~~USANA Health Sciences, Inc.~~

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 ~~“Company,” “we”, “us”, “our”~~“Exchange Act”) ~~is filing this amendment (this “Form 10-Q/A”) to our Quarterly Report on Form 10-Q for the quarter ended September 26, 2020 (the “Form 10-Q”),~~. We may also make forward-looking statements in other reports filed with the ~~U.S.~~ 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 ~~Commission”~~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			0												0
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			0												0
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		0										0
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	)		0		(6,357	)		(43,394	)					(49,751	)
Common stock issued under equity award plans		35			0											0
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		0			1,935
Payments for net investment hedge		(1,555	)		(1,089	)
Proceeds from sale of property and equipment		15			0
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		0			60,000
Payments on line of credit		0			(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			0
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			0

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 ~~November~~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, ~~solely~~or on a prospective basis to ~~correct~~new modifications from any date within an interim period that includes or is subsequent to the date of the issuance of a ~~typographical error~~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	$	0	$	0
Foreign currency contracts included in prepaid expenses and other current assets		187		0		187		0
	$	169,791	$	169,604	$	187	$	0

				*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	$	0		$	0
Foreign currency contracts included in other current liabilities		(1,470	)		0		(1,470	)		0
	$	222,622		$	224,092	$	(1,470	)	$	0

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 0 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.

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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:


	*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 ended October 2, 2021, and the fiscal year ended January 2, 2021, 0 observable price changes occurred, and 0 impairment of securities was recorded.

NOTE E – INTANGIBLE ASSETS

The Company performed its annual goodwill impairment test during the third quarter of 2021. 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 any reporting unit was less than its carrying amount. As a result, 0 impairments of goodwill were recognized.

The Company also performed its annual indefinite-lived intangible asset impairment test during the third quarter of 2021. The Company performed a qualitative assessment of the indefinite-lived intangible asset and determined that it 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, 0 impairment of the indefinite-lived intangible asset was recognized.

NOTE F – REVENUE AND CONTRACT LIABILITIES

Revenue is recognized when, or as, control of a promised product or service transfers to a customer, in an amount that reflects the consideration to which the Company expects to be entitled in exchange for transferring those products or services. A majority of the Company’s sales are for products sold at a point in time and shipped to customers, for which control is transferred as goods are delivered to the third party carrier for shipment. The Company receives payment, primarily via credit card, for the sale of products at the time customers place orders and payment is required prior to shipment. Contract liabilities, which are recorded within the “Other current liabilities” line item in the condensed consolidated balance sheets, primarily relate to deferred revenue for product sales for customer payments received in advance of shipment, for outstanding material rights under the initial order program, and for services where control is transferred over time as services are delivered.

Other revenue includes fees, which are paid by the customer at the beginning of the service period, for access to online customer service applications and annual account renewal fees for Associates, for which control is transferred over time as services are delivered and are recognized as revenue on a straight-line basis over the term of the respective contracts.

The following table presents Other Revenue for the periods indicated:

	Quarter Ended				Nine Months Ended
	October 2,		September 26,		October 2,		September 26,
	2021		2020		2021		2020
Other Revenue	$	942	$	817	$	2,880	$	2,794

Disaggregation of revenue by geographic region and major product line is included in Segment Information in Note K.

The following table provides information about contract liabilities from contracts with customers, including significant changes in the contract liabilities balances during the period:


	*October 2,*			*January 2,*
	*2021*			*2021*
Contract liabilities at beginning of period	$	15,952		$	13,852
Increase due to deferral of revenue at period end		15,912			15,952
Decrease due to beginning contract liabilities recognized as revenue		(15,701	)		(13,852	)
Contract liabilities at end of period	$	16,163		$	15,952

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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 G – LINE OF CREDIT

On August 25, 2020, the Company as borrower, and certain of its material subsidiaries as guarantors, entered into the Second Amended and Restated Credit Agreement (the “Credit Agreement”) with Bank of America, N.A. (“Bank of America”) as Administrative Agent, Swingline Lender and Letter of Credit Issuer, and the other lenders party thereto. On April 21, 2021, the Company entered into the First Amendment to the Second Amended and Restated Credit Agreement, which, among other things amended the definition of “LIBOR Replacement Date,” “LIBOR Successor Rate,” and “Eurodollar Rate.”

The Credit Agreement provides for a revolving credit limit for loans to the Company up to $75,000 (the “Credit Facility”). In addition, at the option of the Company, and subject to certain conditions, the Company may request to increase the aggregate commitment under the Credit Facility to up to an additional $200,000.

There was 0 outstanding debt on the Credit Facility as of October 2, 2021. The obligations of the Company under the Credit Agreement are secured by the pledge of the capital stock of certain subsidiaries of the Company, pursuant to a Security and Pledge Agreement.

Interest on revolving borrowings under the Credit Facility are computed at Bank of America’s prime rate or the Eurodollar rate, adjusted by features specified in the Credit Agreement. The Credit Agreement covenants require the Company’s rolling four-quarter consolidated EBITDA of $100,000 or greater and its ratio of consolidated funded debt to consolidated EBITDA of equal to or less than 2.0 to 1.0 at the end of each quarter. The Credit Agreement does not include any restrictions on the payment of cash dividends or share repurchases by the Company. Consolidated EBITDA and consolidated funded debt are non-GAAP terms.

The Company will be required to pay any balance on this Credit Facility in full at the time of maturity in August 2025.

NOTE H – 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 its 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 faces contingencies that are reasonably possible to occur; however, they cannot currently be estimated. While complete assurance cannot be given as 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. It is reasonably possible that a change in the contingencies could result in a change in the amount recorded by the Company in the future.

