usna20211002

usna20211002_10q.htm

Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

______________________

FORM 10-Q

(Mark One)

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended October 2, 2021

☐ 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)

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)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock	USNA	New York Stock Exchange

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 ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ☒	Accelerated filer ☐
Non-accelerated filer ☐	Smaller reporting company ☐
	Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) 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 ☐ No ☒

As of November 5, 2021, there were outstanding 19,461,908 shares of the registrant’s common stock, $0.001 par value.

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USANA HEALTH SCIENCES, INC.

FORM 10-Q

For the Quarterly Period Ended October 2, 2021

TABLE OF CONTENTS

		Page
Cautionary Note Regarding Forward-Looking Statements and Certain Risks		1
PART I. FINANCIAL INFORMATION
Item 1	Financial Statements (unaudited)	2
	Condensed Consolidated Balance Sheets	2
	Condensed Consolidated Statements of Comprehensive Income	3
	Condensed Consolidated Statements of Stockholders’ Equity	4
	Condensed Consolidated Statements of Cash Flows	6
	Notes to Condensed Consolidated Financial Statements	7 - 12
Item 2	Management’s Discussion and Analysis of Financial Condition and Results of Operations	13 - 20
Item 3	Quantitative and Qualitative Disclosures About Market Risk	20
Item 4	Controls and Procedures	20
PART II. OTHER INFORMATION
Item 1	Legal Proceedings	21
Item 1A	Risk Factors	21
Item 2	Unregistered Sales of Equity Securities and Use of Proceeds	21
Item 3	Defaults Upon Senior Securities	22
Item 4	Mine Safety Disclosures	22
Item 5	Other Information	22
Item 6	Exhibits	22
Signatures		23

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Cautionary Note Regarding Forward-Looking Statements and Certain Risks

This report, including “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part I, Item 2, contains “forward-looking statements” within the meaning of the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). We may also make forward-looking statements in other reports filed with the Securities and Exchange Commission (“SEC”), in materials delivered to shareholders and in press releases. In addition, our representatives may from time to time make oral forward-looking statements. All statements other than statements of historical fact are “forward-looking statements” for purposes of federal and state securities laws, including any projections of earnings, revenue or other financial items; any statements of the plans, strategies and objectives of management for future operations; any statements concerning proposed new products; any statements regarding future economic conditions or performance; any statements of belief; and any statements of assumptions underlying any of the foregoing. Forward-looking statements can be identified by words such as: “anticipate,” “intend,” “plan,” “seek,” “believe,” “project,” “estimate,” “expect,” “strategy,” “future,” “likely,” “may,” “should,” “will” and similar references to future periods. Forward-looking statements are neither historical facts nor assurances of future performance. Instead, they are based only on our current beliefs, expectations and assumptions regarding the future of our business, plans and strategies, projections, anticipated events and trends, the economy and other future conditions. Because forward-looking statements relate to the future, they are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict and many of which are outside of our control. Our actual results and financial condition may differ materially from those indicated in the forward-looking statements. Therefore, you should not rely unduly on forward-looking statements.

Although we believe that the expectations reflected in our forward-looking statements are reasonable, actual results could differ materially from those we project or assume in our forward-looking statements. Our future financial condition and results of operations, as well as any forward-looking statements, are subject to change and to inherent risks and uncertainties, such as those disclosed or incorporated by reference in our filings with the SEC. Any forward-looking statement made by us in this report is based only on information currently available to us and speaks only as of the date hereof. We undertake no obligation to publicly update or revise any forward-looking statement, whether written or oral, that may be made from time to time, whether as a result of new information, future developments, the occurrence of unanticipated events or otherwise. Important factors that could cause our actual results, performance and achievements to differ materially from estimates or projections contained in our forward-looking statements in this report include, among others, the following:

●

Our dependence upon the direct selling business model to distribute our products and the activities of our independent Associates;

●

Extensive regulation of our business model and uncertainties relating to the interpretation and enforcement of applicable laws and regulations governing direct selling and anti-pyramiding, particularly in the United States and China;

●

The operation and expansion of our business in China through our subsidiary, BabyCare Holdings, Ltd. (“BabyCare”), including risks related to (i) operating in China in general, (ii) engaging in direct selling in China, (iii) BabyCare’s business model in China, and (iv) changes in the Chinese economy, marketplace or consumer environment;

●

Unanticipated effects of changes to our Compensation Plan;

●

Challenges associated with our planned expansion into new international markets, delays in commencement of sales or product offerings in such markets, delays in compliance with local marketing or other regulatory requirements, or changes in target markets;

