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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
______________________
FORM 10-Q
(Mark One)
x
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended October 1, 2022
or
o
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ___________ to
____________
Commission file number: 001-35024
______________________
USANA HEALTH SCIENCES, INC.
(Exact name of registrant as specified in its charter)
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Utah |
87-0500306 |
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(State or other jurisdiction |
(I.R.S. Employer |
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of incorporation or organization) |
Identification No.) |
______________________
3838 West Parkway Blvd., Salt Lake City, Utah 84120
(Address of principal executive offices) (Zip Code)
______________________
(801) 954-7100
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the
Act:
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Title of each class |
Trading Symbol(s) |
Name of each exchange on which registered |
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Common Stock |
USNA |
New York Stock Exchange
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Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing requirements
for the past 90 days. Yes
x
No
o
Indicate by check mark whether the registrant has submitted
electronically every Interactive Data File required to be submitted
pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter)
during the preceding 12 months (or for such shorter period that the
registrant was required to submit such files). Yes
x
No
o
Indicate by check mark whether the registrant is a large
accelerated filer, an accelerated filer, a non-accelerated filer, a
smaller reporting company, or an emerging growth company. See the
definitions of “large accelerated filer,” “accelerated filer,”
“smaller reporting company,” and “emerging growth company” in Rule
12b-2 of the Exchange Act.
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Large accelerated filer |
x |
Accelerated filer |
o |
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Non-accelerated filer |
o |
Smaller reporting company |
o |
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Emerging growth company |
o |
If an emerging growth company, indicate by check mark if the
registrant has elected not to use the extended transition period
for complying with any new or revised financial accounting
standards provided pursuant to Section 13(a) of the Exchange
Act.
o
Indicate by check mark whether the registrant is a shell company
(as defined in Rule 12b-2 of the Exchange Act). Yes
o
No
x
As of
November 4, 2022,
there
were 19,206,289 outstanding shares of the registrant’s common
stock, $0.001 par value.
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Auditor Name: KPMG LLP
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Auditor Location: Salt Lake City, Utah
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Auditor Firm ID: 185
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USANA HEALTH SCIENCES, INC.
FORM 10-Q
For the Quarterly Period Ended October 1, 2022
TABLE OF CONTENTS
Cautionary Note Regarding Forward-Looking Statements and Certain
Risks
This report, including “Management’s Discussion and Analysis of
Financial Condition and Results of Operations” in Part I, Item 2,
contains “forward-looking statements” within the meaning of the
safe harbor provisions of the U.S. Private Securities Litigation
Reform Act of 1995, Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities Exchange Act of 1934, as
amended (the “Exchange Act”). We may also make forward-looking
statements in other reports filed with the Securities and Exchange
Commission (“SEC”), in materials delivered to shareholders and in
press releases. In addition, our representatives may from time to
time make oral forward-looking statements. All statements other
than statements of historical fact are “forward-looking statements”
for purposes of federal and state securities laws, including any
projections of earnings, revenue or other financial items; any
statements of the plans, strategies and objectives of management
for future operations; any statements concerning proposed new
products; any statements regarding future economic conditions or
performance; any statements of belief; and any statements of
assumptions underlying any of the foregoing. Forward-looking
statements can be identified by words such as: “anticipate,”
“intend,” “plan,” “seek,” “believe,” “project,” “estimate,”
“expect,” “strategy,” “future,” “likely,” “may,” “should,” “will”
and similar references to future periods. Forward-looking
statements are neither historical facts nor assurances of future
performance. Instead, they are based only on our current beliefs,
expectations and assumptions regarding the future of our business,
plans and strategies, projections, anticipated events and trends,
the economy and other future conditions. Because forward-looking
statements relate to the future, they are subject to inherent
uncertainties, risks and changes in circumstances that are
difficult to predict and many of which are outside of our control.
Our actual results and financial condition may differ materially
from those indicated in the forward-looking statements. Therefore,
you should not rely unduly on forward-looking
statements.
Although we believe that the expectations reflected in our
forward-looking statements are reasonable, actual results could
differ materially from those we project or assume in our
forward-looking statements. Our future financial condition and
results of operations, as well as any forward-looking statements,
are subject to change and to inherent risks and uncertainties, such
as those disclosed or incorporated by reference in our filings with
the SEC. Any forward-looking statement made by us in this report is
based only on information currently available to us and speaks only
as of the date hereof. We undertake no obligation to publicly
update or revise any forward-looking statement, whether written or
oral, that may be made from time to time, whether as a result of
new information, future developments, the occurrence of
unanticipated events or otherwise. Important factors that could
cause our actual results, performance and achievements to differ
materially from estimates or projections contained in our
forward-looking statements in this report include, among others,
the following:
•Our
dependence upon the direct selling business model to distribute our
products and the activities of our independent
Associates;
•Extensive
regulation of our business model and uncertainties relating to the
interpretation and enforcement of applicable laws and regulations
governing direct selling and anti-pyramiding, particularly in the
United States and China;
•The
operation and expansion of our business in China through our
subsidiary, BabyCare Holdings, Ltd. (“BabyCare”), including risks
related to (i) operating in China in general, (ii) engaging in
direct selling in China, (iii) BabyCare’s business model in China,
and (iv) changes in the Chinese economy, marketplace or consumer
environment;
•Unanticipated
effects of changes to our Compensation Plan;
•Challenges
associated with our planned expansion into new international
markets, delays in commencement of sales or product offerings in
such markets, delays in compliance with local marketing or other
regulatory requirements, or changes in target markets;
•Uncertainty
related to the magnitude, scope and duration of the impact of the
novel strain coronavirus COVID-19 pandemic (“COVID-19” or the
“COVID-19 pandemic”) to our business, operations and financial
results, including, for example, additional regulatory measures or
voluntary actions that may be put in place to limit the spread of
COVID-19 in the markets where we operate, such as restrictions on
business operations; shelter at home requirements; individual,
group or city-wide lock-downs; or social distancing
requirements;
•Political
events, natural disasters, pandemics, epidemics or other health
crises including, and in addition to, COVID-19 or other events that
may negatively affect economic conditions, consumer spending or
consumer behavior;
•Changes
to trade policies and tariffs, the impact of customs, duties,
taxation, and transfer pricing regulations, as well as regulations
governing distinctions between and our responsibilities to
employees and independent contractors;
•Geo-political
tensions or conflicts, including deterioration in foreign
relations, as well as disputes or tensions amongst countries around
the world in general or between the United States and other
countries, including China;
•Volatile
fluctuation in the value of foreign currencies against the U.S.
dollar;
•Noncompliance
by us or our Associates with any data privacy laws or any security
breach by us or a third party involving the misappropriation, loss,
destruction or other unauthorized use or disclosure of confidential
information;
•Shortages
of raw materials, disruptions in the business of our contract
manufacturers, significant price increases of key raw materials,
significant price increases of freight and transportation,
meaningful delays in freight and shipping, and other disruptions to
our supply chain; and
•Our
continued compliance with debt covenants in our Credit
Facility.
Important information as to these factors can be found in this
document, including, among other sections, in “Management’s
Discussion and Analysis of Financial Condition and Results of
Operations” under the headings of “Overview,” and “Financial
Condition and Liquidity.” Discussion of these factors is
incorporated by reference from Part I, Item 1A, “Risk Factors,” of
this document, and should be considered an integral part of Part I,
Item 2, “Management’s Discussion and Analysis of Financial
Condition and Results of Operations.” For additional information
concerning factors that may cause actual results to vary materially
from those stated in the forward-looking statements, see our
reports on Form 10-K, 10-Q, and 8-K filed with the SEC from time to
time.
Unless otherwise indicated or otherwise required by the context,
the terms “we,” “our,” “it,” “its,” “Company,” and “USANA” refer to
USANA Health Sciences, Inc. and its wholly-owned subsidiaries.
USANA Health Sciences, Inc. and its subsidiaries’ names,
abbreviations thereof, logos, and product and service designators
are all either the registered or unregistered trademarks or
tradenames of USANA Health Sciences, Inc. and its subsidiaries.
Names, abbreviations of names, logos, and products and service
designators of other companies are either the registered or
unregistered trademarks or tradenames of their respective owners.
References to internet websites in this Form 10-Q are provided for
convenience only. Information available through these websites is
not incorporated by reference into this Form 10-Q.
PART I. FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
USANA HEALTH SCIENCES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except par value)
(unaudited)
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As of
October 1,
2022 |
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As of
January 1,
2022 |
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ASSETS |
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Current assets |
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Cash and cash equivalents |
$ |
246,879 |
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$ |
239,832 |
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Inventories |
67,278 |
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98,318 |
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Prepaid expenses and other current assets |
26,997 |
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26,967 |
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Total current assets |
341,154 |
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365,117 |
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Property and equipment, net |
95,228 |
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101,780 |
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Goodwill |
17,104 |
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17,668 |
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Intangible assets, net |
32,158 |
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30,442 |
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Deferred tax assets |
13,019 |
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4,839 |
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Other assets |
57,400 |
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57,894 |
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$ |
556,063 |
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$ |
577,740 |
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LIABILITIES AND STOCKHOLDERS' EQUITY |
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Current liabilities |
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Accounts payable |
$ |
10,362 |
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$ |
13,508 |
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Other current liabilities |
115,484 |
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147,282 |
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Total current liabilities |
125,846 |
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160,790 |
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Deferred tax liabilities |
4,801 |
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7,497 |
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Other long-term liabilities |
14,317 |
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14,329 |
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Stockholders' equity |
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Common stock, $0.001 par value; Authorized - 50,000 shares, issued
and outstanding 19,198 as of October 1, 2022 and 19,393 as of
January 1, 2022
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19 |
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19 |
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Additional paid-in capital |
52,238 |
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50,010 |
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Retained earnings |
378,841 |
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344,637 |
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Accumulated other comprehensive income (loss) |
(19,999) |
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|
458 |
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Total stockholders' equity |
411,099 |
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|
395,124 |
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$ |
556,063 |
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$ |
577,740 |
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The accompanying notes are an integral part of these
statements.