NOTE I – DERIVATIVE FINANCIAL INSTRUMENTS

The Company’s risk management strategy includes the select use of derivative instruments to reduce the effects of volatility in foreign currency exchange exposure on operating results and cash flows. In accordance with the Company’s risk management policies, the Company does not hold or issue derivative instruments for trading or speculative purposes. The Company recognizes all derivative instruments as either assets or liabilities in the balance sheet at their respective fair values. When the Company becomes a party to a derivative instrument and intends to apply hedge accounting, the Company formally documents the hedge relationship and the risk management objective for undertaking the hedge, the nature of risk being hedged, and the hedged transaction, which includes designating the instrument for financial reporting purposes as a fair value hedge, a cash flow hedge, or a net investment hedge. The Company also documents how the hedging instrument’s effectiveness in offsetting the hedged risk will be assessed prospectively and retrospectively, and a description of the method used to measure ineffectiveness.

The Company periodically uses derivative instruments to hedge the foreign currency exposure of its net investment in foreign subsidiaries into U.S. dollars. Initially, the Company records derivative assets on a gross basis in its condensed consolidated balance sheets. Subsequently the fair value of derivatives is measured for each reporting period. The effective portion of gains and losses attributable to these net investment hedges is recorded to foreign currency translation adjustment (“FCTA”) within accumulated other comprehensive income (loss) (“AOCI”) to offset the change in the carrying value of the net investment being hedged, and will subsequently be reclassified to net earnings in the period in which the investment in the subsidiary is either sold or substantially liquidated.

During the nine months ended October 2, 2021 and September 26, 2020, the Company settled European options designated as net investment hedges with notional amounts of $98,684 and $90,000, respectively. NaN settlements occurred during the three months ended October 2, 2021 and September 26, 2020. For the nine months ended October 2, 2021 and September 26, 2020, the Company realized a loss of $1,555 and realized a gain of $846, respectively, recorded to FCTA within other comprehensive income (loss).

As of October 2, 2021, there were 0 derivatives outstanding for which the Company has applied hedge accounting.

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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 J – COMMON STOCK AND EARNINGS PER SHARE

Basic earnings per share (“EPS”) is 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 EPS based on the time they were outstanding in any period. Diluted EPS is based on shares that are outstanding (computed under basic EPS) and on potentially dilutive shares. Shares that are included in the diluted EPS 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 EPS and diluted EPS for the periods indicated:


	*Quarter Ended*				*Nine Months Ended*
	*October 2,*		*September 26,*		*October 2,*		*September 26,*
	*2021*		*2020*		*2021*		*2020*
Net earnings available to common shareholders	$	27,330	$	30,506	$	96,185	$	85,035
Weighted average common shares outstanding - basic		19,961		21,043		20,367		21,191
Dilutive effect of in-the-money equity awards		195		127		199		92
Weighted average common shares outstanding - diluted		20,156		21,170		20,566		21,283
Earnings per common share from net earnings - basic	$	1.37	$	1.45	$	4.72	$	4.01
Earnings per common share from net earnings - diluted	$	1.36	$	1.44	$	4.68	$	4.00

Equity awards for the following shares were not included in the computation of diluted EPS because their effect would be anti-dilutive:

Quarter Ended

Nine Months Ended

October 2,

September 26,

October 2,

September 26,

2021

2020

2021

2020

213

438

During the three months ended October 2, 2021, the Company repurchased and retired 523 shares for $49,751 under the Company’s share repurchase plan. There were 0 shares repurchased during the three months ended September 26, 2020.

During the nine months ended October 2, 2021 and September 26, 2020, the Company repurchased and retired 1,548 shares and 785 shares for $148,906 and $57,029, respectively, under the Company’s share repurchase plan. The excess of the repurchase price over par value is allocated between additional paid-in capital and retained earnings on a pro-rata basis. The purchase of shares under this plan reduces the number of shares outstanding in the above calculations.

On September 16, 2021, the Company's Board of Directors authorized an increase in the amount available under its share repurchase plan to a total of $150,000. The authorization, which occurred during the first quarter of 2021, is inclusive of the $13,943 that was remaining under the prior authorization. As of October 2, 2021, the remaining authorized repurchase amount under the stock repurchase plan was $137,152. There is no expiration date on the remaining approved repurchase amount and no requirement for future share repurchases.

Subsequent to October 2, 2021, and through November 5, 2021, the Company repurchased and retired 216 shares of common stock for $20,944, at an average market price of $96.94 per share.

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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 K – 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 network marketing system of independent distributors (“Associates”). The Company aggregates its operating segments into 1 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 ~~inserted~~below summarizes the approximate percentage of total product revenue that has been contributed by the Company’s nutritionals, foods, and personal care and skincare products for the periods indicated.


	*Quarter Ended*						*Nine Months Ended*
	*October 2,*			*September 26,*			*October 2,*			*September 26,*
	*2021*			*2020*			*2021*			*2020*
USANA® Nutritionals		85	%		85	%		86	%		83	%
USANA Foods(1)		8	%		9	%		8	%		11	%
Personal care and Skincare		6	%		5	%		5	%		5	%
All Other		1	%		1	%		1	%		1	%

⁽¹⁾Includes the Company’s new Active Nutrition line, which launched in ~~Part I -~~ five markets late in the first quarter of 2021 and will roll out to additional markets in future periods.

