false--01-02Q2202000008962640000896264usna:UsanaNutritionalsMember2020-03-292020-06-270000896264usna:UsanaFoodsMember2020-03-292020-06-270000896264usna:PersonalCareSkincareMember2020-03-292020-06-270000896264usna:AllOtherMember2020-03-292020-06-270000896264usna:UsanaNutritionalsMember2019-12-292020-06-270000896264usna:UsanaFoodsMember2019-12-292020-06-270000896264usna:PersonalCareSkincareMember2019-12-292020-06-270000896264usna:AllOtherMember2019-12-292020-06-270000896264usna:UsanaNutritionalsMember2019-03-312019-06-290000896264usna:UsanaFoodsMember2019-03-312019-06-290000896264usna:PersonalCareSkincareMember2019-03-312019-06-290000896264usna:AllOtherMember2019-03-312019-06-290000896264usna:UsanaNutritionalsMember2018-12-302019-06-290000896264usna:UsanaFoodsMember2018-12-302019-06-290000896264usna:PersonalCareSkincareMember2018-12-302019-06-290000896264usna:AllOtherMember2018-12-302019-06-290000896264srt:MaximumMemberus-gaap:LineOfCreditMemberusna:ThirdAmendmentMember2019-07-152019-07-150000896264srt:MinimumMemberus-gaap:LineOfCreditMemberusna:ThirdAmendmentMember2019-07-150000896264usna:AmendedAndRestatedCreditAgreementMember2016-02-192016-02-190000896264usna:AmendedAndRestatedCreditAgreementMember2016-02-190000896264us-gaap:CommonStockMember2020-03-292020-06-270000896264us-gaap:CommonStockMember2019-12-292020-06-270000896264us-gaap:CommonStockMember2019-03-312019-06-290000896264us-gaap:CommonStockMember2018-12-302019-06-290000896264us-gaap:RetainedEarningsMember2020-06-270000896264us-gaap:AdditionalPaidInCapitalMember2020-06-270000896264us-gaap:AccumulatedOtherComprehensiveIncomeMember2020-06-270000896264us-gaap:RetainedEarningsMember2020-03-280000896264us-gaap:AdditionalPaidInCapitalMember2020-03-280000896264us-gaap:AccumulatedOtherComprehensiveIncomeMember2020-03-2800008962642020-03-280000896264us-gaap:RetainedEarningsMember2019-12-280000896264us-gaap:AdditionalPaidInCapitalMember2019-12-280000896264us-gaap:AccumulatedOtherComprehensiveIncomeMember2019-12-280000896264us-gaap:RetainedEarningsMember2019-06-290000896264us-gaap:AdditionalPaidInCapitalMember2019-06-290000896264us-gaap:AccumulatedOtherComprehensiveIncomeMember2019-06-290000896264us-gaap:RetainedEarningsMember2019-03-300000896264us-gaap:AdditionalPaidInCapitalMember2019-03-300000896264us-gaap:AccumulatedOtherComprehensiveIncomeMember2019-03-3000008962642019-03-300000896264us-gaap:RetainedEarningsMember2018-12-290000896264us-gaap:AdditionalPaidInCapitalMember2018-12-290000896264us-gaap:AccumulatedOtherComprehensiveIncomeMember2018-12-290000896264usna:SoutheastAsiaAndPacificMember2020-03-292020-06-270000896264usna:NorthAsiaMember2020-03-292020-06-270000896264usna:GreaterChinaMember2020-03-292020-06-270000896264usna:AmericasAndEuropeMember2020-03-292020-06-270000896264srt:AsiaPacificMember2020-03-292020-06-270000896264country:CN2020-03-292020-06-270000896264usna:SoutheastAsiaAndPacificMember2019-12-292020-06-270000896264usna:NorthAsiaMember2019-12-292020-06-270000896264usna:GreaterChinaMember2019-12-292020-06-270000896264usna:AmericasAndEuropeMember2019-12-292020-06-270000896264srt:AsiaPacificMember2019-12-292020-06-270000896264country:CN2019-12-292020-06-270000896264usna:SoutheastAsiaAndPacificMember2019-03-312019-06-290000896264usna:NorthAsiaMember2019-03-312019-06-290000896264usna:GreaterChinaMember2019-