USANA Health Sciences Announces Final Fourth Quarter and Full-Year Financial Results
2008 Marks the 6th Consecutive Year of Record Sales and Associates
SALT LAKE CITY--(BUSINESS WIRE)-- USANA Health Sciences, Inc. (NASDAQ: USNA) today announced final financial results for the fiscal fourth quarter and full year, ending January 3, 2009. The financial results presented by the Company in this press release include comparisons to financial results for the year 2007. The results for 2007 have been restated due to an IRS tax adjustment, as disclosed by the Company in a Form 8-K filed on February 23, 2009. These restated financial results will also be disclosed in the financial statements and related disclosures in the Company's 2008 Form 10-K.
Financial Performance
Net sales for the fourth quarter of 2008 increased by 2.1% to a record $111.1 million, compared with $108.7 million in the fourth quarter of the prior year. Net sales growth for the 14-week fourth quarter of 2008 resulted from a 12.5% increase in the number of active Associates, compared with the fourth quarter of the prior year. Dramatic changes in currencies during the fourth quarter, driven by the strengthening U.S. dollar, reduced net sales by approximately $10 million, compared with the fourth quarter of the prior year.
Earnings per share during the fourth quarter, before a one-time adjustment, decreased 15.2% to $0.56 per share, compared with $0.66 per share in the fourth quarter of 2007. This decrease was due primarily to the impact of currency changes during the quarter. After a one-time adjustment of about $0.27, earnings per share decreased to $0.29, a 56.1% decrease, compared with the fourth quarter of the prior year. This one-time adjustment was the result of an unanticipated arbitration award against the Company for approximately $7 million.
For the full year of 2008, record net sales were $429.0 million, an increase of 1.4%, compared with $423.1 million for the full year of 2007. This increase in net sales was the result of growth in the number of active Associates, primarily in East Asia, which was partially offset by decreased sales in the U.S., Canada, and in some of our markets in Southeast Asia/Pacific.
Earnings per share from continuing operations for the full year of 2008 decreased 30.2% to $1.85, compared with $2.65 in 2007. Excluding the one-time adjustment for the arbitration award noted above, earnings per share for 2008 was $2.12. This decrease in earnings per share was primarily due to higher overall operating costs. During 2008, the Company repurchased approximately 1.1 million shares for a total of $39.9 million.
Regional Results
During the fourth quarter of 2008, net sales in North America decreased 1.3% to $67.0 million, compared with the fourth quarter of the prior year. This decline was primarily the result of a stronger U.S. dollar, which decreased net sales in this region by $5.4 million. Excluding currency changes, net sales in North America during the fourth quarter increased by 6.7%, compared with the fourth quarter of the prior year. Additionally, the number of active Associates in this region increased by 7.0% during the quarter, compared with the fourth quarter of prior year.
Net sales in the Asia Pacific region in the fourth quarter of 2008 increased 7.8% to $44.0 million, compared with $40.8 million in 2007. Excluding currency changes, net sales in Asia Pacific during the fourth quarter increased by 19.0%, compared with the fourth quarter of the prior year. This increase was due to a 19.7% increase in the number of active Associates to 91,000, compared with 76,000 in the fourth quarter of the prior year. The number of active Associates grew in this region due primarily to a 68.8% improvement in Hong Kong and a 36.4% improvement in Malaysia.
Dave Wentz, chief executive officer of USANA Health Sciences, said, "At our international convention held during the third quarter of 2008, we implemented two new global enhancements to our compensation plan. These enhancements provide our Associates with two additional ways to earn income at USANA and incent those Associates who are actively building their business. We are pleased to see the number of active Associates increase in the fourth quarter as a result of these enhancements. During these uncertain economic times, we remain optimistic that our direct selling opportunity will continue to attract individuals who are looking for income through a rewarding home-based business."
Outlook
Today, the Company is providing financial guidance for the full year 2009. Considering current global economic conditions and the strength of the U.S. dollar, the Company projects a modest increase in consolidated net sales of about 2% in 2009. It also anticipates local currency growth during the year. The effect of changes in foreign currency, however, is expected to reduce net sales by 6% to 8%. Earnings per share for 2009 are estimated to increase about 4%, compared with the full year of 2008, and are also expected to be dramatically reduced by changes in foreign currency. This earnings per share estimate for 2009 is based on an effective tax rate of 36%.
Jeff Yates, the Company's vice president and chief financial officer, said, "The fourth quarter of 2008 was significantly impacted by changes in foreign currency, which reduced our overall operating results. For most of 2009, we anticipate that year-over-year comparisons will be affected by the current strength of the U.S. dollar. Accordingly, our guidance for 2009 reflects these anticipated currency pressures. We are optimistic, however, that the recent compensation plan enhancements will increase our sales in the local currencies. Additionally, we will continue to manage spending to ensure that our overall costs correlate with our actual sales."
