USANA Health Sciences Announces Record Third Quarter 2010 Financial Results

    --  Net sales increased by 21.9% to $135.0 million; Active Associates
        increased by 17.6%
    --  Earnings per share increased by 54.9% to $0.79
    --  Company raises outlook for 2010

SALT LAKE CITY--(BUSINESS WIRE)-- USANA Health Sciences, Inc. (NASDAQ: USNA) today announced record financial results for its fiscal third quarter ended October 2, 2010.

Financial Performance

Net sales in the third quarter of 2010 increased 21.9% to $135.0 million, compared with $110.7 million in the third quarter of the prior year. This growth was due to higher product sales, driven primarily by a 17.6% increase in the number of active Associates.

Net earnings in the third quarter of 2010 increased to $12.8 million, or $0.79 per share, compared with $7.9 million, or $0.51 per share, in the third quarter of the prior year, representing a 54.9% increase. This significant year-over-year increase resulted from an improved gross profit margin, a higher operating margin and a lower effective tax rate. The earnings per share gains were partially offset by a higher number of diluted shares outstanding.

For the nine months ended October 2, 2010, net sales increased by 18.7% to $380.1 million, compared with $320.2 million for the first nine months of the prior year. This growth in sales was due to an overall increase in product sales, driven by a higher average number of active Associates. Additionally, favorable changes in currency exchange rates accounted for $17.4 million of the increase in net sales for the first nine months of 2010.

Net earnings for the first nine months of 2010 increased to $33.3 million, or $2.11 per share, compared with net earnings of $23.3 million, or $1.51 per share, for the first nine months of the prior year. This increase in earnings per share during the nine-month period resulted from significantly improved gross profit margins, lower relative selling, general and administrative expenses, and a lower effective tax rate, which were partially offset by higher Associate incentives expenses and a higher average number of diluted shares outstanding.

Regional Results

Net sales in the Asia Pacific region for the third quarter of 2010 increased by 48.7% to $75.0 million, compared with the third quarter of the prior year. This improvement was primarily due to 134% growth in Hong Kong. Additionally, the recent acquisition of BabyCare added $3.4 million in sales for the quarter. The number of active Associates increased by 47.4%, which was primarily the result of growth in Hong Kong and the addition of 10,000 active Associates purchasing product in BabyCare.

"Asia Pacific continues to be the region that is driving our current success, resulting in record highs for both sales and earnings," said Chief Executive Officer Dave Wentz. "With our focus on expanding our product and business offerings in the growing markets of Asia, the addition of BabyCare into the USANA family is significant because it provides the platform necessary to introduce our products into that market."

During the third quarter of 2010, net sales in the North America region decreased by 0.6% to $60.0 million, compared with the third quarter of the prior year. The United States, however, experienced modest growth of 0.3% in the third quarter, while sales decreased in both Canada and Mexico. The number of Active Associates in the North America region declined by 10.8%, compared with the third quarter of the prior year.

Wentz also emphasized the company's continuing commitment to building its North American region. "In August we held our annual International Convention in Salt Lake City, where we launched several new products and a new interactive presentation tool. These new products and this new sales tool are designed to promote sales growth in North America, as well as in our other markets."


Chief Financial Officer Jeff Yates said, "I am very pleased to see further improvements in our operating results during the third quarter. Our objective over the last several quarters has been to position ourselves for operating leverage as we experience growth in our top-line. Additionally, capital investments aimed at improving operating efficiencies facilitated a 290 basis-point improvement to our operating margin, compared with last year, and a 20 basis-point improvement on a consecutive quarter basis. In light of our sales growth and our margin improvements, coupled with the acquisition of BabyCare, we are raising our financial guidance for 2010. We now project consolidated net sales to be between $512 million and $515 million and earnings per share to be between $2.90 and $2.93."

Conference Call

USANA will hold a conference call and webcast to discuss this announcement with investors on Wednesday, October 27, 2010 at 11:00AM Eastern Time. Investors may listen to the call by accessing USANA's website at


USANA develops and manufactures high quality nutritional, personal care, and weight management products that are sold directly to Associates and Preferred Customers throughout the United States, Canada, Australia, New Zealand, Hong Kong, Japan, Taiwan, South Korea, Singapore, Mexico, Malaysia, the Philippines, the Netherlands, and the United Kingdom. Additionally, USANA's wholly-owned subsidiary, BabyCare, Ltd., operates a direct selling business in China. More information on USANA can be found at

Safe Harbor

This press release contains forward-looking statements within the meaning of Section 27A of the Securities Act and Section 21E of the Securities Exchange Act. Our actual results could differ materially from those projected in these forward-looking statements, which involve a number of risks and uncertainties, including global economic conditions generally, reliance upon our network of independent Associates, the governmental regulation of our products, manufacturing and marketing risks, adverse publicity risks, and risks associated with our international expansion. The contents of this release should be considered in conjunction with the risk factors, warnings, and cautionary statements that are contained in our most recent filings with the Securities and Exchange Commission.