USANA HEALTH SCIENCES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE
INCOME
(in thousands, except per share data)
(unaudited)
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Quarter Ended |
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Nine Months Ended |
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October 1,
2022 |
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October 2,
2021 |
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October 1,
2022 |
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October 2,
2021 |
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Net sales |
$ |
233,300 |
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$ |
274,352 |
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$ |
770,641 |
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$ |
919,165 |
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Cost of sales |
46,560 |
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50,715 |
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|
147,460 |
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165,380 |
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Gross profit |
186,740 |
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|
223,637 |
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623,181 |
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753,785 |
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Operating expenses: |
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Associate incentives |
98,090 |
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116,222 |
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336,914 |
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404,580 |
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Selling, general and administrative |
66,020 |
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66,645 |
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201,204 |
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210,518 |
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Total operating expenses |
164,110 |
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|
182,867 |
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|
538,118 |
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|
615,098 |
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Earnings from operations |
22,630 |
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|
40,770 |
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|
85,063 |
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|
138,687 |
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Other income (expense): |
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Interest income |
918 |
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|
487 |
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|
2,330 |
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|
1,926 |
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Interest expense |
(32) |
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|
(18) |
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|
(160) |
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|
(39) |
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Other, net |
(292) |
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|
(889) |
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|
(1,414) |
|
|
(1,578) |
|
|
Other income (expense), net |
594 |
|
|
(420) |
|
|
756 |
|
|
309 |
|
|
Earnings before income taxes |
23,224 |
|
|
40,350 |
|
|
85,819 |
|
|
138,996 |
|
|
Income taxes |
8,295 |
|
|
13,020 |
|
|
29,264 |
|
|
42,811 |
|
|
Net earnings |
$ |
14,929 |
|
|
$ |
27,330 |
|
|
$ |
56,555 |
|
|
$ |
96,185 |
|
|
|
|
|
|
|
|
|
|
|
Earnings per common share |
|
|
|
|
|
|
|
|
Basic |
$ |
0.78 |
|
|
$ |
1.37 |
|
|
$ |
2.94 |
|
|
$ |
4.72 |
|
|
Diluted |
$ |
0.78 |
|
|
$ |
1.36 |
|
|
$ |
2.93 |
|
|
$ |
4.68 |
|
|
|
|
|
|
|
|
|
|
|
Weighted average common shares outstanding |
|
|
|
|
|
|
|
|
Basic |
19,221 |
|
19,961 |
|
19,263 |
|
20,367 |
|
Diluted |
19,252 |
|
20,156 |
|
19,325 |
|
20,566 |
|
|
|
|
|
|
|
|
|
|
Comprehensive income: |
|
|
|
|
|
|
|
|
Net earnings |
$ |
14,929 |
|
|
$ |
27,330 |
|
|
$ |
56,555 |
|
|
$ |
96,185 |
|
|
Other comprehensive income (loss), net of tax: |
|
|
|
|
|
|
|
|
Foreign currency translation adjustment |
(11,677) |
|
|
(776) |
|
|
(24,040) |
|
|
(448) |
|
|
Tax benefit (expense) related to foreign currency translation
adjustment |
1,134 |
|
|
259 |
|
|
3,583 |
|
|
2,600 |
|
|
Other comprehensive income (loss), net of tax |
(10,543) |
|
|
(517) |
|
|
(20,457) |
|
|
2,152 |
|
|
Comprehensive income |
$ |
4,386 |
|
|
$ |
26,813 |
|
|
$ |
36,098 |
|
|
$ |
98,337 |
|
The accompanying notes are an integral part of these
statements.
USANA HEALTH SCIENCES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’
EQUITY
(in thousands)
(unaudited)
For nine months ended October 2, 2021
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common Stock |
|
Additional
Paid-in
Capital |
|
Retained
Earnings |
|
Accumulated
Other
Comprehensive
Income (Loss) |
|
Total |
|
Shares |
|
Value |
|
|
|
|
|
Balance at January 2, 2021 |
21,038 |
|
$ |
21 |
|
|
$ |
62,460 |
|
|
$ |
382,794 |
|
|
$ |
(3,625) |
|
|
$ |
441,650 |
|
|
Net earnings |
|
|
|
|
|
|
96,185 |
|
|
|
|
96,185 |
|
|
Other comprehensive income (loss), net of tax |
|
|
|
|
|
|
|
|
2,152 |
|
|
2,152 |
|
|
Equity-based compensation expense |
|
|
|
|
11,039 |
|
|
|
|
|
|
11,039 |
|
|
Common stock repurchased and retired |
(1,548) |
|
(1) |
|
|
(19,512) |
|
|
(129,393) |
|
|
|
|
(148,906) |
|
|
Common stock issued under equity award plans |
156 |
|
— |
|
|
|
|
|
|
|
|
— |
|
|
Tax withholding for net-share settled equity awards |
|
|
|
|
(3,041) |
|
|
|
|
|
|
(3,041) |
|
|
Balance at October 2, 2021 |
19,646 |
|
$ |
20 |
|
|
$ |
50,946 |
|
|
$ |
349,586 |
|
|
$ |
(1,473) |
|
|
$ |
399,079 |
|
For nine months ended October 1, 2022
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common Stock |
|
Additional
Paid-in
Capital |
|
Retained
Earnings |
|
Accumulated
Other
Comprehensive
Income (Loss) |
|
Total |
|
Shares |
|
Value |
|
|
|
|
|
Balance at January 1, 2022 |
19,393 |
|
$ |
19 |
|
|
$ |
50,010 |
|
|
$ |
344,637 |
|
|
$ |
458 |
|
|
$ |
395,124 |
|
|
Net earnings |
|
|
|
|
|
|
56,555 |
|
|
|
|
56,555 |
|
|
Other comprehensive income (loss), net of tax |
|
|
|
|
|
|
|
|
(20,457) |
|
|
(20,457) |
|
|
Equity-based compensation expense |
|
|
|
|
9,815 |
|
|
|
|
|
|
9,815 |
|
|
Common stock repurchased and retired |
(288) |
|
— |
|
|
(3,031) |
|
|
(22,351) |
|
|
|
|
(25,382) |
|
|
Common stock issued under equity award plans |
93 |
|
— |
|
|
|
|
|
|
|
|
— |
|
|
Tax withholding for net-share settled equity awards |
|
|
|
|
(4,556) |
|
|
|
|
|
|
(4,556) |
|
|
Balance at October 1, 2022 |
19,198 |
|
$ |
19 |
|
|
$ |
52,238 |
|
|
$ |
378,841 |
|
|
$ |
(19,999) |
|
|
$ |
411,099 |
|
The accompanying notes are an integral part of these
statements.
USANA HEALTH SCIENCES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’
EQUITY
(in thousands)
(unaudited)
For the three months ended October 2, 2021
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common Stock |
|
Additional
Paid-in
Capital |
|
Retained
Earnings |
|
Accumulated
Other
Comprehensive
Income (Loss) |
|
Total |
|
Shares |
|
Value |
|
|
|
|
|
Balance at July 3, 2021 |
20,134 |
|
$ |
20 |
|
|
$ |
53,909 |
|
|
$ |
365,650 |
|
|
$ |
(956) |
|
|
$ |
418,623 |
|
|
Net earnings |
|
|
|
|
|
|
27,330 |
|
|
|
|
27,330 |
|
|
Other comprehensive income (loss), net of tax |
|
|
|
|
|
|
|
|
(517) |
|
|
(517) |
|
|
Equity-based compensation expense |
|
|
|
|
3,454 |
|
|
|
|
|
|
3,454 |
|
|
Common stock repurchased and retired |
(523) |
|
— |
|
|
(6,357) |
|
|
(43,394) |
|
|
|
|
(49,751) |
|
|
Common stock issued under equity award plans |
35 |
|
— |
|
|
|
|
|
|
|
|
— |
|
|
Tax withholding for net-share settled equity awards |
|
|
|
|
(60) |
|
|
|
|
|
|
(60) |
|
|
Balance at October 2, 2021 |
19,646 |
|
$ |
20 |
|
|
$ |
50,946 |
|
|
$ |
349,586 |
|
|
$ |
(1,473) |
|
|
$ |
399,079 |
|
For the three months ended October 1, 2022
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common Stock |
|
Additional
Paid-in
Capital |
|
Retained
Earnings |
|
Accumulated
Other
Comprehensive
Income (Loss) |
|
Total |
|
Shares |
|
Value |
|
|
|
|
|
Balance at July 2, 2022 |
19,196 |
|
$ |
19 |
|
|
$ |
49,206 |
|
|
$ |
363,912 |
|
|
$ |
(9,456) |
|
|
$ |
403,681 |
|
|
Net earnings |
|
|
|
|
|
|
14,929 |
|
|
|
|
14,929 |
|
|
Other comprehensive income (loss), net of tax |
|
|
|
|
|
|
|
|
(10,543) |
|
|
(10,543) |
|
|
Equity-based compensation expense |
|
|
|
|
3,076 |
|
|
|
|
|
|
3,076 |
|
|
Common stock issued under equity award plans |
2 |
|
— |
|
|
|
|
|
|
|
|
— |
|
|
Tax withholding for net-share settled equity awards |
|
|
|
|
(44) |
|
|
|
|
|
|
(44) |
|
|
Balance at October 1, 2022 |
19,198 |
|
$ |
19 |
|
|
$ |
52,238 |
|
|
$ |
378,841 |
|
|
$ |
(19,999) |
|
|
$ |
411,099 |
|
The accompanying notes are an integral part of these
statements.