Selected Financial Information

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


	*Quarter Ended*				*Nine Months Ended*
	*October 2,*		*September 26,*		*October 2,*		*September 26,*
	*2021*		*2020*		*2021*		*2020*
Net Sales to External Customers
Asia Pacific
Greater China	$	123,235	$	136,013	$	437,629	$	391,446
Southeast Asia Pacific		64,570		76,313		212,819		192,694
North Asia		33,068		28,969		100,671		82,072
Asia Pacific Total		220,873		241,295		751,119		666,212
Americas and Europe		53,479		57,218		168,046		157,911
Consolidated Total	$	274,352	$	298,513	$	919,165	$	824,123

The following table provides further information on markets representing 10% or more of consolidated net sales and long-lived assets, respectively:

	Quarter Ended				Nine Months Ended
	October 2,		September 26,		October 2,		September 26,
	2021		2020		2021		2020
Net sales:
China	$	109,226	$	120,523	$	394,407	$	346,526
South Korea	$	32,117	$	27,792	$	97,474	$	79,317
Philippines	$	18,930	$	33,585	$	67,811	$	73,599

	*As of*
	*October 2,*		*January 2,*
	*2021*		*2021*
Long-lived assets:
China	$	90,748	$	92,692
United States	$	83,954	$	82,167

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Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) is designed to provide an understanding of USANA’s financial condition, results of operations and cash flows by reviewing certain key indicators and measures of performance.

The MD&A is presented in six sections as follows:

●

Overview

●

Impact of the COVID-19 Pandemic

●

Customers

●

Non-GAAP Financial Measures

●

Results of Operations

●

Liquidity and Capital Resources

This MD&A should be read in conjunction with the Unaudited Condensed Consolidated Financial Statements and Notes thereto that are contained in this quarterly report, as well as Part II, Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations of our Annual Report on Form 10-K for the year ended January 2, 2021 (“2020 Form 10-K”) filed with the SEC on March 2, 2021, and our other filings, including the Current Reports on Form 8-K, that have been filed with the SEC through the date of this report. Forward-looking statements in Part I, Item 2 may involve risks and uncertainties that could cause results to differ materially from those projected (refer to the section entitled “Cautionary Note Regarding Forward-Looking Statements and Certain Risks” on page 151 and the risk factors provided in Part II, Item 1A for discussion of these risks and uncertainties).

Overview

We develop and manufacture high quality, science-based nutritional and personal care and skincare products that ~~incorrectly presents~~are distributed internationally through direct selling. We use this distribution method because we believe it is more conducive to meeting our vision as a company, which is to improve the ~~percentage~~overall health and nutrition of ~~total product revenue contributed~~individuals and families around the world. Our customer base is primarily comprised of two types of customers: “Associates” and “Preferred Customers,” referred to together as “active Customers.” Our Associates also sell our products to retail customers. Associates share in our company vision by acting as independent distributors of our ~~USANA® Nutritionals~~products in addition to purchasing our products for their personal use. Preferred Customers purchase our products strictly for personal use and ~~USANA Foods product lines,~~are not permitted to resell or to distribute the products. We only count as active Customers those Associates and Preferred Customers who have purchased from us at any time during the most recent three-month period. As of October 2, 2021, we had approximately 576,000 active Customers worldwide.

We have ongoing operations in the following markets, 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. The countries included in these regions and sub-regions are described below:

(1) Asia Pacific -

(i) Greater China - Hong Kong, Taiwan, and China. Our business in China is conducted by BabyCare Holdings, Ltd., our ~~top-selling products as follows: “Optimizers” is corrected to read “63%” instead~~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.

Table of “64%”, “Essentials/CellSentials” is corrected to read “20%” instead of “21%”, “USANA Foods” is corrected to read “11%” instead of “9%”, “USANA® Essentials/CellSentials” is corrected to read “13%” instead of “14%”, “Proflavanol®” is corrected to read “11%” instead of “9%, and ‘Probiotic” is corrected to read “10%” instead of “9”. No other corrections or changes were required to be made to the table on page 15. The corrected table is below, and replaces in its entirety the table originally included on page 15 of the Form 10-Q:Contents

The following table summarizes the approximate percentage of total product revenue that has been contributed by our major product lines and our top-selling products for the current and prior-year periods as indicated:

Nine Months Ended

September 26,

September 28,

2020

2019

Product Line

USANA® Nutritionals
Optimizers 63% 64%
Essentials/CellSentials* 20% 19%
USANA Foods 11% 8%
Personal care and Skincare 5% 8%
All Other 1% 1%
Key Product

USANA® Essentials/CellSentials 13% 12%
Proflavanol® 11% 11%
Probiotic 10% 10%

	Nine Months Ended
	October 2,		September 26,
	2021		2020
Product Line
USANA® Nutritionals
Optimizers		68%		63%
Essentials/CellSentials(1)		18%		20%
USANA Foods⁽²⁾		8%		11%
Personal care and Skincare		5%		5%
All Other		1%		1%
Key Product
USANA® Essentials/CellSentials		12%		13%
Proflavanol®		10%		11%
Probiotic		9%		10%

⁽¹⁾Represents a product line consisting of multiple products, as opposed to the actual USANA® Essentials / CellSentials product.

⁽²⁾Includes our new Active Nutrition line.

Our new Active Nutrition line promotes healthy weight management, digestive health, energy and hydration through a holistic approach. We launched the Active Nutrition line in five markets including the United States through the first nine months of 2021 and plan to roll this line out to additional markets in future periods.

