USANA HEALTH SCIENCES INC
For the period ended Jun 29, 2024. Filed Aug 6, 2024.
View on SEC.govAbout this filing
A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Jun 29, 2024 · Filed Aug 6, 2024
USNA$13.63-1.7%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2024-03-30; filed 2024-05-07.
0000896264-24-000165
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2024-06-29; filed 2024-08-06.
0000896264-24-000208
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 59 previous paragraphs and 76 current paragraphs.
43 unchanged; 13 reworded; 17 added; 3 removed; 0 previous and 3 current paragraphs rearranged.
Tables are not compared: 4 previous and 5 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (17)
Current report
Asia Pacific: The constant currency decline in this region was primarily the result of lower active Customer counts and lower sales per active Customer, partially offset by modest price increases throughout the region. This decline was primarily concentrated in China, South Korea and the Philippines. A local currency net sales decline of 8.3% in China was due to a decrease of 8.3% in average spend per customer, mainly influenced by promotional activity, while active Customers remained consistent with the prior year. A local currency net sales decline of 19.3% in South Korea was primarily due to a 16.3% decrease in active Customers and a 3.5% decrease in average spend per customer. A local currency net sales decline of 28.8% in the Philippines was primarily due to a 18.2% decrease in active Customers and a 13.1% decrease in average spend per customer.
Current report
Gross profit decreased 70 basis points to 81.1% of net sales, down from 81.8% in the prior-year quarter. The decrease can primarily be attributed to unfavorable changes in currency exchange rates and loss of leverage on lower sales, which was partially offset by lower material costs, decreased scrap and freight charges as well as modest price increases.
Current report
Associate incentives decreased 50 basis points to 42.5% of net sales, down from 43.0% in the prior-year quarter. The relative decrease can primarily be attributed to decreased spending on Associate related incentive trips in certain markets and benefits from modest price changes.
Current report
The year-to-date effective tax rate increased to 43.0% from the 35.5% reported in the comparable period of 2023 or 37.7% for fiscal 2023. The higher effective tax rate can be attributed to: i) China’s increased relative share of taxable income, ii) a concentration of infrastructure costs in our corporate headquarters, and iii) generally softer operating performance, including the impact of unfavorable exchange rates, in our other markets around the world. The revised year-to-date effective tax rate resulted in a 48.4% rate for the second quarter of 2024.
Current report
Net Sales
Current report
Asia Pacific: The constant currency decline in this region was primarily the result of a sales decline in Southeast Asia Pacific and North Asia. There were local currency declines in nearly all markets in the Southeast Asia Pacific sub-region, most notably in the Philippines, Australia, and Malaysia, which had local currency net sales declines of 27.5%, 10.4%, and 8.0%, respectively. The decrease in local currency net sales in the Philippines was primarily the result of a 23.4% decrease in active Customers and a 5.7% decrease in average spend per customer. The decrease in local currency net sales in Australia was primarily due to a 12.5% decrease in active Customers, partially offset by a 2.4% increase in average spend per customer. The decrease in local currency net sales in Malaysia was primarily due to a 10.9% decrease in active Customers, partially offset by a 3.6% increase in average spend per customer. The decrease in constant currency net sales in North Asia was primarily concentrated in South Korea, which had a local currency sales decline of 21.8%. The decrease in local currency net sales in South Korea was primarily due to a 16.8% decrease in active Customers and a 5.9% decrease in average spend per customer.
Current report
Americas and Europe: There were local currency sales declines in most of the markets in this region. The decrease in constant currency net sales was primarily concentrated in the United States and Canada, which had local currency net sales declines of 13.4%, and 10.3%, respectively. The decrease in net sales in the United States was primarily due to a 5.7% decrease in active Customers and a 8.3% decrease in average spend per customer. The decrease in net sales in Canada was primarily due to a 3.0% decrease in active Customers and a 7.2% decrease in average spend per customer.
Current report
Gross Profit
Current report
Gross profit remained consistent at 81.1% of net sales for the six months ended June 29, 2024 compared to the six months ended July 1, 2023. While currency exchange rates and a loss of leverage on lower sales continue to be a detriment to the gross profit margin, these were offset by benefits from decreased scrap charges, favorable changes in market and product sales mix, modest price increases, and lower freight expense.
Current report
Associate Incentives
Current report
Selling, General and Administrative Expenses
Current report
Selling, general and administrative expenses increased 150 basis points relative to net sales and decreased$6.4 million in absolute terms. The relative increase can be attributed to leverage lost on lower net sales. The lower expense in absolute terms can be primarily attributed to a decrease in spending for meetings and events, advertising, and other professional services.