USANA HEALTH SCIENCES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended |
|
October 1,
2022 |
|
October 2,
2021 |
|
Cash flows from operating activities |
|
|
|
|
Net earnings |
$ |
56,555 |
|
|
$ |
96,185 |
|
|
Adjustments to reconcile net earnings to net cash provided by (used
in) operating activities |
|
|
|
|
Depreciation and amortization |
10,101 |
|
|
9,754 |
|
|
Right-of-use asset amortization |
6,057 |
|
|
6,778 |
|
|
(Gain) loss on sale of property and equipment |
138 |
|
|
45 |
|
|
Equity-based compensation expense |
9,815 |
|
|
11,039 |
|
|
Deferred income taxes |
(8,314) |
|
|
(2,603) |
|
|
Changes in operating assets and liabilities: |
|
|
|
|
Inventories |
14,241 |
|
|
(8,608) |
|
|
Prepaid expenses and other assets |
1,160 |
|
|
1,650 |
|
|
Accounts payable |
(2,742) |
|
|
(4,223) |
|
|
Other liabilities |
(23,572) |
|
|
(13,712) |
|
|
Net cash provided by (used in) operating activities |
63,439 |
|
|
96,305 |
|
|
Cash flows from investing activities |
|
|
|
|
Receipts on notes receivable |
— |
|
|
116 |
|
|
Proceeds from the settlement of net investment hedges |
4,555 |
|
|
— |
|
|
Payments for net investment hedge |
— |
|
|
(1,555) |
|
|
Payments to acquire assets |
(6,532) |
|
|
— |
|
|
Proceeds from sale of property and equipment |
4 |
|
|
15 |
|
|
Purchases of property and equipment |
(7,115) |
|
|
(9,610) |
|
|
Net cash provided by (used in) investing activities |
(9,088) |
|
|
(11,034) |
|
|
Cash flows from financing activities |
|
|
|
|
Repurchase of common stock |
(25,382) |
|
|
(145,926) |
|
|
Borrowings on line of credit |
11,000 |
|
|
— |
|
|
Payments on line of credit |
(11,000) |
|
|
— |
|
|
Payments related to tax withholding for net-share settled equity
awards |
(4,556) |
|
|
(3,041) |
|
|
Net cash provided by (used in) financing activities |
(29,938) |
|
|
(148,967) |
|
|
Effect of exchange rate changes on cash, cash equivalents, and
restricted cash |
(17,702) |
|
|
(351) |
|
|
Net increase (decrease) in cash, cash equivalents, and restricted
cash |
6,711 |
|
|
(64,047) |
|
|
Cash, cash equivalents, and restricted cash at beginning of
period |
243,653 |
|
|
315,937 |
|
|
Cash, cash equivalents, and restricted cash at end of
period |
$ |
250,364 |
|
|
$ |
251,890 |
|
|
Reconciliation of cash, cash equivalents, and restricted cash to
the consolidated balance sheets |
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
$ |
246,879 |
|
|
$ |
248,695 |
|
|
Restricted cash included in prepaid expenses and other current
assets |
— |
|
|
93 |
|
|
Restricted cash included in other assets |
3,485 |
|
|
3,102 |
|
|
Total cash, cash equivalents, and restricted cash |
$ |
250,364 |
|
|
$ |
251,890 |
|
|
Supplemental disclosures of cash flow information |
|
|
|
|
Cash paid during the period for: |
|
|
|
|
Interest |
$ |
47 |
|
|
$ |
8 |
|
|
Income taxes |
39,204 |
|
|
49,065 |
|
|
Cash received during the period for: |
|
|
|
|
Income tax refund |
96 |
|
|
138 |
|
|
Non-cash investing and financing activities: |
|
|
|
|
Right-of-use assets obtained in exchange for lease
obligations |
5,108 |
|
|
1,948 |
|
|
Accrued purchases of property and equipment |
204 |
|
|
245 |
|
|
Contingent consideration given to acquire assets |
886 |
|
|
— |
|
|
Unsettled trades for repurchase of common stock |
— |
|
|
2,980 |
|
The accompanying notes are an integral part of these
statements.
USANA HEALTH SCIENCES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except per share data)
(unaudited)
NOTE A – ORGANIZATION, CONSOLIDATION, AND BASIS OF
PRESENTATION
The COVID-19 pandemic has negatively impacted economies,
businesses, sales practices, supply chains, and consumer behavior
around the world. The ongoing COVID-19 pandemic has created an
unpredictable operating environment for us in many of our markets
around the world and caused meaningful disruptions in both sales
and operations for the three and nine months ended October 1,
2022, and for fiscal 2021. At this time, the Company is unable to
predict the impact that COVID-19 will have on its business,
financial position, and operating results in future periods due to
numerous uncertainties and is closely monitoring the impact of the
pandemic on all aspects of its business. Additionally, we have been
experiencing inflationary pressures across several areas of our
business which has created a challenging operating
environment.
USANA Health Sciences, Inc. develops and manufactures high quality,
science-based nutritional and personal care products that are sold
internationally through a direct selling channel. The Condensed
Consolidated Financial Statements (the “Financial Statements”)
include the accounts and operations of the Company, which are
grouped and presented in two geographic regions: (1) Asia Pacific,
and (2) Americas and Europe. Asia Pacific is further divided into
three sub-regions: (i) Greater China, (ii) Southeast Asia Pacific,
and (iii) North Asia.
(1)Asia
Pacific -
(i)Greater
China - Hong Kong, Taiwan, and China. The Company’s business in
China is conducted by BabyCare Holdings, Ltd., the Company’s
wholly-owned subsidiary.
(ii)Southeast
Asia Pacific – Australia, New Zealand, Singapore, Malaysia, the
Philippines, Thailand, and Indonesia.
(iii)North
Asia – Japan and South Korea.
(2)Americas
and Europe – United States, Canada, Mexico, Colombia, the United
Kingdom, France, Germany, Spain, Italy, Romania, Belgium, and the
Netherlands.
The condensed consolidated balance sheet as of January 1,
2022, derived from audited consolidated financial statements, and
the unaudited interim condensed consolidated financial information
of the Company have been prepared in accordance with the
instructions to Form 10-Q and Rule 10-01 of Regulation S-X
promulgated by the SEC. Accordingly, certain information and
disclosures that are normally included in financial statements
prepared in accordance with accounting principles generally
accepted in the United States of America (“U.S. GAAP”) have been
condensed or omitted pursuant to such rules and regulations. The
preparation of condensed consolidated financial statements in
conformity with U.S. GAAP requires management to make estimates and
assumptions that affect the reported amounts of assets and
liabilities and the disclosure of contingent assets and liabilities
at the date of the condensed consolidated financial statements and
the reported amounts of revenues and expenses during the reporting
period. Actual results could differ from these estimates. In the
opinion of the Company’s management, the accompanying interim
condensed consolidated financial information contains all
adjustments, consisting only of normal recurring adjustments that
are necessary to state fairly the Company’s financial position as
of October 1, 2022, and results of operations and cash flows
for the three and nine months ended October 1, 2022 and
October 2, 2021.
The interim financial statements should be read in conjunction with
the audited consolidated financial statements and notes thereto
that are included in the Company’s Annual Report on Form 10-K for
the year ended January 1, 2022. The results of operations for
the three and nine months ended October 1, 2022, are not
necessarily indicative of the results that may be expected for the
fiscal year ending December 31, 2022.
Recent Accounting Pronouncements
Issued Accounting Pronouncements Not Yet Adopted
In October 2021, the Financial Accounting Standards Board ("FASB")
issued ASU No. 2021-08, Business Combinations (Topic 805):
Accounting for Contract Assets and Contract Liabilities from
Contracts with Customers.
ASU
USANA HEALTH SCIENCES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except per share data)
(unaudited)
2021-08 requires an acquirer to recognize and measure contract
assets and contract liabilities (deferred revenue) acquired in a
business combination in accordance with Revenue from Contracts with
Customers (Topic 606). Under this approach, the acquirer applies
the revenue model as if it had originated the contracts. This is a
departure from the current requirement to measure contract assets
and contract liabilities at fair value at the acquisition date. ASU
2021-08 is effective for annual periods beginning after December
15, 2022 and interim periods within those annual periods. ASU
2021-08 should be applied prospectively to business combinations
occurring on or after the date of adoption. Evaluation of this new
standard is dependent on multiple circumstances including the
timing and complexity of completed business combinations. As a
result, the Company intends to adopt the provisions of ASU 2021-08
in the first quarter of 2023.
No other new accounting pronouncement issued or effective during
the three and nine months ended October 1, 2022, had, or is
expected to have, a material impact on the Company's condensed
consolidated financial statements.
