USANA Health Sciences, Inc. — Form 10-Q Summary
Period clarification: The request metadata says 2021 Q1, but the supplied filing is for the quarter ended April 2, 2022, compared with the quarter ended April 3, 2021. Financial statement amounts below are in U.S. dollars; figures reported in thousands are converted to millions where shown.
Business context and reporting period
USANA develops and manufactures nutrition, food, personal-care and skincare products sold internationally through independent direct-selling Associates. It reported approximately 552,000 active Customers at April 2, 2022, down 10.5% from a year earlier. Sales outside the United States represented 89.6% of consolidated net sales. The company reports one segment, with geographic results presented for Asia Pacific and Americas and Europe.
Key financial metrics
| Metric | Q1 2022 | Q1 2021 |
|---|---|---|
| Net sales | $272.9 million | $308.0 million |
| Gross profit / margin | $221.5 million / 81.2% | $250.3 million / 81.3% |
| Operating earnings / margin | $33.1 million / 12.1% | $44.2 million / 14.4% |
| Net earnings / net margin | $22.5 million / 8.2% | $30.6 million / 9.9% |
| Diluted EPS | $1.15 | $1.45 |
| Operating cash flow | $19.7 million | $19.7 million |
Associate incentives were $119.6 million, or 43.8% of sales, versus $134.5 million, or 43.7%. SG&A was $68.8 million, down $2.8 million in dollars but up 210 basis points as a share of sales. The effective tax rate was 32.5%, compared with 30.9%.
At April 2, 2022, cash and cash equivalents were $237.8 million and total cash, cash equivalents and restricted cash were $241.6 million. Current assets were $363.8 million and current liabilities $158.0 million (current ratio approximately 2.3). The company had $10.0 million outstanding on its $75.0 million revolving facility; the filing reports no other borrowing balance. The facility matures in August 2025 and includes quarterly covenants requiring rolling four-quarter EBITDA of at least $100 million and funded debt to EBITDA of no more than 2.0 to 1.0.
Operating cash flow of $19.7 million and investing cash outflow of $1.8 million were offset by financing cash outflow of $19.6 million, including $25.4 million of share repurchases and $10.0 million of credit-facility borrowings. Cash and cash equivalents fell $2.1 million from January 1, 2022. Share repurchases reduced outstanding shares to 19.185 million at quarter-end; $82.8 million remained authorized.
Material changes versus the prior comparable period
- Sales declined 11.4% ($35.1 million); management attributed the decrease primarily to the 10.5% decline in active Customers and $2.8 million of unfavorable currency impact. Sales fell 10.5% excluding currency effects.
- Asia Pacific sales decreased 13.1%; Greater China declined 10.2% and Southeast Asia Pacific 24.1%. Americas and Europe sales declined 3.9%. North Asia sales were nearly flat in reported dollars, while sales excluding currency effects increased 7.4%.
- Net earnings fell 26.6%, and diluted EPS declined 20.7%. Lower sales and higher relative operating expenses were the main factors; lower diluted share count partly offset the EPS decline.
- Gross margin slipped 10 basis points. Management cited inventory valuation adjustments, currency and product costs, partly offset by favorable sales mix.
- Share repurchases were $25.4 million, versus $69.5 million in the prior-year quarter. Weighted-average diluted shares declined to 19.481 million from 21.096 million.
Outlook, commentary and risks
The filing provides no specific numeric revenue or earnings guidance. Management said it expects cash balances, future operating cash flow and credit availability to cover ordinary-course operating and capital needs for the foreseeable future. It warned that COVID-19 disruptions were likely to continue affecting the business throughout 2022, including sales practices, supply chains, raw-material availability and freight costs.
Management said the pandemic’s overall impact had not been material to date, but acknowledged meaningful disruptions to sales and operations and uncertainty about future effects. Other disclosed risks include dependence on direct selling and Associate activity; regulation of direct selling, particularly in China; foreign-exchange movements; geopolitical and trade tensions; supply-chain disruption; and compliance with credit covenants. China held $176.4 million of cash at quarter-end; transfers of profits and dividends to the United States may be delayed under Chinese regulatory requirements. The company reported ordinary-course legal matters that management did not believe would materially adversely affect its financial condition, liquidity or results, while noting outcomes and potential changes could not be assured.
Disclosure controls were assessed as effective as of April 2, 2022; no material change in internal control over financial reporting was reported. The filing states that risk factors had not changed materially from the 2021 Form 10-K.
Important facts for investors to verify
- Confirm the reporting period: the supplied filing covers Q1 2022, not Q1 2021.
- Track active Customer counts and sales trends by region, particularly Greater China and Southeast Asia Pacific, and assess ongoing pandemic and currency effects.
- Monitor operating margins, product and freight costs, incentive spending, and whether lower sales continue to pressure expense leverage.
- Review China cash-transfer constraints and liquidity concentration, alongside the $10 million borrowing and ongoing compliance with credit-facility covenants.
- Assess the pace of share repurchases relative to operating cash flow and the company’s stated capital needs; repurchases are discretionary.