Current report
Income Taxes
Current report
Income taxes increased to 43.0% of pre-tax earnings, up from 35.5% of pre-tax earnings for thesix months ended July 1, 2023. The higher effective tax rate can be attributed to: i) China’s increased relative share of taxable income, ii) a concentration of infrastructure costs in our corporate headquarters, and iii) generally softer operating performance, including the impact of unfavorable exchange rates, in our other markets around the world.
Current report
Diluted Earnings per Share
Current report
Diluted EPS decreased 23.9% to $1.40 as compared to $1.84 reported for the six months ended July 1, 2023. This decrease can be attributed to lower net earnings.
Current report
During the six months ended June 29, 2024, our China subsidiary remitted profits through an annual dividend of $75.8 million to the United States, inclusive of net proceeds from a dividend hedge and net of applicable taxes.
Removed paragraphs (3)
Previous report
Asia Pacific: The decline in this region is mainly the result of lower active Customer counts and average spend per customer in the North Asia and Southeast Asia Pacific sub-regions, partially offset by an increase in active Customer counts in Greater China, as well as modest price increases throughout the region. The decrease in constant currency net sales in North Asia was primarily the result of a 24.1% decrease in local currency net sales in South Korea due, in great part, to a 17.3% decrease in active Customers. The decrease in constant currency net sales in Southeast Asia Pacific is largely the result of local currency sales declines in Malaysia and the Philippines of 19.5%, and 26.1%, which can be primarily attributed to a 17.2%, and 28.0% decrease in active Customers, respectively. The increase in constant currency net sales in Greater China was primarily the result of a 10.0% increase in local currency net sales in China due to a 15.3% increase in active Customers. The customer growth in China was driven by a market-specific incentive promotion that took place during the first quarter of 2024.
Previous report
Gross profit increased 60 basis points to 81.1% of net sales, up from 80.5% in the prior-year quarter. The increase can be attributed to favorable changes in market and product sales mix, a decrease in inventory scrap charges, and modest price increases. These improvements were partially offset by unfavorable changes in currency exchange rates.
Previous report
Income taxes increased to 39.0% of pre-tax earnings, up from 35.5% 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.
Reworded paragraphs (13)
Previous wording
We develop and manufacture high quality, science-based nutritional and personal care and skincare products that are distributed internationally primarily 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. In 2023, we launched our Affiliate program in the United States, Canada, and Mexico and are evaluating introducing the program in other markets. This program offers another sales and compensation opportunity to individuals who are interested in selling USANA products. Affiliates are discussed and reported in the report as part of our Associates. 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 March 30, 2024, we had approximately 494,000 active Customers worldwide.
Current wording
We develop and manufacture high quality, science-based nutritional and personal care and skincare products that are distributed internationally primarily 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. In 2023, we launched our Affiliate program in the United States, Canada, and Mexico and are evaluating introducing the program in other markets. This program offers another sales and compensation opportunity to individuals who are interested in selling USANA products. Affiliates are discussed and reported in the report as part of our Associates. 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 June 29, 2024, we had approximately 468,000 active Customers worldwide.
Previous wording
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 three months ended March 30, 2024, net sales outside of the United States represented 90.3% 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.
Current wording
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 six months ended June 29, 2024, net sales outside of the United States represented 90.1% 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.
Previous wording
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. During the three months ended March 30, 2024, sales to Associates and Preferred Customers were each approximately 50% of total Direct-selling segment sales. 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.
Current wording
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 acco unted for approximately 50% of Direct-selling segment sales during the six months ended June 29, 2024, with the remainder of our sales generated from 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.
Previous wording
Net sales for the first quarter of 2024 decreased 8.3% to $227.8 million, a decrease of $20.6 million, compared with the prior-year quarter. The change in net sales was primarily the result of a decrease in average spend per customer, partially offset by a slight increase in active Customers and modest price increases compared to the prior-year quarter. During the first quarter of 2023, we benefited from increased demand for several of our health products in China following a shift in the government's COVID-19 policy, and our announcement of product price increases in several markets stimulated product purchasing ahead of those increases, both of which contributed to higher average spend per customer. Additionally, unfavorable changes in currency exchange rates negatively impacted net sales by an estimated $7.2 million in the current year quarter.
Current wording
Net sales for the second quarter of 2024 decreased 10.6% to $212.9 million, a decrease of $25.3 million, compared with the prior-year quarter. The decrease in net sales was primarily the result of a decrease in active Customers and a decrease in average spend per customer, partially offset by modest price increases compared to the prior-year quarter. Additionally, unfavorable changes in currency exchange rates negatively impacted net sales by an estimated $5.3 million.