NOTE B – BUSINESS COMBINATIONS
During the second quarter, the Company acquired assets in business
combinations for an aggregate purchase consideration of $6,532 in
cash and $886 in contingent consideration. The preliminary purchase
price allocations were $964 to tangible assets, $6,065 to
intangible assets, and $389 to goodwill.
The primary reasons for the business combinations are to augment
and expand the Company's core competencies.
The amount of revenue and earnings related to the business
combinations since the acquisition date is immaterial.
Subsequent to the acquisition date, the Company made certain
measurement period adjustments to the preliminary purchase price
allocation, which resulted in an increase to goodwill of $252. The
increase was primarily due to a $105 decrease of certain tangible
assets acquired and an increase to assumed liabilities of
$147.
The contingent consideration liability is based on the achievement
of certain milestones over a three-year period. Under the terms of
the purchase agreement, the contingent consideration consists of
three earn-out periods capped at $500 per earn-out period. The
maximum earn-out is $1,500 per the asset purchase agreement. As of
the acquisition date, the contingent consideration had a fair value
of $886. The estimated fair value of the contingent consideration
liability as of the date of acquisition was determined using an
option pricing method based upon available information and certain
assumptions known and contains key inputs that are unobservable in
the market, which represents a Level 3 measurement within the fair
value hierarchy. Contingent consideration is included in Fair Value
Measures in Note C.
Pro forma results of operations have not been presented because the
effects of the acquisitions were not material to the Company’s
condensed consolidated financial statements.
NOTE C – FAIR VALUE MEASURES
The Company measures at fair value certain of its financial and
non-financial assets and liabilities by using a fair value
hierarchy that prioritizes the inputs to valuation techniques used
to measure fair value. Fair value is the price that would be
received to sell an asset or paid to transfer a liability in an
orderly transaction between market participants at the measurement
date, essentially an exit price, based on the highest and best use
of the asset or liability. The levels of the fair value hierarchy
are:
•Level
1 inputs are quoted market prices in active markets for identical
assets or liabilities that are accessible at the measurement
date.
•Level
2 inputs are from other than quoted market prices included in Level
1 that are observable for the asset or liability, either directly
or indirectly.
•Level
3 inputs are unobservable and are used to measure fair value in
situations where there is little, if any, market activity for the
asset or liability at the measurement date.
USANA HEALTH SCIENCES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except per share data)
(unaudited)
As of October 1, 2022, and January 1, 2022, the following
financial assets and liabilities were measured at fair value on a
recurring basis using the type of inputs shown:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
October 1,
2022 |
|
Fair Value Measurements Using |
|
|
Inputs |
|
|
Level 1 |
|
Level 2 |
|
Level 3 |
|
Money market funds included in cash equivalents |
$ |
174,519 |
|
|
$ |
174,519 |
|
|
$ |
— |
|
|
$ |
— |
|
|
Foreign currency contracts included in prepaid expenses and other
current assets |
2,022 |
|
|
— |
|
|
2,022 |
|
|
— |
|
|
Contingent consideration included in other current liabilities of
($338) and other long-term liabilities of ($548)
|
(886) |
|
|
— |
|
|
— |
|
|
(886) |
|
|
|
$ |
175,655 |
|
|
$ |
174,519 |
|
|
$ |
2,022 |
|
|
$ |
(886) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
January 1,
2022 |
|
Fair Value Measurements Using |
|
|
Inputs |
|
|
Level 1 |
|
Level 2 |
|
Level 3 |
|
Money market funds included in cash equivalents |
$ |
163,619 |
|
|
$ |
163,619 |
|
|
$ |
— |
|
|
$ |
— |
|
|
Foreign currency contracts included in other current
liabilities |
(461) |
|
|
— |
|
|
(461) |
|
|
— |
|
|
|
$ |
163,158 |
|
|
$ |
163,619 |
|
|
$ |
(461) |
|
|
$ |
— |
|
There were no transfers of financial assets or liabilities between
levels of the fair value hierarchy for the periods
indicated.
The majority of the Company’s non-financial assets, which include
long-lived assets, are not required to be carried at fair value on
a recurring basis. However, if an impairment charge is required, a
non-financial asset would be written down to fair value. As of
October 1, 2022 and January 1, 2022, there were no
non-financial assets measured at fair value on a non-recurring
basis.
The Company’s financial instruments include cash equivalents,
restricted cash, other liabilities, and foreign currency contracts.
The recorded values of cash equivalents and restricted cash
approximate their fair values, based on their short-term
nature.
NOTE D – INVENTORIES
Inventories consist of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
October 1,
2022 |
|
January 1,
2022 |
|
Raw materials |
$ |
19,592 |
|
|
$ |
30,280 |
|
|
Work in progress |
6,850 |
|
|
9,586 |
|
|
Finished goods |
40,836 |
|
|
58,452 |
|
|
Inventories |
$ |
67,278 |
|
|
$ |
98,318 |
|
|
Noncurrent inventories |
$ |
5,532 |
|
|
$ |
— |
|
Noncurrent inventory consists of $2.9 million of raw materials and
$2.6 million of finished goods inventory and is included in the
“Other assets” line item on the Company’s condensed consolidated
balance sheets. Noncurrent inventory is anticipated to be consumed
beyond our normal operating cycle, but prior to
obsolescence.
USANA HEALTH SCIENCES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except per share data)
(unaudited)
NOTE E – INVESTMENT IN EQUITY SECURITIES
As of October 1, 2022 and January 1, 2022, the carrying
amount of equity securities without readily determinable fair
values
was $20,000 and
is included in the “Other assets” line item on the Company’s
condensed consolidated balance sheets.
During the three and nine months ended October 1, 2022, and
the fiscal year ended January 1, 2022, no observable price
changes occurred, and no impairment of securities was
recorded.
NOTE F - INTANGIBLE ASSETS
The Company performed its annual goodwill impairment test during
the third quarter of 2022. The Company performed a qualitative
assessment of each reporting unit and determined that it was not
more-likely-than-not that the fair value of any reporting unit was
less than its carrying amount. As a result, no impairment of
goodwill was recognized.
The Company also performed its annual indefinite-lived intangible
asset impairment test during the third quarter of 2022. The Company
performed a qualitative assessment of the indefinite-lived
intangible asset and determined that it was not
more-likely-than-not that the fair value of the indefinite-lived
intangible asset was less than the carrying amount. As a result, no
impairment of the indefinite-lived intangible asset was
recognized.
NOTE G – REVENUE AND CONTRACT LIABILITIES
Revenue is recognized when, or as, control of a promised product or
service transfers to a customer, in an amount that reflects the
consideration to which the Company expects to be entitled in
exchange for transferring those products or services. A majority of
the Company’s sales are for products sold at a point in time and
shipped to customers, for which control is transferred as goods are
delivered to the third-party carrier for shipment. The Company
receives payment, primarily via credit card, for the sale of
products at the time customers place orders and payment is required
prior to shipment. Contract liabilities, which are recorded within
the “Other current liabilities” line item in the condensed
consolidated balance sheets, primarily relate to deferred revenue
for product sales for customer payments received in advance of
shipment, for outstanding material rights under the initial order
program, and for services where control is transferred over time as
services are delivered.
Other revenue includes fees, which are paid by the customer at the
beginning of the service period, for access to online customer
service applications and annual account renewal fees for
Associates, for which control is transferred over time as services
are delivered and are recognized as revenue on a straight-line
basis over the term of the respective contracts.
The following table presents Other Revenue for the periods
indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter Ended |
|
Nine Months Ended |
|
October 1,
2022 |
|
October 2,
2021 |
|
October 1,
2022 |
|
October 2,
2021 |
|
Other Revenue |
$ |
894 |
|
|
$ |
942 |
|
|
$ |
2,689 |
|
|
$ |
2,880 |
|
Disaggregation of revenue by geographic region and major product
line is included in Segment Information in Note L.
USANA HEALTH SCIENCES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except per share data)
(unaudited)
The following table provides information about contract liabilities
from contracts with customers, including significant changes in the
contract liabilities balances during the period:
|
|
|
|
|
|
|
|
|
|
|
|
|
October 1,
2022 |
|
January 1,
2022 |
|
Contract liabilities at beginning of period |
$ |
19,635 |
|
|
$ |
15,952 |
|
|
Increase due to deferral of revenue at end of period |
12,114 |
|
|
19,635 |
|
|
Decrease due to beginning contract liabilities recognized as
revenue |
(18,427) |
|
|
(15,952) |
|
|
Contract liabilities at end of period |
$ |
13,322 |
|
|
$ |
19,635 |
|
NOTE H – LINE OF CREDIT
On August 25, 2020, the Company as borrower, and certain of its
material subsidiaries as guarantors, entered into the Second
Amended and Restated Credit Agreement (the “Credit
Agreement”)
with Bank of America, N.A. (“Bank of America”)
as Administrative Agent, Swingline Lender and Letter of Credit
Issuer, and the other lenders party thereto. On August 10, 2022,
the Company entered into the Second Amendment to the Second Amended
and Restated Credit Agreement ("Restated Credit Agreement"), which
replaces the Eurodollar Rate, and LIBOR terms and provisions with
the
Bloomberg Short-Term Bank Yield Index rate
("BSBY").
The Credit Agreement provides for a revolving credit limit for
loans to the Company up to $75,000 (the “Credit
Facility”).