Because we have operations in multiple markets, with sales and expenses being generated and incurred in multiple currencies, our reported U.S. dollar sales and earnings can be significantly affected by fluctuations in currency exchange rates. In general, our operating results are affected positively by a weakening of the U.S. dollar and negatively by a strengthening of the U.S. dollar. During the nine months ended October 2, 2021, net sales outside of the United States represented 91.2% of consolidated net sales. In our net sales discussions that follow, we approximate the impact of currency fluctuations on net sales by translating current year sales at the average exchange rates in effect during the comparable periods of the prior year.

Impact of the COVID-19 Pandemic

The COVID-19 pandemic, including the spread of new variants of the virus, has negatively impacted economies, businesses, sales practices, supply chains, and consumer behavior around the world. The ongoing COVID-19 pandemic has created an unpredictable operating environment for us in many of our markets around the world and caused meaningful disruptions in both sales and operations. Government-imposed restrictions, health and safety mandated best practices, and public hesitance regarding in-person gatherings have reduced our ability and the ability of our Associates to hold sales meetings, required our Associates to share and sell our products in a predominantly virtual environment, resulted in cancellations of key Company events and trips, required us to utilize a work-from-home strategy for all non-manufacturing and non-distribution employees, and required us to temporarily close our walk-in and fulfillment locations in some markets where we have such properties. The pandemic has also affected the availability and cost of various of our raw materials, packaging materials and shipping resources to transport our products to our various markets around the world. Our supply chain and logistics have incurred some disruption and we could experience more significant disruptions or closures in the future. These factors and others related to the COVID-19 pandemic, including the spread of new variants of the virus, will likely continue to negatively affect our business throughout 2021 in a number of ways, including those described below.

● Our Workforce. The health and safety of our employees around the world remains our top priority. We remain committed to being socially responsible as a corporate leader in each of our markets and doing our part to reduce the spread of COVID-19. As such, we are continuing to utilize a modified operating model in each of our markets as necessary to follow applicable guidelines from government and health officials. Although a significant portion of our non-manufacturing and non-distribution employees continued with remote working arrangements, we began efforts during the second quarter to bring these employees back to our offices, in markets where health and safety best practices have allowed us to safely do so. In connection with this effort, we are permitting most of our employees to utilize a hybrid work schedule, which allows them to split their time working at the ~~filing~~office and remotely. Employees working on site are required to follow applicable health and safety guidelines. We are also continuing to utilize flexible shift schedules, time and attendance policies, and sick-leave policies to promote health, wellness and safety. Where necessary in our international markets, we have temporarily closed product will-call centers and continue to offer curbside delivery and subsidized shipping to customers. We will continue to monitor the situation surrounding the pandemic and implement additional risk mitigation actions where necessary.

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● Our Operations. All of our production facilities remain operational under enhanced safety measures and as of the date of this ~~Form 10-Q/A and pursuant~~report, however we have experienced disruptions in several of our markets due to the ~~rules~~escalation of the ~~Commission,~~COVID-19 pandemic. These disruptions have affected our customers and salesforce and, in some cases our ability to operate and ship products. In some markets, we have had to postpone or cancel certain planned business events and activities. In other markets, we have delayed the ~~Company~~introduction of new product offerings until 2022. Although we have successfully modified our operations in each of our markets to date, future efforts to reduce the spread of COVID-19, including the spread of new variants of the virus, may negatively affect our business. The extent of any disruption to our business in each of our markets going forward is difficult to estimate and will depend on many factors, many of which are outside of our control. Our operating plan continues to entail efforts to safeguard against disruptions through maintaining and operating (i) raw material procurement; (ii) manufacturing; (iii) distribution; (iv) selling; (v) operating cash flows and liquidity; (vi) Associate engagement and activity; and (vii) employee support and engagement.

● Our Sales and Salesforce. Demand for our high quality nutritional products has remained high during the pandemic, although our sales and customer count activity during the third quarter were softer than anticipated due, in large part, to a challenging operating environment in many of our markets around the world from the escalation of the COVID-19 pandemic. We continue to utilize a primarily virtual strategy to hold meetings and events with our salesforce; however, in markets where health and safety best practices have allowed us to safely do so, we have held in-person meetings. We will evaluate this strategy as the year and situation with the pandemic progresses. Notwithstanding the foregoing, person-to-person and face-to-face selling and events remain an important part of our business and we plan to begin incorporating the same into our strategy as it becomes safe and appropriate for us and our sales force to do so.

● Our Liquidity. Our liquidity position is strong. We expect to continue to fund our business with cash flow from operations and believe that we have sufficient liquidity to satisfy our day-to-day cash needs. Notwithstanding the foregoing, we will continue to evaluate and take action, as necessary, to preserve adequate liquidity and ensure that our business can continue to operate at full strength during these uncertain times. Additionally, as long as uncertainty remains surrounding the duration and impact of the COVID-19 pandemic, the potential impact from the pandemic on our business, financial condition or longer-term financial or operational results will remain uncertain. We will continue to align spending with sales performance and defer non-priority capital investments amid the COVID-19 pandemic.

Customers

Because we sell our products to a customer base of independent Associates and Preferred Customers, we increase our sales by increasing the number of our active Customers, the amount they spend on average, or both. Our primary focus continues to be increasing the number of active Customers. We believe this focus is consistent with our vision of improving the overall health and nutrition of individuals and families around the world. Sales to Associates account for approximately 55.5% of product sales during the nine months ended October 2, 2021. The remainder of our sales are to Preferred Customers. Increases or decreases in product sales are typically the result of variations in the volume of product sold relating to fluctuations in the number of active Customers purchasing our products. The number of active Associates and Preferred Customers is, therefore, used by management as a key non-financial indicator to evaluate our operational performance.

