NOTE  J – COMMITMENTS AND CONTINGENCIES

 

 

With the exception of the Company’s Salt Lake City headquarters, Australian facility, and Tianjin, China facility, facilities are generally leased.  Each of the facility lease agreements is a non-cancelable operating lease generally structured with renewal options and expires prior to or during 2020.  The Company utilizes equipment under non-cancelable operating leases, expiring through 2019.  The minimum commitments under operating leases at January 3, 2015 are as follows:

 

 

 

 

These leases generally provide that property taxes, insurance, and maintenance expenses are the responsibility of the Company.  Such expenses are not included in the operating lease amounts outlined in the table above or in the rent expense amounts that follow.  The total rent expense for the years ended 2012, 2013, and 2014 was approximately $6,452,  $9,254,  and $11,129 respectively.    

 

The Company has other unconditional purchase obligations relating to capital projects and advertising agreements of $15,746 and $4,752 that will be paid in the next two years, respectively

NOTE J – COMMITMENTS AND CONTINGENCIES – CONTINUED

 

 

The Company is involved in various lawsuits, claims, investigations and other legal matters from time to time that arise in the ordinary course of conducting business, including matters involving our products, intellectual property, supplier relationships, distributors, relationships with competitors, employees and other matters. The Company establishes reserves when a particular contingency is probable and estimable. The Company has not accrued for any

contingency at January 3, 2015 as the Company does not consider any contingency to be probable nor estimable. The Company faces contingencies that are reasonably possible to occur; however, they cannot currently be estimated. While complete assurance cannot be given to the outcome of these proceedings, management does not currently believe that any of these matters, individually or in the aggregate, will have a material adverse effect on our financial condition, liquidity or results of operations.

 

On August 7, 2014, a purported shareholder derivative lawsuit was filed in the Third Judicial District Court of Salt Lake County, State of Utah, against certain of the Company’s directors and officers.  The derivative complaint, which also names USANA as a nominal defendant but is asserted on USANA’s behalf, contains claims of breach of fiduciary duty, waste of corporate assets and unjust enrichment against the defendant directors and officers in connection with certain equity awards granted by the Compensation Committee of the Company’s Board of Directors in February 2014.  The Company believes the claims in the complaint are without merit and intends to vigorously defend the suit.  In the opinion of management, and based upon advice of counsel, the likelihood of an adverse outcome against the Company in this matter is remote.  As such, management believes that the ultimate outcome of this lawsuit will not have a material impact on the Company’s financial position or results of operations.

 

 

The Company sponsors an employee benefit plan under Section 401(k) of the Internal Revenue Code.  This plan covers employees who are at least 18 years of age and have met a one-month service requirement.  The Company makes a matching contribution equal to 100 percent of the first one percent of a participant’s compensation that is contributed by the participant, and 50 percent of that deferral that exceeds one percent of the participant’s compensation, not to exceed six percent of the participant’s compensation, subject to the limits of ERISA.    In addition, the Company may make a discretionary contribution based on earnings.  The Company’s matching contributions cliff vest at two years of service.  Contributions made by the Company to the plan in the United States for the years ended 2012, 2013, and 2014 were $1,024,  $1,149, and $1,324, respectively.