USANA Health Sciences, Inc. (NYSE: USNA) announced financial results for its fiscal second quarter ended June 30, 2018.
Record second quarter net sales of $301.5 million, an increase of 17.3% year-over-year
Second quarter diluted earnings per share increased 46.2% year-over-year to $1.36 per share
For the second quarter of 2018, net sales were $301.5 million, compared with $257.1 million in the prior-year period, a 17.3% increase year-over-year. Favorable currency exchange rates positively impacted net sales by $12.5 million for the quarter as compared to the prior-year.
Celavive, the Companys new skincare line, contributed approximately $7 million in incremental sales for the quarter. In markets where Celavive has launched, skin and personal care products accounted for 9.5% of overall sales in the second quarter of 2018, versus 5.7% a year ago. The Companys total number of active Customers increased 5.3% year-over-year to 597,000.
Net earnings for the second quarter increased 45.8% to $33.9 million, compared with net earnings of $23.3 million reported in the prior-year period. Earnings per diluted share increased to $1.36 per diluted share, an increase of 46.2% on a year-over-year basis.
The increase in net earnings was due primarily to higher net sales and lower relative operating expenses compared to the prior year period. Costs related to China and the Companys internal investigation into its China operations were nominal during the second quarter of 2018 as compared to approximately $1.3 million, after tax, during the prior year period.
Our operating results for the second quarter exceeded our expectations and reflect the momentum we are seeing in most of our regions. This momentum helped us generate the highest quarterly revenue and earnings per share in the Companys history,’
said Kevin Guest, Chief Executive Officer.
Although the strengthening of the U.S. dollar will be a challenge during the second half of the year, we are positioned to deliver additional sales growth as we host our International Convention in Salt Lake City, launch Celavive in China, and hold our Chinese national meeting in Macau.’
Weighted average diluted shares outstanding were 24.8 million for the second quarter of 2018, compared with diluted shares of 25.0 million in the prior-year period.
The Company ended the quarter with $256.3 million in cash and cash equivalents, with an additional $42.4 million invested in short-term securities, and with no debt. As of June 30, 2018, there was $47.1 million remaining under the current share repurchase authorization.
Net sales in the Asia Pacific region increased by 21.2% to $241.6 million for the second quarter of 2018. Within Asia Pacific, net sales:
- Increased 22.8% in Greater China;
- Increased 36.1% in North Asia; and
- Increased 12.5% in the Southeast Asia Pacific region.
Sales growth in Greater China was primarily driven by an 8.9% increase in Active Customers in Mainland China, while sales growth in North Asia resulted primarily from 20.7% Active Customer growth in South Korea. Sales growth in Southeast Asia Pacific was driven by 23.8% Active Customer growth in Malaysia. The total number of active Customers in the Asia Pacific region increased by 8.8% year-over-year.
Net sales in the Americas and Europe region for the second quarter of 2018 increased by 3.7% to $59.9 million, and active Customers in this region declined 4.8%.
Our Asia Pacific region continues to drive our growth, as we experienced double-digit sales growth in several markets within this region for the quarter,’ continued Mr. Guest. In the Americas and Europe region, net sales increased modestly on both a year-over-year and sequential-quarter basis, although the number of active Customers declined. The highlight for this region during the quarter was the opening of four new European markets on June 20th, which generated both excitement for our customers and momentum in Europe.’
China Preferred Customers
The Company has had a long-standing Preferred Customer program in China but, due to certain attributes of that program, had historically reported China Preferred Customers as Associates. The Company began reporting China Preferred Customers as Preferred Customers with its results for the fourth quarter of 2017.
Internal Investigation of China Operations
As the Company first disclosed in February 2017, it is voluntarily conducting an internal investigation of its China operations, BabyCare Ltd. The investigation focuses on compliance with the Foreign Corrupt Practices Act (FCPA’) and certain conduct and policies at BabyCare, including BabyCares expense reimbursement policies.
The Audit Committee of the Board of Directors has assumed direct responsibility for reviewing these matters and has hired experienced counsel to conduct the investigation. While the Company does not believe that the subject amounts are quantitatively material, or will materially affect its financial statements, it cannot currently predict the outcome of the investigation on its business, results of operations, or financial condition.
The Company has voluntarily contacted the Securities and Exchange Commission and the United States Department of Justice to advise both agencies that an internal investigation is underway and intends to provide additional information to both agencies as the investigation progresses. The Company cannot currently predict the duration, scope, or result of the investigation.
USANA develops and manufactures high-quality nutritional supplements, healthy foods and personal care products that are sold directly to Associates and Preferred Customers throughout the United States, Canada, Australia, New Zealand, Hong Kong, China, Japan, Taiwan, South Korea, Singapore, Mexico, Malaysia, the Philippines, the Netherlands, the United Kingdom, Thailand, France, Belgium, Colombia, Indonesia, Germany, Spain, Romania, and Italy. More information on USANA can be found at www.usana.com.
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