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'''USANA Health Sciences, Inc.''' ({{nyse|USNA}}), or '''USANA''', is a Utah-based manufacturer of various nutritional and skin-care products distributed via [[direct sales]] using a [[multilevel marketing]] distribution model. USANA products, most of which are manufactured at the company's <ref name="FDA-OTC"/> [[Salt Lake City, Utah]] facility, are sold in thirteen international markets via a network of independent distributors (referred to as "associates"). USANA is the 24th largest direct selling company in the world.<ref>{{cite web|title=Direct Selling News Global 100|url=http://www.directsellingnews.com/index.php/site/entries_archive_display/top_100|publisher=Direct Selling News|accessdate=18 July 2011}}</ref>
'''USANA Health Sciences, Inc.''' ({{nyse|USNA}}), or '''USANA''', is a Utah-based [[multilevel marketing]] company that produces various nutritional and skin-care products. USANA products, most of which are manufactured at the company's <ref name="FDA-OTC"/> [[Salt Lake City, Utah]] facility, are sold in thirteen international markets via a network of independent distributors (referred to as "associates"). USANA is the 24th largest direct selling company in the world.<ref>{{cite web|title=Direct Selling News Global 100|url=http://www.directsellingnews.com/index.php/site/entries_archive_display/top_100|publisher=Direct Selling News|accessdate=18 July 2011}}</ref> In 2007, several of USANAs executives were discovered to have made false statements in their resumes.<ref name="Another USANA official forced to revise resume"/> Critics of the company have argued that USANA's business model is a [[pyramid scheme]].<ref name="Most People Won't Get Their Money Back"/><ref name="Pyramid, Phony Bios"/><ref name="As stocks plunge"/>

In 2007, USANA came under heavy scrutiny after [[Barry Minkow]] filed a 500-page report alleging USANA was operating as an illegal [[pyramid scheme]].<ref name="Most People Won't Get Their Money Back"/><ref name="Pyramid, Phony Bios"/><ref name="As stocks plunge"/> The report was retracted in 2008 as part of an undisclosed settlement.<ref name="Supplement-maker USANA settles suit with critic"/>


==Background and organization==
==Background and organization==

Revision as of 18:24, 19 July 2011

USANA Health Sciences, Inc.
Company typePublic
NYSE: USNA
IndustryNetwork Marketing of Nutritional & Skin Care products
FoundedWest Valley City, UT (1992 (1992))
FounderMyron Wentz, Ph.D.
Headquarters
West Valley City, UT
,
United States
Key people
Myron Wentz, Ph.D. (Founder & Chairman)

David Wentz (CEO)
Kevin Guest (President of North America)
Deborah Woo (President of Asia Pacific)
Roy Truett (COO)

Douglas Hekking (CFO)
ProductsNutritional supplements, weight management, personal care
RevenueIncrease US$ 517.644 million (2010)[1]
Increase US$ 68.864 million (2010)[1]
Increase US$ 45.651 million (2010)[1]
Total assetsIncrease US$ 203.802 million (2010)[1]
Total equityIncrease US$ 145.166 million (2010)[1]
Number of employees
1,240 (7 Mar 2011)[2]
Websitewww.usana.com

40°42′42″N 111°58′49″W / 40.711563°N 111.9802884°W / 40.711563; -111.9802884

USANA Health Sciences, Inc. (NYSE: USNA), or USANA, is a Utah-based multilevel marketing company that produces various nutritional and skin-care products. USANA products, most of which are manufactured at the company's [3] Salt Lake City, Utah facility, are sold in thirteen international markets via a network of independent distributors (referred to as "associates"). USANA is the 24th largest direct selling company in the world.[4] In 2007, several of USANAs executives were discovered to have made false statements in their resumes.[5] Critics of the company have argued that USANA's business model is a pyramid scheme.[6][7][8]

