NOTE D – OTHER ASSETS

Other assets consist primarily of a secured loan to a third-party supplier of the Company’s nutrition bars and land use rights related to a production facility in China.



The Company has extended non-revolving credit to its supplier of nutrition bars to allow it to acquire equipment that is necessary to manufacture the USANA nutrition bars, which is secured by the equipment.  This relationship provided improved supply chain stability for USANA and created a mutually beneficial relationship between the parties.  Notes receivable are valued at their unpaid principal balance plus any accrued but unpaid interest, which approximates fair value.  Interest accrues at an annual interest rate of LIBOR plus 400 basis points. The note has a maturity date of February 1, 2024 and was to be repaid by a combination of cash payments and credits for the manufacture of USANA’s nutrition bars.  There is no prepayment penalty.  The note receivable from this supplier as of December 31, 2016, and July 1, 2017 was $6,867 and $6,868, respectively.



During the second quarter of 2017, the Company experienced challenges with the third-party supplier of the Company’s nutrition bars.  Due to these challenges, the Company has determined to no longer use the existing supplier of the nutritional bars.  The Company has evaluated the recoverability of the note receivable from this supplier, which will now be repaid through cash payments.  Through this analysis and examination of financial data of the third-party supplier, the Company believes that the third-party supplier has the wherewithal to repay the note receivable by the maturity date as of July 1, 2017.  Accordingly, no impairment was recorded during second quarter of 2017.  The Company will continue to evaluate the recoverability of the note receivable in future periods.



This third-party supplier is considered to be a variable interest entity; however, the Company is not the primary beneficiary due to the inability to direct the activities that most significantly affect the third-party supplier's economic performance. Additionally, the Company does not absorb a majority of the third-party supplier's expected losses or returns. Consequentially, the financial information of the third-party supplier is not consolidated. The maximum exposure to loss as a

result of the Company's involvement with the third-party supplier is limited to the carrying value of the note receivable due from the third-party supplier.