●

Uncertainty related to the magnitude, scope and duration of the impact of the novel strain coronavirus COVID-19 pandemic (“COVID-19” or the “COVID-19 pandemic”) to our business, operations and financial results, including, for example, additional regulatory measures or voluntary actions that may be put in place to limit the spread of COVID-19 in the markets where we operate, such as restrictions on business operations, shelter at home, or social distancing requirements;

●

Political events, natural disasters, pandemics, epidemics or other health crises including, and in addition to, COVID-19 or other events that may negatively affect economic conditions, consumer spending or consumer behavior;

	●	Changes to trade policies and tariffs, the impact of customs, duties, taxation, and transfer pricing regulations, as well as regulations governing distinctions between and our responsibilities to employees and independent contractors;

	●	Deterioration in foreign relations, as well as international disputes, or tensions, between the United States and other countries, including China;

●

Volatile fluctuation in the value of foreign currencies against the U.S. dollar;

●

Noncompliance by us or our Associates with any data privacy laws or any security breach by us or a third party involving the misappropriation, loss, destruction or other unauthorized use or disclosure of confidential information;

●

Shortages of raw materials, disruptions in the business of our contract manufacturers, significant price increases of key raw materials, significant price increases of freight and transportation, meaningful delays in freight and shipping, and other disruptions to our supply chain; and

●

Our continued compliance with debt covenants in our Credit Facility.

Important information as to these factors can be found in this document, including, among other sections, in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” under the headings of “Overview,” and “Financial Condition and Liquidity.” Discussion of these factors is incorporated by reference from Part I, Item 1A, “Risk Factors,” of this document, and should be considered an integral part of Part I, Item 2, “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” For additional information concerning factors that may cause actual results to vary materially from those stated in the forward-looking statements, see our reports on Form 10-K, 10-Q and 8-K filed with the SEC from time to time.

Unless otherwise indicated or otherwise required by the context, the terms “we,” “our,” “it,” “its,” “Company,” and “USANA” refer to USANA Health Sciences, Inc. and its wholly-owned subsidiaries. USANA Health Sciences, Inc. and its subsidiaries’ names, abbreviations thereof, logos, and product and service designators are all either the registered or unregistered trademarks or tradenames of USANA Health Sciences, Inc. and its subsidiaries. Names, abbreviations of names, logos, and products and service designators of other companies are either the registered or unregistered trademarks or tradenames of their respective owners. References to internet websites in this Form 10-Q are provided for convenience only. Information available through these websites is not incorporated by reference into this Form 10-Q.

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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*
	*October 2,*			*January 2,*
	*2021*			*2021*
ASSETS
Current assets
Cash and cash equivalents	$	248,695		$	311,917
Inventories		96,316			90,224
Prepaid expenses and other current assets		23,414			23,145
Total current assets		368,425			425,286
Property and equipment, net		100,957			100,445
Goodwill		17,510			17,367
Intangible assets, net		30,312			30,796
Deferred tax assets		5,465			4,640
Other assets		56,277			62,353
	$	578,946		$	640,887
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable	$	13,706		$	18,195
Other current liabilities		144,258			149,878
Total current liabilities		157,964			168,073
Deferred tax liabilities		7,840			12,009
Other long-term liabilities		14,063			19,155
Stockholders' equity
Common stock, $0.001 par value; Authorized -- 50,000 shares, issued and outstanding 19,646 as of October 2, 2021 and 21,038 as of January 2, 2021		20			21
Additional paid-in capital		50,946			62,460
Retained earnings		349,586			382,794
Accumulated other comprehensive income (loss)		(1,473	)		(3,625	)
Total stockholders' equity		399,079			441,650
	$	578,946		$	640,887

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*
	*October 2,*			*September 26,*			*October 2,*			*September 26,*
	*2021*			*2020*			*2021*			*2020*
Net sales	$	274,352		$	298,513		$	919,165		$	824,123
Cost of sales		50,715			56,358			165,380			150,091
Gross profit		223,637			242,155			753,785			674,032
Operating expenses:
Associate incentives		116,222			131,144			404,580			358,065
Selling, general and administrative		66,645			65,656			210,518			192,014
Total operating expenses		182,867			196,800			615,098			550,079
Earnings from operations		40,770			45,355			138,687			123,953
Other income (expense):
Interest income		487			460			1,926			1,879
Interest expense		(18	)		(1,377	)		(39	)		(1,615	)
Other, net		(889	)		(163	)		(1,578	)		(800	)
Other income (expense), net		(420	)		(1,080	)		309			(536	)
Earnings before income taxes		40,350			44,275			138,996			123,417
Income taxes		13,020			13,769			42,811			38,382
Net earnings	$	27,330		$	30,506		$	96,185		$	85,035

