Table of Contents

 

 

 

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, 2011

 

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: 0-21116

 


 

USANA HEALTH SCIENCES, INC.

(Exact name of registrant as specified in its charter)

 

Utah

 

87-0500306

(State or other jurisdiction

 

(I.R.S. Employer

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)

 

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 and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post 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, or a smaller reporting company.  See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer o

 

Accelerated filer x

 

 

 

Non-accelerated filer o

 

Smaller reporting company 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

 

The number of shares outstanding of the registrant’s common stock as of October 31, 2011 was 14,959,597.

 

 

 



Table of Contents

 

USANA HEALTH SCIENCES, INC.

 

FORM 10-Q

 

For the Quarterly Period Ended October 1, 2011

 

INDEX

 

 

 

Page

 

 

 

PART I. FINANCIAL INFORMATION

 

 

 

 

Item 1

Financial Statements (unaudited)

 

 

 

Consolidated Balance Sheets

3

 

 

Consolidated Statements of Earnings – Quarter Ended

4

 

 

Consolidated Statements of Earnings – Nine Months Ended

5

 

 

Consolidated Statements of Stockholders’ Equity and Comprehensive Income

6

 

 

Consolidated Statements of Cash Flows

7

 

 

Notes to Consolidated Financial Statements

8–20

Item 2

Management’s Discussion and Analysis of Financial Condition and Results of Operations

21–31

Item 3

Quantitative and Qualitative Disclosures About Market Risk

31

Item 4

Controls and Procedures

31

 

 

 

PART II.     OTHER INFORMATION

 

 

 

 

Item 2

Unregistered Sales of Equity Securities and Use of Proceeds

32

Item 6

Exhibits

33–34

 

 

 

Signatures

35

 

2



Table of Contents

 

PART I.  FINANCIAL INFORMATION

 

Item 1.  Financial Statements

 

USANA HEALTH SCIENCES, INC. AND SUBSIDIARIES

 

CONSOLIDATED BALANCE SHEETS

 

(in thousands)

 

(unaudited)

 

 

 

As of

 

As of

 

 

 

January 1,

 

October 1,

 

 

 

2011

 

2011

 

 

 

 

 

 

 

ASSETS

 

 

 

 

 

Current assets

 

 

 

 

 

Cash and cash equivalents

 

$

24,222

 

$

36,317

 

Inventories

 

34,078

 

36,199

 

Prepaid expenses and other current assets

 

23,377

 

17,461

 

Total current assets

 

81,677

 

89,977

 

 

 

 

 

 

 

Property and equipment, net

 

57,568

 

59,756

 

 

 

 

 

 

 

Goodwill

 

17,267

 

17,596

 

Intangible assets, net

 

41,915

 

42,370

 

Deferred tax assets

 

12,383

 

13,486

 

Other assets

 

5,826

 

6,108

 

 

 

$

216,636

 

$

229,293

 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

Current liabilities

 

 

 

 

 

Accounts payable

 

$

6,445

 

$

9,096

 

Other current liabilities

 

52,584

 

50,193

 

Total current liabilities

 

59,029

 

59,289

 

 

 

 

 

 

 

Deferred tax liabilities

 

9,793

 

9,896

 

Other long-term liabilities

 

1,012

 

969

 

 

 

 

 

 

 

Stockholders’ equity

 

 

 

 

 

Common stock, $0.001 par value; Authorized — 50,000 shares, issued and outstanding 15,985 as of January 1, 2011 and 14,954 as of October 1, 2011

 

16

 

15

 

Additional paid-in capital

 

51,222

 

46,834

 

Retained earnings

 

90,207

 

106,170

 

Accumulated other comprehensive income

 

5,357

 

6,120

 

Total stockholders’ equity

 

146,802

 

159,139

 

 

 

$

216,636

 

$

229,293

 

 

The accompanying notes are an integral part of these statements.

 

3



Table of Contents

 

USANA HEALTH SCIENCES, INC. AND SUBSIDIARIES

 

CONSOLIDATED STATEMENTS OF EARNINGS

 

(in thousands, except per share data)

 

(unaudited)

 

 

 

Quarter Ended

 

 

 

October 2,

 

October 1,

 

 

 

2010

 

2011

 

 

 

 

 

 

 

Net sales

 

$

135,006

 

$

143,501

 

Cost of sales

 

25,157

 

25,202

 

 

 

 

 

 

 

Gross profit

 

109,849

 

118,299

 

 

 

 

 

 

 

Operating expenses:

 

 

 

 

 

Associate incentives

 

60,560

 

66,158

 

Selling, general and administrative

 

30,751

 

33,365

 

 

 

 

 

 

 

Total operating expenses

 

91,311

 

99,523

 

 

 

 

 

 

 

Earnings from operations

 

18,538

 

18,776

 

 

 

 

 

 

 

Other income (expense):

 

 

 

 

 

Interest income

 

36

 

42

 

Interest expense

 

(42

)

(1

)

Other, net

 

557

 

92

 

 

 

 

 

 

 

Other income, net

 

551

 

133

 

 

 

 

 

 

 

Earnings before income taxes

 

19,089

 

18,909

 

 

 

 

 

 

 

Income taxes

 

6,240

 

6,524

 

 

 

 

 

 

 

Net earnings

 

$

12,849

 

$

12,385

 

 

 

 

 

 

 

Earnings per common share

 

 

 

 

 

Basic

 

$

0.83

 

$

0.82

 

Diluted

 

$

0.79

 

$

0.81

 

 

 

 

 

 

 

Weighted average common shares outstanding

 

 

 

 

 

Basic

 

15,562

 

15,043

 

Diluted

 

16,247

 

15,205

 

 

The accompanying notes are an integral part of these statements.

