USANA HEALTH SCIENCES INC - Quarter Report: 2015 October (Form 10-Q)

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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 3, 2015

 

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)

 

 

 

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.

 

 

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 November 10, 2015 was 12,769,551.

 

 

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USANA HEALTH SCIENCES, INC.

 

FORM 10-Q

 

For the Quarterly Period Ended October 3, 2015

 

INDEX

 

 

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PART I. FINANCIAL INFORMATION

 

Item 1. Financial Statements

 

USANA HEALTH SCIENCES, INC. AND SUBSIDIARIES

 

CONDENSED CONSOLIDATED BALANCE SHEETS

 

(in thousands, except par value)

(unaudited)

 

		As of			As of
		January 3,			October 3,
		2015			2015
ASSETS
Current assets
Cash and cash equivalents		$	111,126		$	174,195
Inventories		45,248			61,580
Prepaid expenses and other current assets		34,553			34,049
Total current assets		190,927			269,824
Property and equipment, net		71,164			78,525
Goodwill		17,941			17,675
Intangible assets, net		40,952			39,506
Deferred tax assets		5,933			8,352
Other assets		23,667			25,046
		$	350,584		$	438,928
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities
Accounts payable		$	7,779		$	9,498
Other current liabilities		100,926			104,967
Total current liabilities		108,705			114,465
Deferred tax liabilities		10,601			10,030
Other long-term liabilities		1,114			1,044
Stockholders’ equity
Common stock, $0.001 par value; Authorized — 50,000 shares, issued and outstanding 12,633 as of January 3, 2015 and 12,886 as of October 3, 2015		13			13
Additional paid-in capital		61,613			78,152
Retained earnings		166,406			237,111
Accumulated other comprehensive income		2,132			(1,887		)
Total stockholders’ equity		230,164			313,389
		$	350,584		$	438,928

 

The accompanying notes are an integral part of these statements.

 

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USANA HEALTH SCIENCES, INC. AND SUBSIDIARIES

 

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

 

(in thousands, except per share data)

(unaudited)

 

		Quarter Ended						Nine Months Ended
		September 27,			October 3,			September 27,			October 3,
		2014			2015			2014			2015
Net sales		$	191,944		$	233,292		$	562,601		$	685,914
Cost of sales		34,585			41,048			103,278			119,501
Gross profit		157,359			192,244			459,323			566,413
Operating expenses:
Associate incentives		82,605			101,521			242,577			304,751
Selling, general and administrative		45,499			52,757			133,282			155,137
Total operating expenses		128,104			154,278			375,859			459,888
Earnings from operations		29,255			37,966			83,464			106,525
Other income (expense):
Interest income		8			367			435			753
Interest expense		(5		)	(4		)	(11		)	(11		)
Other, net		(300		)	78			(299		)	(219		)
Other income (expense), net		(297		)	441			125			523
Earnings before income taxes		28,958			38,407			83,589			107,048
Income taxes		9,460			12,798			28,253			36,343
Net earnings		$	19,498		$	25,609		$	55,336		$	70,705
Earnings per common share
Basic		$	1.51		$	1.99		$	4.09		$	5.55
Diluted		$	1.47		$	1.92		$	3.96		$	5.35
Weighted average common shares outstanding
Basic		12,873			12,852			13,520			12,747
Diluted		13,263			13,317			13,964			13,209
Comprehensive income:
Net earnings		$	19,498		$	25,609		$	55,336		$	70,705
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustment		(198		)	(4,990		)	(1,058		)	(6,374		)
Tax benefit (expense) related to foreign currency translation adjustment		57			1,831			447			2,355
Other comprehensive income (loss), net of tax		(141		)	(3,159		)	(611		)	(4,019		)
Comprehensive income		$	19,357		$	22,450		$	54,725		$	66,686

 

The accompanying notes are an integral part of these statements.

