USANA Health Sciences Announces First Quarter 2010 Financial Results
-- Net sales increase by 22.4% to a record $119.1 million -- Earnings per share increase by 44.2% to $0.62
SALT LAKE CITY--(BUSINESS WIRE)-- USANA Health Sciences, Inc. (NASDAQ: USNA) today announced financial results for its fiscal first quarter ended April 3, 2010.
Net sales in the first quarter of 2010 improved 22.4% to a record $119.1 million, compared with $97.3 million in the first quarter of the prior year. This increase over the prior year was due to an overall increase in product sales, driven primarily by a 10.9% increase in the number of active Associates, which is largely the result of continued growth in our Asia Pacific region. Additionally, favorable changes in currency exchange rates increased net sales by $8.6 million in the first quarter of 2010.
Net earnings in the first quarter of 2010 were $9.6 million, or $0.62 per share, compared with $6.6 million, or $0.43 per share, in the first quarter of the prior year. This year-over-year increase in net earnings resulted from higher net sales, lower relative selling, general and administrative expenses, and improved gross profit margins. These improvements were partially offset by higher Associate incentives expenses.
During the first quarter of 2010, net sales in the North America region increased by 8.3%, or $4.6 million, to $60.5 million, compared with the first quarter of the prior year. In local currency, sales in this region increased by 2.0%. The sales growth in this region was primarily due to higher sales per Associate. Active Associates in the North America region, however, decreased by 3.1% to 94,000, compared with the first quarter of the prior year. Difficult economic conditions in North America continue to be a factor for Associate declines in this region.
"We are pleased to see sales growth in North America during the first quarter, particularly in the U.S., where we grew compared with both last year and the prior quarter," said Dave Wentz, chief executive officer. "While we are disappointed with our lack of customer growth in this region, we believe that there is significant potential for growth in North America. We remain committed to regaining momentum in this important region. In fact, later this year we will introduce what we believe are exciting new products, as well as business and training tools, to assist our Associates in growing their business."
Net sales in the Asia Pacific region for the first quarter of 2010 increased by 41.5%, or $17.2 million, to $58.6 million, compared with the first quarter of the prior year. This improvement was primarily due to an overall increase in product sales, driven by 26.4% 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 and South Korea.
"We are also pleased by the rapid growth of our Asia Pacific region, which continues to report double-digit growth in both sales and Associates," continued Wentz. "We are excited about our upcoming Asia Pacific Convention, which provides the perfect venue to launch several new products exclusive to this region and an opportunity to train, motivate, and celebrate the success of our Associates."
During the second quarter, we will begin to implement changes to better manage our Associate Incentives expense. These changes will include adjustments to reduce our exposure to currency fluctuations, as well as certain policy changes.
Jeff Yates, chief financial officer, said, "I am pleased with our first quarter operating results, which were stronger than expected. In light of these results, we believe that now is an opportune time to make strategic changes to help us further manage our Associate Incentives expense. These changes may, in the short-term, slow our growth or reduce our top-line results in certain markets. Importantly, as I have commented previously, we are committed to improving our operating margin and believe these changes will not only enable us to achieve this objective, but also help us strategically to drive the long-term success of our business.
"As a result of the foregoing, we are modestly increasing our financial guidance for 2010. We now project consolidated net sales to be between $470 million and $480 million and earnings per share to be between $2.50 and $2.60," concluded Yates.
USANA will hold a conference call and webcast to discuss this announcement with investors on Wednesday, April 28, 2010 at 11:00AM Eastern Time. Investors may listen to the call by accessing USANA's website at http://www.usanahealthsciences.com.
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.
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-Apr-09 3-Apr-10 Net sales $ 97,299 $ 119,087 Cost of sales 19,846 23,020 Gross profit 77,453 96,067 Operating expenses Associate incentives 41,890 54,118 Selling, general and administrative 25,330 27,458 Earnings from operations 10,233 14,491 Other income (expense) (90 ) 339 Earnings before income taxes 10,143 14,830 Income taxes 3,497 5,189 NET EARNINGS $ 6,646 $ 9,641 Earnings per share - diluted $ 0.43 $ 0.62 Weighted average shares outstanding - diluted 15,382 15,513 USANA Health Sciences, Inc. Consolidated Balance Sheets (In thousands) As of As of 2-Jan-10 3-Apr-10 (Unaudited) ASSETS Current Assets Cash and cash equivalents $ 13,658 $ 21,523 Inventories 25,761 27,404 Other current assets 12,507 11,704 Total current assets 51,926 60,631 Property and equipment, net 57,241 56,625 Goodwill 5,690 5,690 Other assets 8,581 9,106 Total assets $ 123,438 $ 132,052 LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities Accounts payable $ 5,810 $ 5,396 Other current liabilities 34,668 38,764 Total current liabilities 40,478 44,160 Line of credit 7,000 - Other long-term liabilities 1,587 1,526 Stockholders' equity 74,373 86,366 Total liabilities and stockholders' equity $ 123,438 $ 132,052
USANA Health Sciences, Inc. Sales by Region (Unaudited) (In thousands) Quarter Ended 4-Apr-09 3-Apr-10 Region North America United States $ 36,489 37.5 % $ 37,606 31.6 % Canada 14,936 15.4 % 17,560 14.7 % Mexico 4,470 4.6 % 5,354 4.5 % North America Total 55,895 57.5 % 60,520 50.8 % Asia Pacific Southeast Asia/Pacific 19,938 20.5 % 24,533 20.6 % East Asia 16,955 17.4 % 28,263 23.7 % North Asia 4,511 4.6 % 5,771 4.9 % Asia Pacific Total 41,404 42.5 % 58,567 49.2 % Consolidated $ 97,299 100.0 % $ 119,087 100.0 % Active Associates by Region(1) (Unaudited) As of 4-Apr-09 3-Apr-10 Region North America United States 58,000 31.5 % 56,000 27.5 % Canada 26,000 14.1 % 25,000 12.2 % Mexico 13,000 7.1 % 13,000 6.4 % North America Total 97,000 52.7 % 94,000 46.1 % Asia Pacific Southeast Asia/Pacific 45,000 24.5 % 44,000 21.6 % East Asia 35,000 19.0 % 57,000 27.9 % North Asia 7,000 3.8 % 9,000 4.4 % Asia Pacific Total 87,000 47.3 % 110,000 53.9 % Total 184,000 100.0 % 204,000 100.0 %
(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-Apr-09 3-Apr-10 Region North America United States 41,000 60.3% 39,000 60.0% Canada 16,000 23.5% 15,000 23.1% Mexico 3,000 4.4% 3,000 4.6% North America Total 60,000 88.2% 57,000 87.7% Asia Pacific Southeast Asia/Pacific 7,000 10.3% 6,000 9.3% East Asia 1,000 1.5% 1,000 1.5% North Asia - 0.0% 1,000 1.5% Asia Pacific Total 8,000 11.8% 8,000 12.3% Total 68,000 100.0% 65,000 100.0%
(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 April 27, 2010