 

4



Table of Contents

 

USANA HEALTH SCIENCES, INC. AND SUBSIDIARIES

 

CONSOLIDATED STATEMENTS OF EARNINGS

 

(in thousands, except per share data)

 

(unaudited)

 

 

 

Nine Months Ended

 

 

 

October 2,

 

October 1,

 

 

 

2010

 

2011

 

 

 

 

 

 

 

Net sales

 

$

380,104

 

$

435,992

 

Cost of sales

 

70,912

 

77,072

 

 

 

 

 

 

 

Gross profit

 

309,192

 

358,920

 

 

 

 

 

 

 

Operating expenses:

 

 

 

 

 

Associate incentives

 

171,743

 

198,725

 

Selling, general and administrative

 

87,358

 

103,038

 

 

 

 

 

 

 

Total operating expenses

 

259,101

 

301,763

 

 

 

 

 

 

 

Earnings from operations

 

50,091

 

57,157

 

 

 

 

 

 

 

Other income (expense):

 

 

 

 

 

Interest income

 

70

 

146

 

Interest expense

 

(68

)

(9

)

Other, net

 

301

 

97

 

 

 

 

 

 

 

Other income, net

 

303

 

234

 

 

 

 

 

 

 

Earnings before income taxes

 

50,394

 

57,391

 

 

 

 

 

 

 

Income taxes

 

17,134

 

19,800

 

 

 

 

 

 

 

Net earnings

 

$

33,260

 

$

37,591

 

 

 

 

 

 

 

Earnings per common share

 

 

 

 

 

Basic

 

$

2.16

 

$

2.43

 

Diluted

 

$

2.11

 

$

2.39

 

 

 

 

 

 

 

Weighted average common shares outstanding

 

 

 

 

 

Basic

 

15,397

 

15,495

 

Diluted

 

15,763

 

15,712

 

 

The accompanying notes are an integral part of these statements.

 

5



Table of Contents

 

 USANA HEALTH SCIENCES, INC. AND SUBSIDIARIES

 

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY AND COMPREHENSIVE INCOME

 

Nine Months Ended October 2, 2010 and October 1, 2011

 

(in thousands)

 

(unaudited)

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

 

Additional

 

 

 

Other

 

 

 

 

 

Common Stock

 

Paid-in

 

Retained

 

Comprehensive

 

 

 

 

 

Shares

 

Value

 

Capital

 

Earnings

 

Income

 

Total

 

For the Nine Months Ended October 2, 2010

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at January 2, 2010

 

15,309

 

$

15

 

$

16,425

 

$

56,410

 

$

1,523

 

$

74,373

 

Comprehensive income

 

 

 

 

 

 

 

 

 

 

 

 

 

Net earnings

 

 

 

 

33,260

 

 

33,260

 

Foreign currency translation adjustment, net of tax benefit of $614

 

 

 

 

 

2,305

 

2,305

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Comprehensive income

 

 

 

 

 

 

 

 

 

 

 

35,565

 

Common stock repurchased and retired

 

(199

)

 

(2,232

)

(6,398

)

 

(8,630

)

Common stock issued in connection with acquisition

 

400

 

1

 

17,715

 

 

 

17,716

 

Equity-based compensation expense

 

 

 

7,107

 

 

 

7,107

 

Common stock issued under equity award plans, including tax benefit of $50

 

250

 

 

4,690

 

 

 

4,690

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at October 2, 2010

 

15,760

 

$

16

 

$

43,705

 

$

83,272

 

$

3,828

 

$

130,821

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

For the Nine Months Ended October 1, 2011

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at January 1, 2011

 

15,985

 

$

16

 

$

51,222

 

$

90,207

 

$

5,357

 

$

146,802

 

Comprehensive income

 

 

 

 

 

 

 

 

 

 

 

 

 

Net earnings

 

 

 

 

37,591

 

 

37,591

 

Foreign currency translation adjustment, net of tax benefit of $491

 

 

 

 

 

763

 

763

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Comprehensive income

 

 

 

 

 

 

 

 

 

 

 

38,354

 

Equity-based compensation expense

 

 

 

7,739

 

 

 

7,739

 

Common stock repurchased and retired

 

(1,095

)

(1

)

(11,072

)

(21,628

)

 

(32,701

)

Common stock issued under equity award plans, including tax expense of $309

 

64

 

 

(270

)

 

 

(270

)

Tax impact of canceled vested equity awards

 

 

 

(785

)

 

 

(785

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at October 1, 2011

 

14,954

 

$

15

 

$

46,834

 

$

106,170

 

$

6,120

 

$

159,139

 

 

The accompanying notes are an integral part of these statements.

 

6



Table of Contents

 

USANA HEALTH SCIENCES, INC. AND SUBSIDIARIES

 

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(unaudited)

 

 

 

Nine Months Ended

 

 

 

October 2,

 

October 1,

 

 

 

2010

 

2011

 

 

 

 

 

 

 

Cash flows from operating activities

 

 

 

 

 

Net earnings

 

$

33,260

 

$

37,591

 

Adjustments to reconcile net earnings to net cash provided by operating activities

 

 

 

 

 

Depreciation and amortization

 

5,641

 

6,361

 

Loss on sale of property and equipment

 

87

 

44

 

Equity-based compensation expense

 

7,107

 

7,739

 

Excess tax benefits from equity-based payment arrangements

 

(792

)

(48

)

Deferred income taxes

 

(1,221

)

(1,473

)

Inventory valuation

 

989

 

888

 

Changes in operating assets and liabilities:

 

 

 

 

 

Inventories

 

(5,040

)

(3,552

)

Prepaid expenses and other assets

 

30

 

6,063

 

Accounts payable

 

41

 

2,614

 

Other liabilities

 

6,137

 

(2,759

)

 

 

 

 

 

 

Total adjustments

 

12,979

 

15,877

 

 

 

 

 

 

 

Net cash provided by operating activities

 

46,239

 

53,468

 

 

 

 

 

 

 

