USANA Health Sciences Inc. (NYSE: USNA) announced financial results for its fiscal second quarter ended June 28, 2014. The Company also reiterated net sales and earnings guidance for 2014.

Financial performance
For the second quarter of 2014, net sales decreased slightly to $188.3 million, compared with $189.1 million in the prior-year period. Net sales, on a comparative basis, were negatively impacted by: $7.0 million of incremental sales in the second quarter of 2013 that occurred ahead of policy changes, which included restricting Associate purchases to their country of residence; $3.3 million from unfavorable changes in currency exchange rates, and price discounts that the Company implemented in 2013. The number of active Associates for the second quarter increased 11.4 percent year-over-year, and 6.8 percent sequentially, largely as a result of the initiatives implemented by the Company in 2013.

Net earnings for the second quarter were $19.3 million, compared with $24.2 million during the prior-year period. This decrease resulted from lower gross margins and higher operating expenses, which were due largely to the pricing and compensation plan initiatives implemented by the Company in 2013. Earnings per share for the quarter were $1.36, compared with $1.72 in the second quarter of the prior year. Weighted average diluted shares outstanding were 14.2 million in the second quarter of 2014, compared with 14.1 million in the prior-year period. During the quarter, the Company accelerated its share repurchase activity by repurchasing approximately 682,000 shares under its authorized repurchase program for a total investment of $49.1 million. Additionally, as of July 25, 2014, the Company has spent $21.4 million during the month of July to repurchase approximately 285,000 shares pursuant to a Rule 10b5-1 trading plan. As of July 25, 2014, there was $129.5 million remaining under the current share repurchase authorization. The Company ended the quarter debt–free with approximately $118.3 million in cash and cash equivalents.

“USANA generated solid results during the second quarter, notwithstanding several factors that created a challenging year-over-year comparable,” said Dave Wentz, USANA’s CEO. “In 2013, we made a number of important changes to our business, including world-wide policy changes, enhancements to our Associate compensation plan and pricing initiatives. These changes have improved our core business by generating double digit year-over-year increases in our customer counts, Auto Order sales and check earners. As we anticipated and previously communicated, these changes have also created tough year-over-year comparables in 2014 and have caused our financial results to trail our operational progress. As we execute our 2014 strategies, we are confident that our performance will continue to accelerate during the second half of the year and we will deliver another year of record results in 2014. We are also committed to returning value to shareholders through our share repurchase program.”

Regional results
Net sales in the Asia Pacific region increased by 1.8 percent to $124.6 million, compared with $122.4 million for the second quarter of the prior year. This improvement was due to nearly 14 percent sales growth in the Southeast Asia Pacific region, which was driven by sales and customer growth in every market in the region. Net sales in the Greater China region decreased 4.3 percent on a year-over-year basis, due to nearly $7.0 million in incremental sales during the second quarter of 2013 that occurred ahead of policy changes, which included restricting Associate purchases to their country of residence. Sequentially, net sales in the Greater China region increased 4.6 percent due to double-digit sales and customer growth in China. The number of active Associates in the Asia Pacific region increased by 16.9 percent year-over-year, due to double-digit Associate growth in the Greater China and Southeast Asia Pacific regions.

Net sales in the Americas/Europe region declined 4.7 percent to $63.7 million, due primarily to a sales decline in the U.S., which was partially offset by net sales growth in other markets in the region. The number of active Associates in this region was flat.

“Our business continues to produce strong results in Asia Pacific, as nearly every market in this region delivered sales and customer growth during the quarter. As we anticipated, our performance in China accelerated during the quarter and produced double-digit sales and customer growth compared to the prior quarter. We expect our results in China to continue to accelerate as the year progresses and remain confident in our long-term growth potential in this important market. We also have initiatives planned for the second-half of 2014 that are designed to drive sales and customer growth in each of our regions, with an emphasis on North America and the United States in particular. We look forward to hosting our 22ndAnnual International Convention in August, where we will make several exciting announcements,” concluded Mr. Wentz.

Outlook

Chief Financial Officer Paul Jones commented, “During the second quarter, we faced difficult year-over-year comparables, yet generated strong results. We expect our financial performance to accelerate during the second half of 2014, as we execute initiatives to produce world-wide growth and operational efficiency, and we are reiterating our previously issued guidance. We also believe that these initiatives will provide sustainable growth for the Company over the long-term.”

Kevin Guest named company president
Kevin G. Guest, 51, has been promoted to president of USANA world-wide effective Aug. 1, 2014. Mr. Guest will focus his efforts on sales growth, customer growth and sales force development. Mr. Guest has been with the Company since 2003 and has served in a variety of leadership positions within the Company over the last 11 years. Most recently, he has served as president of the Americas, Europe and South Pacific since October 2012, where he has designed and executed initiatives that have generated growth in these regions.

“Kevin has been extensively involved with USANA since the Company was founded more than 20 years ago,” said Dave Wentz. “His vision for the business, dedication to customers and employees, and overall integrity and leadership have been and will continue to be invaluable to our organization,” concluded Wentz.

Beginning Aug. 3, 2014, Dave Wentz will reduce his time in the office for one year to spend more time with his family. During this time, Mr. Wentz will focus his efforts on strategic initiatives, business development, the True Health Foundation and customer events, including the Company’s international and regional conventions. He intends to return to his full-time role on Aug. 3, 2015.