USANA Health Sciences Announces Second Quarter 2008 Financial Results
Record Sales of $109.2 Million; EPS of $0.62
SALT LAKE CITY--(BUSINESS WIRE)--
USANA Health Sciences, Inc. (NASDAQ: USNA) today announced its financial results for the fiscal second quarter, ended June 28, 2008. The company reported net sales of $109.2 million and earnings per share of $0.62, which approximated the preliminary results for the second quarter announced on June 18, 2008.
Financial Performance
Net sales for the second quarter of 2008 increased by 1.5% to $109.2 million, compared with $107.5 million in the second quarter of the prior year. This increase in net sales was primarily the result of new incentive programs for the company's Associates and stronger foreign currencies. On a consecutive quarter basis, net sales increased by 7.5%.
Earnings per share from continuing operations were $0.62 per share, compared with $0.66 per share in the second quarter of 2007, a decrease of 6.1%. This decrease in earnings per share for the quarter was due to higher overall operating costs. On a consecutive quarter basis, earnings per share increased by 34.8%. Notably, earnings per share in the second quarter were reduced by $0.03 due to charges relating to the recently terminated tender offer.
For the six months ended June 28, 2008, net sales increased by 1.2% to $210.8 million, compared with $208.2 in the first six months of 2007. Earnings per share from continuing operations were $1.08 in the first six months of 2008, a decrease of 16.9%, compared with $1.30 in the same period of 2007.
Regional Results
North America Region
During the second quarter of 2008, net sales in North America decreased by 3.3% to $65.9 million, compared with the second quarter of the prior year. Excluding changes in foreign currency, net sales decreased by 5.9%. This decrease was mainly due to lower-than-expected sales in the U.S., where the number of active Associates declined by 7.7% on a year-over-year basis. On a sequential quarter basis, however, net sales increased by 4.1% in the U.S. and by 5.9% in North America.
Asia Pacific Regions
Net sales in the Asia Pacific regions, during the second quarter of 2008, increased by 9.9% to $43.3 million, compared with the second quarter of 2007. Excluding changes in foreign currency, net sales increased by 2.6% in these regions. This growth was primarily attributable to increases of 44.9% in Hong Kong, 28.7% in Malaysia, and 11.7% in Taiwan. These sales increases were partially offset by a 3.8% decline in Australia/New Zealand and a 3.3% decline in Singapore, compared with the second quarter of 2007. On a sequential quarter basis, net sales in the Asia Pacific regions increased by 10.2%.
"We were pleased to see our second quarter financial results come in above our original expectations," said Dave Wentz, president of USANA Health Sciences. "Achieving sequential quarterly sales gains in all but two of our 13 markets gives me confidence that our business is starting to regain its upward momentum. We will continue to focus on accelerating our top-line growth."
Gil Fuller, the company's executive vice president and chief financial officer, said, "We have made extra efforts this quarter to reduce overall corporate spending. Additionally, the majority of the capital investments that we have made to expand our corporate headquarters and regional facility in Sydney, Australia are now largely behind us."
Beginning today, the company is changing its practice for providing financial guidance. USANA will no longer provide financial guidance for its fiscal quarters. The company will, however, provide financial guidance on an annual basis, which it will update periodically. Commenting on this financial guidance, Fuller said, "We are making this change to our guidance practice to focus on the longer-term prospects of our business."
Outlook
On July 21, 2008, the Company's Compensation Committee increased base salaries and issued significant equity grants that vest over five years. These grants will replace annual grants that the committee would otherwise issue during that time. These increases in cash and equity compensation will reduce earnings per share for 2008 by approximately $0.12. The committee believes that doing this will increase shareholder value over the long-term by retaining and motivating key management personnel.
The company believes that, for the full-year 2008, net sales will be between $435 million and $445 million and earnings per share on a fully diluted basis will be between $2.30 and $2.36. This earnings per share estimate is based on a full-year effective tax rate of 36.5%.