Background and organization

USANA was founded by an immunologist and microbiologist Myron Wentz.[9] It is based in West Valley City, Utah. The company sells its products through multilevel marketing: distributors recruit other distributors.[9] The products are not available through retail channels, but instead can only be obtained through one of its independent distributors (referred to as "associates") or by direct order through the company.[9] The company has approximately 228,000 associates and 77,000 "preferred customers" in its worldwide distribution network. In 2010, 90% of product sales was purchased by associates, and 10% by preferred customers.[10] The company states that, as of 2010, its products are marketed in the United States, Canada, Australia, New Zealand, United Kingdom, Netherlands, Japan, Hong Kong, Taiwan, Korea, Singapore, Mexico, Malaysia, The Philippines, and China. From 2004 to 2006, USANA was named on Forbes “200 Best Small Companies” list.[11] In 2007, USANA was not included on Forbes' 200 Best Small Companies” list, and an article in the magazine quoted industry and government experts who had raised questions about USANA’s business practices and products.[12][13] USANA responded by issuing a press release denying that the company had breached a $40 million loan agreement with Bank of America.[14]

During 2007, USANA faced repeated controversy after several of its executives were discovered to have made false statements regarding their qualifications.[5] The executives included Denis Waitley, a member of the board of directors who had falsely claimed to hold a a master's degree from the Naval Postgraduate School;[5][7] sales associate Ladd McNamara, who quit the company's medical advisory board after it was discovered that his license to practice medicine had been revoked;[15][16][17] the Vice President of Research and Development, Timothy Wood, who was found to have doctorate in forestry, as opposed to biology as he had claimed;[18] and the Executive Vice President and Chief Financial Officer, Gilbert Fuller, who had continued to use the title of CPA,[19] though his CPA license had expired 10 years before he joined USANA in 1996.[5][18][20]

In August 2007, USANA announced that it had been notified by the Securities and Exchange Commission (SEC) that its shares were subject to delisting from the NASDAQ because the company had failed to have the financial information in its quarterly Form 10-Q reviewed by an independent auditor. USANA reported this was due to their public accountant resigning and not yet being replaced.[21] In October 2007, USANA announced that NASDAQ had determined they were in compliance and their stock would continue to be listed.[22]

On January 3, 2011, USANA completed the transfer of its common stock from the NASDAQ to the New York Stock Exchange.[23]

On May 10, 2011, it was announced that 4 of USANA's executives (President and COO Fred W. Cooper, CFO Jeffrey A. Yates, EVP of Sales Mark H. Wilson, and VP of Finance Riley Timmer) had unexpectedly resigned their positions at the company to pursue an unspecified business opportunity.[24][25]

Products

USANA products encompass three product lines: USANA Nutritionals (Essentials, Optimizers, and Digestion/Detox nutritional supplements), USANA Diet & Energy (RESET meal replacement shakes, protein bars, and Rev3 energy drinks), and Sensé personal care (skin care, skin treatment, and hair & body care products). USANA manufactures 90% of its products in-house, including all of its tableted nutritional supplements.[3] The Sensé personal care line was reformulated in 2004 with a patented[26][27] new preserving technology that uses a combination of botanicals, antioxidants and other ingredients without the use of parabens.[28]

Several of USANA's products are certified by NSF International in the Dietary Supplements category[29] (NSF/ANSI 173) as having the identity and quantity of their dietary ingredients accurately described on the product label and containing no undeclared ingredients.[30] In addition, several products are also certified under NSF's Certified for Sport certification program.[31] The tablets that make up the Essentials product[32] are certified by HFL Sport Science's INFORMED-CHOICE Certification Program to be regularly tested for substances considered prohibited in sport and that the products have been manufactured to high quality standards.[33]

In August of 2010, USANA announced its ability to manufacture nutritional tablets with two distinct formulas into one bilayered tablet, as well as the release of two new formulas, Proflavanol C100 and Hepasil DTX.[34] According to Jim Brown, vice president of operations at USANA, the new technology (dubbed Nutritional Hybrid Technology) will allow for the creation of new supplements and cut down on consumer pill fatigue, as well as the opportunity for sustain-and-release tablets.[35]