Cash flows from investing activities

 

 

 

 

 

Acquisitions, net of cash acquired

 

$

(42,694

)

$

 

Proceeds from sale of property and equipment

 

32

 

1

 

Purchases of property and equipment

 

(3,676

)

(8,558

)

 

 

 

 

 

 

Net cash used in investing activities

 

(46,338

)

(8,557

)

 

 

 

 

 

 

Cash flows from financing activities

 

 

 

 

 

Proceeds from equity awards exercised

 

$

4,640

 

$

39

 

Excess tax benefits from equity-based payment arrangements

 

792

 

48

 

Repurchase of common stock

 

(8,630

)

(32,701

)

Borrowings on line of credit

 

23,350

 

 

Payments on line of credit

 

(11,350

)

 

 

 

 

 

 

 

Net cash used in financing activities

 

8,802

 

(32,614

)

 

 

 

 

 

 

Effect of exchange rate changes on cash and cash equivalents

 

567

 

(202

)

 

 

 

 

 

 

Net increase in cash and cash equivalents

 

9,270

 

12,095

 

 

 

 

 

 

 

Cash and cash equivalents, beginning of period

 

13,658

 

24,222

 

 

 

 

 

 

 

Cash and cash equivalents, end of period

 

$

22,928

 

$

36,317

 

 

 

 

 

 

 

Supplemental disclosures of cash flow information

 

 

 

 

 

 

 

 

 

 

 

Cash paid during the period for:

 

 

 

 

 

Interest

 

$

62

 

$

10

 

Income taxes

 

18,582

 

19,281

 

 

 

 

 

 

 

Non-cash financing activities

 

 

 

 

 

Common stock issued in connection with acquisitions

 

17,716

 

 

 

The accompanying notes are an integral part of these statements.

 

7



Table of Contents

 

USANA HEALTH SCIENCES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except per share data)

(unaudited)

 

Organization, Consolidation, and Basis of Presentation

 

USANA Health Sciences, Inc. develops and manufactures high-quality nutritional and personal care products that are sold internationally through a network marketing system, which is a form of direct selling.  The Consolidated Financial Statements include the accounts and operations of USANA Health Sciences, Inc. and its wholly-owned subsidiaries (collectively, the “Company” or “USANA”) in two geographic regions: North America and Asia Pacific, which is further divided into three sub-regions; Southeast Asia/Pacific, Greater China, and North Asia.  North America includes the United States, Canada, Mexico, and direct sales from the United States to the United Kingdom and the Netherlands.  Southeast Asia/Pacific includes Australia, New Zealand, Singapore, Malaysia, and the Philippines; Greater China includes Hong Kong, Taiwan and China; and North Asia includes Japan and South Korea.  All significant inter-company accounts and transactions have been eliminated in this consolidation.

 

The condensed balance sheet as of January 1, 2011, derived from audited financial statements, and the unaudited interim consolidated financial information of the Company have been prepared in accordance with Article 10 of Regulation S-X promulgated by the Securities and Exchange Commission.  Certain information and footnote disclosures that are normally included in financial statements that have been prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted pursuant to such rules and regulations.  In the opinion of management, the accompanying interim consolidated financial information contains all adjustments, consisting of normal recurring adjustments that are necessary to present fairly the Company’s financial position as of October 1, 2011 and results of operations for the quarters and nine months ended October 2, 2010 and October 1, 2011.  These 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, 2011.  The results of operations for the quarter and nine months ended October 1, 2011, may not be indicative of the results that may be expected for the fiscal year 2011 ending December 31, 2011.

 

Revisions

 

Revisions relating to deferred taxes and intangible assets have been made to the Company’s financial statements to reflect adjustments made to correct the presentation of deferred taxes on a gross rather than net basis, and to record the impact of currency translation on intangible assets acquired as part of the 2010 purchase of BabyCare Holdings Ltd.  These adjustments revise amounts reported for periods prior to January 2, 2011 in the financial statements and related notes, for deferred taxes, goodwill, intangible assets and accumulated other comprehensive income in the Consolidated Balance Sheet, and the foreign currency translation adjustment component of comprehensive income in the Consolidated Statement of Stockholders’ Equity and Comprehensive Income.  While the overall net deferred tax amount has not changed, certain deferred tax line items in the Consolidated Balance Sheet have been modified to reflect a gross presentation.  Additionally, goodwill and intangible assets have been increased, along with a corresponding increase in accumulated other comprehensive income, to capture the changes on these assets related to foreign currency translation. These revisions had no effect on our earnings from operations, net earnings, or earnings per share.

 

8



Table of Contents

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (continued)

(in thousands, except per share data)

(unaudited)

 

Revisions — continued

 

The following tables illustrate the effects of the revision on the Company’s consolidated financial statements for only those line items that were affected:

 

Consolidated Balance Sheet Items

(in thousands)

 

 

 

As of January 1, 2011

 

 

 

As Previously
Reported

 

Adjustment

 

As Revised

 

Prepaid expenses and other current assets, including current deferred tax assets

 

$

21,972

 

$

1,405

 

$

23,377

 

Total current assets

 

80,272

 

1,405

 

81,677

 

Goodwill

 

16,930

 

337

 

17,267

 

Intangible assets, net

 

40,616

 

1,299

 

41,915

 

Other assets, including long-term deferred tax assets

 

8,416

 

9,793

 

18,209

 

Total assets

 

203,802

 

12,834

 

216,636

 

Other current liabilities

 

51,179

 

1,405

 

52,584

 

Total current liabilities

 

57,624

 

1,405

 

59,029

 

Long-term deferred tax liabilities

 

 

9,793

 

9,793

 

Accumulated other comprehensive income *

 

3,721

 

1,636

 

5,357

 

Total stockholders’ equity *

 

145,166

 

1,636

 

146,802

 

Total liabilities and stockholders’ equity

 

203,802

 

12,834

 

216,636

 

 


* Change also reflected in the beginning balance within the Consolidated Statement of Stockholders’ Equity and Comprehensive Income.

