USANA Health Sciences Announces Second Quarter 2009 Financial Results
Record net sales of $112.1 million Earnings per share of $0.57 Active Associate count increased 18.3% to a record 200,000 Net sales increased 15.2% on sequential quarter basis Earnings per share increased 32.6% on sequential quarter basis Company raises outlook for 2009
SALT LAKE CITY--(BUSINESS WIRE)-- USANA Health Sciences, Inc. (NASDAQ: USNA) today announced financial results for its fiscal second quarter, ended July 4, 2009.
Financial Performance
Net sales for the second quarter of 2009 improved to a record $112.1 million, compared with $109.2 million in the second quarter of the prior year, an increase of 2.6%. On a sequential quarter basis, net sales grew by 15.2%. The year-over-year increase was due to an overall increase in product sales, driven by an 18.3% increase in the number of active Associates and, to a lesser extent, by an increase in product prices. The negative effect of changes in currency exchange rates reduced net sales in the second quarter by approximately $9.1 million, or 7.5%. Excluding changes in currency rates, net sales in the second quarter would have been $121.2 million.
Earnings per share for the second quarter of 2009 decreased by 6.6% to $0.57 per share, compared with $0.61 per share in the second quarter of the prior year. On a sequential quarter basis, earnings per share grew by 32.6%. The year-over-year decrease was primarily due to the negative effect of currency exchange rates. Higher Associate incentives expense and lower gross profit margins also contributed to this decrease. Earnings per share in the quarter, however, benefited from lower selling, general and administrative expenses, a lower number of diluted shares outstanding, and a lower effective tax rate.
Dave Wentz, chief executive officer, said, "We are pleased to have achieved record sales during this quarter, despite the current economic recession, and we are particularly encouraged by the extraordinary growth in the number of our active Associates. The two new compensation plan enhancements that we introduced in the third quarter of 2008 are motivating our Associates to focus on growing their businesses. We believe that these enhancements were important in driving sales this quarter."
For the six months ended July 4, 2009, net sales decreased by 0.7% to $209.4 million, compared with $210.8 million for the first six months of the prior year. This decrease was primarily due to the negative effect of changes in currency exchange rates, which reduced net sales by approximately $19.5 million. Excluding changes in currency rates, net sales for the first six months of 2009 would have been $228.9 million. Earnings per share were $1.00 for the first six months of 2009, a decrease of 5.7%, compared with $1.06 for the first six months of the prior year. This decrease was also primarily due to the negative effect of changes in currency exchange rates.
Regional Results
During the second quarter of 2009, net sales in North America decreased by 4.8%, or $3.2 million, to $62.7 million, compared with the second quarter of the prior year. This decline was primarily the result of negative changes in currency exchange rates, which decreased net sales in this region by $4.2 million. The number of active Associates in this region, however, increased by 10.4% to 106,000, compared with the second quarter of the prior year.
In local currency, sales in Mexico increased by 29.5% compared with the second quarter of 2008. Sales in Canada and the U.S., however, decreased by 3.0% and 0.5%, respectively. Excluding currency changes, net sales in North America for the second quarter would have increased by 1.6%.
On a sequential quarter basis, sales increased by 9.4% in the U.S., 42.7% in Mexico and 10.2% in Canada. The number of active Associates increased by 12.1% in the U.S., 15.4% in Mexico, and remained flat in Canada.
Net sales in the Asia Pacific region for the second quarter of 2009 increased by 14.0%, or $6.1 million, to $49.4 million, compared with the second quarter of the prior year. Excluding the negative impact of a stronger U.S. dollar, net sales in this region increased during the quarter by 25.2%. This improvement was due to an overall increase in sales volume, driven by 28.8% growth in the number of active Associates and, to a lesser extent, by somewhat better pricing. Active Associates in the region grew to a record 94,000, compared with 73,000 for the second quarter of the prior year. This increase in the number of active Associates was due primarily to double-digit growth in Hong Kong, Malaysia, and South Korea. Additionally, the Company's newest market, the Philippines, added 5,000 Associates during the quarter.
On a sequential quarter basis, net sales increased by 12.2% in North America and 19.2% in Asia Pacific. Additionally, nearly all of our markets experienced sales growth and six of our markets experienced double-digit sales growth. The effect of currency exchange rates on a sequential quarter basis added $3.8 million to overall net sales. The number of active Associates also increased 8.7% overall, with 9.3% and 8.0% improvements in North America and Asia Pacific, respectively.
"Our Asia Pacific region continues to show remarkable growth in sales and active Associates," continued Wentz. "We are also pleased with the improved sequential quarter results, particularly in the U.S., where difficult economic conditions have had the greatest effect on our sales and earnings. We will continue to find ways to improve the long-term growth of the Company."