Conference Call
USANA will hold a conference call and webcast to discuss this announcement with investors on Tuesday, February 24, 2009 at 11:00 a.m. 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 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 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 Year Ended
29-Dec-07 3-Jan-09 29-Dec-07 3-Jan-09
(as restated) (as restated)
Net sales $ 108,748 $ 111,058 $ 423,149 $ 429,012
Cost of sales 22,902 23,264 87,891 88,878
Gross profit 85,846 87,794 335,258 340,134
Operating expenses
Associate incentives 44,533 53,789 170,383 185,329
Selling, general and 24,393 26,398 94,174 106,808
administrative
Earnings from 16,920 7,607 70,701 47,997
operations
Other income 283 (1,051 ) 471 (1,676 )
Earnings from
continuing operations 17,203 6,556 71,172 46,321
before income taxes
Income taxes 6,246 2,066 25,530 16,376
Income from continuing 10,957 4,490 45,642 29,945
operations
Loss from discontinued - - (612 ) -
operations
NET EARNINGS $ 10,957 $ 4,490 $ 45,030 $ 29,945
Earnings per share -
diluted
Continuing operations $ 0.66 $ 0.29 $ 2.65 $ 1.85
Discontinued operations $ - $ - $ (0.03 ) $ -
Net Earnings $ 0.66 $ 0.29 $ 2.62 $ 1.85
Weighted average shares 16,586 15,642 17,206 16,163
outstanding - diluted
USANA Health Sciences, Inc.
Consolidated Balance Sheets (Unaudited)
(in thousands)
As of As of
29-Dec-07 3-Jan-09
(as restated)
ASSETS
Current Assets
Cash and cash equivalents $ 12,865 $ 13,281
Inventories 19,439 23,879
Other current assets 13,688 15,514
Total current assets 45,992 52,674
Property and equipment, net 52,061 56,762
Goodwill 5,690 5,690
Other assets 5,385 7,446
Total assets $ 109,128 $ 122,572
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable $ 8,111 $ 6,879
Other current liabilities 37,763 47,655
Total current liabilities 45,874 54,534
Line of credit 28,000 34,990
Other long-term liabilities 2,305 1,212
Stockholders' equity 32,949 31,836
Total liabilities and stockholders' equity $ 109,128 $ 122,572
USANA Health Sciences, Inc.
Sales by Region
(in thousands)
Quarter Ended
29-Dec-07 3-Jan-09
(Unaudited) (Unaudited)
Region
North America
United States $ 41,697 38.3 % $ 42,350 38.1 %
Canada 20,462 18.8 % 18,653 16.8 %
Mexico 5,748 5.3 % 6,011 5.4 %
North America Total 67,907 62.4 % 67,014 60.3 %
Asia Pacific
Southeast Asia/Pacific 23,184 21.3 % 22,368 20.2 %
East Asia 13,568 12.5 % 17,532 15.8 %
North Asia 4,089 3.8 % 4,144 3.7 %
Asia Pacific Total 40,841 37.6 % 44,044 39.7 %
Consolidated $ 108,748 100.0 % $ 111,058 100.0 %
Active Associates by Region(1)
As of
29-Dec-07 3-Jan-09
(Unaudited) (Unaudited)
Region
North America
United States 61,000 34.6 % 63,000 31.8 %
Canada 26,000 14.8 % 29,000 14.6 %
Mexico 13,000 7.4 % 15,000 7.6 %
North America Total 100,000 56.8 % 107,000 54.0 %
Asia Pacific
Southeast Asia/Pacific 39,000 22.2 % 44,000 22.2 %
East Asia 30,000 17.0 % 40,000 20.2 %
North Asia 7,000 4.0 % 7,000 3.6 %
Asia Pacific Total 76,000 43.2 % 91,000 46.0 %
Total 176,000 100.0 % 198,000 100.0 %
(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
29-Dec-07 3-Jan-09
(Unaudited) (Unaudited)
Region
North America
United States 50,000 64.1 % 43,000 60.6 %
Canada 18,000 23.1 % 16,000 22.5 %
Mexico 2,000 2.6 % 3,000 4.2 %
North America Total 70,000 89.8 % 62,000 87.3 %
Asia Pacific
Southeast Asia/Pacific 6,000 7.6 % 7,000 9.9 %
East Asia 1,000 1.3 % 1,000 1.4 %
North Asia 1,000 1.3 % 1,000 1.4 %
Asia Pacific Total 8,000 10.2 % 9,000 12.7 %
Total 78,000 100.0 % 71,000 100.0 %
(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 February 23, 2009