Previous wording
Net earnings for the first quarter of 2024 were $16.5 million, a decrease of 10.0% compared with $18.4 million during the prior-year quarter. The decrease in net earnings was primarily the result of decreased sales and higher relative income taxes.
Current wording
Net earnings for the second quarter of 2024 were $10.4 million, a decrease of 39.7% compared with $17.3 million during the prior-year quarter. The decrease in net earnings was the result of decreased sales and higher relative operating expenses combined with an increase in effective tax rate.
Previous wording
Quarters Ended March 30, 2024 and April 1, 2023
Current wording
Three Months Ended June 29, 2024 and July 1, 2023
Previous wording
Americas and Europe: The decline in this region is mainly the result of lower active Customer counts and average spend per customer in the United States and Canada, partially offset by modest price increases throughout the region. The decrease in constant currency net sales in this region is largely the result of local currency sales declines in the United States and Canada of 16.3%, and 19.3%, attributable to a 4.5%, and 8.6% decrease in active Customers, respectively.
Current wording
Americas and Europe: The decrease in this region was primarily the result of lower active Customer counts and lower average spend per customer, partially offset by modest price increases. The decrease in constant currency net sales is largely the result of a sales decline in the United States, which had a net sales decline of 10.3% due to a 6.8% decrease in active Customers and a 3.8% decrease in average spend per customer.
Previous wording
Selling, general and administrative expenses increased 130 basis points relative to net sales and decreased $2.6 million in absolute terms. The relative increase is largely due to a loss of leverage on lower year-over-year net sales. The decreased expense in absolute terms can primarily be attributed to a decrease in variable costs.
Current wording
Selling, general and administrative expenses increased 160 basis points relative to net sales and decreased $3.8 million in absolute terms. The relative increase is largely due to a loss of leverage on lower year-over-year net sales. The lower expense in absolute terms can be primarily attributed to a decrease in spending for meetings and events, advertising, and other professional services.
Previous wording
Diluted EPS decreased 9.5% to $0.86 as compared to $0.95 reported in the prior-year quarter. This decrease can be attributed to lower net earnings.
Current wording
Diluted EPS decreased 39.3% to $0.54 as compared to $0.89 reported in the prior-year quarter. This decrease can be attributed to lower net earnings.
Previous wording
Associate incentives decreased 70 basis points to 42.0% of net sales, down from 42.7% in the prior-year quarter. The relative decrease can primarily be attributed to modest price increases, as well as decreased spend on promotional incentives. These improvements were partially offset by an unfavorable shift in market sales mix.
Current wording
Associate incentives decreased 60 basis points to 42.2% of net sales, down from 42.8% for the six months ended July 1, 2023. The relative decrease can primarily be attributed to decreased spend on promotional incentives, as well as modest price increases. These improvements were partially offset by an unfavorable shift in market sales mix.
Previous wording
Cash and cash equivalents decre ased to $328.3 million as of March 30, 2024, from $330.4 million as of December 30, 2023. Cash flow provided by operating activities was$17.7 million partially offset by cash used in financing activities of $11.9 million, and cash used in investing activities of $4.1 million.
Current wording
Cash and cash equivalents incre ased to $332.4 million as of June 29, 2024, from $330.4 million as of December 30, 2023. Cash flow provided by operating activities was$25.7 million partially offset by cash used in financing activities of $13.3 million, cash used in investing activities of $5.6 million, and the unfavorable effect of exchange rate changes on cash and cash equivalents of $4.8 million.
Previous wording
As discussed above, our principal source of liquidity comes from our net cash flow from operations. Net cash flow provided by operating activities was$17.7 million for the first three months of 2024. 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 2023 annual employee bonus, accrued associate incentives, and prepaid expenses.
Current wording
Net cash flow provided by operating activities was$25.7 million for the firstsix months of 2024. 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 accounts payable, accrued associate incentives, and the 2023 annual employee bonus.
Previous wording
Net cash flow provided by operating activities was$12.8 million for the first three months of 2023. Net earnings combined with adjustments of non-cash items contributed positively to our net cash flows provided by operating activities, partially offset bycash used to pay accrued associate incentives and the 2022 annual employee bonus.
Current wording
Net cash flow provided by operating activities was $22.4 million for the first six months of 2023. 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 accrued associate incentives and the 2022 annual employee bonus.
Rearranged current paragraphs (3)
Current report — wording carried from elsewhere
Six Months Ended June 29, 2024 and July 1, 2023
Current report — wording carried from elsewhere
The following table summarizes the changes in net sales by geographic region for the six months ended as of the dates indicated:
Current report — wording carried from elsewhere
As discussed above, our principal source of liquidity comes from our net cash flow from operations.