NOTE E – OTHER ASSETS

Other assets consist primarily of land use rights related to a production facility in China and a secured loan to a former supplier of the Company’s nutrition bars.  The Company extended non-revolving credit to the former supplier of nutrition bars to allow it to acquire equipment that was necessary to manufacture the USANA nutrition bars, which is secured by the equipment.  This relationship was intended to provide improved supply chain stability for USANA and create a mutually beneficial relationship between the parties.    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 total contractual unpaid principal balance, including accrued unpaid interest on the note receivable from this supplier as of December 31, 2016, and September 30, 2017 was $6,867 and $6,742, respectively.  



A loan is considered impaired when, based on current information and events; it is probable that the Company will be unable to collect the scheduled payments in accordance with the contractual terms of the loan.  Factors considered in determining impairment include payment status, collateral value and the probability of collecting payments when due.

NOTE E – OTHER ASSETS - CONTINUED

During the first half of 2017, the Company experienced challenges with the third-party supplier of the Company’s nutrition bars and subsequently determined to no longer use this supplier.  The Company has evaluated the recoverability of the note receivable from this supplier, considering financial data of the third-party supplier, and the estimated fair value of the collateralized equipment as of September 30, 2017.  Based on this analysis, the Company believes it is probable that the note receivable has been impaired.  Accordingly, an impairment of $1,622 was recorded as determined by the difference between the notes receivable balance and the estimated fair value of the collateralized equipment as a practical expedient.  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.