 

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USANA HEALTH SCIENCES, INC. AND SUBSIDIARIES

 

CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY

Nine Months Ended October 3, 2015

 

(in thousands)

(unaudited)

 

													Accumulated
							Additional						Other
		Common Stock					Paid-in			Retained			Comprehensive
		Shares		Value			Capital			Earnings			Income (Loss)			Total
Balance at January 3, 2015		12,633		$	13		$	61,613		$	166,406		$	2,132		$	230,164
Net earnings										70,705						70,705
Other comprehensive income (loss), net of tax													(4,019		)	(4,019		)
Equity-based compensation expense							6,952									6,952
Common stock issued under equity award plans		253														—
Tax benefit from equity award activity							9,587									9,587
Balance at October 3, 2015		12,886		$	13		$	78,152		$	237,111		$	(1,887	)	$	313,389

 

The accompanying notes are an integral part of these statements.

 

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USANA HEALTH SCIENCES, INC. AND SUBSIDIARIES

 

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

 

(in thousands)

(unaudited)

 

		Nine Months Ended
		September 27,			October 3,
		2014			2015
Cash flows from operating activities
Net earnings		$	55,336		$	70,705
Adjustments to reconcile net earnings to net cash provided by (used in) operating activities
Depreciation and amortization		6,685			7,284
(Gain) loss on sale of property and equipment		31			1
Equity-based compensation expense		5,929			6,952
Excess tax benefits from equity-based payment arrangements		(3,996		)	(9,739		)
Deferred income taxes		(849		)	(1,993		)
Changes in operating assets and liabilities:
Inventories		4,956			(18,432		)
Prepaid expenses and other assets		(524		)	(565		)
Income tax payable related to tax benefit from equity award activity		3,926			9,587
Accounts payable		(3,249		)	1,868
Other liabilities		(850		)	8,849
Net cash provided by (used in) operating activities		67,395			74,517
Cash flows from investing activities
Additions to notes receivable		(3,159		)	(1,579		)
Purchases of investment securities held-to-maturity		(3,871		)	—
Maturities of investment securities		12,511			—
Proceeds from sale of property and equipment		10			182
Purchases of property and equipment		(13,266		)	(16,468		)
Net cash provided by (used in) investing activities		(7,775		)	(17,865		)
Cash flows from financing activities
Excess tax benefits from equity-based payment arrangements		3,996			9,739
Repurchase of common stock		(122,662		)	—
Borrowings on line of credit		10,000			—
Net cash provided by (used in) financing activities		(108,666		)	9,739
Effect of exchange rate changes on cash and cash equivalents		(559		)	(3,322		)
Net increase (decrease) in cash and cash equivalents		(49,605		)	63,069
Cash and cash equivalents, beginning of period		137,343			111,126
Cash and cash equivalents, end of period		$	87,738		$	174,195
Supplemental disclosures of cash flow information
Cash paid during the period for:
Interest		$	11		$	11
Income taxes		11,716			18,918
Non-cash investing activities:
Credits on notes receivable		600			466
Accrued purchases of property and equipment		—			1,906
Non-cash financing activities:
Unsettled trades for repurchase of common stock		(2,990		)	—

 

The accompanying notes are an integral part of these statements.

 

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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

 

USANA Health Sciences, Inc. develops and manufactures high-quality nutritional and personal care products that are sold internationally through a global 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: Asia Pacific, and Americas and Europe.  Asia Pacific is further divided into three sub-regions: Greater China, Southeast Asia Pacific, and North Asia. Greater China includes Hong Kong, Taiwan and China; Southeast Asia Pacific includes Australia, New Zealand, Singapore, Malaysia, the Philippines, and Thailand; North Asia includes Japan, and South Korea.  Americas and Europe includes the United States, Canada, Mexico, Colombia, the United Kingdom, France, Belgium, and the Netherlands.  All intercompany accounts and transactions have been eliminated in this consolidation.