USANA states that their products are of high quality, justifying their relatively high cost: but this claim was disputed by Anthony Almada, Chief Scientist of the nutritional supplement industry consulting firm Imaginutrition, who stated in an interview in Forbes that "The economic reality of Usana, and other [multilevel marketing] entities, mandates that their products invariably lack robust distinctiveness and convincing evidence of consumer relevance and superiority—achievable through rigorous clinical trials only—to their retail counterparts."[12] These comments were supported by natural health product specialist Prof. Jean-Louis Brazier of the University of Montreal's Faculty of Pharmacy who examined USANA's products for Radio-Canada's consumer report show La Facture. Brazier found that they cost two to three times the price of equivalent store-bought items, and no evidence that USANA's products were of better quality than their competitors.[9]

Business Model

USANA, a multilevel marketing company, sells its products primarily via non-employee distributors known as sales "associates" as well as via the Internet. Associates may be eligible to receive commissions based on their own product sales as well as through sales made by any new distributors they recruit (referred to in multilevel marketing parlance as a "downline").[9] USANA uses a binary infinite compensation plan which awards commissionable 'points' for sales volume. When the points reach a pre-determined number, the associate is paid. If the points do not reach the payment threshold, they accumulate towards the next week. USANA requires that associates must purchase a minimum of 100 volume of products (equivalent to approximately $110–$130) every four weeks in order to remain eligible to receive compensation. If this minimum requirement is not maintained, the distributor will lose the points that have accumulated but not yet been paid on.[36] According to documentation from USANA corporate 87% of associates fail to make enough off of commissions to recover the cost of their qualifying purchases with 67% of all associates making no commission; 72.2% of the company's commissions are earned by the top 2.31% of associates.[6] According to a 2011 article published by the Salt Lake City Tribune, USANA's FY09 income disclosure statement indicated that the average yearly income of the company's 165,710 associates, which includes those just starting out, was $617, while the "top-of-the-pyramid distributors earn an average of $857,865 annually".[37]

USANAs 2009 income disclosure statement defines "associates" as those who are “actively building a business, acting as wholesale buyers, or are new distributors.[38] USANAs 2009 SEC 10-K filing draws a distinction between associates and preferred customers. Associates are defined as independent distributors of USANA products who also purchase USANA products for personal use. Preferred customers may purchase products, at wholesale prices, strictly for personal use and are not permitted to resell or to distribute. As of January 2009, USANA had 198,000 active Associates and 71,000 preferred customers.[39]

USANA's associates are bound by distributor agreements, which forbid distributors from making "misleading income claims" to potential associates or from making health claims for the products.[9] However, an investigative report aired by Radio-Canada in February 2009, which included hidden camera filming of recruitment and other sessions, found that one group of associates appeared to violate the company's policies. The program contrasted the information about potential revenues presented at meetings and in written materials with the Canadian legal requirements for multi-level marketing schemes to provide clear, frequent and complete information about the revenue of the typical participant.[9][40] In addition, the same group of associates were filmed making recommendations for using USANA products to treat illnesses including leukemia.[9]

In 2008, two Canadian USANA distributors were awarded $7 million in compensation for damages related to their wrongful dismissal from the company. USANA had terminated their positions in 2003 because USANA believed the distributor had violated the companies' policies and procedures.[41][42]

New Zealand government statistician for the Commerce Commission, Dr. Murray H. Smith, who served as an expert witness in every pyramid scheme case brought by the Commission preceding 10 years, opined in 2008 that very few USANA distributors are likely to become wealthy, going as far as to state "you can make a very strong argument that this could be a pyramid scheme." When asked by the National Business Review to review Usana's business structure and compensation plan, it was Smith’s opinion, from a statistical not legal standpoint, that USANA demonstrated a number of characteristics commonly occurring in pyramid schemes including that most members recoup less than what they pay to participate; that those at the top of the structure are more likely to make more than those on the bottom of the structure; and that as the company grows it will become harder to recruit others. Dr. Smith also noted the company’s significant turnover in distributors making it necessary to continually recruit.Cite error: The <ref> tag has too many names (see the help page).