 

Consolidated Statement of Stockholders’ Equity and Comprehensive Income Items

(in thousands)

 

 

 

For the nine months ended October 2, 2010

 

 

 

As Previously
Reported

 

Adjustment

 

As Revised

 

Accumulated other comprehensive income (loss), foreign currency translation adjustment

 

$

1,431

 

$

874

 

$

2,305

 

Accumulated other comprehensive income (loss), total comprehensive income

 

34,691

 

874

 

35,565

 

Accumulated other comprehensive income (loss), balance at October 2, 2010

 

2,954

 

874

 

3,828

 

Total stockholders’ equity at October 2, 2010

 

129,947

 

874

 

130,821

 

 

9



Table of Contents

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (continued)

(in thousands, except per share data)

(unaudited)

 

Recent accounting pronouncements

 

In May 2011, the FASB issued Accounting Standards Update No. 2011-04, Fair Value Measurement (Topic 820): Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs (ASU 2011-04).  ASU 2011-04 updates existing guidance in Topic 820 to establish common requirements for measuring fair value and for disclosing information about fair value measurements in accordance with U.S. Generally Accepted Accounting Principles (U.S. GAAP) and International Financial Reporting Standards (IFRS).  ASU 2011-04 is effective prospectively for fiscal years, and interim periods, beginning after December 15, 2011.  Early adoption is not permitted.  The Company does not expect adoption of this standard to have a material impact on its consolidated financial statements.

 

In June 2011, the FASB issued Accounting Standards Update No. 2011-05, Comprehensive Income (Topic 220): Presentation of Comprehensive Income (ASU 2011-05).  The objective of ASU 2011-05 is to improve the comparability, consistency, and transparency of financial reporting and to increase the prominence of items reported in other comprehensive income.  To increase the prominence of items reported in other comprehensive income and to facilitate the convergence of U.S. GAAP and IFRS, ASU 2011-05 eliminates the option to present components of other comprehensive income as part of the statement of changes in stockholders’ equity.  Under the amendments in this update, an entity has the option to present the total of comprehensive income, the components of net income, and the components of other comprehensive income either in a single continuous statement of comprehensive income or in two separate but consecutive statements.  Regardless of which option is chosen, items that are reclassified from other comprehensive income to net income must be presented on the face of the financial statements.  These amendments do not change the items that must be reported in other comprehensive income or when an item of other comprehensive income must be reclassified to net income.  Also, the amendments do not change the option for an entity to present components of other comprehensive income either net of related tax effects or before related tax effects, with one amount shown for the aggregate income tax expense or benefit related to the total of other comprehensive income items.  ASU 2011-05 is effective for fiscal years, and interim periods within those years, beginning after December 15, 2011.  Early adoption is permitted.  The Company does not expect adoption of this standard to have a material impact on its consolidated financial statements.

 

In September 2011, the FASB issued Accounting Standards Update No. 2011-08, Intangibles—Goodwill and Other (Topic 350): Testing Goodwill for Impairment (ASU 2011-08).  ASU 2011-08 simplifies how entities test goodwill for impairment.  The amendments in this update permit an entity to first assess qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount as a basis for determining whether it is necessary to perform the two-step goodwill impairment test.  An entity also has the option to bypass the qualitative assessment for any reporting unit in any period and proceed directly to performing the first step of the two-step goodwill impairment test.  An entity may resume performing the qualitative assessment in any subsequent period.  Additionally, an entity no longer is permitted to carry forward its detailed calculation of a reporting unit’s fair value from a prior year as previously permitted by Topic 350.

 

ASU 2011-08 is effective for annual and interim goodwill impairment tests performed for fiscal years beginning after December 15, 2011.  Early adoption is permitted, including for annual and interim goodwill impairment tests performed as of a date before September 15, 2011, if an entity’s financial statements for the most recent annual or interim period have not yet been issued.  The Company has early adopted this standard, which did not have a material impact on its consolidated financial statements.

 

10



Table of Contents

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (continued)

(in thousands, except per share data)

(unaudited)

 

NOTE A — FAIR VALUE OF FINANCIAL INSTRUMENTS

 

The Company reports term deposits in accordance with established authoritative guidance, which requires a three-level valuation hierarchy for disclosure of fair value measurements.  The valuation hierarchy is based upon the transparency of inputs to the valuation of an asset or liability as of the measurement date.

 

The three levels are defined as follows:

 

·                  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.

 

The fair values of term deposits placed with banks are determined based on the pervasive interest rates in the market, which are also the interest rates as stated in the contracts with the banks. The Company classifies the valuation techniques that use the pervasive interest rates input as Level 2.  The carrying values of these term deposits approximate their fair values due to their short-term maturities.  As of October 1, 2011, the fair value of term deposits in the consolidated balance sheet totaled $313, classified in cash and cash equivalents.

 

NOTE B — INVENTORIES

 

Inventories consist of the following:

 

 

 

January 1,

 

October 1,

 

 

 

2011

 

2011

 

 

 

 

 

 

 

Raw materials

 

$

9,372

 

$

10,155

 

Work in progress

 

5,791

 

6,844

 

Finished goods

 

18,915

 

19,200

 

 

 

 

 

 

 

 

 

$

34,078

 

$

36,199

 

 

NOTE C — PREPAID EXPENSES AND OTHER CURRENT ASSETS

 

Prepaid expenses and other current assets consist of the following:

 

 

 

January 1,

 

October 1,

 

 

 

2011

 

2011

 

 

 

 

 

 

 

Prepaid insurance

 

$

1,175

 

$

342

 

Other prepaid expenses

 

2,583

 

2,249

 

Federal income taxes receivable

 

3,108

 

1,985

 

Miscellaneous receivables, net

 

