% compared with the second quarter of the prior year. Importantly, on a sequential quarter basis, active Associates increased by 1.1% and sales increased by 2.6% in this region.
Net sales in the Asia Pacific region for the second quarter of 2010 increased by 29.5% to $63.9 million, compared with the second quarter of the prior year. This improvement was mainly due to an overall increase in product sales, driven by 22.3% growth in the number of active Associates. This increase in the number of active Associates was primarily the result of double-digit growth in Hong Kong.
"Although our results in North America were down slightly over last year, we are pleased to see consecutive quarter improvements in this region in both sales and active Associates," said Dave Wentz, chief executive officer. "The success of our Asia Pacific region continues to drive our top-line growth. This success was highlighted this quarter by our Asia Pacific convention held in May in Hong Kong, which was our largest ever Associate-attended event. At this event, we introduced several new region-specific products that contributed to record convention sales of $2.8 million. Highlighting this convention was the announcement of our intention to open business in China. We believe that now is the right time for USANA to make the necessary investments for entry into this large and growing market."
Outlook
Jeff Yates, chief financial officer, said, "I am pleased with our strong second quarter operating results which were better than we expected, particularly the 160 basis-point improvement we made to our operating margin. While the Asia Pacific convention in May added about $1.6 million in SG&A spending, this was more than offset by the significant improvement to our gross margin. In light of our strong second quarter operating results, we are raising our financial guidance for 2010. We now project consolidated net sales to be between $488 million and $495 million and earnings per share to be between $2.73 and $2.80."
Conference Call
USANA will hold a conference call and webcast to discuss this announcement with investors on Wednesday, July 28, 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. 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
4-Jul-09 3-Jul-10
Net sales $ 112,093 $ 126,011
Cost of sales 23,753 22,735
Gross profit 88,340 103,276
Operating expenses
Associate incentives 50,321 57,065
Selling, general and administrative 24,719 29,149
Earnings from operations 13,300 17,062
Other income (expense) 125 (587 )
Earnings before income taxes 13,425 16,475
Income taxes 4,634 5,705
NET EARNINGS $ 8,791 $ 10,770
Earnings per share - diluted $ 0.57 $ 0.69
Weighted average shares outstanding - diluted 15,385 15,697
USANA Health Sciences, Inc.
Consolidated Balance Sheets
(In thousands)
As of As of
2-Jan-10 3-Jul-10
(Unaudited)
ASSETS
Current Assets
Cash and cash equivalents $ 13,658 $ 28,427
Inventories 25,761 30,789
Other current assets 12,507 11,910
Total current assets 51,926 71,126
Property and equipment, net 57,241 56,035
Goodwill 5,690 5,690
Other assets 8,581 10,821
Total assets $ 123,438 $ 143,672
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable $ 5,810 $ 7,121
Other current liabilities 34,668 36,523
Total current liabilities 40,478 43,644
Line of credit 7,000 -
Other long-term liabilities 1,587 1,470
Stockholders' equity 74,373 98,558
Total liabilities and stockholders' equity $ 123,438 $ 143,672
USANA Health Sciences, Inc.
Sales by Region
(Unaudited)
(In thousands)
Quarter Ended
4-Jul-09 3-Jul-10
Region
North America
United States $ 39,908 35.6 % $ 37,992 30.1 %
Canada 16,454 14.7 % 18,373 14.6 %
Mexico 6,379 5.7 % 5,748 4.6 %
North America Total 62,741 56.0 % 62,113 49.3 %
Asia Pacific
Southeast Asia/Pacific 24,518 21.9 % 23,968 19.0 %
East Asia 19,649 17.5 % 34,437 27.3 %
North Asia 5,185 4.6 % 5,493 4.4 %
Asia Pacific Total 49,352 44.0 % 63,898 50.7 %
Consolidated $ 112,093 100.0 % $ 126,011 100.0 %
Active Associates by Region(1)
(Unaudited)
As of
4-Jul-09 3-Jul-10
Region
North America
United States 65,000 32.5 % 57,000 27.1 %
Canada 26,000 13.0 % 26,000 12.4 %
Mexico 15,000 7.5 % 12,000 5.7 %
North America Total 106,000 53.0 % 95,000 45.2 %
Asia Pacific
Southeast Asia/Pacific 46,000 23.0 % 44,000 21.0 %
East Asia 40,000 20.0 % 63,000 30.0 %
North Asia 8,000 4.0 % 8,000 3.8 %
Asia Pacific Total 94,000 47.0 % 115,000 54.8 %
Total 200,000 100.0 % 210,000 100.0 %
(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 from USANA 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
4-Jul-09 3-Jul-10
Region
North America
United States 42,000 60.9 % 39,000 59.1 %
Canada 15,000 21.7 % 15,000 22.7 %
Mexico 3,000 4.3 % 3,000 4.6 %
North America Total 60,000 86.9 % 57,000 86.4 %
Asia Pacific
Southeast Asia/Pacific 7,000 10.1 % 6,000 9.1 %
East Asia 1,000 1.5 % 2,000 3.0 %
North Asia 1,000 1.5 % 1,000 1.5 %
Asia Pacific Total 9,000 13.1 % 9,000 13.6 %
Total 69,000 100.0 % 66,000 100.0 %
(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 from USANA at any time during the most recent three-month period.
Source: USANA Health Sciences, Inc.
Released July 27, 2010