USANA Q4 Revenue Up 22.3% From $186 Million To $227 Million

 

USANA Health Sciences, Inc. today announced financial results for its fiscal fourth quarter ended January 3, 2015. The Company also provided net sales and earnings guidance for 2015.

Financial Performance

For the fourth quarter of 2014, net sales increased by 22.3% to $227.9 million, compared with $186.3 million in the prior-year period. The fourth quarter of 2014 was a 14-week quarter as compared to a typical 13-week quarter in the prior year period. The Company estimates that this extra week contributed approximately $16 million to net sales for the quarter. The increase in net sales was driven by 31.7% growth in the number of active Associates, largely as a result of strong growth in the Company’s Asia Pacific region. Net sales, on a comparative basis, were negatively impacted by $6.3 million due to a strengthening U.S. dollar.

Net earnings for the fourth quarter increased by 5.0% to $21.3 million, compared with $20.3 million during the prior-year period. This increase was driven by higher net sales and improved gross margins, which was partially offset by higher operating expenses. On a relative basis, Associate Incentives expense increased 170 basis points due to the incentive program that the Company offered during the fourth quarter. Earnings per share for the quarter increased 17.0% to $1.65, compared with $1.41 in the fourth quarter of the prior year.

This increase in earnings per share was attributable to higher net earnings and a lower number of diluted shares outstanding due to the Company’s share repurchases during 2014. Weighted average diluted shares outstanding were 12.9 million as of the end of the fourth quarter of 2014, compared with 14.4 million in the prior-year period. The Company estimates that the extra week of sales contributed approximately $0.12 to earnings per share for the quarter.

During the quarter, the Company repurchased approximately 172,000 shares under its authorized repurchase program for a total investment of $13.2 million. As of January 3, 2015, there was $61.2 million remaining under the current share repurchase authorization. The Company ended the fourth quarter with no debt and with $111.1 million in cash and cash equivalents.

“USANA generated exceptional results in the fourth quarter, which included double-digit sales, earnings per share and customer growth,” said Kevin Guest, USANA’s President.

“While our results did benefit from the extra week of sales during the quarter, the more significant catalyst for our performance was the incentive we introduced to our Associate sales force during the fourth quarter. Although it created pressure on our operating margin, the incentive was very successful in accelerating our sales and customer growth for the quarter. This incentive will end in February 2015, but we will offer other market-specific incentives throughout 2015 and expect to carry the momentum we are seeing in our business throughout the year.”

Regional Results

Net sales in the Asia Pacific region increased by 34.1% to $163.3 million, compared with $121.8 million for the fourth quarter of the prior year. Net sales also increased by 25.4% on a sequential quarter basis. The year-over-year increase was due to 45.1% sales growth in the Greater China region, 18.8% sales growth in the Southeast Asia Pacific region, and 16.1% sales growth in the North Asia region.

Sales growth in Greater China was driven by double-digit sales and customer growth in Mainland China, while sales growth in Southeast Asia Pacific resulted from double-digit sales and customer growth in the Philippines, Australia/New Zealand, Malaysia and Thailand. Sales growth in North Asia was driven by double-digit sales and customer growth in South Korea. The number of active Associates in the Asia Pacific region increased by 44.3% year-over-year, and increased 26.3% sequentially.

Net sales in the Americas/Europe region were essentially flat at $64.5 million, due primarily to a sales decline in the U.S., which was offset by double-digit local currency sales growth in Canada and Mexico. The number of active Associates in this region increased by 3.7% compared to the prior-year period.

“Our Asia Pacific region led the way during the quarter, where we saw double-digit sales and customer growth in most markets in the region. Our Associates throughout the region embraced the promotion we offered during the fourth quarter and utilized it to grow their sales organizations at an accelerated pace.

This was most evident in Mainland China, where we saw significant sales and customer growth, which was bolstered by the excitement generated by our National Sales Meeting in early November. We were also pleased with the results we generated in the Americas/Europe region during the quarter, which included solid customer and sales growth in Canada and Mexico,” continued Mr. Guest.

2014 Results

For the year ended January 3, 2015, net sales increased by 10.1% to $790.5 million, compared with $718.2 million in the prior year. The increase in net sales was largely driven by sales and Associate growth in the Company’s Asia Pacific region. Net sales for the full-year were negatively impacted by $14.9 million due to a strengthening U.S. dollar.

Net earnings for 2014 decreased by 3.0% to $76.6 million, compared with $79.0 million in the prior year. This decrease resulted primarily from a 130 basis point increase in Associate Incentives expense due primarily to the pricing and compensation plan changes implemented during the third quarter of 2013. Earnings per share for the year increased by 0.7% to $5.60, compared with $5.56 in the prior year. This increase in earnings per share was attributable to a lower number of diluted shares outstanding due to the Company’s share repurchases during 2014. Weighted average diluted shares outstanding were 13.7 million for fiscal 2014, compared with 14.2 million for fiscal 2013.

“2014 was another exceptional year for USANA,” concluded Mr. Guest. “Our vision as a Company continues to center on improving the overall health and nutrition of individuals and families around the world through our world-class product offering. To further this vision in 2015, we will continue to execute our overall strategy, which focuses on promoting customer loyalty, enjoyment and success with USANA. This includes advancing our personalization initiative with investments in product and technology innovation to benefit our customers.

We are also excited about our recent announcement that USANA is now a Trusted Partner and Sponsor of the Dr. Oz Show. This expansion of our marketing strategy is intended to make it easier for our Associates to introduce USANA products to potential customers. Finally, we will continue to enhance our rewarding Associate Compensation Plan by introducing short-term, market-specific incentives to drive customer growth. I am excited about our growth opportunities in the coming year and believe that the strategies we have in place will produce another record year for USANA in 2015.”

Outlook

The Company provided the following consolidated net sales and earnings per share outlook for 2015:

• Consolidated net sales between $850 million and $870 million
• Earnings per share between $6.40 and $6.70

Chief Financial Officer, Paul Jones, commented, “We are pleased with the results that USANA delivered in 2014 and are encouraged about our opportunities in 2015. As our initial outlook suggests, we are confident in the strength of our underlying business and expect 2015 to be another record year. Consistent with prior years, we anticipate that our results will accelerate during the year following the customary seasonal pressure from the Chinese New Year.

We will also make several necessary investments in Fiscal 2015 to strengthen key areas of our business. These investments will include our information technology systems and infrastructure, brand-awareness, product innovation, and new technology to complement product innovation. These investments will be reflected in both higher SG&A expense along with a significant amount of capital expenditures. We believe that they are the proper investments to support USANA’s long-term growth objectives.”