 

The condensed consolidated balance sheet as of January 3, 2015, derived from audited consolidated 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 (“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 any 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 management, the accompanying interim 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 3, 2015 and results of operations for the quarters and nine months ended September 27, 2014 and October 3, 2015.

 

The interim consolidated 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 3, 2015.  The results of operations for the quarter and nine months ended October 3, 2015, may not be indicative of the results that may be expected for the fiscal year 2015 ending January 2, 2016.

 

Recent Accounting Pronouncements

 

In May 2014, the Financial Accounting Standards Board (“FASB”) issued an Accounting Standard Update (“ASU”) No. 2014-09, “Revenue from Contracts with Customers (Topic 606).” ASU 2014-09 includes a five-step process by which entities will recognize revenue to depict the transfer of goods or services to customers in amounts that reflect the consideration to which an entity expects to be entitled in exchange for those goods or services.  The standard also will require enhanced disclosures to enable users of financial statements to understand the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. In July 2015, the FASB announced a decision to defer the effective date of this ASU. ASU 2014-09 is effective for annual and interim reporting periods beginning after December 15, 2017, with early adoption permitted for annual and interim reporting periods beginning after December 15, 2016.  The Company is currently evaluating the impact ASU 2014-09 will have on its consolidated financial statements.

 

In July 2015, the FASB issued ASU No. 2015-11, “Simplifying the Measurement of Inventory”.  For entities that do not measure inventory using the last-in, first-out or retail inventory method, ASU 2015-11 changes the measurement principle for inventory from the lower of cost or market to lower of cost and net realizable value, where net realizable value is the estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal and transportation. The ASU is effective for annual and interim reporting periods beginning after December 15, 2016.  The Company is currently evaluating the impact ASU 2015-11 will have on its consolidated financial statements.

 

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USANA HEALTH SCIENCES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS) (Continued)

(in thousands, except per share data)

(unaudited)

 

NOTE B — 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.

 

As of the dates indicated, the following financial assets and liabilities were measured at fair value on a recurring basis using the type of inputs shown:

 

					Fair Value Measurements Using
					Inputs
		January 3, 2015			Level 1			Level 2			Level 3
Money market funds included in cash equivalents		$	4,833		$	4,833		$	—		$	—

 

					Fair Value Measurements Using
					Inputs
		October 3, 2015			Level 1			Level 2			Level 3
Money market funds included in cash equivalents		$	20,462		$	20,462		$	—		$	—

 

There were no transfers of financial assets or liabilities between Level 1 and Level 2 inputs for the periods indicated.

 

The majority of the Company’s non-financial assets, which include goodwill, intangible assets, and property and equipment, are not required to be carried at fair value on a recurring basis. However, if certain triggering events occur (or tested at least annually for goodwill and indefinite-lived intangibles) such that a non-financial asset is required to be evaluated for impairment, an impairment charge is recorded to reduce the carrying value to the fair value, if the carrying value exceeds the fair value. At January 3, 2015 and October 3, 2015, there were no non-financial assets measured at fair value on a non-recurring basis.

 

The Company’s financial instruments include cash equivalents, accounts receivable, restricted cash, notes receivable, and accounts payable. The recorded values of cash equivalents, accounts receivable, restricted cash, and accounts payable approximate their fair values, based on their short-term nature. The carrying value of the notes receivable approximate fair value because the variable interest rates in the notes reflect current market rates.

 

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USANA HEALTH SCIENCES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS) (Continued)

(in thousands, except per share data)

(unaudited)

NOTE C — INVENTORIES

 

Inventories consist of the following:

 

		January 3,			October 3,
		2015			2015
Raw materials		$	15,127		$		19,722
Work in progress		7,545			8,785
Finished goods		22,576			33,073
		$	45,248		$	61,580

 

NOTE D — INTANGIBLE ASSETS

 

The Company performed its annual goodwill impairment test during the third quarter of 2015. 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 each reporting unit was less than its carrying amount. As a result, the two-step goodwill impairment test was not required and no impairments of goodwill were recognized.