Earnings per common share
Basic	$	1.37		$	1.45		$	4.72		$	4.01
Diluted	$	1.36		$	1.44		$	4.68		$	4.00

Weighted average common shares outstanding
Basic		19,961			21,043			20,367			21,191
Diluted		20,156			21,170			20,566			21,283

Comprehensive income:
Net earnings	$	27,330		$	30,506		$	96,185		$	85,035
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustment		(776	)		6,381			(448	)		2,005
Tax benefit (expense) related to foreign currency translation adjustment		259			(331	)		2,600			(1,184	)
Other comprehensive income (loss), net of tax		(517	)		6,050			2,152			821
Comprehensive income	$	26,813		$	36,556		$	98,337		$	85,856

The accompanying notes are an integral part of these statements.

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USANA HEALTH SCIENCES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(in thousands)

(unaudited)

For nine months ended September 26, 2020
													*Accumulated*
							*Additional*						*Other*
	*Common Stock*						*Paid-in*			*Retained*			*Comprehensive*
	*Shares*			*Value*			*Capital*			*Earnings*			*Income (Loss)*			*Total*
Balance at December 28, 2019		21,655		$	22		$	59,445		$	306,146		$	(13,901	)	$	351,712
Net earnings											85,035						85,035
Other comprehensive income (loss), net of tax														821			821
Equity-based compensation expense								10,519									10,519
Common stock repurchased and retired		(785	)		(1	)		(9,012	)		(48,016	)					(57,029	)
Common stock issued under equity award plans		150			—												—
Tax withholding for net-share settled equity awards								(1,941	)								(1,941	)
Balance at September 26, 2020		21,020		$	21		$	59,011		$	343,165		$	(13,080	)	$	389,117

For nine months ended October 2, 2021
													*Accumulated*
							*Additional*						*Other*
	*Common Stock*						*Paid-in*			*Retained*			*Comprehensive*
	*Shares*			*Value*			*Capital*			*Earnings*			*Income (Loss)*			*Total*
Balance at January 2, 2021		21,038		$	21		$	62,460		$	382,794		$	(3,625	)	$	441,650
Net earnings											96,185						96,185
Other comprehensive income (loss), net of tax														2,152			2,152
Equity-based compensation expense								11,039									11,039
Common stock repurchased and retired		(1,548	)		(1	)		(19,512	)		(129,393	)					(148,906	)
Common stock issued under equity award plans		156			—												—
Tax withholding for net-share settled equity awards								(3,041	)								(3,041	)
Balance at October 2, 2021		19,646		$	20		$	50,946		$	349,586		$	(1,473	)	$	399,079

The accompanying notes are an integral part of these statements.

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USANA HEALTH SCIENCES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(in thousands)

(unaudited)

For the three months ended September 26, 2020
										*Accumulated*
					*Additional*					*Other*
	*Common Stock*				*Paid-in*			*Retained*		*Comprehensive*
	*Shares*		*Value*		*Capital*			*Earnings*		*Income (Loss)*			*Total*
Balance at June 27, 2020		21,017	$	21	$	55,526		$	312,659	$	(19,130	)	$	349,076
Net earnings									30,506					30,506
Other comprehensive income (loss), net of tax											6,050			6,050
Equity-based compensation expense						3,528								3,528
Common stock issued under equity award plans		3		—										—
Tax withholding for net-share settled equity awards						(43	)							(43	)
Balance at September 26, 2020		21,020	$	21	$	59,011		$	343,165	$	(13,080	)	$	389,117

For the three months ended October 2, 2021
												*Accumulated*
						*Additional*						*Other*
	*Common Stock*					*Paid-in*			*Retained*			*Comprehensive*
	*Shares*			*Value*		*Capital*			*Earnings*			*Income (Loss)*			*Total*
Balance at July 3, 2021		20,134		$	20	$	53,909		$	365,650		$	(956	)	$	418,623
Net earnings										27,330						27,330
Other comprehensive income (loss), net of tax													(517	)		(517	)
Equity-based compensation expense							3,454									3,454
Common stock repurchased and retired		(523	)		—		(6,357	)		(43,394	)					(49,751	)
Common stock issued under equity award plans		35			—											—
Tax withholding for net-share settled equity awards							(60	)								(60	)
Balance at October 2, 2021		19,646		$	20	$	50,946		$	349,586		$	(1,473	)	$	399,079