Sponsorships

USANA is a paid sponsor of various athletic organizations.[43][44][45][46] In 2006, USANA signed a co-sponsorship agreement with the Sony Ericsson WTA tour.[47][48]

USANA offers an Athlete Guarantee Program to select members of the Canadian Olympic team through a sponsorship agreement, which stipulates that should an athlete enrolled in the program test positive for a banned substance as a result of taking USANA products, USANA will compensate the athlete with up to two times his or her current annual earnings (up to $1 million CAD).[49][50]

Lawsuit

On February 20, 2007, Barry Minkow, an executive of the Fraud Discovery Institute, distributed a 500-page report to officials at the U.S. Securities and Exchange Commission (SEC), the Federal Bureau of Investigation (FBI), and the Internal Revenue Service (IRS) accusing USANA of operating an illegal pyramid scheme.[7][8] USANA countered by lodging suits against Minkow and his company claiming defamation and stock manipulation. The company denounced Minkow as a convicted felon and liar (Minkow had served a 7-year prison term starting in 1987 for stock fraud; he later became a senior pastor for the Community Bible Church in Mira Mesa and a "fraud-buster" who assisted federal and state authorities in various fraud investigations).

According to an article published in the San Diego Reader, USANA was subsequently the subject of investigations by the SEC and FBI.[7] The company's longtime auditing firm, Grant Thornton, resigned in July 2007 because it could not agree with USANA on procedures for an outside, independent investigation of the charges. Because it had no auditor, USANA was late with official government filings and was not in compliance with SEC and NASDAQ requirements.

On the day Minkow's report was released, USANA's shares had traded at $61.19 but by August the share price had tumbled to less than $35.[13][7] Minkow, acknowledged that he was shorting USANA's shares, hoping to profit from a drop in the stock price.[5] However, in reference to USANA's lawsuit, news columnist Herb Greenberg commented that the criticism of Minkow "is a bunch of malarkey; he has a right to publish his research, as long as people know his position [in the stock]." Minkow had revealed in the report that he was betting for the stock to go down.[7] USANA dropped the defamation suit and in March 2008 U.S. District Judge Tena Campbell threw out four of the five claims brought by USANA against Minkow ruling that USANAs claims violated California’s anti-SLAPP law for suing Minkow for fair criticism.[51] and that USANA did not show a reasonable probability of winning on those claims.[52] The judge also cited two examples where USANA failed to refute Minkow's claims that their products were overpriced and of no better quality than other lower-priced brands.[52] The remaining charge of stock manipulation was settled in July 2008 when USANA and Minkow reached an undisclosed settlement, which included the removal of all USANA-related materials from the Fraud Discovery Institute website, a related Chinese website, and from YouTube. Minkow also agreed to never trade in USANA's stock again.[53] Separately from the settlement, the company paid $142,510 in attorney fees to Minkow and his institute under an order from federal Magistrate Samuel Alba. Court documents show that USANA never pursued others whom they suspected of being part of the alleged stock manipulation nor did they ask for an injunction, their only avenue of release in this case.[52]