We believe that our ability to attract and retain active Customers is positively influenced by a number of factors, including our high quality product offerings and the general public’s heightened awareness and understanding of the connection between diet and long-term health. Additionally, we believe that our Associate compensation plan and the general public’s growing desire for a secondary source of income and small business ownership are key to our ability to attract and retain Associates. We periodically make changes to our Compensation Plan in an effort to ensure that it is among the most competitive plans in the industry, to encourage behavior that we believe leads to a successful business for our Associates, and to ensure that our plan provides us with leverage to grow sales and earnings. Additionally, the initiatives we are executing under our customer experience and technology enhancements strategy are designed to promote active Customer growth.

To further support our Associates in building their businesses, we traditionally sponsor meetings and events throughout the year, which offer information about our products and our network marketing system. We also provide low cost sales tools, including online sales, business management, and training tools, which are intended to support our Associates in building and maintaining a successful home-based business. Although we provide training and sales tools, we ultimately rely on our Associates to sell our products, attract new active Customers to purchase our products, and educate and train new Associates. We sponsor meetings designed to assist Associates in their business development and to provide a forum for interaction with our Associate leaders and members of our management team.

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The table below summarizes the changes in our active Customer base by geographic region, rounded to the nearest thousand as of the dates indicated:

	Total Active Customers by Region
	As of				As of				Change from			Percent
	October 2, 2021				September 26, 2020				Prior Year			Change
Asia Pacific:
Greater China		246,000	42.7	%		284,000	43.7	%		(38,000	)		(13.4	%)
Southeast Asia Pacific		134,000	23.3	%		158,000	24.3	%		(24,000	)		(15.2	%)
North Asia		63,000	10.9	%		60,000	9.2	%		3,000			5.0	%
Asia Pacific Total		443,000	76.9	%		502,000	77.2	%		(59,000	)		(11.8	%)
Americas and Europe		133,000	23.1	%		148,000	22.8	%		(15,000	)		(10.1	%)
		576,000	100.0	%		650,000	100.0	%		(74,000	)		(11.4	%)

Non-GAAP Financial Measures

We report our financial results in accordance with accounting principles generally accepted in the United States (GAAP). However, to supplement the financial results prepared in accordance with GAAP, we use non-GAAP financial measures described below. Our management believes these non-GAAP financial measures that exclude the impact of specific items (described below) may be useful to investors in their assessment of our ongoing operating performance and provide additional meaningful comparisons between current results and results in prior operating periods and in understanding the activities and business metrics of our operations. We believe that these non-GAAP financial measures reflect an additional way of viewing aspects of our business that, when viewed with our GAAP results, provide a more complete understanding of factors and trends affecting our business. We provide non-GAAP financial information for informational purposes only. Readers should consider the information in addition but not instead of or superior to, our consolidated financial statements prepared in accordance with GAAP. This non-GAAP financial information may be determined or calculated differently by other companies, limiting the usefulness of those measures for comparative purposes.

In this report, we use “constant currency” net sales, “local currency” net sales, and other currency-related financial information terms that are non-GAAP financial measures. We believe the use of these terms is helpful in understanding the impact of fluctuations in foreign-currency exchange rates and facilitating period-to-period comparisons of our results of operations and provides investors an additional perspective on trends and underlying business results. Changes in our reported revenue and profits in this report include the impacts of changes in foreign currency exchange rates. As additional information to the reader, we provide constant currency assessments in the tables and the narrative information in this MD&A to remove or quantify the impact of the fluctuation in foreign exchange rates and utilize constant currency results in our analysis of performance. Our constant currency financial results are calculated by translating the current period’s financial results at the same average exchange rates in effect during the applicable prior-year period and then comparing this amount to the prior-year period’s financial results. The GAAP reconciliations of these non-GAAP measures are contained in the tables within Results of Operations.

Results of Operations

Summary of Financial Results

Net sales for the third quarter of 2021 decreased 8.1% to $274.4 million, a decrease of $24.2 million, compared with the prior-year quarter. This decrease was primarily the result of a timing difference in a successful short-term incentive program that we have offered during the last two years. In 2021, we offered this incentive program during the second quarter, whereas, in 2020, we offered this program during the third quarter, thereby creating a challenging comparable on both a year-over-year and sequential basis for the third quarter of 2021. The decrease in net sales for the quarter was partially offset by favorable changes in currency exchange rates, which benefited net sales for the third quarter by $9.9 million.

Net earnings for the third quarter of 2021 were $27.3 million, a decrease of 10.5% compared with $30.5 million during the prior-year quarter. The decrease in net earnings was mainly the result of decreased sales and higher relative operating expenses.

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Quarters Ended October 2, 2021 and September 26, 2020

Net Sales

The following table summarizes the changes in net sales by geographic region for the fiscal quarters ended as of the dates indicated:

	Net Sales by Region
	(in thousands)
	Quarter Ended
	October 2, 2021				September 26, 2020				Change from prior year			Percent change			Currency impact on sales		Percent change excluding currency impact
Asia Pacific
Greater China	$	123,235	44.9	%	$	136,013	45.5	%	$	(12,778	)		(9.4	%)	$	7,457		(14.9	%)
Southeast Asia Pacific		64,570	23.5	%		76,313	25.6	%		(11,743	)		(15.4	%)		85		(15.5	%)
North Asia		33,068	12.1	%		28,969	9.7	%		4,099			14.1	%		770		11.5	%
Asia Pacific Total		220,873	80.5	%		241,295	80.8	%		(20,422	)		(8.5	%)		8,312		(11.9	%)
Americas and Europe		53,479	19.5	%		57,218	19.2	%		(3,739	)		(6.5	%)		1,570		(9.3	%)
	$	274,352	100.0	%	$	298,513	100.0	%	$	(24,161	)		(8.1	%)	$	9,882		(11.4	%)

