USANA Health Sciences Inc. (NYSE: USNA) announced financial results for its fiscal first quarter ended March 29, 2014. The Company also updated net sales and earnings guidance for 2014.

Financial performance
For the first quarter of 2014, net sales increased by 7.9 percent to $182.4 million, compared with $169.1 million in the prior-year period. The increase in net sales was driven by overall customer growth of more than 16.0 percent, which was largely due to the initiatives implemented by the Company in 2013. Net sales growth, however, was negatively impacted by unfavorable changes in currency exchange rates, which reduced net sales for the quarter by $5.0 million, as approximately 80 percent of the Company’s sales are outside of the U.S. The challenging media and regulatory environment that emerged in China during the quarter also negatively impacted net sales.

Net earnings for the first quarter were $16.5 million, a 7.0 percent decrease, compared with the prior-year period. This decrease resulted primarily from higher Associate Incentives expense due to the pricing and compensation plan initiatives implemented in 2013. Earnings per share for the quarter decreased 10.2 percent to $1.15, compared with $1.28 in the first quarter of the prior year. This decrease was attributed to lower net earnings and a higher number of diluted shares outstanding. Weighted average diluted shares outstanding were 14.4 million in the first quarter of 2014, compared with 13.9 million in the prior-year period. Additionally, the Company ended the quarter debt-free.

“Our business generated solid results in the first quarter, as evidenced by our double-digit growth in customers, world-wide unit volume and auto order volume,” said Dave Wentz, USANA’s chief executive officer. “Growth in each of these indicators is important to our business, but customer growth is our highest priority and it is encouraging to see this metric accelerate as a result of our 2013 initiatives. While these initiatives are producing the intended effect on customer growth, they have also created some pressure on our operating margin through lower gross margins and higher Associate Incentives expense, which we anticipated. Additionally, an unfavorable shift in currency exchange rates and the challenging environment that emerged in China pressured our financial performance for the quarter. I’m pleased with USANA’s performance in light of these factors.”

Regional results
Net sales in the Asia Pacific region increased by 13.0 percent to $118.6 million, compared with $104.9 million for the first quarter of the prior year. This improvement was due primarily to sales growth in the Greater China and Southeast Asia Pacific regions with China, Singapore and the Philippines experiencing the most meaningful growth. The Greater China region generated net sales growth in excess of 12 percent on a year-over-year basis. However, quarterly sequential sales for this region declined 1.1 percent due to the normal seasonality of the Chinese New Year, as well as the negative media and regulatory focus on businesses in the Company’s industry during the quarter.

Net sales in the Americas/Europe region were essentially flat at $63.8 million, compared with $64.1 million in the prior-year period, due primarily to a net sales decline in the U.S., which was partially offset by net sales growth in other markets in the region.

“As we anticipated, our business in several markets experienced the customary seasonal pressure of the Chinese New Year,” continued Mr. Wentz. “Additionally, the challenging environment that emerged in China during the quarter impacted our sales and customer growth in that market. Although we believe that the environment in China will continue to impact our short-term performance in that market, we remain confident in our growth opportunity in China and will continue to invest and build a sustainable business there. We also remain confident in the underlying strength of our world-wide business, and we expect the initiatives we put in place during 2013 will continue to drive long-term growth for the Company,” concluded Mr. Wentz.

Increased share repurchase authorization
The Board of Directors has authorized up to $200 million in funding for share repurchases by the Company of its outstanding common stock. This authorization is inclusive of the approximately $13.6 million that was remaining under the prior authorization as of the end of the first quarter of 2014. Repurchases may be made from time to time, in the open market, through block trades or otherwise. The number of shares to be purchased and the timing of purchases will be based on market conditions, the level of cash balances, general business opportunities, and other factors.

Outlook
The Company provided the following updated financial outlook for 2014:

Chief Financial Officer Paul Jones commented, “Although our first quarter results were impacted by a number of factors, we continue to expect our financial performance to accelerate as the year progresses. The pricing and Associate compensation plan initiatives we implemented in 2013, however, will continue to create a challenging year-over-year comparable for our financial performance. Additionally, we anticipate that the environment in China will continue to impact our growth in 2014 and have adjusted our outlook accordingly. We remain committed to growing our business in China and will continue to invest in this important market as part of our growth strategy. We will also continue to advance our personalization strategy around the world and leverage the initiatives we implemented during 2013 to drive long-term growth for the Company.”