In addition, at the option of the Company, and subject to certain
conditions, the Company may request to increase the aggregate
commitment under the Credit Facility to up to an additional
$200,000.
There was no outstanding debt on the Credit Facility at
October 1, 2022. The obligations of the Company under the
Credit Agreement are secured by the pledge of the capital stock of
certain subsidiaries of the Company, pursuant to a Security and
Pledge Agreement.
Interest on revolving borrowings under the Credit Facility is
computed at
BSBY,
adjusted by features specified in the Credit Agreement. The Credit
Agreement covenants require the Company’s rolling four-quarter
consolidated EBITDA (per the credit agreement) to be $100,000 or
greater and its ratio of consolidated funded debt to consolidated
EBITDA to be equal to or less than 2.0 to 1.0 at the end of each
quarter. The Credit Agreement does not include any restrictions on
the payment of cash dividends or share repurchases by the Company.
Consolidated EBITDA and consolidated funded debt are non-GAAP
terms.
The Company will be required to pay any balance on this Credit
Facility in full at the time of maturity in
August 2025.
NOTE I – CONTINGENCIES
The Company is involved in various lawsuits, claims, and other
legal matters from time to time that arise in the ordinary course
of conducting business, including matters involving its products,
intellectual property, supplier relationships, distributors,
competitor relationships, employees and other matters. The Company
records a liability when a particular contingency is probable and
estimable. The Company faces contingencies that are reasonably
possible to occur; however, they cannot currently be estimated.
While complete assurance cannot be given as 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 the Company’s financial condition,
liquidity or results of operations. It is reasonably possible that
a change in the contingencies could result in a change in the
amount recorded by the Company in the future.
NOTE J – DERIVATIVE FINANCIAL INSTRUMENTS
The Company’s risk management strategy includes the select use of
derivative instruments to reduce the effects of volatility in
foreign currency exchange exposure on operating results and cash
flows. In accordance with the Company’s risk management policies,
the Company does not hold or issue derivative instruments for
trading or speculative purposes. The Company recognizes all
derivative instruments as either assets or liabilities in the
balance sheet at their respective fair values. When the Company
becomes a party to a derivative instrument and intends to apply
hedge accounting, the
USANA HEALTH SCIENCES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except per share data)
(unaudited)
Company formally documents the hedge relationship and the risk
management objective for undertaking the hedge, the nature of risk
being hedged, and the hedged transaction, which includes
designating the instrument for financial reporting purposes as a
fair value hedge, a cash flow hedge, or a net investment hedge. The
Company also documents how the hedging instrument’s effectiveness
in offsetting the hedged risk will be assessed prospectively and
retrospectively, and a description of the method used to measure
ineffectiveness.
The Company periodically uses derivative instruments to hedge the
foreign currency exposure of its net investment in foreign
subsidiaries into U.S. dollars. Initially, the Company records
derivative assets on a gross basis in its condensed consolidated
balance sheets. Subsequently the fair value of derivatives is
measured for each reporting period. The effective portion of gains
and losses attributable to these net investment hedges is recorded
to foreign currency translation adjustment (“FCTA”) within
accumulated other comprehensive income (loss) (“AOCI”) to offset
the change in the carrying value of the net investment being hedged
and will subsequently be reclassified to net earnings in the period
in which the investment in the subsidiary is either sold or
substantially liquidated.
During the nine months ended October 1, 2022, the Company
settled a forward contract with a notional amount of $98,930.
During the nine months ended October 2, 2021, the Company
settled a European option with a notional amount of $98,684. Both
the forward contract and the European option were designated as net
investment hedges. No settlements occurred during the three months
ended October 1, 2022 and October 2, 2021. For the three
and nine months ended October 1, 2022 and October 2,
2021, the Company realized a gain of $4,555 and a loss of $1,555,
respectively, recorded to FCTA within AOCI. The Company assessed
hedge effectiveness under the forward rate method, determining the
hedging instruments were highly effective.
As of October 1, 2022, there were no derivatives outstanding
for which the Company has applied hedge accounting.
NOTE K – COMMON STOCK AND EARNINGS PER SHARE
Basic earnings per share (“EPS”) is based on the weighted-average
number of shares outstanding for each period. Shares that have been
repurchased and retired during the periods specified below have
been included in the calculation of the number of weighted-average
shares that are outstanding for the calculation of basic EPS based
on the time they were outstanding in any period. Diluted EPS is
based on shares that are outstanding (computed under basic EPS) and
on potentially dilutive shares. Shares that are included in the
diluted EPS calculations under the treasury stock method include
equity awards that are in-the-money but have not yet been
exercised.
The following is a reconciliation of the numerator and denominator
used to calculate basic EPS and diluted EPS for the periods
indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter Ended |
|
Nine Months Ended |
|
October 1,
2022 |
|
October 2,
2021 |
|
October 1,
2022 |
|
October 2,
2021 |
|
Net earnings available to common shareholders |
$ |
14,929 |
|
|
$ |
27,330 |
|
|
$ |
56,555 |
|
|
$ |
96,185 |
|
|
Weighted average common shares outstanding - basic |
19,221 |
|
19,961 |
|
19,263 |
|
20,367 |
|
Dilutive effect of in-the-money equity awards |
31 |
|
195 |
|
62 |
|
199 |
|
Weighted average common shares outstanding - diluted |
19,252 |
|
20,156 |
|
19,325 |
|
20,566 |
|
Earnings per common share from net earnings - basic |
$ |
0.78 |
|
|
$ |
1.37 |
|
|
$ |
2.94 |
|
|
$ |
4.72 |
|
|
Earnings per common share from net earnings - diluted |
$ |
0.78 |
|
|
$ |
1.36 |
|
|
$ |
2.93 |
|
|
$ |
4.68 |
|
USANA HEALTH SCIENCES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except per share data)
(unaudited)
Equity awards for the following shares were not included in the
computation of diluted EPS due to the fact that their effect would
be anti-dilutive:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter Ended |
|
Nine Months Ended |
|
October 1,
2022 |
|
October 2,
2021 |
|
October 1,
2022 |
|
October 2,
2021 |
|
|
439 |
|
60 |
|
328 |
|
59 |
There were no shares repurchased during the three months ended
October 1, 2022. During the three months ended October 2,
2021, the Company repurchased and retired 523 shares for $49,751
under the Company's share repurchase plan.
During the nine months ended October 1, 2022 and
October 2, 2021, the Company repurchased and retired 288
shares and 1,548 shares for $25,382 and $148,906, respectively,
under the Company’s share repurchase plan. The excess of the
repurchase price over par value is allocated between additional
paid-in capital and retained earnings on a pro-rata basis. The
purchase of shares under this plan reduces the number of shares
outstanding in the above calculations.
As of October 1, 2022, the remaining authorized repurchase
amount under the stock repurchase plan was $82,839. There is no
expiration date on the remaining approved repurchase amount and no
requirement for future share repurchases.
NOTE L – SEGMENT INFORMATION
USANA develops, manufactures, and distributes high-quality,
science-based nutritional and personal care and skin care products
that are distributed internationally through direct selling. The
Company aggregates its operating segments into one reportable
segment, as management believes that the Company’s segments exhibit
similar long-term financial performance and have similar economic
characteristics. Performance for a region or market is evaluated
based on sales. No single customer accounted for 10% or more of net
sales for the periods presented. The table below summarizes the
approximate percentage of total product revenue that has been
contributed by the Company’s nutritionals, foods, and personal care
and skincare products for the periods indicated.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter Ended |
|
Nine Months Ended |
|
October 1,
2022 |
|
October 2,
2021 |
|
October 1,
2022 |
|
October 2,
2021 |
|
USANA® Nutritionals |
86 |
% |
|
85 |
% |
|
86 |
% |
|
86 |
% |
|
USANA Foods(1) |
7 |
% |
|
8 |
% |
|
7 |
% |
|
8 |
% |
|
Personal care and Skincare |
6 |
% |
|
6 |
% |
|
6 |
% |
|
5 |
% |
|
All Other |
1 |
% |
|
1 |
% |
|
1 |
% |
|
1 |
% |
(1)Includes
the Company’s new Active Nutrition line, which launched in five
markets in 2021 and all but two of the remaining markets through
the third quarter of 2022.
USANA HEALTH SCIENCES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except per share data)
(unaudited)
Selected Financial Information
Financial information, presented by geographic region is listed
below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter Ended |
|
Nine Months Ended |
|
October 1,
2022 |
|
October 2,
2021 |
|
October 1,
2022 |
|
October 2,
2021 |
|
Net Sales to External Customers |
|
|
|
|
|
|
|
|
Asia Pacific |
|
|
|
|
|
|
|
|
Greater China |
$ |
109,682 |
|
|
$ |
123,235 |
|
|
$ |
384,196 |
|
|
$ |
437,629 |
|
|
Southeast Asia Pacific |
47,308 |
|
|
64,570 |
|
|
149,880 |
|
|
212,819 |
|
|
North Asia |
25,667 |
|
|
33,068 |
|
|
84,409 |
|
|
100,671 |
|
|
Asia Pacific Total |
182,657 |
|
|
220,873 |
|
|
618,485 |
|
|
751,119 |
|
|
Americas and Europe |
50,643 |
|
|
53,479 |
|
|
152,156 |
|
|
168,046 |
|
|
Consolidated Total |
$ |
233,300 |
|
|
$ |
274,352 |
|
|
$ |
770,641 |
|
|
$ |
919,165 |
|
The following table provides further information on markets
representing ten percent or more of consolidated net sales and
long-lived assets, respectively:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter Ended |
|
Nine Months Ended |
|
October 1,
2022 |
|
October 2,
2021 |
|
October 1,
2022 |
|
October 2,
2021 |
|
Net sales: |
|
|
|
|
|
|
|
|
China |
$ |
97,443 |
|
|
$ |
109,226 |
|
|
$ |
346,086 |
|
|
$ |
394,407 |
|
|
South Korea |
$ |
25,099 |
|
|
$ |
32,117 |
|
|
$ |
82,439 |
|
|
$ |
97,474 |
|
|
United States |
$ |
26,942 |
|
|
$ |
26,969 |
|
|
$ |
79,803 |
|
|
$ |
81,107 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of |
|
|
October 1,
2022 |
|
January 1,
2022 |
|
Long-lived assets: |
|
|
|
|
China |
$ |
81,752 |
|
|
$ |
91,530 |
|
|
United States |
$ |
83,539 |
|
|
$ |
85,350 |
|
Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Management’s Discussion and Analysis of Financial Condition and
Results of Operations (“MD&A”) is designed to provide an
understanding of USANA’s financial condition, results of operations
and cash flows by reviewing certain key indicators and measures of
performance.