Asia Pacific: The decline in this region is largely the result of a challenging operating environment in several of our Asia Pacific markets due to the escalation of the COVID-19 pandemic, and a successful world-wide incentive program that took place in the prior-year quarter, which did not take place in the current-year quarter. The decrease in constant currency net sales in Greater China was primarily the result of a sales decline in China, where local currency net sales decreased 15.5%, due to a 13.8% decrease in active Customers. The decrease in constant currency net sales in Southeast Asia Pacific is largely the result of sales declines in the Philippines and Australia, which had local currency net sales decline of 42.2% and 10.9%, due to a 42.3% and 9.5% decrease in active Customers, respectively. These declines were partially offset by local currency sales growth in Malaysia, which generated local currency net sales growth of 23.5%, due to a 17.5% increase in active Customers. The increase in constant currency net sales in North Asia was driven by South Korea, which had local currency net sales increase of 12.8%, due to a 7.0% increase in active Customers.

Americas and Europe: The decline in this region was largely the result of the world-wide incentive program that took place in the prior-year quarter, which did not take place in the current-year quarter, as described above. The decrease in constant currency net sales in Americas and Europe was primarily the result of a sales decline in Mexico and Canada, where local currency net sales declined 22.6% and 11.2%, due to a 21.9% and 8.9% decrease in active Customers, respectively.

Gross Profit

Gross profit increased 40 basis points to 81.5% of net sales, up from 81.1% in the prior-year quarter. This increase can be attributed to favorable changes in currency exchange rates, and lower conversion costs as a result of higher production levels undertaken to build up inventory levels. These improvements were partially offset by leverage lost on fixed period costs due to lower sales, and unfavorable change in market mix.

Associate Incentives

Associate incentives decreased 150 basis points to 42.4% of net sales, down from 43.9% in the prior-year quarter. The relative decrease can primarily be attributed to the short-term incentive program offered during the prior-year quarter, as described above. These results were partially offset by increased spending on Associate related incentive trips in certain markets.

Selling, General and Administrative Expenses

Selling, general and administrative expenses increased 220 basis points relative to net sales, and increased $1.0 million in absolute terms. The relative increase can be attributed to leverage lost on lower net sales. The increased expense in absolute terms is due to higher employee related costs, and an increase in variable expenses.

Income Taxes

Income taxes increased to 32.3% of pre-tax earnings, up from 31.1% of pre-tax earnings in the prior-year quarter. The effective tax rate increased during the current quarter, due to lower consolidated profitability and lower deferred tax asset balances compared to prior expectations.

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Diluted Earnings per Share

Diluted EPS decreased 5.6% to $1.36 as compared to $1.44 reported in the prior-year quarter. This decrease can be attributed to lower net earnings, partially offset by lower diluted share count.

Nine Months Ended October 2, 2021 and September 26, 2020

Net Sales

The following table summarizes the changes in net sales by geographic region for the nine months ended as of the dates indicated:

	Net Sales by Region
	(in thousands)
	Nine Months Ended
	October 2, 2021				September 26, 2020				Change from prior year		Percent change			Currency impact on sales		Percent change excluding currency impact
Asia Pacific
Greater China	$	437,629	47.6	%	$	391,446	47.5	%	$	46,183		11.8	%	$	30,654		4.0	%
Southeast Asia Pacific		212,819	23.2	%		192,694	23.4	%		20,125		10.4	%		9,417		5.6	%
North Asia		100,671	10.9	%		82,072	10.0	%		18,599		22.7	%		5,529		15.9	%
Asia Pacific Total		751,119	81.7	%		666,212	80.9	%		84,907		12.7	%		45,600		5.9	%
Americas and Europe		168,046	18.3	%		157,911	19.1	%		10,135		6.4	%		6,087		2.6	%
	$	919,165	100.0	%	$	824,123	100.0	%	$	95,042		11.5	%	$	51,687		5.3	%

Asia Pacific: The increase in constant currency net sales in Greater China was primarily driven by China, which generated local currency net sales growth of 5.3%. The increase in constant currency net sales in Southeast Asia Pacific was driven primarily by Malaysia and Singapore, which had local currency net sales growth of 39.4% and 10.7%, respectively. This growth was partially offset by the Philippines, which had local currency net sales decline of 9.8%. The increase in constant currency net sales in North Asia was driven by South Korea, which had local currency net sales growth of 16.1%.

Americas and Europe: The increase in constant currency net sales in Americas and Europe was driven by net sales growth in the United States, which had local currency sales growth of 4.3%. Additionally, Europe increased constant currency net sales by 10.1%.

Gross Profit

Gross profit increased 20 basis points to 82.0% for the first nine months of 2021, from 81.8% in the prior year. The relative increase can be attributed to favorable changes in currency exchange rates, and lower conversion costs from higher production levels, partially offset by an unfavorable shift in market mix, and increased freight expense.

Associate Incentives

Associate incentives increased 60 basis points to 44.0% of net sales for the first nine months of 2021, compared with 43.4% in the prior-year period. The relative increase can be attributed to changes in market sales mix, and increased spend on miscellaneous associate incentives.