 

The Company performed its annual indefinite-lived intangible asset impairment test during the third quarter of 2015.  The Company performed a qualitative assessment of the indefinite-lived intangible asset and determined that is 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, the quantitative impairment test was not required and no impairment was recognized.

 

Historically, the indefinite-lived intangible assets included the BabyCare direct sales license and BabyCare product formulas.  The Company evaluates the remaining useful life of the indefinite-lived intangible assets each reporting period to determine whether events and circumstances continue to support an indefinite useful life.  During the third quarter of 2015, a process was initiated in China to approve additional USANA products, which will limit the life of certain of the acquired BabyCare product formulas.  As a result, the product formulas intangible asset was determined to no longer have an indefinite life.  Accordingly, the product formulas intangible asset of $9,208 as of October 3, 2015 will be amortized prospectively on a straight-line basis over its estimated remaining useful life of 8 years.  Upon determining that the product formulas intangible asset no longer has an indefinite life, it was tested for impairment and no impairment was noted.

 

NOTE E — OTHER ASSETS

 

Other assets consists primarily of a secured loan to a third-party supplier of the Company’s nutrition bars and land use rights related to a production facility under development in China.

 

The Company has extended non-revolving credit to its supplier of nutrition bars to allow them to acquire equipment that is necessary to manufacture the USANA nutrition bars.  This relationship provides improved supply chain stability for USANA and creates a mutually beneficial relationship between the parties.  Notes receivable are valued at their unpaid principal balance plus any accrued but unpaid interest, which approximates fair value.  Interest accrues at an annual interest rate of LIBOR plus 400 basis points. The note has a maturity date of February 1, 2024 and will be repaid by a combination of cash payments and credits for the manufacture of USANA’s nutrition bars.  There is no prepayment penalty.  Notes receivable from this supplier as of January 3, 2015, and October 3, 2015 were $8,519 and $8,735, respectively.

 

This third-party supplier is considered to be a variable interest entity; however, the Company is not the primary beneficiary due to the inability to direct the activities that most significantly affect the third-party supplier’s economic performance. Additionally, the Company does not absorb a majority of the third-party supplier’s expected losses or returns. Consequentially, the financial information of the third-party supplier is not consolidated. The maximum exposure to loss as a

 

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USANA HEALTH SCIENCES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS) (Continued)

(in thousands, except per share data)

(unaudited)

 

NOTE E — OTHER ASSETS-CONTINUED

 

result of the Company’s involvement with the third-party supplier is limited to the carrying value of the note receivable due from the third-party supplier.

 

The Company is building a state-of-the-art manufacturing and production facility in China, which is expected to become operational in early 2016.  As part of this project, land use rights totaling $7,378, and $7,208 as of January 3, 2015 and October 3, 2015, respectively, have been purchased and are being amortized over 50 years.

 

NOTE F — LINE OF CREDIT

 

The Company has a $75,000 line of credit with Bank of America. Interest is computed at the bank’s Prime Rate or LIBOR, adjusted by features specified in the Credit Agreement. The collateral for this line of credit is the pledge of the capital stock of certain subsidiaries of the Company, set forth in a separate pledge agreement with the bank. Part of the credit agreement is that any existing bank guarantees are considered a reduction of the overall availability of credit and part of the covenant calculation. This resulted in a $4,575, and $4,279 reduction in the available borrowing limit as of January 3, 2015 and October 3, 2015, respectively, due to existing normal course of business guarantees in certain markets. The Credit Agreement contains restrictive covenants based on adjusted EBITDA and a debt coverage ratio.

 

There was no outstanding debt on this line of credit at January 3, 2015 or at October 3, 2015.  The Company will be required to pay any balance on this line of credit in full at the time of maturity in April 2016 unless the line of credit is replaced or terms are renegotiated.