03-312019-06-290000896264usna:AmericasAndEuropeMember2019-03-312019-06-290000896264srt:AsiaPacificMember2019-03-312019-06-290000896264country:CN2019-03-312019-06-290000896264usna:SoutheastAsiaAndPacificMember2018-12-302019-06-290000896264usna:NorthAsiaMember2018-12-302019-06-290000896264usna:GreaterChinaMember2018-12-302019-06-290000896264usna:AmericasAndEuropeMember2018-12-302019-06-290000896264srt:AsiaPacificMember2018-12-302019-06-290000896264country:CN2018-12-302019-06-290000896264us-gaap:AccumulatedOtherComprehensiveIncomeMember2020-03-292020-06-270000896264us-gaap:AccumulatedOtherComprehensiveIncomeMember2019-12-292020-06-270000896264us-gaap:AccumulatedOtherComprehensiveIncomeMember2019-03-312019-06-290000896264us-gaap:AccumulatedOtherComprehensiveIncomeMember2018-12-302019-06-290000896264country:US2020-06-270000896264country:CN2020-06-270000896264country:US2019-12-280000896264country:CN2019-12-280000896264us-gaap:RetainedEarningsMember2020-03-292020-06-270000896264us-gaap:RetainedEarningsMember2019-12-292020-06-270000896264us-gaap:RetainedEarningsMember2019-03-312019-06-290000896264us-gaap:RetainedEarningsMember2018-12-302019-06-290000896264us-gaap:LineOfCreditMemberusna:ThirdAmendmentMember2019-07-150000896264srt:ScenarioForecastMemberusna:ThirdAmendmentMember2020-09-302020-09-300000896264us-gaap:LineOfCreditMemberusna:ThirdAmendmentMember2019-07-152019-07-1500008962642018-12-302019-12-280000896264us-gaap:LineOfCreditMember2020-06-270000896264us-gaap:FairValueInputsLevel2Memberus-gaap:FairValueMeasurementsRecurringMember2020-06-270000896264us-gaap:FairValueInputsLevel1Memberus-gaap:FairValueMeasurementsRecurringMember2020-06-270000896264us-gaap:FairValueMeasurementsRecurringMember2020-06-270000896264us-gaap:FairValueInputsLevel2Memberus-gaap:FairValueMeasurementsRecurringMember2019-12-280000896264us-gaap:FairValueInputsLevel1Memberus-gaap:FairValueMeasurementsRecurringMember2019-12-280000896264us-gaap:FairValueMeasurementsRecurringMember2019-12-280000896264us-gaap:LineOfCreditMember2019-12-292020-06-270000896264us-gaap:CommonStockMember2020-06-270000896264us-gaap:CommonStockMember2020-03-280000896264us-gaap:CommonStockMember2019-12-280000896264us-gaap:CommonStockMember2019-06-290000896264us-gaap:CommonStockMember2019-03-300000896264us-gaap:CommonStockMember2018-12-2900008962642018-12-290000896264us-gaap:MoneyMarketFundsMemberus-gaap:FairValueInputsLevel1Memberus-gaap:FairValueMeasurementsRecurringMember2020-06-270000896264us-gaap:MoneyMarketFundsMemberus-gaap:FairValueMeasurementsRecurringMember2020-06-270000896264us-gaap:MoneyMarketFundsMemberus-gaap:FairValueInputsLevel1Memberus-gaap:FairValueMeasurementsRecurringMember2019-12-280000896264us-gaap:MoneyMarketFundsMemberus-gaap:FairValueMeasurementsRecurringMember2019-12-2800008962642019-06-290000896264us-gaap:AdditionalPaidInCapitalMember2020-03-292020-06-2700008962642020-03-292020-06-270000896264us-gaap:AdditionalPaidInCapitalMember2019-12-292020-06-270000896264us-gaap:AdditionalPaidInCapitalMember2019-03-312019-06-2900008962642019-03-312019-06-290000896264us-gaap:AdditionalPaidInCapitalMember2018-12-302019-06-2900008962642018-12-302019-06-2900008962642020-06-2700008962642019-12-2800008962642020-07-3100008962642019-12-292020-06-27usna:itemxbrli:pureusna:segmentiso4217:USDxbrli:sharesiso4217:USDxbrli:shares