3,735

 

2,944

 

Deferred commissions

 

4,867

 

3,864

 

Term deposits

 

3,034

 

 

Deferred tax assets

 

3,116

 

4,194

 

Other current assets

 

1,759

 

1,883

 

 

 

 

 

 

 

 

 

$

23,377

 

$

17,461

 

 

11



Table of Contents

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (continued)

(in thousands, except per share data)

(unaudited)

 

NOTE D — PROPERTY AND EQUIPMENT

 

Cost of property and equipment and their estimated useful lives is as follows:

 

 

 

 

 

January 1,

 

October 1,

 

 

 

Years

 

2011

 

2011

 

 

 

 

 

 

 

 

 

Buildings

 

40

 

$

38,732

 

$

39,343

 

Laboratory and production equipment

 

5-7

 

17,723

 

18,778

 

Sound and video library

 

5

 

600

 

600

 

Computer equipment and software

 

3-5

 

27,788

 

29,790

 

Furniture and fixtures

 

3-5

 

4,953

 

5,024

 

Automobiles

 

3-5

 

290

 

293

 

Leasehold improvements

 

3-5

 

5,404

 

5,344

 

Land improvements

 

15

 

2,051

 

2,040

 

 

 

 

 

 

 

 

 

 

 

 

 

97,541

 

101,212

 

 

 

 

 

 

 

 

 

Less accumulated depreciation and amortization

 

 

 

48,298

 

52,794

 

 

 

 

 

 

 

 

 

 

 

 

 

49,243

 

48,418

 

 

 

 

 

 

 

 

 

Land

 

 

 

8,107

 

7,780

 

 

 

 

 

 

 

 

 

Deposits and projects in process

 

 

 

218

 

3,558

 

 

 

 

 

 

 

 

 

 

 

 

 

$

57,568

 

$

59,756

 

 

NOTE E — INTANGIBLE ASSETS

 

Goodwill and intangible assets that have indefinite useful lives are tested annually for impairment, or more frequently if impairment indicators are present.  Such indicators of impairment include, but are not limited to, changes in business climate, and operating or cash flow losses related to such assets.  Goodwill and indefinite lived intangible assets are not amortized.  Definite lived intangibles are amortized over their related useful lives.  No events have occurred subsequent to any of our acquisitions that have resulted in an impairment of the original goodwill or intangible asset amounts that were initially recorded from the transactions.

 

Goodwill is as follows:

 

 

 

 

 

 

 

Currency

 

 

 

 

 

 

 

January 1,

 

Goodwill

 

translation

 

Impairment

 

October 1,

 

 

 

2011

 

acquired

 

adjustments

 

adjustments

 

2011

 

 

 

 

 

 

 

 

 

 

 

 

 

North America

 

$

6,390

 

$

 

$

 

$

 

$

6,390

 

Asia Pacific

 

10,877

 

 

329

 

 

11,206

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

$

17,267

 

$

 

$

329

 

$

 

$

17,596

 

 

12



Table of Contents

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (continued)

(in thousands, except per share data)

(unaudited)

 

NOTE E — INTANGIBLE ASSETS — CONTINUED

 

Intangible assets are as follows:

 

 

 

As of October 1, 2011

 

Weighted-average

 

 

 

Gross carrying

 

Accumulated

 

Net carrying

 

amortization

 

 

 

amount

 

amortization

 

amount

 

period (years)

 

 

 

 

 

 

 

 

 

 

 

Amortized intangible assets

 

 

 

 

 

 

 

 

 

Trade Name and Trademarks

 

$

4,147

 

$

(467

)

$

3,680

 

10

 

Customer Relationships

 

2,020

 

(758

)

1,262

 

3

 

 

 

6,167

 

(1,225

)

4,942

 

 

 

 

 

 

 

 

 

 

 

 

 

Unamortized intangible assets

 

 

 

 

 

 

 

 

 

Product Formulas

 

9,145

 

 

 

9,145

 

 

 

Direct Sales License

 

28,283

 

 

 

28,283

 

 

 

 

 

37,428

 

 

 

37,428

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

$

43,595

 

 

 

$

42,370

 

 

 

 

 

 

 

 

 

 

 

 

 

Aggregate Amortization Expense:

 

 

 

 

 

 

 

 

 

For the nine months ended October 1, 2011

 

$

816

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Estimated Amortization Expense:

 

 

 

 

 

 

 

 

 

Remainder of 2011

 

272

 

 

 

 

 

 

 

2012

 

1,088

 

 

 

 

 

 

 

2013

 

836

 

 

 

 

 

 

 

2014

 

415

 

 

 

 

 

 

 

2015

 

415

 

 

 

 

 

 

 

Thereafter

 

1,916

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

$

4,942

 

 

 

 

 

 

 

 

NOTE F — OTHER CURRENT LIABILITIES

 

Other current liabilities consist of the following:

 

 

 

January 1,

 

October 1,

 

 

 

2011

 

2011

 

 

 

 

 

 

 

Associate incentives

 

$

11,379

 

$

11,914

 

Accrued employee compensation

 

14,395

 

11,703

 

Income Taxes

 

1,571

 

2,880

 

Sales taxes

 

4,671

 

4,090

 

Deferred tax liabilities

 

1,405

 

1,501

 

Associate promotions

 

1,491

 

1,046

 

Deferred revenue

 

11,772

 

10,162

 

Provision for returns and allowances

 

929

 

963

 

All other

 

4,971

 

5,934

 

 

 

 

 

 

 

 

 

$

52,584

 

$

50,193

 

 

13



Table of Contents

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (continued)

(in thousands, except per share data)

(unaudited)

 

NOTE G — EQUITY BASED COMPENSATION

 

Equity-based compensation expense for the quarters ended October 2, 2010, and October 1, 2011, was $2,967 and $2,937, respectively.  The related tax benefit for these periods was $1,180 and $1,073, respectively.  Expense for the nine months ended October 2, 2010, and October 1, 2011, was $7,107 and $7,739, respectively.  The related tax benefit for these periods was $2,693 and $2,824, respectively.