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*
	*October 2,*			*September 26,*
	*2021*			*2020*
Cash flows from operating activities
Net earnings	$	96,185		$	85,035
Adjustments to reconcile net earnings to net cash provided by (used in) operating activities
Depreciation and amortization		9,754			10,513
Right-of-use asset amortization		6,778			6,479
(Gain) loss on sale of property and equipment		45			145
Equity-based compensation expense		11,039			10,519
Deferred income taxes		(2,603	)		(4,623	)
Changes in operating assets and liabilities:
Inventories		(8,608	)		(8,858	)
Prepaid expenses and other assets		1,650			(7,259	)
Accounts payable		(4,223	)		2,179
Other liabilities		(13,712	)		18,356
Net cash provided by (used in) operating activities		96,305			112,486
Cash flows from investing activities
Receipts on notes receivable		116			236
Proceeds from the settlement of net investment hedges		—			1,935
Payments for net investment hedge		(1,555	)		(1,089	)
Proceeds from sale of property and equipment		15			—
Purchases of property and equipment		(9,610	)		(13,610	)
Net cash provided by (used in) investing activities		(11,034	)		(12,528	)
Cash flows from financing activities
Repurchase of common stock		(145,926	)		(57,029	)
Borrowings on line of credit		—			60,000
Payments on line of credit		—			(60,000	)
Payments related to tax withholding for net-share settled equity awards		(3,041	)		(1,941	)
Net cash provided by (used in) financing activities		(148,967	)		(58,970	)
Effect of exchange rate changes on cash, cash equivalents, and restricted cash		(351	)		2,672
Net increase (decrease) in cash, cash equivalents, and restricted cash		(64,047	)		43,660
Cash, cash equivalents, and restricted cash at beginning of period		315,937			237,688
Cash, cash equivalents, and restricted cash at end of period	$	251,890		$	281,348
Reconciliation of cash, cash equivalents, and restricted cash to the consolidated balance sheets

Cash and cash equivalents	$	248,695		$	278,418
Restricted cash included in prepaid expenses and other current assets		93			—
Restricted cash included in other assets		3,102			2,930
Total cash, cash equivalents, and restricted cash	$	251,890		$	281,348
Supplemental disclosures of cash flow information
Cash paid during the period for:
Interest	$	8		$	1,556
Income taxes		49,065			43,789
Cash received during the period for:
Income tax refund		138			270
Non-cash investing and financing activities:
Right-of-use assets obtained in exchange for lease obligations		1,948			3,775
Accrued purchases of property and equipment		245			414
Unsettled trades for repurchase of common stock		2,980			—

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, science-based nutritional and personal care products that are sold internationally through a network marketing system, which is a form of direct selling. The Condensed Consolidated Financial Statements (the “Financial Statements”) include the accounts and operations of the Company, which are grouped and presented in two geographic regions: (1) Asia Pacific, and (2) Americas and Europe. Asia Pacific is further divided into three sub-regions: (i) Greater China, (ii) Southeast Asia Pacific, and (iii) North Asia.

(1) Asia Pacific -

(i) Greater China - Hong Kong, Taiwan, and China. The Company’s business in China is conducted by BabyCare Holdings, Ltd., the Company’s wholly-owned subsidiary.

(ii) Southeast Asia Pacific – Australia, New Zealand, Singapore, Malaysia, the Philippines, Thailand, and Indonesia.

(iii) North Asia – Japan and South Korea.

(2) Americas and Europe – United States, Canada, Mexico, Colombia, the United Kingdom, France, Germany, Spain, Italy, Romania, Belgium, and the Netherlands.

The condensed consolidated balance sheet as of January 2, 2021, derived from audited consolidated financial statements, and the unaudited interim condensed consolidated financial information of the Company have been prepared in accordance with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X promulgated by the SEC. Accordingly, certain information and disclosures that are normally included in financial statements 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 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 the Company’s management, the accompanying interim condensed 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 2, 2021 and results of operations and cash flows for the three and nine months ended October 2, 2021 and September 26, 2020.

The interim 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 2, 2021. The results of operations for the three and nine months ended October 2, 2021 are not necessarily indicative of the results that may be expected for the fiscal year ending January 1, 2022.