Table of Contents

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

______________________

FORM 10-Q

(Mark One)

x  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 27, 2020

or

¨  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ___________ to ____________

Commission file number: 001-35024

______________________

USANA HEALTH SCIENCES, INC.

(Exact name of registrant as specified in its charter)

Utah

87-0500306

(State or other jurisdiction

(I.R.S. Employer

of incorporation or organization)

Identification No.)

______________________

3838 West Parkway Blvd., Salt Lake City, Utah 84120

(Address of principal executive offices) (Zip Code)

______________________

(801) 954-7100

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock

USNA

New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x   No ¨

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes x   No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer x

Accelerated filer ¨

Non-accelerated filer ¨

Smaller reporting company ¨

Emerging growth company ¨

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨   No x

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: As of July 31, 2020, 21,020,007 shares of common stock, $.001 par value, of the registrant were outstanding.


Table of Contents

 

USANA HEALTH SCIENCES, INC.

FORM 10-Q

For the Quarterly Period Ended June 27, 2020

TABLE OF CONTENTS

Page

Cautionary Note Regarding Forward-Looking Statements and Certain Risks

1

PART I. FINANCIAL INFORMATION

Item 1

Financial Statements (unaudited)

2

Condensed Consolidated Balance Sheets

2

Condensed Consolidated Statements of Comprehensive Income

3

Condensed Consolidated Statements of Stockholders’ Equity

4

Condensed Consolidated Statements of Cash Flows

6

Notes to Condensed Consolidated Financial Statements

7 - 13

Item 2

Management’s Discussion and Analysis of Financial Condition and Results of Operations

14 - 21

Item 3

Quantitative and Qualitative Disclosures About Market Risk

21

Item 4

Controls and Procedures

21

PART II. OTHER INFORMATION

Item 1

Legal Proceedings

22

Item 1A

Risk Factors

22

Item 2

Unregistered Sales of Equity Securities and Use of Proceeds

22

Item 3

Defaults Upon Senior Securities

22

Item 4

Mine Safety Disclosures

22

Item 5

Other Information

22

Item 6

Exhibits

22

Signatures

23

 



Table of Contents

 

Cautionary Note Regarding Forward-Looking Statements and Certain Risks

This report contains, “forward-looking statements” within the meaning of the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). All statements other than statements of historical fact are “forward-looking statements” for purposes of federal and state securities laws, including any projections of earnings, revenue or other financial items; any statements of the plans, strategies and objectives of management for future operations; any statements concerning proposed new products; any statements regarding future economic conditions or performance; any statements of belief; and any statements of assumptions underlying any of the foregoing. Forward-looking statements can be identified by words such as: “anticipate,” “intend,” “plan,” “seek,” “believe,” “project,” “estimate,” “expect,” “strategy,” “future,” “likely,” “may,” “should,” “will” and similar references to future periods. Forward-looking statements are neither historical facts nor assurances of future performance. Instead, they are based only on our current beliefs, expectations and assumptions regarding the future of our business, future plans and strategies, projections, anticipated events and trends, the economy and other future conditions. Because forward-looking statements relate to the future, they are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict and many of which are outside of our control. Our actual results and financial condition may differ materially from those indicated in the forward-looking statements.