 

During the nine months ended October 1, 2011, certain executives left the Company, which resulted in the cancelation of these executives’ equity awards.  The recapture of equity compensation expense related to the cancelation of unvested equity awards reduced equity-based compensation expense for the nine months ended October 1, 2011 by $1,230.  The related tax impact for these cancelations was $424.

 

The following table shows the remaining unrecognized compensation expense on a pre-tax basis for all types of equity awards that were outstanding as of October 1, 2011.  This table does not include an estimate for future grants that may be issued.

 

Remainder of 2011

 

$

2,800

 

2012

 

10,027

 

2013

 

6,448

 

2014

 

4,475

 

2015 and beyond

 

2,828

 

 

 

$

26,578

 

 

The cost above is expected to be recognized over a weighted-average period of 2.1 years.

 

During the nine months ended October 1, 2011, the Company’s shareholders approved a 5,000 increase in the number of new shares authorized for issuance under the Company’s 2006 Equity Incentive Award Plan (the “2006 Plan”).  This increase brings the total shares authorized under the 2006 Plan to 10,000.  The 2006 Plan is currently the only plan utilized by the Company for the issuance of equity awards.  As of October 1, 2011, a total of 5,363 units had been issued under this plan, comprising 5,241 stock-settled stock appreciation rights, 114 deferred stock units, and 8 stock options.  Also, as of October 1, 2011, 811 units had been canceled and added back to the number of units available for issuance under the 2006 Plan.

 

A summary of the Company’s stock option and stock-settled stock appreciation right activity for the nine months ended October 1, 2011 is as follows:

 

 

 

Shares

 

Weighted-
average grant
price

 

Weighted-average
remaining
contractual term

 

Aggregate
intrinsic
value*

 

Outstanding at January 1, 2011

 

4,047

 

$

32.46

 

3.5

 

$

45,263

 

Granted

 

417

 

28.83

 

 

 

 

 

Exercised

 

(57

)

28.66

 

 

 

 

 

Canceled or expired

 

(607

)

32.29

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Outstanding at October 1, 2011

 

3,800

 

$

32.15

 

3.1

 

$

2,623

 

 

 

 

 

 

 

 

 

 

 

Exercisable at October 1, 2011

 

1,562

 

$

32.50

 

2.6

 

$

1,273

 

 


*  Aggregate intrinsic value is defined as the difference between the current market value at the reporting date (the closing price of the Company’s common stock on the last trading day of the period) and the exercise price of awards that were in-the-money.  The closing price of the Company’s common stock at January 1, 2011 and October 1, 2011, was $43.45 and $27.50, respectively.

 

14



Table of Contents

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (continued)

(in thousands, except per share data)

(unaudited)

 

NOTE G — EQUITY BASED COMPENSATION — CONTINUED

 

The weighted-average fair value of stock-settled stock appreciation rights that were granted during the nine-month periods ended October 2, 2010, and October 1, 2011 was $17.07 and $12.40, respectively.  The total intrinsic value of awards that were exercised during the nine-month periods ended October 2, 2010, and October 1, 2011 was $6,057 and $555, respectively.

 

The following table includes weighted-average assumptions that the Company has used to calculate the fair value of equity awards that were granted during the periods indicated.  Deferred stock units are full-value shares at the date of grant and have been excluded from the table below:

 

 

 

Quarter Ended

 

Nine Months Ended

 

 

 

October 2,

 

October 1,

 

October 2,

 

October 1,

 

 

 

2010

 

2011

 

2010

 

2011

 

 

 

 

 

 

 

 

 

 

 

Expected volatility

 

54.8

%

56.0

%

54.9

%

56.0

%

Risk-free interest rate

 

1.4

%

1.1

%

1.7

%

1.1

%

Expected life

 

4.2 yrs.

 

3.8 yrs.

 

4.2 yrs.

 

3.9 yrs.

 

Expected dividend yield

 

 

 

 

 

Weighted-average grant price

 

$

43.73

 

$

28.16

 

$

38.23

 

$

28.83

 

 

A summary of the Company’s deferred stock unit activity for the nine months ended October 1, 2011 is as follows:

 

 

 

Shares

 

Weighted-
average Fair
Value

 

Nonvested at January 1, 2011

 

100

 

$

44.29

 

Granted

 

 

 

 

Vested

 

(49

)

 

44.29

 

Canceled or expired

 

(2

)

 

44.29

 

 

 

 

 

 

 

Nonvested at October 1, 2011

 

49

 

$

44.29

 

 

15



Table of Contents

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (continued)

(in thousands, except per share data)

(unaudited)

 

NOTE H — COMMON STOCK AND EARNINGS PER SHARE

 

Basic earnings per share are 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 earnings per share.  Diluted earnings per common share are based on shares that are outstanding (computed under basic EPS) and on potentially dilutive shares.  Shares that are included in the diluted earnings per share calculations under the treasury stock method include equity awards that are in-the-money but have not yet been exercised.