USANA Health Sciences, Inc.

Consolidated Statements of Earnings

(In thousands, except per share data)


                                                 Quarter Ended

                                                 3-Oct-09     2-Oct-10

Net sales                                        $ 110,764    $ 135,006

Cost of sales                                      22,637       25,157

Gross profit                                       88,127       109,849

Operating expenses

Associate incentives                               50,799       60,560

Selling, general and administrative                25,414       30,751

Earnings from operations                           11,914       18,538

Other income                                       110          551

Earnings before income taxes                       12,024       19,089

Income taxes                                       4,112        6,240

NET EARNINGS                                     $ 7,912      $ 12,849

Earnings per share - diluted                     $ 0.51       $ 0.79

Weighted average shares outstanding - diluted      15,547       16,247

USANA Health Sciences, Inc.

Consolidated Balance Sheets

(In thousands)

                                                 As of        As of

                                                 2-Jan-10     2-Oct-10



Current Assets

Cash and cash equivalents                        $ 13,658     $ 22,928

Inventories                                        25,761       32,605

Other current assets                               12,507       17,225

Total current assets                               51,926       72,758

Property and equipment, net                        57,241       58,326

Goodwill                                           5,690        16,930

Other assets                                       8,581        53,515

Total assets                                     $ 123,438    $ 201,529


Current liabilities

Accounts payable                                 $ 5,810      $ 8,485

Other current liabilities                          34,668       43,021

Line of Credit- short term                         -            19,000

Total current liabilities                          40,478       70,506

Line of credit- long term                          7,000        -

Other long-term liabilities                        1,587        1,076

Stockholders' equity                               74,373       129,947

Total liabilities and stockholders' equity       $ 123,438    $ 201,529

USANA Health Sciences, Inc.

Sales by Region


(In thousands)

                          Quarter Ended

                          3-Oct-09               2-Oct-10


North America

United States             $ 38,098     34.4%     $ 38,228     28.3%

Canada                      16,661     15.0%       16,419     12.2%

Mexico                      5,535      5.0%        5,314      3.9%

North America Total         60,294     54.4%       59,961     44.4%

Asia Pacific

Southeast Asia/Pacific      25,227     22.8%       25,730     19.1%

Greater China               20,262     18.3%       43,456     32.2%

North Asia                  4,981      4.5%        5,859      4.3%

Asia Pacific Total          50,470     45.6%       75,045     55.6%

Consolidated              $ 110,764    100.0%    $ 135,006    100.0%

Active Associates by Region(1)


                          As of

                          3-Oct-09               2-Oct-10


North America

United States               61,000     30.7%       55,000     23.5%

Canada                      26,000     13.1%       25,000     10.7%

Mexico                      15,000     7.5%        11,000     4.7%

North America Total         102,000    51.3%       91,000     38.9%

Asia Pacific

Southeast Asia/Pacific      49,000     24.6%       46,000     19.7%

Greater China               40,000     20.1%       89,000     38.0%

North Asia                  8,000      4.0%        8,000      3.4%

Asia Pacific Total          97,000     48.7%       143,000    61.1%

Total                       199,000    100.0%      234,000    100.0%

(1) Associates are independent distributors of our products who also purchase our products for their personal use. We only count as active those Associates who have purchased product at any time during the most recent three-month period, either for personal use or for resale.

Active Preferred Customers by Region(2)


                          As of

                          3-Oct-09            2-Oct-10


North America

United States             40,000    58.8%     37,000    50.0%

Canada                    15,000    22.1%     14,000    18.9%

Mexico                    3,000     4.4%      3,000     4.1%

North America Total       58,000    85.3%     54,000    73.0%

Asia Pacific

Southeast Asia/Pacific    8,000     11.7%     7,000     9.5%

Greater China             1,000     1.5%      12,000    16.2%

North Asia                1,000     1.5%      1,000     1.3%

Asia Pacific Total        10,000    14.7%     20,000    27.0%

Total                     68,000    100.0%    74,000    100.0%

(2) Preferred Customers purchase our products strictly for their personal use and are not permitted to resell or to distribute the products. We only count as active those Preferred Customers who have purchased product at any time during the most recent three-month period.

    Source: USANA Health Sciences, Inc.