SALT LAKE CITY–(BUSINESS WIRE )–USANA Health Sciences, Inc. (NYSE: USNA) today announced financial results for its fiscal third quarter ended October 1, 2016.
“Despite these growing pains, during the quarter we introduced one of the greatest product innovations in USANA’s history with the launch of our Incelligence™ product platform at our International Convention in August”
Net sales for the third quarter of 2016 increased by 9.0% to $254.2 million, compared with $233.3 million in the prior-year period, but came in below the Company’s expectations due to softer-than-anticipated sales in the Greater China region. The increase in net sales is attributed to a 12.6% increase in the number of active Associates and a 5.6% increase in the number of Preferred Customers. The continued strength of the U.S. dollar negatively impacted net sales during the quarter by $5.7 million.
Net earnings for the third quarter of 2016 increased to $30.1 million, an increase of 17.5% compared to $25.6 million in the prior-year period. The increase in net earnings was due primarily to a meaningfully lower effective tax rate, as well as higher net sales, which were partially offset by higher operating expenses during the quarter. The significant decrease in the effective tax rate for the third quarter is due to the Company’s early adoption of ASU 2016-09 (Topic 718) – Improvements to Employee Share-Based Payment Accounting. As a result of USANA’s adoption of this standard, on a year-over-year basis, the Company recognized (i) modestly higher equity compensation expense, (ii) a higher diluted share count, and (iii) a meaningfully lower effective tax rate for the current-year quarter due to the recognition of excess tax benefits on the income statement pursuant to this standard (excess tax benefits were previously recognized as an adjustment to equity). For the third quarter, the Company’s adoption of this standard increased net earnings by approximately $6.5 million, or $0.50 on a diluted per share basis.
Earnings per diluted share for the third quarter increased by 25.0% to $2.40, compared with $1.92 in the prior year period. The increase in earnings per share was the result of the adoption of the previously noted accounting standard as well as a lower number of diluted shares outstanding due to the Company’s share repurchases over the last 12 months. Weighted average diluted shares outstanding were 12.5 million as of the end of the third quarter of 2016, compared with 13.3 million in the prior-year period.
The Company’s balance sheet remains strong with $134.5 million in cash and cash equivalents. As of October 1, 2016, the Company also had $35.4 million remaining under its current share repurchase authorization.
“While USANA posted another quarter of solid growth and achievements, our topline results in the Greater China region came in below our expectations and impacted our overall results,” said Dave Wentz, USANA’s Co-CEO. “Our top priorities for 2016 continue to be completing the transition to our state-of-the-art production facility in Beijing and enhancing our information technology infrastructure around the world. These improvements are essential to allow USANA to continue providing the highest level of customer service and to provide the foundation for future growth. Our focus on these objectives, however, has taken precedence over short-term initiatives to drive sales growth around the world in 2016 and also affected our momentum in China during the quarter. I am pleased to report, however, that during the quarter we received all of the necessary permits to begin production in our new China facility and we now anticipate that the facility will be fully operational by the end of the year. With this facility coming online, we are making preparations to begin offering growth initiatives in China in early 2017, but continue to believe that we will be in a better position to fully drive growth in China and our other markets when the improvements to our IT infrastructure are complete.”
“Despite these growing pains, during the quarter we introduced one of the greatest product innovations in USANA’s history with the launch of our Incelligence™ product platform at our International Convention in August,” continued Mr. Wentz. “Incelligence™ is USANA’s proprietary, patent-pending technology that is designed to support your body’s natural ability to nourish, protect and renew itself. As part of our Incelligence™ platform, we also launched our new flagship multivitamin, CellSentials™, at convention. These launches, and our convention in general, were a huge success. We set new records for sales and attendance at our convention and our 2017 event has already sold out. Incelligence™ is being launched in our various markets around the world and is a key part of our growth strategy.”
Net sales in the Asia Pacific region increased 13.2% to $190.4 million year-over-year, despite a negative $4.5 million impact from a stronger U.S. dollar. Within Asia Pacific, net sales increased by 10.8% in Greater China and 16.2% in constant currency. Net sales growth in Greater China resulted from a 22.2% increase in the number of active Associates in mainland China.
Net sales increased by 18.3% in the Southeast Asia Pacific region, compared to the prior year period. This sales increase was driven by local-currency sales growth in every market in the region, with double-digit sales growth in Australia, New Zealand, Malaysia, the Philippines, and Thailand. The inclusion of our newest market, Indonesia, also helped drive growth in this region.
Net sales increased by 16.5% in the North Asia region, compared to the prior year period. This sales increase was largely due to continued sales and customer growth in South Korea.
Net sales in the Americas/Europe region decreased by 2.0% to $63.8 million, compared to the prior year period. This decrease resulted from an 8.0% decline in net sales in the U.S., which was partially offset by local currency sales growth in each of Mexico, Canada and Europe.
The Company is revising its consolidated net sales outlook and earnings per share outlook for 2016 as follows:
“As we begin the final quarter of 2016, we are revising our outlook in light of our anticipated growth rate for the remainder of the year,” commented Paul Jones, Chief Financial Officer. “Our team remains confident in the strength of our underlying business around the world, and our confidence is reflected in the Board’s decision to split the stock. Our balance sheet remains strong and we remain positioned to return value to shareholders. We look forward to delivering another record year for USANA.”