 

 

 

Quarter Ended

 

 

 

October 2,

 

October 1,

 

 

 

2010

 

2011

 

 

 

 

 

 

 

Net earnings available to common shareholders

 

$

12,849

 

$

12,385

 

 

 

 

 

 

 

Basic EPS

 

 

 

 

 

 

 

 

 

 

 

Shares

 

 

 

 

 

Common shares outstanding entire period

 

15,309

 

15,985

 

Weighted average common shares:

 

 

 

 

 

Issued during period

 

320

 

39

 

Canceled during period

 

(67

)

(981

)

 

 

 

 

 

 

Weighted average common shares outstanding during period

 

15,562

 

15,043

 

 

 

 

 

 

 

Earnings per common share from net earnings - basic

 

$

0.83

 

$

0.82

 

 

 

 

 

 

 

Diluted EPS

 

 

 

 

 

 

 

 

 

 

 

Shares

 

 

 

 

 

Weighted average common shares outstanding during period - basic

 

15,562

 

15,043

 

 

 

 

 

 

 

Dilutive effect of in-the-money equity awards

 

685

 

162

 

 

 

 

 

 

 

Weighted average common shares outstanding during period - diluted

 

16,247

 

15,205

 

 

 

 

 

 

 

Earnings per common share from net earnings - diluted

 

$

0.79

 

$

0.81

 

 

Equity awards for 434 and 2,002 shares of stock were not included in the computation of diluted EPS for the quarters ended October 2, 2010, and October 1, 2011, respectively, due to the fact that their exercise prices were greater than the average market price of the shares.

 

16



Table of Contents

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (continued)

(in thousands, except per share data)

(unaudited)

 

NOTE H — COMMON STOCK AND EARNINGS PER SHARE — CONTINUED

 

 

 

Nine Months Ended

 

 

 

October 2,

 

October 1,

 

 

 

2010

 

2011

 

 

 

 

 

 

 

Net earnings available to common shareholders

 

$

33,260

 

$

37,591

 

 

 

 

 

 

 

Basic EPS

 

 

 

 

 

 

 

 

 

 

 

Shares

 

 

 

 

 

Common shares outstanding entire period

 

15,309

 

15,985

 

Weighted average common shares:

 

 

 

 

 

Issued during period

 

110

 

19

 

Canceled during period

 

(22

)

(509

)

 

 

 

 

 

 

Weighted average common shares outstanding during period

 

15,397

 

15,495

 

 

 

 

 

 

 

Earnings per common share from net earnings - basic

 

$

2.16

 

$

2.43

 

 

 

 

 

 

 

Diluted EPS

 

 

 

 

 

 

 

 

 

 

 

Shares

 

 

 

 

 

Weighted average common shares outstanding during period - basic

 

15,397

 

15,495

 

 

 

 

 

 

 

Dilutive effect of in-the-money equity awards

 

366

 

217

 

 

 

 

 

 

 

Weighted average common shares outstanding during period - diluted

 

15,763

 

15,712

 

 

 

 

 

 

 

Earnings per common share from net earnings - diluted

 

$

2.11

 

$

2.39

 

 

Equity awards for 1,627 and 1,571 shares of stock were not included in the computation of diluted EPS for the nine months ended October 2, 2010, and October 1, 2011, respectively, due to the fact that their exercise prices were greater than the average market price of the shares.

 

NOTE I — COMPREHENSIVE INCOME

 

Total comprehensive income consisted of the following:

 

 

 

Quarter Ended

 

Nine Months Ended

 

 

 

October 2,

 

October 1,

 

October 2,

 

October 1,

 

 

 

2010

 

2011

 

2010

 

2011

 

 

 

 

 

 

 

 

 

 

 

Net Earnings

 

$

12,849

 

$

12,385

 

$

33,260

 

$

37,591

 

Foreign currency translation adjustment, net of tax

 

2,768

 

(1,259

)

2,305

 

763

 

 

 

 

 

 

 

 

 

 

 

Comprehensive income

 

$

15,617

 

$

11,126

 

$

35,565

 

$

38,354

 

 

17



Table of Contents

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (continued)

(in thousands, except per share data)

(unaudited)

 

NOTE J — SEGMENT INFORMATION

 

USANA operates in a single operating segment as a direct selling company that develops, manufactures, and distributes high-quality nutritional and personal care products that are sold through a global network marketing system of independent distributors (“Associates”).  As such, management has determined that the Company operates in one reportable business segment.  Performance for a region or market is primarily evaluated based on sales.  The Company does not use profitability reports on a regional or market basis for making business decisions.  No single Associate 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 nutritional and personal care products for the periods indicated.

 

 

 

Quarter Ended

 

Nine Months Ended

 

 

 

October 2,

 

October 1,

 

October 2,

 

October 1,

 

Product Line

 

2010

 

2011

 

2010

 

2011

 

 

 

 

 

 

 

 

 

 

 

USANA® Nutritionals

 

78

%

78

%

77

%

78

%

USANA Foods

 

12

%

12

%

12

%

12

%

Sensé — beautiful science®

 

7

%

7

%

8

%

7

%

 

Selected financial information for the Company is presented for two geographic regions: North America and Asia Pacific, with three sub-regions under Asia Pacific.  Individual markets are categorized into these regions as follows:

 

·                  North America

 

·                  United States (including direct sales from the United States to the United Kingdom and the Netherlands)

 

·                  Canada

 

·                  Mexico

 

·                  Asia Pacific

 

·                  Southeast Asia/Pacific — Australia, New Zealand, Singapore, Malaysia, and the Philippines

 

·                  Greater China — Hong Kong, Taiwan, and China*

 

·                  North Asia — Japan and South Korea

 


* Our business in China is that of BabyCare, our wholly-owned subsidiary.