Although we believe that the expectations reflected in our forward-looking statements are reasonable, actual results could differ materially from those we project or assume in our forward-looking statements. Our future financial condition and results of operations, as well as any forward-looking statements, are subject to change and to inherent risks and uncertainties, such as those disclosed or incorporated by reference in our filings with the Securities and Exchange Commission (“SEC”). Any forward-looking statement made by us in this report is based only on information currently available to us and speaks only as of the date hereof. We undertake no obligation to publicly update any forward-looking statement, whether written or oral, that may be made from time to time, whether as a result of new information, future developments, the occurrence of unanticipated events or otherwise. Important factors that could cause our actual results, performance and achievements to differ materially from estimates or projections contained in our forward-looking statements in this report include, among others, the following:

Our dependence upon the direct selling business model to distribute our products and the activities of our independent Associates;

Extensive regulation of our business model and uncertainties relating to the interpretation and enforcement of applicable laws and regulations governing direct selling and anti-pyramiding, particularly in the United States and China;

The operation and expansion of our business in China through our subsidiary, BabyCare Holdings, Ltd. (“BabyCare”), including risks related to (i) operating in China in general, (ii) engaging in direct selling in China, (iii) BabyCare’s business model in China, and (iv) changes in the Chinese economy, marketplace or consumer environment;

Unanticipated effects of changes to our Compensation Plan;

Challenges associated with our planned expansion into new international markets, delays in commencement of sales or product offerings in such markets, delays in compliance with local marketing or other regulatory requirements, or changes in target markets;

Uncertainty related to the magnitude, scope and duration of the impact of the novel strain coronavirus COVID-19 pandemic (“COVID-19” or the “COVID-19 pandemic”) to our business, operations and financial results, including, for example, additional regulatory measures or voluntary actions that may be put in place to limit the spread of COVID-19 in the markets where we operate, such as restrictions on business operations, shelter at home, or social distancing requirements;

Political events, natural disasters, pandemics, epidemics or other health crises including, and in addition to, COVID-19 or other events that may negatively affect economic conditions, consumer spending or consumer behavior;

Changes to trade policies and tariffs, the impact of customs, duties, taxation, and transfer pricing regulations, as well as regulations governing distinctions between and our responsibilities to employees and independent contractors;

Volatile fluctuation in the value of foreign currencies against the U.S. dollar;

Shortages of raw materials, disruptions in the business of our contract manufacturers, significant price increases of key raw materials, and other disruptions to our supply chain, and;

Our continued compliance with debt covenants in our credit facility.

Unless otherwise indicated or otherwise required by the context, the terms “we,” “our,” “it,” “its,” “Company,” and “USANA” refer to USANA Health Sciences, Inc. and its subsidiaries.

 

1


Table of Contents

PART I.  FINANCIAL INFORMATION

Item 1. FINANCIAL STATEMENTS

USANA HEALTH SCIENCES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except par value)

(unaudited)

As of

As of

June 27,

December 28,

2020

2019

ASSETS

Current assets

Cash and cash equivalents

$

227,368

$

234,830

Inventories

69,279

68,905

Prepaid expenses and other current assets

28,302

25,544

Total current assets

324,949

329,279

Property and equipment, net

98,435

95,233

Goodwill

16,521

16,636

Intangible assets, net

29,008

29,840

Deferred tax assets

3,741

3,090

Other assets

39,497

42,856

$

512,151

$

516,934

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities

Accounts payable

$

10,942

$

12,525

Other current liabilities

128,775

123,573

Total current liabilities

139,717

136,098

Deferred tax liabilities

6,584

10,282

Other long-term liabilities

16,774

18,842

Stockholders' equity

Common stock, $0.001 par value; Authorized -- 50,000 shares,

issued and outstanding 21,017 as of June 27, 2020

and 21,655 as of December 28, 2019

21

22

Additional paid-in capital

55,526

59,445

Retained earnings

312,659

306,146

Accumulated other comprehensive income (loss)

(19,130)

(13,901)

Total stockholders' equity

349,076

351,712

$

512,151

$

516,934

The accompanying notes are an integral part of these statements.