See also

References

  1. ^ a b c d e USANA Health Sciences / 2010 Annual Report Selected Financial Data - page 43-44
  2. ^ USANA Health Sciences / 2010 Annual Report Business - page 25
  3. ^ a b Dalal, Mihir (11 July 2011). "USANA Health gets FDA nod to make over-the-counter drugs". Reuters. Retrieved 14 July 2011.
  4. ^ "Direct Selling News Global 100". Direct Selling News. Retrieved 18 July 2011.
  5. ^ a b c d e Paul Foy (2007-06-12). "Another USANA official forced to revise resume". Daily Herald. {{cite news}}: Italic or bold markup not allowed in: |publisher= (help)
  6. ^ a b Helen Malmgren (2007-07-13). "Most People Won't Get Their Money Back". National Business Review. {{cite news}}: Italic or bold markup not allowed in: |publisher= (help)
  7. ^ a b c d e f Don Bauder (2007-09-13). "Pyramid, Phony Bios". "San Diego Reader. {{cite news}}: Italic or bold markup not allowed in: |publisher= (help)
  8. ^ a b Dave Anderson (2007-03-17). "As stocks plunge, Usana sues Minkow over report". Deseret Morning News. {{cite news}}: Italic or bold markup not allowed in: |publisher= (help)
  9. ^ a b c d e f g h "Vente à paliers multiples: légale, à de strictes conditions!". La Facture (in French). 2009-02-24. Radio-Canada. Retrieved 2011 May 11. {{cite episode}}: Check date values in: |accessdate= (help)
  10. ^ "USANA Annual Report 2010". United States Securities and Exchange Commission. 2011-03-14. {{cite news}}: Italic or bold markup not allowed in: |publisher= (help)
  11. ^ "200 Best Small Companies". Forbes. 2006. Retrieved 2008-10-14.
  12. ^ a b Evelyn M. Rusli (August 8, 2007). "Hard to Swallow". Forbes. Retrieved 2008-10-14.
  13. ^ a b Helen Malmgren (August 11, 2007). "Forbes is Usana's latest critic". The National Business Review. Retrieved 2008-10-14.
  14. ^ Robert MacMillan (August 9, 2007). "Update 1--USANA says Forbes article makes false statements". Reuters. Retrieved 2008-10-14.
  15. ^ http://web.archive.org/web/20070927213929/http://www.nbr.co.nz/docs/35081069_ohio.pdf
  16. ^ http://web.archive.org/web/20070927213808/http://www.nbr.co.nz/docs/04-036573_georgia.pdf
  17. ^ Helen Malmgren (2007-08-16). "Troubled USANA faces new stock woes". The National Business Review. {{cite news}}: Italic or bold markup not allowed in: |publisher= (help)
  18. ^ a b Roddy Boyd (2007-06-12). "CFO's no CPA - USANA under fire on executive bios". New York Post. {{cite news}}: Italic or bold markup not allowed in: |publisher= (help)
  19. ^ "USANA Health Sciences Schedule 14A Definitive Proxy Statement". United States Securities and Exchange Commission. 2007-03-13. Retrieved 2011-05-11.
  20. ^ License 120645-2601 Detail
  21. ^ "Usana's shares subject to delisting by Nasdaq". Desert News. August 15, 2007. Retrieved 3 May 2011.
  22. ^ Desert News. October 18, 2007 reports that NASDAQ will keep listing it's stock http://www.deseretnews.com/article/695219627/Usana-reports-that-Nasdaq-will-keep-listing-its-stock.htmltitle=USANA reports that NASDAQ will keep listing it's stock. Retrieved 4 May 2011. {{cite news}}: Check |url= value (help); Missing or empty |title= (help)
  23. ^ "USANA's stock listings moving to NYSE". The Salt Lake Tribune. 22 December 2010. Retrieved 23 June 2011.
  24. ^ Tom Harvey (May 10, 2011). "Stock of Utah's Usana dips as 4 execs depart". Salt Lake Tribune. Retrieved 2011-5-11. {{cite web}}: Check date values in: |accessdate= (help)