 

NOTE G — 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 our 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 has not accrued for any contingency at October 3, 2015 as the Company does not consider any contingency to be probable nor estimable. The Company faces contingencies that are reasonably possible to occur; however, they cannot currently be estimated. While complete assurance cannot be given 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.

 

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USANA HEALTH SCIENCES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS) (Continued)

(in thousands, except per share data)

(unaudited)

 

NOTE H — EQUITY BASED COMPENSATION

 

The Company utilizes a share-based compensation plan, which is more fully described in Note K to the Consolidated Financial Statements in Form 10-K for the year ended January 3, 2015.  The description provided applies to the Company’s 2006 Plan (“2006 Plan”), as well as its recently adopted 2015 Equity Incentive Award Plan (the “2015 Plan”).  The Company adopted the 2015 Plan to replace the 2006 Plan, which is set to expire in April of 2016.  The maximum number of shares of common stock available for issuance under the 2015 Plan is 5,000.  The Company began issuing awards under the 2015 Plan in the third quarter of 2015.

 

Equity-based compensation expense for the quarters ended September 27, 2014, and October 3, 2015, was $1,858, and $2,564 respectively.  The related tax benefit for these periods was $613, and $857, respectively.  Expense for the nine months ended September 27, 2014 and October 3, 2015, was $5,929 and $6,952, respectively. The related tax benefit for these periods was $1,973 and $2,340 respectively.

 

The following table shows the remaining unrecognized compensation expense on a pre-tax basis for all types of unvested equity awards outstanding as of October 3, 2015.  This table does not include an estimate for future grants that may be issued.

 

2015		$	4,223
2016		17,316
2017		16,187
2018		13,423
2019+		8,670
		$	59,819

 

The cost above is expected to be recognized over a weighted-average period of 3.6 years.

 

The Company uses the Black-Scholes option pricing model to estimate the fair value of its equity awards.  The weighted-average fair value of stock-settled stock appreciation rights that were granted during the nine months ended September 27, 2014, and October 3, 2015, was $17.92 and $47.43, respectively.  Following is a table that includes the weighted-average assumptions that the Company used to calculate fair value of equity awards that were granted during the periods indicated.

 

		Nine Months Ended
		September 27,			October 3,
		2014			2015
Expected volatility (1)		40.0		%	43.6		%
Risk-free interest rate (2)		1.2		%	1.3		%
Expected life (3)		3.55 yrs.			3.82 yrs.
Expected dividend yield (4)		0.0		%	0.0		%
Weighted-average exercise price (5)		$	58.04		$	135.97

 

(1) The Company utilizes historical volatility of the trading price of its common stock.

(2) Risk-free interest rate is based on the U.S. Treasury yield curve with respect to the expected life of the award.

(3) Depending upon the terms of the award, one of two methods will be used to calculate expected life:

(i) a weighted-average that includes historical settlement data of the Company’s equity awards and a hypothetical holding period, or (ii) the simplified method.

(4) The Company historically has not paid and currently has no plan to pay dividends.

(5) Exercise price is the closing price of the Company’s common stock on the date of grant.

 

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USANA HEALTH SCIENCES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS) (Continued)

(in thousands, except per share data)

(unaudited)

 

NOTE H — EQUITY BASED COMPENSATION - CONTINUED

 

A summary of the Company’s stock option and stock-settled stock appreciation right activity is as follows:

 

		Shares		Weighted- average exercise price			Weighted-average remaining contractual term		Aggregate intrinsic value*
Outstanding at January 3, 2015		1,555		$	49.20		2.9		$	82,564
Granted		1,018		135.97
Exercised		(353	)	36.57
Forfeited		(19	)	43.83
Expired		—		—
Outstanding at October 3, 2015		2,201		$	91.39		3.4		$	101,795
Exercisable at October 3, 2015		130		$	40.26		1.4		$	12,380

 

*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 3, 2015, and October 3, 2015, was $102.28 and $135.38, respectively.