Outlook
Jeff Yates, chief financial officer, said, "We are optimistic about our second quarter results and are raising our financial guidance for 2009. We anticipate, however, continued headwinds from unfavorable currency exchange rates and difficult economic conditions, particularly in North America. Accordingly, we now project consolidated net sales for 2009 to be between $415 million and $425 million. Although we anticipate local currency sales growth in most markets during the year, we expect unfavorable currency exchange rates to reduce sales by as much $24 million for the full-year of 2009. We are also raising our earnings per share guidance for 2009, and now estimate that EPS will be between $1.95 and $2.00. This projection includes the negative effect of currency exchange rates, which we expect will reduce earnings per share by as much as $0.24 in 2009.
"Importantly, we will also continue to manage our general and administrative spending and will continue to look for ways to reduce costs and to increase our operating efficiencies. Our main focus, however, will continue to be growing our customer base and increasing our top-line."
Conference Call
USANA will hold a conference call and webcast to discuss this announcement with investors on Wednesday, July 29, 2009 at 10:00AM 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 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 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 (Unaudited)
(In thousands, except per share data)
Quarter Ended
28-Jun-08(1) 4-Jul-09
Net sales $ 109,208 $ 112,093
Cost of sales 21,884 23,753
Gross profit 87,324 88,340
Operating expenses
Associate incentives 45,603 50,321
Selling, general and administrative 25,753 24,719
Earnings from operations 15,968 13,300
Other income (expense) (65 ) 125
Earnings before income taxes 15,903 13,425
Income taxes 5,821 4,634
NET EARNINGS $ 10,082 $ 8,791
Earnings per share - diluted $ 0.61 $ 0.57
Weighted average shares outstanding - diluted 16,460 15,385
(1) All amounts reflective of adjustments made due to the restatement
of previously reported amounts
USANA Health Sciences, Inc.
Consolidated Balance Sheets
(in thousands)
As of As of
3-Jan-09 4-Jul-09
(Unaudited)
ASSETS
Current Assets
Cash and cash equivalents $ 13,281 $ 11,170
Inventories 23,879 24,656
Other current assets 15,514 12,904
Total current assets 52,674 48,730
Property and equipment, net 57,369 57,601
Goodwill 5,690 5,690
Other assets 6,839 7,933
Total assets $ 122,572 $ 119,954
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable $ 6,879 $ 4,697
Other current liabilities 47,655 32,400
Total current liabilities 54,534 37,097
Line of credit 34,990 28,170
Other long-term liabilities 1,212 1,885
Stockholders' equity 31,836 52,802
Total liabilities and stockholders' equity $ 122,572 $ 119,954
USANA Health Sciences, Inc.
Sales by Region
(in thousands)
Quarter Ended
28-Jun-08 4-Jul-09
(Unaudited) (Unaudited)
Region
North America
United States $ 40,125 36.8 % $ 39,908 35.6 %
Canada 19,527 17.9 % 16,454 14.7 %
Mexico 6,269 5.7 % 6,379 5.7 %
North America Total 65,921 60.4 % 62,741 56.0 %
Asia Pacific
Southeast Asia/Pacific 24,170 22.1 % 24,518 21.9 %
East Asia 15,057 13.8 % 19,649 17.5 %
North Asia 4,060 3.7 % 5,185 4.6 %
Asia Pacific Total 43,287 39.6 % 49,352 44.0 %
Consolidated $ 109,208 100.0 % $ 112,093 100.0 %
Active Associates by Region(1)
As of
28-Jun-08 4-Jul-09
(Unaudited) (Unaudited)
Region
North America
United States 57,000 33.7 % 65,000 32.5 %
Canada 26,000 15.4 % 26,000 13.0 %
Mexico 13,000 7.7 % 15,000 7.5 %
North America Total 96,000 56.8 % 106,000 53.0 %
Asia Pacific
Southeast Asia/Pacific 39,000 23.1 % 46,000 23.0 %
East Asia 27,000 16.0 % 40,000 20.0 %
North Asia 7,000 4.1 % 8,000 4.0 %
Asia Pacific Total 73,000 43.2 % 94,000 47.0 %
Total 169,000 100.0 % 200,000 100.0 %
(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
28-Jun-08 4-Jul-09
(Unaudited) (Unaudited)
Region
North America
United States 49,000 63.6 % 42,000 60.9 %
Canada 17,000 22.1 % 15,000 21.7 %
Mexico 3,000 3.9 % 3,000 4.3 %
North America Total 69,000 89.6 % 60,000 86.9 %
Asia Pacific
Southeast Asia/Pacific 6,000 7.8 % 7,000 10.1 %
East Asia 1,000 1.3 % 1,000 1.5 %
North Asia 1,000 1.3 % 1,000 1.5 %
Asia Pacific Total 8,000 10.4 % 9,000 13.1 %
Total 77,000 100.0 % 69,000 100.0 %
(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 28, 2009