The MD&A is presented in seven sections as
follows:
•Overview
•Products
•Impact
of the COVID-19 Pandemic
•Customers
•Non-GAAP
Financial Measures
•Results
of Operations
•Liquidity
and Capital Resources
This discussion and analysis from management's perspective should
be read in conjunction with the Unaudited Condensed Consolidated
Financial Statements and Notes thereto that are contained in this
quarterly report, as well as Part II, Item 7, Management’s
Discussion and Analysis of Financial Condition and Results of
Operations of our Annual Report on Form 10-K for the year ended
January 1, 2022 (“2021
Form 10-K”),
filed with the SEC on March 1, 2022, and our other filings,
including the Current Reports on Form 8-K, that have been filed
with the SEC through the date of this report. Forward-looking
statements in Part I, Item 2 may involve risks and uncertainties
that could cause results to differ materially from those projected
(refer to the section entitled “Cautionary Note Regarding
Forward-Looking Statements and Certain Risks” on page 1 and the
risk factors provided in Part II, Item 1A for discussion of these
risks and uncertainties).
Overview
We develop and manufacture high quality, science-based nutritional
and personal care and skincare products that are distributed
internationally through direct selling. We use this distribution
method because we believe it is more conducive to meeting our
vision as a company, which is to improve the overall health and
nutrition of individuals and families around the world. Our
customer base is primarily comprised of two types of customers:
“Associates” and “Preferred Customers,” referred to together as
“active Customers.” Our Associates also sell our products to retail
customers. Associates share in our company vision by acting as
independent distributors of our products in addition to purchasing
our products for their personal use. Preferred Customers purchase
our products strictly for personal use and are not permitted to
resell or to distribute the products. We only count as active
Customers those Associates and Preferred Customers who have
purchased from us at any time during the most recent three-month
period. As of October 1, 2022, we had approximately 474,000
active Customers worldwide.
We have operations in multiple markets, with sales and expenses
being generated and incurred in multiple currencies. Our reported
U.S. dollar sales and earnings can be significantly affected by
fluctuations in currency exchange rates. In general, our operating
results are affected positively by a weakening of the U.S. dollar
and negatively by a strengthening of the U.S. dollar. During the
nine months ended October 1, 2022, net sales outside of the
United States represented 89.6%
of
consolidated net sales. In our net sales discussions that follow,
we approximate the impact of currency fluctuations on net sales by
translating current year sales at the average exchange rates in
effect during the comparable periods of the prior
year.
Products
The following table summarizes the approximate percentage of total
product revenue that has been contributed by our major product
lines and our top-selling products for the current and prior-year
periods as indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended |
|
October 1,
2022 |
|
October 2,
2021 |
|
Product Line |
|
|
|
|
USANA® Nutritionals |
|
|
|
|
Optimizers |
69% |
|
68% |
|
Essentials/CellSentials(1) |
17% |
|
18% |
|
USANA Foods(2)
|
7% |
|
8% |
|
Personal care and Skincare |
6% |
|
5% |
|
All Other |
1% |
|
1% |
|
Key Product |
|
|
|
|
USANA® Essentials/CellSentials |
11% |
|
12% |
|
Proflavanol® |
10% |
|
10% |
|
Probiotic |
10% |
|
9% |
(1)Represents
a product line consisting of multiple products, as opposed to the
actual USANA® Essentials / CellSentials product.
(2)Includes
our new Active Nutrition line, which launched in five markets in
2021 and all but two of our remaining markets through the third
quarter of 2022.
Impact of the COVID-19 Pandemic
The COVID-19 pandemic, including the spread of new variants of the
virus, has negatively impacted economies, businesses, sales
practices, supply chains, and consumer behavior around the world.
The ongoing COVID-19 pandemic has created an unpredictable
operating environment for us in many of our markets around the
world and caused meaningful disruptions in both sales and
operations. Government-imposed restrictions, health and safety
mandated best practices, and public hesitance regarding in-person
gatherings have reduced our ability and the ability of our
Associates to hold sales meetings, required our Associates to share
and sell our products in a predominantly virtual environment,
resulted in cancellations of key Company events and trips, required
us to modify our workforce strategies, and required us, at times,
to temporarily close our walk-in and fulfillment locations in some
markets where we have such properties. The pandemic has also
affected the availability and cost of various of our raw materials,
packaging materials and shipping resources to transport our
products to our various markets around the world. Our supply chain
and logistics have incurred some disruption and we could experience
more significant disruptions or closures in the future. These
factors and others related to the COVID-19 pandemic, including the
spread of new variants of the virus, will likely continue to
negatively affect our business throughout
2022
in a number of ways.
Customers
Because we sell our products to a customer base of independent
Associates and Preferred Customers, we increase our sales by
increasing the number of our active Customers, the amount they
spend on average, or both. Our primary focus continues to be
increasing the number of active Customers. We believe this focus is
consistent with our vision of improving the overall health and
nutrition of individuals and families around the world. Sales to
Associates account
for approximately 54%
of product sales during the nine months ended October 1, 2022.
The remainder of our sales are to Preferred Customers. Increases or
decreases in product sales are typically the result of variations
in the volume of product sold relating to fluctuations in the
number of active Customers purchasing our products. The number of
active Associates and Preferred Customers is, therefore, used by
management as a key non-financial indicator to evaluate our
operational performance.
We believe that our ability to attract and retain active Customers
is positively influenced by a number of factors, including our
high-quality product offerings and the general public’s heightened
awareness and understanding of the connection between diet and
long-term health. Additionally, we believe that our Associate
compensation plan and the
general public’s growing desire for a secondary source of income
and small business ownership are key to our ability to attract and
retain Associates. We periodically update our Compensation Plan in
an effort to ensure that it is among the most competitive plans in
the industry, to encourage behavior that we believe leads to a
successful business for our Associates, and to ensure that our plan
provides us with leverage to grow sales and earnings. Additionally,
the initiatives we are executing under our customer experience and
technology enhancements strategy are designed to promote active
Customer growth.
To further support our Associates in building their businesses, we
traditionally sponsor meetings and events throughout the year,
which offer information about our products and our network
marketing system. We also provide low-cost sales tools, including
online sales, business management, and training tools, which are
intended to support our Associates in building and maintaining a
successful home-based business. Although we provide training and
sales tools, we ultimately rely on our Associates to sell our
products, attract new active Customers to purchase our products,
and educate and train new Associates. We sponsor meetings designed
to assist Associates in their business development and to provide a
forum for interaction with our Associate leaders and members of our
management team.
The table below summarizes the changes in our active Customer base
by geographic region, rounded to the nearest thousand as of the
dates indicated:
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Total Active Customers by Region |
|
Change from
Prior Year |
|
Percent
Change |
|
As of
October 1, 2022 |
|
As of
October 2, 2021 |
|
|
|
Asia Pacific: |
|
|
|
|
|
|
|
|
|
|
|
|
Greater China |
213,000 |
|
44.9 |
% |
|
246,000 |
|
42.7 |
% |
|
(33,000) |
|
(13.4 |
%) |
|
Southeast Asia Pacific |
95,000 |
|
20.1 |
% |
|
134,000 |
|
23.3 |
% |
|
(39,000) |
|
(29.1 |
%) |
|
North Asia |
54,000 |
|
11.4 |
% |
|
63,000 |
|
10.9 |
% |
|
(9,000) |
|
(14.3 |
%) |
|
Asia Pacific Total |
362,000 |
|
76.4 |
% |
|
443,000 |
|
76.9 |
% |
|
(81,000) |
|
(18.3 |
%) |
|
Americas and Europe |
112,000 |
|
23.6 |
% |
|
133,000 |
|
23.1 |
% |
|
(21,000) |
|
(15.8 |
%) |
|
|
474,000 |
|
100.0 |
% |
|
576,000 |
|
100.0 |
% |
|
(102,000) |
|
(17.7 |
%) |
Non-GAAP Financial Measures
We report our financial results in accordance with accounting
principles generally accepted in the United States (“GAAP”).