2


Table of Contents

USANA HEALTH SCIENCES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(in thousands, except per share data)

(unaudited)

Quarter Ended

Six Months Ended

June 27,

June 29,

June 27,

June 29,

2020

2019

2020

2019

Net sales

$

258,991

$

256,016

$

525,610

$

529,006

Cost of sales

47,674

46,494

93,733

92,395

Gross profit

211,317

209,522

431,877

436,611

Operating expenses:

Associate incentives

110,852

111,511

226,921

234,041

Selling, general and administrative

60,879

66,854

126,358

136,409

Total operating expenses

171,731

178,365

353,279

370,450

Earnings from operations

39,586

31,157

78,598

66,161

Other income (expense):

Interest income

435

1,301

1,419

2,785

Interest expense

(217)

(10)

(238)

(22)

Other, net

175

64

(637)

(118)

Other income (expense), net

393

1,355

544

2,645

Earnings before income taxes

39,979

32,512

79,142

68,806

Income taxes

12,002

11,134

24,613

23,256

Net earnings

$

27,977

$

21,378

$

54,529

$

45,550

Earnings per common share

Basic

$

1.33

$

0.92

$

2.56

$

1.95

Diluted

$

1.32

$

0.91

$

2.56

$

1.93

Weighted average common shares outstanding

Basic

21,034

23,245

21,265

23,364

Diluted

21,129

23,370

21,340

23,648

Comprehensive income:

Net earnings

$

27,977

$

21,378

$

54,529

$

45,550

Other comprehensive income (loss), net of tax:

Foreign currency translation adjustment

1,861

(5,592)

(4,376)

(818)

Tax benefit (expense) related to foreign currency

translation adjustment

(1,892)

242

(853)

(1,052)

Other comprehensive income (loss), net of tax

(31)

(5,350)

(5,229)

(1,870)

Comprehensive income

$

27,946

$

16,028

$

49,300

$

43,680

The accompanying notes are an integral part of these statements.


3


Table of Contents

USANA HEALTH SCIENCES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY

(in thousands)

(unaudited)

For six months ended June 29, 2019

Accumulated

Additional

Other

Common Stock

Paid-in

Retained

Comprehensive

Shares

Value

Capital

Earnings

Income (Loss)

Total

Balance at December 29, 2018

23,567

$

24

$

72,008

$

329,501

$

(10,387)

$

391,146

Net earnings

45,550

45,550

Other comprehensive income (loss), net of tax

(1,870)

(1,870)

Equity-based compensation expense

8,601

8,601

Common stock repurchased and retired

(651)

(1)

(10,115)

(47,507)

(57,623)

Common stock issued under equity award plans

64

Tax withholding for net-share settled equity awards

(1,648)

(1,648)

Balance at June 29, 2019

22,980

$

23

$

68,846

$

327,544

$

(12,257)

$

384,156

For six months ended June 27, 2020

Accumulated

Additional

Other

Common Stock

Paid-in

Retained

Comprehensive

Shares

Value

Capital

Earnings

Income (Loss)

Total

Balance at December 28, 2019

21,655

$

22

$

59,445

$

306,146

$

(13,901)

$

351,712

Net earnings

54,529

54,529

Other comprehensive income (loss), net of tax

(5,229)

(5,229)

Equity-based compensation expense

6,991

6,991

Common stock repurchased and retired

(785)

(1)

(9,012)

(48,016)

(57,029)

Common stock issued under equity award plans

147

Tax withholding for net-share settled equity awards

(1,898)

(1,898)

Balance at June 27, 2020

21,017

$

21

$

55,526

$

312,659

$

(19,130)

$

349,076

The accompanying notes are an integral part of these statements.


4


Table of Contents

USANA HEALTH SCIENCES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY

(in thousands)

(unaudited)

For the three months ended June 29, 2019

Accumulated

Additional

Other

Common Stock

Paid-in

Retained

Comprehensive

Shares

Value

Capital

Earnings

Income (Loss)

Total

Balance at March 30, 2019

23,335

$

23

$

69,100

$

329,001

$

(6,907)

$

391,217

Net earnings

21,378

21,378

Other comprehensive income (loss), net of tax

(5,350)

(5,350)

Equity-based compensation expense

4,769

4,769

Common stock repurchased and retired

(367)

(4,788)

(22,835)

(27,623)