 

18



Table of Contents

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (continued)

(in thousands, except per share data)

(unaudited)

 

NOTE J — SEGMENT INFORMATION — CONTINUED

 

Selected Financial Information

 

Selected financial information, presented by geographic region, is listed below for the periods ended as of the dates indicated:

 

 

 

Quarter Ended

 

Nine Months Ended

 

 

 

October 2,

 

October 1,

 

October 2,

 

October 1,

 

 

 

2010

 

2011

 

2010

 

2011

 

Net Sales to External Customers

 

 

 

 

 

 

 

 

 

North America

 

 

 

 

 

 

 

 

 

United States

 

$

38,228

 

$

37,975

 

$

113,826

 

$

112,132

 

Canada

 

16,419

 

16,107

 

52,352

 

50,896

 

Mexico

 

5,314

 

4,946

 

16,416

 

16,288

 

North America Total

 

59,961

 

59,028

 

182,594

 

179,316

 

Asia Pacific

 

 

 

 

 

 

 

 

 

Southeast Asia/Pacific

 

25,730

 

30,117

 

74,231

 

82,036

 

Greater China

 

43,456

 

47,012

 

106,156

 

152,801

 

North Asia

 

5,859

 

7,344

 

17,123

 

21,839

 

Asia Pacific Total

 

75,045

 

84,473

 

197,510

 

256,676

 

 

 

 

 

 

 

 

 

 

 

Consolidated Total

 

$

135,006

 

$

143,501

 

$

380,104

 

$

435,992

 

 

 

 

As of

 

 

 

October 2,

 

October 1,

 

 

 

2010

 

2011

 

Total Assets

 

 

 

 

 

North America

 

 

 

 

 

United States

 

$

94,452

 

$

98,067

 

Canada

 

3,853

 

3,072

 

Mexico

 

3,170

 

2,580

 

North America Total

 

101,475

 

103,719

 

Asia Pacific

 

 

 

 

 

Southeast Asia/Pacific

 

26,591

 

25,730

 

Greater China

 

78,445

 

92,964

 

North Asia

 

6,851

 

6,880

 

Asia Pacific Total

 

111,887

 

125,574

 

 

 

 

 

 

 

Consolidated Total

 

$

213,362

 

$

229,293

 

 

19



Table of Contents

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (continued)

(in thousands, except per share data)

(unaudited)

 

NOTE J — SEGMENT INFORMATION — CONTINUED

 

The following table provides further information on markets representing ten percent or more of consolidated net sales and long-lived assets, respectively:

 

 

 

Quarters Ended

 

Nine Months Ended

 

 

 

October 2,

 

October 1,

 

October 2,

 

October 1,

 

 

 

2010

 

2011

 

2010

 

2011

 

 

 

 

 

 

 

 

 

 

 

Net sales:

 

 

 

 

 

 

 

 

 

United States

 

$

38,228

 

$

37,975

 

$

113,826

 

$

112,132

 

Hong Kong

 

34,518

 

34,826

 

85,385

 

116,814

 

Canada

 

16,419

 

16,107

 

52,352

 

50,896

 

 

 

 

As of

 

 

 

January 1,

 

October 1,

 

 

 

2011

 

2011

 

Long-lived Assets:

 

 

 

 

 

United States

 

$

44,017

 

$

46,981

 

Australia

 

15,779

 

14,572

 

China

 

57,818

 

59,365

 

 

20



Table of Contents

 

Item 2.    MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

 

The following discussion and analysis of USANA’s financial condition and results of operations is presented in six sections:

 

·                  Overview

·                  Customers

·                  Current Focus

·                  Results of Operations

·                  Liquidity and Capital Resources

·                  Forward-Looking Statements and Certain Risks

 

This discussion and analysis should be read in conjunction with the Unaudited Consolidated Financial Statements and Notes thereto that are contained in this quarterly report, as well as Management’s Discussion and Analysis of Financial Condition and Results of Operations that are included in our Annual Report on Form 10-K for the year ended January 1, 2011, and our other filings, including Current Reports on Form 8-K, that have been filed with the Securities and Exchange Commission (“SEC”) through the date of this report.

 

Overview

 

We develop and manufacture high-quality, science-based nutritional and personal care products that are distributed internationally through a network marketing system, which is a form of direct selling.  Our customer base comprises two types of customers: “Associates” and “Preferred Customers.”  Associates are independent distributors of our products who also purchase our products for their personal use.  Preferred Customers purchase our products strictly for their personal use and are not permitted to resell or to distribute the products.  As of October 1, 2011, we had approximately 214,000 active Associates and approximately 66,000 active Preferred Customers worldwide.  For purposes of this report, we only count as active customers those Associates and Preferred Customers who have purchased product from USANA at any time during the most recent three-month period, either for personal use or for resale.

 

We have ongoing operations in the following markets, which are grouped and presented as follows:

 

·                  North America

 

·                  United States

 

·                  Canada

 

·                  Mexico

 

·                  Asia Pacific

 

·                  Southeast Asia/Pacific — Australia, New Zealand, Singapore, Malaysia, and the Philippines

 

·                  Greater China — Hong Kong, Taiwan, and China*

 

·                  North Asia — Japan and South Korea

 


* Our business in China is that of BabyCare, our wholly-owned subsidiary.

 

21



Table of Contents

 

Our primary product lines consist of USANAâ Nutritionals, USANA Foods, and Sensé — beautiful scienceâ (Sensé), which is our line of personal care products.  The USANA Nutritionals product line is further categorized into two separate classifications: Essentials and Optimizers.  The following tables summarize 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 indicated:

 

 

 

Nine Months Ended

 

 

 

October 2,

 

October 1,

 

 

 

2010

 

2011

 

Product Line

 

 

 

 

 

USANA® Nutritionals

 

 

 

 

 

Essentials

 

30

%

29

%

Optimizers

 

47

%

49

%

USANA Foods

 

12

%

12

%

Sensé — beautiful science®

 

8

%

7

%

All Other

 

3

%

3

%

 

 

 

 

 

 

Key Product

 

 

 

 

 

USANA® Essentials

 

18

%

18

%

Proflavanol®

 

11

%

12

%

HealthPak 100 ™

 

10

%

9

%

 

We believe that our ability to attract and retain Associates and Preferred Customers to sell and consume our products is positively influenced by a number of factors.  Some of these factors include: the general public’s heightened awareness and understanding of the connection between diet and long-term health, the aging of the worldwide population as older people generally tend to consume more nutritional supplements, and the growing desire for a secondary source of income and small business ownership.

 

We believe that our high-quality products and our financially rewarding Associate Compensation Plan are the key components to attracting