Selling, General and Administrative Expenses

Selling, general and administrative expenses decreased 50 basis points relative to net sales, and increased $18.5 million in absolute terms for the first nine months of 2021. The relative improvement can be attributed to leverage gained on higher net sales. The increased expense in absolute terms is due to higher employee related costs, an increase in variable expenses associated with higher sales, and increased event costs in certain markets.

Income Taxes

Income taxes decreased to 30.8% of pre-tax earnings for the first nine months of 2021, down from 31.1% of pre-tax earnings in the prior-year period. The lower effective tax rate is due primarily to increased earnings in the United States, which allowed for greater foreign tax credit utilization.

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Diluted Earnings per Share

Diluted EPS increased 17.0% in the first nine months of 2021 to $4.68 as compared to $4.00 reported in the prior-year period. This increase can be attributed to higher net earnings and a lower diluted share count.

Liquidity and Capital Resources

We have historically met our working capital and capital expenditure requirements by using net cash flow from operations and by drawing on our line of credit. Our principal source of liquidity is our operating cash flow. Although we are required to maintain cash deposits with banks in certain of our markets, there are currently no material restrictions on our ability to transfer and remit funds among our international markets. In China, however, our compliance with Chinese accounting and tax regulations promulgated by the State Administration of Foreign Exchange (“SAFE”) results in transfer and remittance of our profits and dividends from China to the United States on a delayed basis. If SAFE or other Chinese regulators introduce new regulations, or change existing regulations which allow foreign investors to remit profits and dividends earned in China to other countries, our ability to remit profits or pay dividends from China to the United States may be limited in the future.

We believe we have sufficient liquidity to satisfy our cash needs and expect to continue to fund our business with cash flow from operations. We continue, however, to evaluate and take action, as necessary, to preserve adequate liquidity and ensure that our business can continue to operate during these uncertain times. Additionally, we continually evaluate opportunities, to repurchase shares of our common stock and will, from time to time, consider the acquisition of, or investment in complementary businesses, products, services and technologies, which has the potential to affect our liquidity.

Cash and Cash Equivalents

Cash and cash equivalents decreased to $248.7 million at October 2, 2021, from $311.9 million at January 2, 2021. Cash flow provided by operating activities generated $96.3 million during the nine months ended October 2, 2021. The decrease in cash and cash equivalents was primarily due to cash used to repurchase and retire shares of our common stock totaling $148.9 million, which is comprised of $145.9 million cash, and an accrual for unsettled trades of $3.0 million, which was settled subsequent to quarter-end, and $9.6 million of capital expenditures.

The table below presents concentrations of cash and cash equivalents by market for the periods indicated:

	Cash and cash equivalents
	(in Millions)
	As of		As of
	October 2, 2021		January 2, 2021
China	$	108.7	$	133.8
United States		80.1		119.7
All other markets		59.9		58.4
Total Cash and cash equivalents	$	248.7	$	311.9

Cash Flows Provided by Operations

As discussed above, our principal source of liquidity comes from our net cash flow from operations, which results from a strong operating margin. Net cash flow provided by operating activities was $96.3 million for the first nine months of 2021. Net earnings combined with adjustments of non-cash items contributed positively to our net cash flow provided by operating activities, partially offset by purchases of inventories, the payout of the annual employee bonus, and a reduction in trade payables.

Net cash flow provided by operating activities was $112.5 million for the nine months of 2020. Net earnings combined with adjustments of non-cash items contributed positively to our net cash flows provided by operating activities, partially offset by purchases of inventories, the payout of the annual employee bonus, and a reduction in trade payables.

Line of Credit

Information with respect to our line of credit may be found in Note G to the Condensed Consolidated Financial Statements included in Item 1 of Part I of this report.

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Share Repurchase

Information with respect to share repurchases may be found in Note J to the Condensed Consolidated Financial Statements included in Item 1 of Part I of this report.

Off-Balance Sheet Arrangements

None.

Summary

We believe our current cash balances, future cash provided by operations, and amounts available under our line of credit will be sufficient to cover our operating and capital needs in the ordinary course of business for the foreseeable future. If we experience an adverse operating environment or unanticipated and unusual capital expenditure requirements, additional financing may be required. No assurance can be given, however, that additional financing, if required, would be available to us at all or on favorable terms. We might also require or seek additional financing for the purpose of expanding into new markets, growing our existing markets, mergers and acquisitions, or for other reasons. Such financing may include the use of additional debt or the sale of additional equity securities. Any financing which involves the sale of equity securities or instruments that are convertible into equity securities could result in immediate and possibly significant dilution to our existing shareholders.

Critical Accounting Policies

There were no changes during the quarter to our critical accounting policies as disclosed in our 2020 Form ~~10-Q/~~10-K. Our significant accounting policies are disclosed in Note A ~~new certifications~~to our Consolidated Financial Statements filed with our 2020 Form 10-K.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

We have no material changes to the disclosures on this matter made in our 2020 Form 10-K. For a discussion of our exposure to market risk, refer to our market risk disclosures set forth in the section entitled “Quantitative and Qualitative Disclosures About Market Risk” in the 2020 Form 10-K.

Item 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

We maintain disclosure controls and procedures that are designed to ensure that information that is required to be disclosed in our Exchange Act reports is recorded, processed, summarized, and reported within the time periods that are specified in the SEC’s rules and forms and that such information is accumulated and communicated to management, including our Principal Executive Officer and Principal Financial Officer, as appropriate, to allow timely decisions regarding any required disclosure. In designing and evaluating these disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives.