  25. ^ "Usana Health Services COO, CFO resign, shares skid". Forbes Magazine. May 10, 2011. Retrieved 06-07-2011. {{cite web}}: Check date values in: |accessdate= (help)[dead link‍]
  26. ^ "New preserving technology". USPTO. 8 May 2007. Retrieved 23 June 2011.
  27. ^ "USANA Health Sciences Receives U.S. Patent on Exclusive Self-Preserving Technology for Skin Care and Beauty Products" (Press release). Business Wire. 8 May 2007. Retrieved 23 June 2011.
  28. ^ "New preserving technology". Cosmetics design-europe.com. 16 September 2004. Retrieved 23 June 2011.
  29. ^ "NSF Dietary Supplements Listing -USANA Health Sciences". NSF. Retrieved 28 April 2011.
  30. ^ "Dietary Supplements Functional Food and Beverages". NSF. Retrieved 28 April 2011.
  31. ^ "NSF Certified for Sport Listing -USANA Health Sciences". NSF. Retrieved 23 June 2011.
  32. ^ "Informed Choice tested products -USANA". Retrieved 31 May 2011.
  33. ^ "About Informed Choice". Retrieved 31 May 2011.
  34. ^ "Innovative Nutritional Hybrid Technology Introduced At USANA International Convention" (Press release). Business Wire. 26 August 2010. Retrieved 4 June 2011.
  35. ^ Adam Risman. "USANA Health Sciences' Vitamin Efficiency". NYSE Magazine. Retrieved 4 June 2011.
  36. ^ "USANA pay plan". [dead link‍]
  37. ^ Steven Oberbeck (18 February 2011). "State of supplements: Elusive wealth, strong lure". The Salt Lake Tribune. Retrieved 6 June 2011.
  38. ^ "FY09 North American Average Total Earnings" (PDF). Retrieved 1 March 2011.
  39. ^ "Usana Health Sciences, Inc. Form 10-K For the Fiscal Year Ended January 2, 2010" (PDF). Retrieved 20 April 2011.
  40. ^ "Competition Bureau - Multi-level Marketing and Pyramid Selling". www.competitionbureau.gc.ca. Retrieved 2009-03-11.
  41. ^ "USANA Form 8-K". United States Securities and Exchange Commission. 2008-12-22. {{cite news}}: Italic or bold markup not allowed in: |publisher= (help)
  42. ^ "Judgement will cost Usana $7 million". The Salt Lake Tribune. 2009-02-13. {{cite news}}: Italic or bold markup not allowed in: |publisher= (help)[dead link‍]
  43. ^ The Official US Speedskating Website | url=http://www.usspeedskating.org/
  44. ^ Speed Skating Canada | url=http://www.speedskating.ca/
  45. ^ USANA Announces Partnership with Great Britain Short Track Speed Skating | url=http://www.iceskating.org.uk/node/2858
  46. ^ "Cross Country Canada - Corporate Partner / Supplier Team". Cccski.com. Retrieved 2011-05-11.
  47. ^ Liz Robbins (2006-08-23). "WTA Tour Signs On With Vitamin Supplier". New York Times. {{cite news}}: Italic or bold markup not allowed in: |publisher= (help)
  48. ^ "USANA, women's tennis tour ink deal on 'clean' supplements". Salt Lake Tribune. 2006-08-23. {{cite news}}: Italic or bold markup not allowed in: |publisher= (help)
  49. ^ "Athlete Guarantee Program". Retrieved 28 April 2011.
  50. ^ "Supplement manufacturer offers $735,000 guarantee". Toledo Blade. Associated Press. 11 April 2004.
  51. ^ "USANA ordered to pay for SLAPP violation". Salt Lake Tribune. Associated Press. 2008-05-07. {{cite news}}: Italic or bold markup not allowed in: |publisher= (help)
  52. ^ a b c Tom Harvey (2008-03-05). "USANA claims tossed". Salt Lake Tribune. {{cite news}}: Italic or bold markup not allowed in: |publisher= (help)
  53. ^ Paul Foy (July 29, 2008). "Supplement-maker USANA settles suit with critic". Associated Press. {{cite news}}: Italic or bold markup not allowed in: |publisher= (help)
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