However, to supplement the financial results prepared in accordance
with GAAP, we use non-GAAP financial measures described below. Our
management believes these non-GAAP financial measures that exclude
the impact of specific items (described below) may be useful to
investors in their assessment of our ongoing operating performance
and provide additional meaningful comparisons between current
results and results in prior operating periods and in understanding
the activities and business metrics of our operations. We believe
that these non-GAAP financial measures reflect an additional way of
viewing aspects of our business that, when viewed with our GAAP
results, provide a more complete understanding of factors and
trends affecting our business. We provide non-GAAP financial
information for informational purposes only. Readers should
consider the information in addition but not instead of or superior
to, our consolidated financial statements prepared in accordance
with GAAP. This non-GAAP financial information may be determined or
calculated differently by other companies, limiting the usefulness
of those measures for comparative purposes.
In this report, we use “constant currency” net sales, “local
currency” net sales, and other currency-related financial
information terms that are non-GAAP financial measures. We believe
the use of these terms is helpful in understanding the impact of
fluctuations in foreign-currency exchange rates and facilitating
period-to-period comparisons of our results of operations and
provides investors an additional perspective on trends and
underlying business results. Changes in our reported revenue and
profits in this report include the impacts of changes in foreign
currency exchange rates. As additional information to the reader,
we provide constant currency assessments in the tables and the
narrative information in this MD&A to remove or quantify the
impact of the fluctuation in foreign exchange rates and utilize
constant currency results in our analysis of performance. Our
constant currency financial results are calculated by translating
the current period’s financial results at the same average exchange
rates in effect during the applicable prior-year period and then
comparing this amount to the prior-year period’s financial results.
The GAAP reconciliations of these non-GAAP measures are contained
in the tables within Results of Operations.
Results of Operations
Summary of Financial Results
Net sales for the third quarter of 2022 decreased 15.0% to $233.3
million, a decrease of $41.1 million, compared with the prior-year
quarter. Current year sales programs and market specific promotions
have performed below expectations, largely due to disruptions
attributable to COVID-19 related lockdowns, and inflationary and
economic challenges in many of our markets, particularly in our
Asia Pacific markets. These disruptions have contributed to a 17.7%
decline in active Customers compared to the prior-year quarter.
Additionally, unfavorable changes in currency exchange rates, have
negatively impacted net sales by an estimated $15.0
million.
Net earnings for the third quarter of 2022 were $14.9 million, a
decrease of 45.4% compared with $27.3 million during the prior-year
quarter. The decrease in net earnings was primarily the result of
decreased sales and higher relative operating
expenses.
Quarters Ended October 1, 2022 and October 2,
2021
Net Sales
The following table summarizes the changes in net sales by
geographic region for the fiscal quarters ended as of the dates
indicated:
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|
|
Net Sales by Region
(in thousands)
Quarter Ended |
|
Change from prior
year |
|
Percent change |
|
Currency impact on
sales |
|
Percent change
excluding currency
impact |
|
October 1, 2022 |
|
October 2, 2021 |
|
|
|
|
|
Asia Pacific |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Greater China |
$ |
109,682 |
|
|
47.0 |
% |
|
$ |
123,235 |
|
|
44.9 |
% |
|
$ |
(13,553) |
|
|
(11.0 |
%) |
|
$ |
(6,199) |
|
|
(6.0 |
%) |
|
Southeast Asia Pacific |
47,308 |
|
|
20.3 |
% |
|
$ |
64,570 |
|
|
23.5 |
% |
|
(17,262) |
|
|
(26.7 |
%) |
|
(3,969) |
|
|
(20.6 |
%) |
|
North Asia |
25,667 |
|
|
11.0 |
% |
|
$ |
33,068 |
|
|
12.1 |
% |
|
(7,401) |
|
|
(22.4 |
%) |
|
(4,006) |
|
|
(10.3 |
%) |
|
Asia Pacific Total |
182,657 |
|
|
78.3 |
% |
|
220,873 |
|
|
80.5 |
% |
|
(38,216) |
|
|
(17.3 |
%) |
|
(14,174) |
|
|
(10.9 |
%) |
|
Americas and Europe |
50,643 |
|
|
21.7 |
% |
|
53,479 |
|
|
19.5 |
% |
|
(2,836) |
|
|
(5.3 |
%) |
|
(875) |
|
|
(3.7 |
%) |
|
|
$ |
233,300 |
|
|
100.0 |
% |
|
$ |
274,352 |
|
|
100.0 |
% |
|
$ |
(41,052) |
|
|
(15.0 |
%) |
|
$ |
(15,049) |
|
|
(9.5 |
%) |
Asia Pacific:
The decline in this region is largely the result of lower active
Customer counts in the region caused, in part, by the challenging
operating environment due to COVID-19. The decrease in constant
currency net sales in Greater China was primarily the result of a
sales decline in China, where local currency net sales decreased
5.6%, due to a 13.8% decrease in active Customers. The decrease in
constant currency net sales in Southeast Asia Pacific is largely
the result of sales declines in Malaysia, and the Philippines,
which had local currency net sales declines of 28.6%, and 23.4%,
due to a 40.4%, and 26.8% decrease in active Customers,
respectively. The decrease in constant currency net sales in North
Asia was primarily the result of a sales decline in South Korea,
where local currency net sales decreased 9.8%, due to a 14.8%
decrease in active Customers.
Americas and Europe:
The decrease in this region is largely the result of lower active
Customer counts in the region. There were local currency sales
declines in all markets in this region, most notable among these
markets, Canada and Mexico, which had local currency net sales
declines of 14.4%, and 20.4%, due to a 12.2%, and 24.0% decrease in
active Customers, respectively.
Gross Profit
Gross profit decreased 150 basis points to 80.0% of net sales, down
from 81.5% in the prior-year quarter. The decrease can be
attributed to unfavorable changes in currency exchange rates, an
increase in inventory valuation adjustments, higher material costs,
and loss of leverage on lower sales. These decreases were partially
offset by favorable changes in market and product sales
mix.
Associate Incentives
Associate incentives decreased 40 basis points to 42.0% of net
sales, down from 42.4% in the prior-year quarter.
The relative decrease can primarily be attributed to the decreased
spend associated with the worldwide sales program offered during
the current-year quarter, as well as, decreased spend on
miscellaneous associate incentives.
Selling, General and Administrative Expenses
Selling, general and administrative expenses increased 400 basis
points relative to net sales and was essentially flat in absolute
terms. The relative increase can be attributed to leverage lost on
lower net sales.
Income Taxes
Income taxes increased to 35.7% of pre-tax earnings, up from 32.3%
of pre-tax earnings in the prior-year quarter. The effective tax
rate increase is due primarily to a change in the mix of pre-tax
income by market.
Diluted Earnings per Share
Diluted EPS decreased 42.6% to $0.78 as compared to $1.36 reported
in the prior-year quarter. This decrease can be attributed to lower
net earnings, partially offset by lower diluted share
count.
Nine Months Ended October 1, 2022 and October 2,
2021
Net Sales
The following table summarizes the changes in net sales by
geographic region for the nine months ended as of the dates
indicated:
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|
|
|
Net Sales by Region
(in thousands) |
|
Change from prior
year |
|
Percent change |
|
Currency impact on
sales |
|
Percent change
excluding currency
impact |
|
Nine Months Ended |
|
|
|
|
|
|
October 1, 2022 |
|
October 2, 2021 |
|
|
|
|
|
Asia Pacific |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Greater China |
$ |
384,196 |
|
|
49.9 |
% |
|
$ |
437,629 |
|
|
47.6 |
% |
|
$ |
(53,433) |
|
|
(12.2 |
%) |
|
$ |
(6,731) |
|
|
(10.7 |
%) |
|
Southeast Asia Pacific |
149,880 |
|
|
19.4 |
% |
|
$ |
212,819 |
|
|
23.2 |
% |
|
(62,939) |
|
|
(29.6 |
%) |
|
(9,906) |
|
|
(24.9 |
%) |
|
North Asia |
84,409 |
|
|
11.0 |
% |
|
$ |
100,671 |
|
|
10.9 |
% |
|
(16,262) |
|
|
(16.2 |
%) |
|
(10,084) |
|
|
(6.1 |
%) |
|
Asia Pacific Total |
618,485 |
|
|
80.3 |
% |
|
751,119 |
|
|
81.7 |
% |
|
(132,634) |
|
|
(17.7 |
%) |
|
(26,721) |
|
|
(14.1 |
%) |
|
Americas and Europe |
152,156 |
|
|
19.7 |
% |
|
168,046 |
|
|
18.3 |
% |
|
(15,890) |
|
|
(9.5 |
%) |
|
(2,031) |
|
|
(8.2 |
%) |
|
$ |
770,641 |
|
|
100.0 |
% |
|
$ |
919,165 |
|
|
100.0 |
% |
|
$ |
(148,524) |
|
|
(16.2 |
%) |
|
$ |
(28,752) |
|
|
(13.0 |
%) |
Asia Pacific:
The decline in this region is largely the result of the challenging
operating environment as discussed above. As a result, there were
local currency sales declines in all markets in this region. The
decrease in constant currency net sales in Greater China was most
notable in China, where local currency net sales decreased 10.7%.
The decrease in constant currency net sales in Southeast Asia
Pacific was most notable in the Philippines, and Malaysia, which
had local currency net sales declines of 34.8%, and 28.0%,
respectively. The decrease in constant currency net sales in North
Asia was most notable in South Korea, which had a local currency
net sales decline of 5.5%.