As of the end of the period covered by ~~its~~this report, our Chief Executive Officer (Principal Executive Officer) and Chief Financial Officer (Principal Financial and Accounting Officer) evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a- 15(e) under the Exchange Act). Based on this evaluation, the Chief Executive Officer and Chief Financial Officer ~~which~~concluded that our disclosure controls and procedures were effective as of October 2, 2021.

Changes in Internal Control Over Financial Reporting

There were no changes in our internal control over financial reporting during the fiscal quarter ended October 2, 2021 that materially affected, or are ~~filed as exhibits hereto. Accordingly, this Form 10-Q/A amends Part II,~~ reasonably likely to materially affect, our internal control over financial reporting.

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PART II. OTHER INFORMATION

Item 61. LEGAL PROCEEDINGS

We are a party to litigation and other proceedings 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.

Information with respect to our legal proceedings may be found in Note H to the Condensed Consolidated Financial Statements included in Item 1 Part I of this report.

Item 1A. RISK FACTORS

Our business, results of operations, and financial condition are subject to various risks. These risks are described elsewhere in this Quarterly Report on Form 10-Q and our other filings with the SEC, including the 2020 Form 10-K. The risk factors identified in our 2020 Form 10-K have not changed in any material respect.

Item 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

(c) Purchases of Equity Securities by the Issuer and Affiliated Purchasers

Our share repurchase plan has been ongoing since the fourth quarter of 2000, with the Board of Directors periodically approving additional dollar amounts for share repurchases under the plan. At October 2, 2021, the authorized amount available for repurchases under the plan was $137.2 million.

Repurchases are made from time to ~~reflect~~time at management’s discretion in accordance with applicable federal securities laws. Repurchases may occur through open market purchases, pursuant to a Rule 10b5-1 trading plan, or in other transactions as permitted by the ~~filing~~rules of the ~~new certifications,~~SEC. There is no requirement for future share repurchases, and ~~to reflect that the other exhibits filed with the Form 10-Q are incorporated by reference in this Amendment to such exhibits as filed with the Form 10-Q.~~

This Form 10-Q/A should be read in conjunction with the Form 10-Q, which remains in effect as of its date. Except as specifically noted above, this Form 10-Q/A does not modify or update disclosures in the Form 10-Q. This Form 10-Q/A does not reflect events occurring after the filingthere is no expiration date of the ~~Form 10-Q~~repurchase plan.

The following table summarizes information relating to purchases of our common stock made by or ~~modify or update any related or other disclosures.~~on behalf of the Company during the quarter ended October 2, 2021.


Issuer Purchases of Equity Securities
(amounts in thousands, except per share data)

Period	Total Number of Shares Purchased	Average Price Paid per Share	Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs
Fiscal July
(Jul. 4, 2021 through Aug. 7, 2021)	127	$97.74	127	$38,452
Fiscal August
(Aug. 8, 2021 through Sep. 4, 2021)	203	$95.92	203	$19,002
Fiscal September
(Sep. 5, 2021 through Oct. 2, 2021)	193	$92.65	193	$137,152*
	523		523

*Information with respect to the authorization of the share repurchase plan may be found in Note J to the Condensed Consolidated Financial Statements included in Item 1 of Part I of this report.

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Item 3. DEFAULTS UPON SENIOR SECURITIES

None.

Item 4. MINE SAFETY DISCLOSURES

Not Applicable.

Item 5. OTHER INFORMATION

None.

Item 6. Exhibits

Exhibits marked with an asterisk (*) are filed herewith.

Exhibit Number	Description
~~10.17~~10.18	First Amendment to the Second Amended and Restated Credit Agreement dated as of ~~August 25, 2020 (incorporated~~April 21, 2021 (incorporated by reference to the ~~Company's Current~~Company’s Quarterly Report on Form ~~8-K,~~10-Q for the period ended April 3, 2021, filed ~~August 27, 2020,~~May 11, 2021, Exhibit ~~10.1,~~10.18, File No. 001-35024).
~~31.1~~ 10.19	*USANA Health Sciences, Inc. Deferred Compensation Plan (filed herewith)
10.20	*USANA Health Sciences, Inc. Deferred Compensation Plan Adoption Agreement (filed herewith)
31.1	*Certification of Principal Executive Officer pursuant to section 302 of the Sarbanes-Oxley Act of 2002
31.2	*Certification of Principal Financial Officer pursuant to section 302 of the Sarbanes-Oxley Act of 2002
32.1	*Certification of Principal Executive Officer pursuant to section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350
32.2	*Certification of Principal Financial Officer pursuant to section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350
101.INS	Inline XBRL Instance Document
101.SCH	Inline XBRL Taxonomy Extension Schema Document
101.CAL	Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF	Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB	Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE	Inline XBRL Taxonomy Extension Presentation Linkbase Document
104	Cover Page Interactive Data file (formatted as Inline XBRL and contained in Exhibit 101)

122

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

Date: November ~~5, 2020~~

10, 2021

	USANA HEALTH SCIENCES, INC.

	/s/ G. Douglas Hekking
	G. Douglas Hekking
	Chief Financial Officer (Principal Financial Officer)

223

Utah	87-0500306
(State or other jurisdiction	(I.R.S. Employer
of incorporation or organization)	Identification No.)

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

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

		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

	Nine Months Ended
	September 26,		September 28,
	2020		2019
Product Line
USANA® Nutritionals
Optimizers		63%		64%
Essentials/CellSentials*		20%		19%
USANA Foods		11%		8%
Personal care and Skincare		5%		8%
All Other		1%		1%
Key Product
USANA® Essentials/CellSentials		13%		12%
Proflavanol®		11%		11%
Probiotic		10%		10%