Common Stock Split
To illustrate the Board of Directors’ confidence in the long term growth potential of USANA and the strategy being executed by management, the Board has approved a two-for-one stock split of the Company’s common shares. The split is also intended to make the stock more accessible to retail investors. Subject to regulatory approval, shareholders will receive one additional common share USNA for each common share held by way of a stock dividend which will be distributed to the shareholders of record as of the close of business on November 14, 2016, with a payment date of November 22, 2016.
The Company has posted the “Management Commentary, Results and Outlook” document on the Company’s website (www.usanahealthsciences.com ) under the “Investor Relations” section of the site. USANA will hold a conference call and webcast to discuss today’s announcement with investors on Wednesday, October 26, 2016, at 11:00 a.m. Eastern Time. Investors may listen to the call by accessing USANA’s website at http://www.usanahealthsciences.com . The call will consist of brief opening remarks by the Company’s management team, before moving directly into questions and answers.
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“From numerous great nominations, the Board of Directors of the World Trade Association of Utah is thrilled to announce doTERRA as the International Company of the Year,” said David Utrilla, president of the World Trade Association of Utah. “Among the many attributes we found in doTERRA are its tremendous international growth and its dedication to helping communities throughout the world. This year alone, doTERRA hosted the largest convention in Utah history with 30,000 attendees from more than 38 countries.”
The Utah Global Forum is an annual event where businesses are educated on how to successfully export in the current global market, and become successful in new and developing markets.
“We sincerely appreciate this recognition from the World Trade Association,” said David Stirling, Founding Executive, CEO & president. “We are particularly pleased to receive this award at the Utah Global Forum because while our hearts and headquarters are here in Utah, we truly are a global company. We source over 100 essential oils from more than 40 countries, and we have loyal customers in over 100 countries. The International Company of the Year award not only speaks to doTERRA’s tremendous international business growth, but also to the extensive work across the world through the doTERRA Healing Hands Foundation™ and doTERRA Co-Impact Sourcing™ initiative.”
Stirling continued, “Just this year, the Healing Hands Foundation has improved the lives of tens of thousands of people through significant donations to organizations that offer hope around the world. doTERRA’s Co-Impact Sourcing has advanced the economic welfare of numerous foreign countries by providing access to global markets and favorable compensation to local growers and distillers. We are honored by this award and will continue our work to make a difference as we continue to grow.”
International Company of the Year adds to the list of awards that doTERRA has recently received. doTERRA was recognized as one of “America’s Best Employers” by Forbes magazine being listed in the top ten of the top 250 midsize employers nationally. According to Forbes, doTERRA is the No. 1 ranked employer in the packaged goods category, No. 1 enterprise in the state of Utah, No. 1 employer in the mountain states area, and No. 2 company in the entire Western United States. doTERRA also has been recognized as “Business of the Year” by Utah Valley BusinessQ, and as the number one “Economic Engine” company by Utah Valley 360’s UV50 Awards.
In just a few short months, she’s climbed from Director 1 to Elite 1 and it’s her leadership that’s helped to accelerate an up-and-coming Canadian market.
“Becoming Canada’s first Elite Social Marketer means everything to me. From day one, I kept it in front of me every day. It was my laser focus for the longest time.
“I sat with my husband on New Year’s Eve 2015 and I told him my goal for 2016 was to be Canada’s first Elite Social Marketer. The fact that it happened is so crazy and amazing but it’s very satisfying. It’s become a total “pinch me” moment in my career.”
Speaking to Jackie’s newest achievement, Modere General Manager Justin Serra , said
“Jackie has an ability to approach and speak with friends, family, and complete strangers about Modere. She’s quickly fallen in love with the culture and the products and it’s contagious–she’s cultivated a business where people are naturally drawn.”
Jackie has been in the network marketing industry for years, but according to her has never seen this type of success and it couldn’t have come at a better time.
“When I started, my husband’s health had caused him to stop working. We didn’t have a penny to our names. We were looking to others for help. Modere fell into my lap, but we couldn’t afford the kit. My husband was furious with me, but I jumped in. It was a literal leap of faith. I told him I would pay the money back within a week.
“I not only repaid the money, but I made more than I borrowed. Since then, we’ve never looked back!”
Her husband was her inspiration and building such a successful team has helped the inspiration grow. Jackie says reaching Elite 1 wasn’t just her doing. Her team, the mentorship she’s received from her upline and the Modere staff have all been the different for her this time around.
“We have such a golden opportunity in this pre-launch stage here in Canada. Our products are awesome and the business model and compensation plan are unlike any other! When you put all these factors together, it’s a recipe for success.”
“Jackie has been a powerful advocate for all of Canada as we work to accelerate the growth in the market,” said David Goodman, Director of Business Development. “She is an example of great leadership through her hard work, her example, and her limitless energy.”
Even though she’s reached Elite 1, Jackie’s goals haven’t changed.
“My goal still remains to grow this Canadian team and cultivate thousands of Elite Social Marketers across Canada. We’re here to serve others (and each other) with authentic passion and heart. Things are moving forward, and we are just getting started!”
Modere offers a category-leading portfolio of “Live Clean” lifestyle essentials beauty and personal care, health and wellness, and household products that are equal parts safe, high-performing, and beautifully designed.
At Modere, we create more than just products; we create meaningful experiences. We believe modern health involves “Live Clean”: pure nutrition, a clean environment, and safe ingredients across all products: consumable, topical and household.
Modere brings a holistic approach to well-being and its products reflect a commitment to excellence and innovation, with tested formulas proven around the globe for more than 25 years. Modere is headquartered in Springville, Utah and its Marketing Center of Excellence and Public Relations is located in Newport Beach, California. For more information please visit www.modere.com
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