 

The total intrinsic value of stock-settled stock appreciation rights exercised during the nine months ended September 27, 2014, and October 3, 2015, was $17,125 and $33,764, respectively.

 

The total fair value of equity awards that vested during the nine months ended September 27, 2014, and October 3, 2015, was $6,559 and $5,662, respectively.  This total fair value includes equity-based awards issued in the form of stock-settled stock appreciation rights.

 

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USANA HEALTH SCIENCES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS) (Continued)

(in thousands, except per share data)

(unaudited)

 

NOTE I — 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 based on the time they were outstanding in any period. 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.

 

The following is a reconciliation of the numerator and denominator used to calculate basic earnings per share and diluted earnings per share for the periods indicated:

 

		Quarter Ended						Nine Months Ended
		September 27,			October 3,			September 27,			October 3,
		2014			2015			2014			2015
Net earnings available to common shareholders		$	19,498		$	25,609		$	55,336		$	70,705
Weighted average common shares outstanding - basic		12,873			12,852			13,520			12,747
Dilutive effect of in-the-money equity awards		390			465			444			462
Weighted average common shares outstanding - diluted		13,263			13,317			13,964			13,209
Earnings per common share from net earnings - basic		$	1.51		$	1.99		$	4.09		$	5.55
Earnings per common share from net earnings - diluted		$	1.47		$	1.92		$	3.96		$	5.35

 

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
		September 27,		October 3,		September 27,		October 3,
		2014		2015		2014		2015
		414		361		357		196

 

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Table of Contents

 

USANA HEALTH SCIENCES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS) (Continued)

(in thousands, except per share data)

(unaudited)

 

NOTE J — SEGMENT INFORMATION

 

USANA operates 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 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 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
		September 27,		October 3,		September 27,		October 3,
		2014		2015		2014		2015
USANA® Nutritionals		78	%	80	%	79	%	81	%
USANA Foods		13	%	12	%	13	%	12	%
Sensé — beautiful science®		7	%	7	%	7	%	6	%

 

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

 

·                  Asia Pacific —

 

·                  Greater China — Hong Kong, Taiwan and China(1)

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

·                  North Asia — Japan and South Korea

 

·                 Americas and Europe — United States, Canada, Mexico, Colombia, the United Kingdom, France, Belgium, and the Netherlands.

 

(1) The Company’s business in China is that of BabyCare, its wholly-owned subsidiary.

 

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Table of Contents

 

USANA HEALTH SCIENCES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS) (Continued)

(in thousands, except per share data)

(unaudited)

 

NOTE J — SEGMENT INFORMATION - CONTINUED

 

Selected Financial Information

 

Financial information by geographic region is presented for the periods indicated below:

 

		Quarter Ended						Nine Months Ended
		September 27,			October 3,			September 27,			October 3,
		2014			2015			2014			2015
Net Sales to External Customers
Asia Pacific
Greater China		$	77,206		$	112,323		$	222,144		$	325,942
Southeast Asia Pacific		44,488			45,936			127,625			137,308
North Asia		8,527			9,920			23,633			29,495
Asia Pacific Total		130,221			168,179			373,402			492,745
Americas and Europe		61,723			65,113			189,199			193,169
Consolidated Total		$	191,944		$	233,292		$	562,601		$	685,914

 

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
		September 27,			October 3,			September 27,			October 3,
		2014			2015			2014			2015
Net sales:
China		$	50,385		$	95,147		$	140,368		$	273,433
United States		$	34,389		$	37,485		$	105,938		$	108,629
Hong Kong		N/A			N/A			$	57,686		N/A

 

		As of
		January 3,			October 3,
		2015			2015
Long-lived Assets:
China		$	81,704		$	85,269
United States		$	53,322		$	58,328

 

NOTE K — SUBSEQUENT EVENTS

 

Subsequent to October 3, 2015, and through November 10, 2015, the Company repurchased and retired 133 shares of common stock for a total investment of $17,588, at an average market price of $131.84 per share.

 

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