Conference Call
USANA will hold a conference call and webcast to discuss this announcement with investors on Wednesday, July 23, 2008 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 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. Forward-looking statements in the foregoing press release include, but are not necessarily limited to, references to the expected outcome of initiatives and promotions planned by the company, guidance given for future operating periods, and the company's belief regarding the future effect of incentive programs on the top-line and on operating costs. 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, 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 (Unaudited)
(In thousands, except per share data)
Quarter Ended
-------------------
30-Jun-07 28-Jun-08
--------- ---------
Net sales $107,542 $109,208
Cost of sales 22,443 21,884
--------- ---------
Gross profit 85,099 87,324
Operating expenses
Associate incentives 43,280 45,603
Selling, general and administrative 22,531 25,135
Research and development 902 618
--------- ---------
Earnings from operations 18,386 15,968
Other income (13) (65)
--------- ---------
Earnings from continuing operations before
income taxes 18,373 15,903
Income taxes 6,966 5,755
--------- ---------
Income from continuing operations 11,407 10,148
Loss from discontinued operations (93) -
--------- ---------
NET EARNINGS $ 11,314 $ 10,148
========= =========
Earnings per share - diluted
Continuing operations $ 0.66 $ 0.62
Discontinued operations $ - $ -
--------- ---------
Net Earnings $ 0.66 $ 0.62
========= =========
Weighted average shares outstanding - diluted 17,163 16,460
========= =========
USANA Health Sciences, Inc.
Consolidated Balance Sheets (Unaudited)
(in thousands)
As of As of
29-Dec-07 28-Jun-08
--------- ---------
ASSETS
Current Assets
Cash and cash equivalents $ 12,865 $ 9,982
Inventories 19,439 22,038
Other current assets 13,688 12,256
--------- ---------
Total current assets 45,992 44,276
Property and equipment, net 52,061 60,163
Goodwill 5,690 5,690
Other assets 5,385 6,016
--------- ---------
Total assets $109,128 $116,145
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable $ 8,111 $ 8,753
Other current liabilities 32,074 33,326
--------- ---------
Total current liabilities 40,185 42,079
Line of credit 28,000 9,835
Other long-term liablilities 2,305 2,820
Stockholders' equity 38,638 61,411
--------- ---------
Total liabilities and stockholders' equity $109,128 $116,145
========= =========
USANA Health Sciences, Inc.
Sales by Region
(in thousands)
Quarter Ended
-------------------------------
30-Jun-07 28-Jun-08
--------------- ---------------
(Unaudited) (Unaudited)
Region
--------------------------------------
North America $ 68,156 63.4% $ 65,921 60.4%
Southeast Asia/Pacific 23,570 21.9% 24,170 22.1%
East Asia 11,631 10.8% 15,057 13.8%
North Asia 4,185 3.9% 4,060 3.7%
-------- ------ -------- ------
Consolidated $107,542 100.0% $109,208 100.0%
======== ====== ======== ======
Active Associates by Region (1)
As of
-----------------------------
30-Jun-07 28-Jun-08
-------------- --------------
(Unaudited) (Unaudited)
Region
----------------------------------------
North America 104,000 58.5% 96,000 56.8%
Southeast Asia/Pacific 40,000 22.5% 39,000 23.1%
East Asia 28,000 15.7% 27,000 16.0%
North Asia 6,000 3.3% 7,000 4.1%
------- ------ ------- ------
Total 178,000 100.0% 169,000 100.0%
======= ====== ======= ======
(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)
As of
---------------------------
30-Jun-07 28-Jun-08
------------- -------------
(Unaudited) (Unaudited)
Region
------------------------------------------
North America 71,000 89.9% 69,000 89.6%
Southeast Asia/Pacific 6,000 7.5% 6,000 7.8%
East Asia 1,000 1.3% 1,000 1.3%
North Asia 1,000 1.3% 1,000 1.3%
------ ------ ------ ------
Total 79,000 100.0% 77,000 100.0%
====== ====== ====== ======
(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 22, 2008