Americas and Europe:
The decline in this region is largely the result of the challenging
operating environment as discussed above, as a result, there were
local currency sales declines in all markets in this region, most
notable among these markets,
Canada and Mexico, where local currency net sales decreased 14.2%
and 23.9%, respectively.
Gross Profit
Gross profit decreased 110 basis points to 80.9% of net sales, down
from 82.0% for the nine months ended 2021. The decrease in gross
profit margin can be attributed to unfavorable changes in currency
exchange rates, inventory valuation adjustments, increased product
costs, and loss of leverage on lower sales. These decreases were
partially offset by favorable changes in market and product sales
mix, and increased transportation costs in the prior-year period
related to the strategic buildup of inventory due to COVID-19
related disruptions to our supply chain and logistics.
Associate Incentives
Associate incentives decreased 30 basis points to 43.7% of net
sales, down from 44.0% for the nine months ended 2021. The relative
decrease can primarily be attributed to a decrease in promotional
incentives, as described above, and decreased spend on
miscellaneous associate incentives.
Selling, General and Administrative Expenses
Selling, general and administrative expenses increased 320 basis
points relative to net sales and decreased $9.3 million in absolute
terms. The relative increase can be attributed to leverage lost on
lower net sales. The decreased expense in absolute terms can be
primarily
attributed to lower costs on
variable expenses, as well as
lower employee related costs.
Income Taxes
Income taxes increased to 34.1% of pre-tax earnings, up from 30.8%
of pre-tax earnings for the
nine months ended 2021.
The effective tax rate increase is due primarily to a change in mix
of pre-tax income by market.
Diluted Earnings per Share
Diluted EPS decreased 37.4% to $2.93 as compared to $4.68 reported
for the nine months ended 2021. This decrease can be attributed to
lower net earnings, partially offset by lower diluted share
count.
Liquidity and Capital Resources
We have historically met our working capital and capital
expenditure requirements by using net cash flow from operations and
by drawing on our line of credit. Our principal source of liquidity
is our operating cash flow. Although we are required to maintain
cash deposits with banks in certain of our markets, there are
currently no material restrictions on our ability to transfer and
remit funds among our international markets. In China, however, our
compliance with Chinese accounting and tax regulations promulgated
by the State Administration of Foreign Exchange (“SAFE”) results in
transfer and remittance of our profits and dividends from China to
the United States on a delayed basis. If SAFE or other Chinese
regulators introduce new regulations or change existing regulations
which allow foreign investors to remit profits and dividends earned
in China to other countries, our ability to remit profits or pay
dividends from China to the United States may be limited in the
future.
We believe we have sufficient liquidity to satisfy our cash needs
and expect to continue to fund our business with cash flow from
operations. We continue, however, to evaluate and take action, as
necessary, to preserve adequate liquidity and ensure that our
business can continue to operate during these uncertain times.
Additionally, we continually evaluate opportunities to repurchase
shares of our common stock and will, from time to time, consider
the acquisition of, or investment in complementary businesses,
products, services, and technologies, which has the potential to
affect our liquidity.
Cash and Cash Equivalents
Cash and cash equivalents increased
to $246.9 million as of
October 1, 2022,
from $239.8
million as of January 1, 2022. Cash flow provided by operating
activities generated
$63.4
million partially offset by cash used in financing activities of
$29.9 million, and cash used in investing activities of $9.1
million primarily to acquire property and equipment and assets in
business combinations during the
nine
months ended
October 1, 2022.
Additionally, unfavorable changes in currency exchange rates, have
negatively impacted cash and cash equivalents, and restricted cash
by an estimated $17.7 million.
The table below presents concentrations of cash and cash
equivalents by market for the periods indicated:
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|
|
|
|
|
|
|
Cash and cash equivalents
(in Millions) |
|
As of
October 1, 2022 |
|
As of
January 1, 2022 |
|
United States |
$ |
120.0 |
|
|
$ |
51.9 |
|
|
China |
87.9 |
|
|
139.9 |
|
|
All other markets |
39.0 |
|
|
48.0 |
|
|
Total Cash and cash equivalents |
$ |
246.9 |
|
|
$ |
239.8 |
|
Cash Flows Provided by Operations
As discussed above, our principal source of liquidity comes from
our net cash flow from operations, which
results from a strong operating margin. Net cash flow provided by
operating activities was
$63.4
million for the first
nine
months of 2022. Net earnings combined with adjustments of non-cash
items contributed positively to our net cash flow provided by
operating activities, partially offset by cash used to pay the 2021
annual employee bonus, and a reduction in trade
payables.
Net cash flow provided by operating activities was
$96.3
million for the first
nine
months of
2021.
Net earnings combined with adjustments of non-cash items
contributed positively to our net cash flows provided by operating
activities, partially offset by
cash used to pay the 2020 annual employee bonus, reduce accruals
related to inventories received at year-end, renew our annual
insurance policies, and renew contracts for certain IT-related
services.
Line of Credit
Information with respect to our line of credit may be found in Note
H to the Condensed Consolidated Financial Statements included in
Item 1 of Part I of this report.
Share Repurchase
Information with respect to share repurchases may be found in Note
K to the Condensed Consolidated Financial Statements included in
Item 1 of Part I of this report.
Summary
We believe our current cash balances, future cash provided by
operations, and amounts available under our line of credit will be
sufficient to cover our operating and capital needs in the ordinary
course of business for the foreseeable future. If we experience an
adverse operating environment or unanticipated and unusual capital
expenditure requirements, additional financing may be required. No
assurance can be given, however, that additional financing, if
required, would be available to us at all or on favorable terms. We
might also require or seek additional financing for the purpose of
expanding into new markets, growing our existing markets, mergers
and acquisitions, or for other reasons. Such financing may include
the use of additional debt or the sale of additional equity
securities. Any financing which involves the sale of equity
securities or instruments that are convertible into equity
securities could result in immediate and possibly significant
dilution to our existing shareholders.
Critical Accounting Policies
There were no changes during the quarter to our critical accounting
policies as disclosed in our 2021 Form 10-K. Our significant
accounting policies are disclosed in Note A to our Consolidated
Financial Statements filed with our 2021 Form 10-K.
Item 3. Quantitative and Qualitative Disclosures About Market
Risk
We have no material changes to the disclosures on this matter made
in our 2021 Form 10-K. For a discussion of our exposure to market
risk, refer to our market risk disclosures set forth in the section
entitled “Quantitative and Qualitative Disclosures About Market
Risk” in the
2021 Form 10-K.
Item 4. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
We maintain disclosure controls and procedures that are designed to
ensure that information that is required to be disclosed in our
Exchange Act reports is recorded, processed, summarized, and
reported within the time periods that are specified in the SEC’s
rules and forms and that such information is accumulated and
communicated to management, including our Principal Executive
Officer and Principal Financial Officer, as appropriate, to allow
timely decisions regarding any required disclosure. In designing
and evaluating these disclosure controls and procedures, management
recognized that any controls and procedures, no matter how well
designed and operated, can provide only reasonable assurance of
achieving the desired control objectives.
As of the end of the period covered by this report, our Chief
Executive Officer (Principal Executive
Officer) and Chief Financial Officer (Principal Financial and
Accounting Officer) evaluated the effectiveness of the design and
operation of our disclosure controls and procedures (as defined in
Rule 13a- 15(e) under the Exchange Act). Based on this evaluation,
the Chief Executive Officer and Chief Financial Officer concluded
that our disclosure controls and procedures were effective as
of
October 1, 2022.
Changes in Internal Control Over Financial Reporting
There were no changes in our internal control over financial
reporting during the fiscal quarter ended
October 1, 2022,
that
materially affected, or are reasonably likely to materially affect,
our internal control over financial reporting.
PART II. OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS
We are a party to litigation and other proceedings that arise in
the ordinary course of conducting business, including matters
involving our products, intellectual property, supplier
relationships, distributors, competitor relationships, employees,
and other matters.
Information with respect to our legal proceedings may be found in
Note I to the Condensed Consolidated Financial Statements included
in Item 1 Part I of this report.
Item 1A. RISK FACTORS
Our business, results of operations, and financial condition are
subject to various risks. Our material risk factors are disclosed
in Part I, Item 1A of our
2021 Form 10-K.
The risk factors identified in our 2021 Form 10-K have not changed
in any material respect.
Item 6. Exhibits
Exhibits marked with an asterisk (*) are filed
herewith.
|
|
|
|
|
|
|
|
|
Exhibit
Number |
|
Description |
|
10.22 |
|
|
|
31.1 |
|
|
|
31.2 |
|
|
|
32.1 |
|
|
|
32.2 |
|
|
|
101.INS |
|
Inline XBRL Instance Document |
|
101.SCH |
|
Inline XBRL Taxonomy Extension Schema Document |
|
101.CAL |
|
Inline XBRL Taxonomy Extension Calculation Linkbase
Document |
|
101.DEF |
|
Inline XBRL Taxonomy Extension Definition Linkbase
Document |
|
101.LAB |
|
Inline XBRL Taxonomy Extension Label Linkbase Document |
|
101.PRE |
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Inline XBRL Taxonomy Extension Presentation Linkbase
Document |
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104 |
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Cover Page Interactive Data file (formatted as Inline XBRL and
contained in Exhibit 101) |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly
authorized.
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Date: November 8, 2022
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USANA HEALTH SCIENCES, INC. |
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/s/ G. Douglas Hekking |
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G. Douglas Hekking |
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Chief Financial Officer
(Principal Financial Officer) |
USANA Health Sciences (NYSE:USNA)
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