The COVID-19 pandemic has negatively impacted economies, businesses, sales practices, supply chains, and consumer behavior around the world. These factors and other events related to COVID-19 have created meaningful disruptions in both the Company's sales and operations for the three and nine months ended October 2, 2021, and for fiscal 2020. At this time, the Company is unable to predict the impact that COVID-19 will have on its business, financial position and operating results in future periods due to numerous uncertainties and is closely monitoring the impact of the pandemic on all aspects of its business.

Recent Accounting Pronouncements

Adopted accounting pronouncements

In December 2019, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2019-12, “Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes.” ASU 2019-12 is intended to simplify various aspects related to accounting for income taxes by removing certain exceptions to the general principles in Topic 740 and clarifying certain aspects of the current guidance to promote consistency among reporting entities. The amendments in this ASU are effective for annual periods beginning after December 15, 2020 and interim periods within those annual periods, with early adoption permitted. Most amendments within this ASU are required to be applied on a prospective basis, while certain amendments must be applied on a retrospective or modified retrospective basis. The Company adopted ASU 2019-12 during the first quarter ended April 3, 2021 and the adoption of the standard did not have an impact on its condensed consolidated financial statements.

In January 2021, the FASB issued ASU No. 2021-01 “Reference Rate Reform (Topic 848): Scope,” which clarifies that certain optional expedients and exceptions in Topic 848 for contract modifications and hedge accounting apply to derivatives that are affected by the discounting transition. Specifically, certain provisions in Topic 848, if elected by an entity, apply to derivative instruments that use an interest rate for margining, discounting, or contract price alignment that is modified as a result of reference rate reform. Amendments in this ASU to the expedients and exceptions in Topic 848 capture the incremental consequences of the scope clarification and tailor the existing guidance to derivative instruments affected by the discounting transition. The amendments in this ASU do not apply to contract modifications made after December 31, 2022, new hedging relationships entered into after December 31, 2022, and existing hedging relationships evaluated for effectiveness in periods after December 31, 2022, except for hedging relationships existing as of December 31, 2022, that apply certain optional expedients in which the accounting effects are recorded through the end of the hedging relationship (including periods after December 31, 2022). The amendments in this ASU are effective immediately for all entities. An entity may elect to apply the amendments in this ASU on a full retrospective basis as of any date from the beginning of an interim period that includes or is subsequent to March 12, 2020, or on a prospective basis to new modifications from any date within an interim period that includes or is subsequent to the date of the issuance of a final ASU, up to the date that financial statements are available to be issued. The Company, on January 7, 2021, adopted ASU 2021-01 on a prospective basis and the adoption of this ASU did not have an impact on its condensed consolidated financial statements.

No other new accounting pronouncement issued or effective during the three and nine months ended October 2, 2021, had, or is expected to have, a material impact on the Company’s condensed 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*
	*October 2,*		*Inputs*
	*2021*		*Level 1*		*Level 2*		*Level 3*
Money market funds included in cash equivalents	$	169,604	$	169,604	$	—	$	—
Foreign currency contracts included in prepaid expenses and other current assets		187		—		187		—
	$	169,791	$	169,604	$	187	$	—

				*Fair Value Measurements Using*
	*January 2,*			*Inputs*
	*2021*			*Level 1*		*Level 2*			*Level 3*
Money market funds included in cash equivalents	$	224,092		$	224,092	$	—		$	—
Foreign currency contracts included in other current liabilities		(1,470	)		—		(1,470	)		—
	$	222,622		$	224,092	$	(1,470	)	$	—

There were no transfers of financial assets or liabilities between levels of the fair value hierarchy for the periods indicated.

The majority of the Company’s non-financial assets, which include long-lived assets, are not required to be carried at fair value on a recurring basis. However, if an impairment charge is required, a non-financial asset would be written down to fair value. As of October 2, 2021 and January 2, 2021, 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, equity securities, accounts payable, and foreign currency contracts. The recorded values of cash equivalents, accounts receivable, restricted cash, and accounts payable approximate their fair values, based on their short-term nature.

Table of Contents

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:


	*October 2,*		*January 2,*
	*2021*		*2021*
Raw materials	$	30,931	$	28,328
Work in progress		10,377		9,956
Finished goods		55,008		51,940
	$	96,316	$	90,224

NOTE D – INVESTMENT IN EQUITY SECURITIES

As of October 2, 2021 and January 2, 2021, the carrying amount of equity securities without readily determinable fair values was $20,000 and is included in the “Other assets” line item on the Company’s condensed consolidated balance sheets.

During the three and nine months

SEC Form 10-Q filed by USANA Health Sciences, Inc.